10-K

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

Form 10-K

[ X ]	Annual Report pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934 For the fiscal year ended 31 December 2004 OR
[     ]	Transition Report pursuant to Section 13 or 15(d) of the  Securities Exchange Act of 1934

Commission file number 1-3677

 Alcan Inc.

Incorporated in:	I.R.S. Employer Identification No.:
Canada	Not applicable
1188 Sherbrooke Street West,
Montreal, Quebec, Canada  H3A 3G2	Telephone: (514) 848-8000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class	Name of each exchange on which registered
Common Shares, without nominal or par value	New York Stock Exchange
Common Share Purchase Rights	New York Stock Exchange
4 7/8% Notes due 2012	New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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 and (2) has been subject to such filing requirements for the past 90 days: Yes  X   No ___.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ X ]
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2):
Yes  X   No ___.
The aggregate market value of the voting stock held by non-affiliates:	USD 15,244 million, as of 30 June 2004
Common Stock of Registrant outstanding:	370,037,313 Common Shares, as at 2 March 2005.
Documents incorporated by reference:
	Portions of the Proxy Circular for the Annual Meeting to be held on 28 April 2005

INDEX TO ALCAN INC.
2004 ANNUAL REPORT ON FORM 10-K

		Page
PART I
Items
1 and 2	Business and Properties..........................................................................................	6
	Overview of Operating Segments..............................................................................	6
	History / Recent Developments................................................................................	8
	Alcan Business Groups...........................................................................................	14
	Bauxite and Alumina.......................................................................................	14
	Primary Metal.................................................................................................	17
	Rolled Products Americas and Asia..................................................................	22
	Rolled Products Europe...................................................................................	23
	Engineered Products.......................................................................................	24
	Packaging......................................................................................................	29
	Information by Geographic Areas..............................................................................	30
	Research and Development......................................................................................	31
	Environment, Health and Safety................................................................................	31
	Properties..............................................................................................................	32
	Employees.............................................................................................................	32
	Patents, Licenses and Trademarks...........................................................................	32
	Competition and Government Regulations.................................................................	33
Item 3	Legal Proceedings..................................................................................................	34
	Environmental Matters.............................................................................................	34
	Other Matters.........................................................................................................	37
Item 4	Submission of Matters to a Vote of Security Holders..................................................	39
PART II
Item 5	Market for the Registrant's Common Equity and Related Stockholder Matters..............	40
Item 6	Selected Financial Data...........................................................................................	42
Item 7	Management's Discussion and Analysis of Financial Condition and    Results of Operations..........................................................................................	43
Item 7A	Quantitative and Qualitative Disclosures about Market Risk........................................	43
Item 8	Financial Statements and Supplementary Data..........................................................	48
Item 9	Changes in and Disagreements with Accountants on Accounting and    Financial Disclosure............................................................................................	48
Item 9A	Controls and Procedures.........................................................................................	48
Item 9B	Other Information....................................................................................................	49
PART III
Item 10	Directors and Executive Officers of the Registrant......................................................	50
Item 11	Executive Compensation.........................................................................................	54
Item 12	Security Ownership of Certain Beneficial Owners and Management.............................	54
Item 13	Certain Relationships and Related Transactions.........................................................	56
Item 14	Principal Accountant Fees and Services...................................................................	56
PART IV
Item 15            Exhibits and Financial Statement Schedules.............................................................		57
Signatures....................................................................................................................................		61
Consent of Independent Accountants..............................................................................................		63

PART I

In this report, unless the context otherwise requires, the following definitions apply:

"Alcan", "Company", "Registrant" or the "Issuer" means Alcan Inc. and, where applicable, one or more Subsidiaries,

"Algroup" means Alusuisse Group Ltd. (now Alcan Holdings Switzerland Ltd.), a Subsidiary of Alcan following the Algroup Combination,

"Algroup Combination" means the process by which Algroup became a Subsidiary of Alcan on 17 October 2000, through the completion of a share exchange offer by Alcan for the shares of Algroup,

"Annual Report" means Alcan's annual report to Shareholders for the year ended 31 December 2004,

"Business Group" refers to each of Alcan's business groups: Bauxite and Alumina, Primary Metal, Engineered Products and Packaging and, prior to the Novelis Spin-off, Rolled Products Americas and Asia and Rolled Products Europe,

"Board" or "Board of Directors" means the board of directors of Alcan,

"Director" means a director of Alcan,

"Dollars" or "$" means U.S. Dollars, unless otherwise specified,

"Executive Officers" means the President and Chief Executive Officer, the Executive Vice Presidents, the Senior Vice Presidents, the Vice Presidents, the Treasurer, the Controller and the Corporate Secretary of Alcan,

"Joint Venture" means an association (incorporated or unincorporated) of companies jointly undertaking a commercial enterprise, but in which Alcan does not hold or exercise a controlling interest. Joint Ventures are accounted for using the equity method, except for joint ventures over which Alcan has an undivided interest in the assets and liabilities, which are consolidated to the extent of Alcan's participation,

"LME" means the London Metal Exchange,

"Novelis" means Novelis Inc., a corporation incorporated under the Canada Business Corporations Act and formed to acquire, pursuant to the Novelis Spin-off, the businesses contributed by Alcan,

"Novelis Spin-off" means the transfer to Novelis of substantially all of the aluminum rolled products businesses held by Alcan prior to the Pechiney Combination and Novelis becoming an independent publicly-traded company on 6 January 2005,

"Proxy Circular" means the management proxy circular prepared in connection with Alcan's Annual Meeting of Shareholders to be held on 28 April 2005, and any adjournment thereof,

"Pechiney" means Pechiney, a French société anonyme, a Subsidiary of the Company following the Pechiney Combination,

"Pechiney Combination" means the process by which Pechiney became a Subsidiary of Alcan on 15 December 2003, through the completion of a cash and Shares offer by Alcan for the securities of Pechiney,

"Related Company" means a company in which Alcan owns, directly or indirectly, 50% or less of the voting stock and in which Alcan has significant influence over management,

"Share" or "Common Share" means a common share in the capital of Alcan,

"Shareholder" means a holder of the Shares,

"Subsidiary" means a company controlled, directly or indirectly, by Alcan,

"Tonne" means a metric tonne of 1,000 kilograms or 2,204.6 pounds, and

"UBC" means a used beverage can.

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Unless otherwise expressly indicated, the financial and other information given in this report is presented on a consolidated basis.

Certain information called for by Items of this Form 10-K Report is incorporated by reference to the Consolidated Financial Statements, to the Management's Discussion and Analysis of Financial Condition and Results of Operations and to the Proxy Circular, each of which is filed herewith as an exhibit to this report. Such information is specifically identified herein, including by the reference "See Consolidated Financial Statements", ''See Management's Discussion and Analysis of Financial Condition and Results of Operations'' or "See Proxy Circular". With the exception of information specifically incorporated by reference from the Proxy Circular, such Proxy Circular is not to be deemed filed as part of this Form 10-K Report. Information incorporated by reference is considered to be part of this report, and information filed later with the Securities and Exchange Commission ("SEC") will automatically update and supersede this information.

Information contained in or otherwise accessed through the Company's website, or any other website referred to in this Form 10-K Report, does not form part of this Form 10-K Report and any website addresses contained herein are inactive textual references only.

Special Note Regarding Forward-Looking Statements

Certain statements made or incorporated by reference in this report are forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995. Terms such as "believes", "expects", "may", "will", "could", "should", "anticipates", "estimates", "intends" and "plans" and the negatives of and variations on terms such as these signify forward-looking statements. Because these forward-looking statements include risks and uncertainties, readers are cautioned that actual results may differ materially from the results expressed in or implied by the statements.

The following factors, among others, could cause actual results or outcomes to differ from the results expressed or implied by forward-looking statements:

• changes in global supply and demand conditions for aluminum and other products;

• changes in aluminum ingot prices;

• changes in raw materials costs and availability;

• changes in the relative values of various currencies;

• cyclical demand and pricing within the principal markets for Alcan's products;

• changes in government regulations, particularly those affecting environmental, health or safety compliance;

• fluctuations in the supply of and prices for power in the areas in which Alcan maintains production facilities;

• the consequences of transferring most of the aluminum rolled products businesses operated by Alcan to Novelis, in particular as regards to the trading price of Alcan common shares and the liabilities that could arise as a result of the Novelis Spin-off;

• the effect of integrating acquired businesses and the ability to attain expected benefits from acquisitions;

• potential discovery of unanticipated commitments or other liabilities associated with the acquisition and integration of Pechiney;

• major changes in technology that affect Alcan's competitiveness;

• the risk of significant losses from trading operations, including losses due to market and credit risks associated with derivatives;

• changes in prevailing interest rates and equity market returns related to pension plan investments, which may result in Alcan's being required to make larger than expected pension plan contributions;

• potential catastrophic damage, increased insurance and security costs and general uncertainties associated with the increased threat of terrorism or war;

• the effect of international trade disputes on Alcan's ability to import materials, export its products and compete internationally;

• relationships with and financial and operating conditions of customers and suppliers;

• economic, regulatory and political factors within the countries in which Alcan operates or sells products; and

• factors affecting Alcan's operations, such as litigation, labour relations and negotiations and fiscal regimes.

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Additional information concerning factors that could cause actual results to differ materially from those in forward-looking statements include, but are not necessarily limited to, those discussed under the heading "Risks and Uncertainties" in the Management's Discussion and Analysis of Financial Condition and Results of Operations. The text under such heading is incorporated herein by reference.

Alcan undertakes no obligation to release publicly the results of any future revisions it may make to forward-looking statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

Alcan files annual, quarterly and special reports and other information with the SEC. Any document so filed can be viewed at the SEC's public reference room at 450 Fifth Street, N. W., Washington, D. C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the SEC's website at www.sec.gov. Such documents are also available through Alcan's website at www.alcan.com. Alcan's website also includes the Charters of its Board of Directors and of its four Committees of the Board of Directors: the Corporate Governance, the Audit, the Human Resources and the Environment, Health & Safety Committees, as well as its Worldwide Code of Employee and Business Conduct, available in 13 languages.

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ITEMS 1 AND 2 BUSINESS AND PROPERTIES

Alcan is the parent company of an international group involved in many aspects of the aluminum and packaging industries. Through Subsidiaries, Joint Ventures and Related Companies around the world, the activities of Alcan include bauxite mining, alumina refining, production of specialty alumina, aluminum smelting, manufacturing and recycling, flexible and specialty packaging, as well as related research and development.

On 18 and 26 May 2004, Alcan announced the proposed spin-off of substantially all of the aluminum rolled products businesses held by Alcan prior to the Pechiney Combination to an independent publicly-traded company, later designated as Novelis. The Novelis Spin-off was completed on 6 January 2005, as discussed below.

On 31 December 2004, Alcan employed approximately 82,500 people in 58 countries. Following completion of the Novelis Spin-off, Alcan employed approximately 73,000 people in 55 countries.

A.         OVERVIEW OF OPERATING SEGMENTS

On 31 December 2004, the Company operated through six Business Groups, each responsible for the different business units of which they are comprised. Pechiney's business operations were integrated into these Business Groups during 2004. The operating segments include the Company's proportionate share of Joint Ventures (including Joint Ventures accounted for using the equity method), as they are managed within each operating segment.

In 2004, the operating segments of the Company were:

1.1       Bauxite and Alumina, headquartered in Montreal, Canada, this group comprises Alcan's worldwide activities related to bauxite mining and refining into smelter-grade and specialty aluminas, owning and/or operating seven bauxite mines and deposits in five countries , six smelter-grade alumina plants in four countries and seven specialty alumina plants in four countries;

1.2      Primary Metal, also headquartered in Montreal, this group comprises smelting operations, power generation, production of primary value-added ingot, manufacturing of smelter anodes and aluminum fluoride, technology sales, equipment sales and engineering operations, operating or having interests in 24 smelters in 12 countries, power facilities in five countries and ten technology and equipment sales centres in eight countries;

1.3       Rolled Products Americas and Asia, headquartered in Cleveland, U.S., this group produces aluminum sheet and light gauge products, operating 15 plants in five countries;

1.4       Rolled Products Europe, headquartered in Zurich, Switzerland, this group produces aluminum sheet, including automotive, can and lithographic sheet, plate and foil stock production, operating 21 plants in seven countries;

1.5      Engineered Products, headquartered in Paris, France, this group produces rolled, extruded and cast aluminum products, engineered shaped products and structures, including cable, wire and rod, as well as composite materials such as aluminum-plastic, fibre-reinforced plastic and foam-plastic in 48 plants located in 11 countries. Also part of this group are 50 service centres in 13 countries offering technical assistance, cutting, shaping, machining and assembling for smaller customers and the nearly 40 offices in 36 countries that sell and source products in 60 countries; and

1.6       Packaging, headquartered in Paris, France, this group consists of Alcan's worldwide food, pharmaceutical and medical, beauty and personal care and tobacco packaging businesses, operating approximately 180 plants in 27 countries. This Business Group has a multi-material approach to customer needs, including plastics, aluminum, paper, paperboard, glass and steel.

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Substantially all of the rolled products facilities comprising the Rolled Products Americas and Asia Business Group and the Rolled Products Europe Business Group, as well as eight facilities from the Bauxite and Alumina, Primary Metal and Packaging Business Groups, were transferred to Novelis as of 6 January 2005 in connection with the Novelis Spin-off.

Since the Novelis Spin-off, the Company has operated through four Business Groups: Bauxite and Alumina, Primary Metal, Engineered Products and Packaging.

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HISTORY / RECENT DEVELOPMENTS

Alcan is a limited liability Canadian company, incorporated on 3 June 1902, with its headquarters and registered office in Montreal, Canada. It was formed as a subsidiary of the Pittsburgh Reduction Company, one of the founding companies of the aluminum industry, to establish a smelter and hydroelectric power facility in Shawinigan, Quebec. In 1928, the international operations and domestic U.S. operations were separated into two competing companies that became Alcan and Alcoa Inc., respectively. During the Second World War, substantial expansion of hydroelectric and smelting capacity took place in Quebec to supply aluminum for the war effort. In the 1950s, Alcan added hydroelectric and smelting capacity in British Columbia. During the post-war period, Alcan expanded internationally and invested in fabricating activities to stimulate demand for its primary metal production.

Alcan continued its international expansion with the Algroup Combination and the Pechiney Combination, both of which significantly increased the Company's presence in the packaging industry.

1.         Alcan's Recent Developments

In the past year, Alcan reported the major events related to its business and corporate governance described below. Events related to the Novelis Spin-off are separately described under the heading "The Novelis Spin-off" below.

On 15 December 2003, through the Pechiney Combination, Alcan acquired a majority of the shares of Pechiney, a French aluminum and packaging company, which then became a Subsidiary. On 6 February 2004, Alcan became owner of all outstanding Pechiney common shares, Pechiney Bonus Allocation Rights, Pechiney OCEANEs and Pechiney American Depositary Shares (collectively "Pechiney securities").

On 8 January 2004, the Company announced that it had secured 97.95% of Pechiney's total share capital as of the expiry of the re-opened offer on 23 December 2003, following the initial offer launched by the Company for Pechiney securities in 2003.

On 15 January 2004, Alcan acquired all Pechiney securities tendered into the re-opened offer. As consideration for the securities tendered into the re-opened offer, Alcan issued 2,082,075 Alcan Common Shares and paid €126 million. On 19 January 2004, Alcan also paid €81 million as additional consideration to holders of Pechiney securities who tendered their securities during the initial offer.

On 22 January 2004, the Company announced that it would permanently halt production at its 60‑year‑old Jonquière Söderberg primary aluminum facility, in the Saguenay region of Quebec, by the second quarter of 2004. Compared to the other Alcan smelters in Quebec, the Jonquière Söderberg plant had the highest production costs, faced the greatest environmental challenges and was one of the least energy efficient.

On 23 January 2004, the Company announced that its withdrawal offer had opened that day as a required step for it to acquire all remaining Pechiney securities in accordance with French securities regulations. The withdrawal offer was opened for ten French trading days until 5 February 2004 and was followed on 6 February 2004 by a compulsory acquisition by which Alcan became the owner of the remaining Pechiney securities.The consideration that  Alcan paid in the withdrawal offer and the subsequent compulsory acquisition was €48.50 in cash for each Pechiney common share (including, for purposes of the compulsory acquisition, Pechiney common shares underlying outstanding Pechiney American Depositary Shares); €4.85 in cash for each Pechiney Bonus Allocation Right; and €82.86 in cash for each Pechiney OCEANE.

On 9 February 2004, the Company announced that, as a result of the compulsory acquisition on 6 February 2004, it had acquired all Pechiney securities it did not already own. The Pechiney common shares were de-listed from the Euronext Paris stock exchange on 6 February 2004. On 9 February 2004, Pechiney filed a notice of termination of registration with the SEC and ceased to be a reporting issuer under the Securities Exchange Act of 1934.

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On 17 February 2004, the Company announced the appointment of Mr. Yves Mansion and Mr. Jean-Paul Jacamon as Directors of the Company. Mr. Mansion is chairman and chief executive officer of Société Foncière Lyonnaise and a member of the French Collège de l'Autorité des marchés financiers. He was group managing director of Assurances Générales de France from 1990 to 2001. Mr. Mansion was a member of the supervisory board of Euler Hermes and deputy director of l'Entreprise de Recherche et d'activités pétrolières. Mr. Jacamon is non-executive chairman of Bonna Sabla and of Gardiner Group. He was chief operating officer and director of Schneider Electric from 1996 to 2002. He is also a director of Le Carbone Lorraine, STACI and AMEC plc.

On 10 March 2004, the Company announced it had secured the necessary regulatory and government approvals for the implementation of the previously announced definitive joint venture agreement with the Qingtongxia Aluminium Company and the Ningxia Electric Power Development and Investment Co. Ltd. Alcan has forecasted an investment of approximately $150 million (of which $110 million was invested as at 31 December 2004) for a 50% participation and for a secure power supply in an existing 150‑kilotonne modern pre-bake smelter located in the Ningxia autonomous region in the People's Republic of China. The joint venture agreement has also given Alcan a substantial operating role and the option to acquire, through additional investment, up to 80% of a new 250‑kilotonne potline, which is currently under construction.

On 14 May 2004, the Company announced the sale of the Boxal Group, a manufacturer of aluminum aerosol cans and part of the Alcan Packaging Business Group, to Exal Holdings B.V., a Dutch privately held company. The sale was approved by the European Commission and was part of the mandated divestments arising from the Pechiney Combination.

On 9 September 2004, the Company announced its decision to proceed with an investment to expand and improve its Gove alumina refinery in the Northern Territory of Australia. The $1.3 billion investment was earmarked to increase the refinery's capacity from about 2.1 million tonnes per year to approximately 3.8 million tonnes and represented approximately a 30% increase in the Company's overall alumina production capacity.

On 28 September 2004, the Company announced the appointment of Dr. H. Onno Ruding as a Director of the Company. Dr. Ruding is a former Minister of Finance of the Netherlands and was an Executive Director of the International Monetary Fund in Washington, D.C. and a member of the Board of Managing Directors of AMRO Bank in Amsterdam. He is the former Vice Chairman of Citicorp and Citibank, N.A. Dr. Ruding serves as a director on the boards of Corning Inc., Holcim AG and RTL Group and is president of the Centre for European Policy Studies (CEPS) in Brussels.

On 8 October 2004, the Company announced that it had reached an agreement to sell assets within its ores and concentrates trading business, which was operated through Pechiney World Trade (USA), Inc. and Pechiney Trading Limited (UK), to its current management team.

On 16 November 2004, the Company announced the sale of the assets of its zinc and lead metal trading business to Trafigura Ltd., an independent commodity trading company. The scope of the transaction included the inventories of Alcan's zinc and lead metal trading and the commercial agreements related to the business, which was operated through Pechiney Trading Limited (UK).

On 18 November 2004, the Company announced that it will conduct a new feasibility study for the construction of a new aluminum smelter in Coega, Eastern Cape Province, South Africa, with the South African Government and their Industrial Development Corporation.

On 24 November 2004, the Company announced that it had signed a protocol of negotiation with Alcoa World Alumina LLC and the Government of the Republic of Guinea for the development of a 1.5-million tonne per year alumina refinery in the West African nation. The protocol sets out the items and framework for the alumina refinery project, which will be negotiated with the Government of the Republic of Guinea during the upcoming months as part of the memorandum of understanding between the parties, announced in May 2004.

On 25 November 2004, the Company announced that it has begun consultations with employee representatives on a proposed restructuring involving nine European sites. The proposed restructuring effort would include the downsizing of activities at four sites, two potential sales and three plant closures.

9

On 29 December 2004, the Company announced that it had paid Powerex, a subsidiary of B.C. Hydro, a sum of $110 million to settle a claim associated with the collapse of Enron Corp. in late 2001 (see page 37). The Company also announced that it had advised B.C.Hydro that it was providing contractual notice for the recall of 140 Megawatts of power it sells to B.C. Hydro under their Long-Term Electricity Purchase Agreement.

Also on 29 December 2004, the Company announced that it had entered into an agreement with Mytilineos Holdings S.A. of Greece, for the sale of Alcan's controlling interest in Aluminium de Grèce S.A.

On 30 December 2004, the Company announced that it had reached agreement on the principal terms of a sale of its ferroalloy division, Pechiney Électrometallurgie (PEM), to Ferroatlántica, S.L, of Spain.

On 11 January 2005, the Company announced it would build two new packaging plants in Russia with an investment of $55 million.

On 3 February 2005, the Company announced the appointment of Mr. Michael Hanley as Executive Vice President of the Company. Mr. Hanley also joined the Office of the President.

On 15 February 2005, the Company announced that it had reached an agreement with the UK administrators of Parkside International, to acquire the assets of Parkside's flexible food packaging plant in Zlotow, Poland.

On 23 February 2005, the Company announced that it had signed a shareholders' agreement on that day with the Oman Oil Company S.A.O.C. ("OOC") and the Abu Dhabi Water and Electricity Authority ("ADWEA") in the development of a proposed 325-kilotonne per annum aluminum smelter project in Sohar, Oman. In June 2004, Alcan announced that it is committed to a 20% stake in the Sohar Aluminium Company L.L.C., with OOC and ADWEA each owning a 40% share. Under a technology transfer agreement, the Company will provide Sohar Aluminium Company L.L.C. with a license and related technical services necessary to implement the Company's AP35 Technology. ADWEA will be providing technical services and management support for the power plant. Alcan would also have the option of acquiring up to a 60% interest in a second potline of similar capacity. The decision for the final approval of the project is expected in the second half of 2005, as well as final construction approval date. Construction activities would begin shortly thereafter, with full production expected by 2008.

2.         Novelis Spin-off

Under the Novelis Spin-off completed on 6 January 2005, pursuant to a plan of arrangement under the Canada Business Corporations Act, Alcan transferred to Novelis substantially all of the aluminum rolled products businesses that it held prior to the Pechiney Combination, as well as certain alumina and primary metal businesses in Brazil and four former Pechiney rolling facilities in Europe, and distributed the shares of Novelis to Alcan Shareholders.

2.1       Background to the Novelis Spin-off

In 2003, Alcan initiated an evaluation of its portfolio of businesses. As part of this exercise, a strategic review of Alcan's rolled products business was presented to the Alcan Board of Directors. A strategy was subsequently developed by Alcan's management involving the separation of Novelis and Alcan into two distinct platforms with different underlying market economics. This strategy involved the spin-off of substantially all of Alcan's rolled products businesses into a separate legal entity, and was presented to the Board of Directors on 14 February 2004, together with a comprehensive overview of portfolio alternatives and the transaction rationale.

On 26 February 2004, the Board of Directors met subsequently to consider the separate investment theses and on 5 March 2004, to discuss the details of the possibility of executing the spin-off. On 24 March 2004, the Board of Directors received a comprehensive report on alternatives to the proposed spin-off, its potential for value creation, expected financial performance and the duties of Directors in the circumstances.

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On 22 April 2004, the Board of Directors considered the spin-off again and, on 11 May 2004, held a detailed review and discussion on the investment theses and execution plan prior to a public announcement. External financial and legal advisors were present at this meeting and reported directly to the Board of Directors. The Directors confirmed their continuing support for the project and, on 17 May 2004, held a meeting to approve the announcement of the spin-off. On 18 May 2004, the spin-off was publicly announced.

On 26 May 2004, Alcan publicly confirmed that the planned spin-off was a fundamental portfolio choice that would have the collateral benefit of achieving the separation of competing businesses that was required to obtain the necessary competition approvals for the Pechiney Combination. Alcan and the European Commission held detailed discussions concerning the terms of and rationale for the proposed transaction and the asset composition of the entity to be spun-off. As part of its planning for the proposed spin-off, Alcan has taken into account the comments received from the European Commission. On 3 November 2004, Alcan submitted a formal approval proposal to the European Commission.

Also on 26 May 2004, Alcan and the United States Department of Justice ("DOJ") executed and filed with the United States District Court in Washington, D.C. an amended final judgment in respect of anti-trust issues relating to the Pechiney Combination. The amendment recognized that the Company's proposed spin-off transaction provided an alternative solution to the anti-trust issue addressed by the existing order to divest the Ravenswood, West Virginia, rolling facility. According to the terms of the amendment, either the sale of the Ravenswood plant or the divestment of the Oswego, New York, rolling facility would sufficiently address the concern of the DOJ. The DOJ has confirmed to Alcan that the spin-off satisfied the undertaking under the amended final judgment.

On 23 June 2004 and 23 September 2004, the Alcan Board of Directors reviewed the progress in relation to the proposed spin-off again.

On 28 September 2004, Alcan filed with the securities authorities in Canada a preliminary version of the Canadian non-offering prospectus and filed with the securities authorities in the United States the U.S. registration statement on Form 10 containing such Canadian prospectus relating to the Novelis Spin-off. The non-offering prospectus is available on SEDAR at www.sedar.com and the registration statement on Form 10 is available on EDGAR at www.sec.gov.

On 27 October 2004, the Board of Directors received a comprehensive update of the proposed separation and financial arrangements for the proposed spin-off.

Following announcement of the proposed spin-off, certain parties independently expressed an interest to acquire Alcan's rolled products businesses. Management, with the assistance of Alcan's financial advisors, engaged in confidential discussions with some of these parties, emphasizing the advantages of the spin-off in terms of value, execution certainty and timing. The best of these proposed offers were presented to the Board of Directors at its 23 November 2004 meeting. The Board of Directors considered these offers and the terms, conditions and risks attached thereto and concluded that the proposed spin-off provided the best value creation proposition to Alcan's Shareholders. Consequently, the Board of Directors approved the convening of a special meeting of its shareholders on 22 December 2004.

On 22 December 2004, the shareholders of Alcan approved the plan of arrangement required for the Novelis Spin-off, voting, 99.92% in favour.

On 4 January 2005, the Company announced that the Board of Directors had given the final authorization for the Novelis Spin-off. The articles of arrangement were filed under the Canada Business Corporation Act and the certificate of arrangement was issued giving effect to the Novelis Spin-off on 6 January 2005.

On 6 January 2005, the Novelis Spin-off became effective and Novelis began operating on a stand-alone basis.

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Alcan and Novelis have entered into a separation agreement providing in particular for the undertaking of Novelis not to engage, for a period of five years following the separation, in the production and sale of certain products for the aluminum plate and aerospace markets. Alcan and Novelis have also entered into several ancillary agreements, including agreements with respect to transitional services, the supply of source and manufactured materials between Alcan and Novelis, intellectual property, tax sharing and disaffiliation and employee matters.

2.2      Reasons for the Novelis Spin-off

The separation of substantially all of the rolled products businesses held by Alcan prior to the Pechiney Combination from the other Alcan businesses was a portfolio choice in the best interests of Alcan and its Shareholders providing a number of benefits to Alcan and to the businesses transferred to Novelis, including:

-          Sharper Business Focus. The separation of Novelis from Alcan has enabled Alcan to focus on developing its portfolio of low cost alumina and primary aluminum businesses as well as its high value-added specialty packaging, aerospace and engineered products businesses. The separation permits Novelis to focus on aluminum rolled products, which allows Novelis to respond more quickly to market demands and efficiently allocate its capital, technical and human resources.

-          Independent Access to Capital. The separation has provided each of Alcan and Novelis with independent access to capital, which is intended to result in more focused capital allocation practices including an appropriate focused alignment of debt capacity with the individual cash generation profile of each company.

-          Targeted Incentives for Employees. The separation has given opportunities within each company to provide incentives to employees that more closely align their interests with the performance of the business within which they are employed.

-          Distinct Investment Profiles. Because Alcan and Novelis operate in different industries with different business profiles, including different cash flow profiles, the shares of each company have distinct investment qualities. Establishing two separate equity securities allowed investors to hold a direct investment in the businesses operated by Novelis and to value each of Alcan and Novelis separately.

-          Sound Resolution to Regulatory Requirements. As part of the Pechiney Combination, Alcan entered into undertakings with European competition regulators that required, among other things, the separation of the ownership of Alcan's Neuf Brisach rolling facility in France and Norf rolling facility in Germany. Alcan also entered into undertakings with the DOJ that required the separation of the ownership of the Oswego, New York, rolling facility from Alcan's Ravenswood, West Virginia, rolling facility. The Novelis Spin-off has offered a sound resolution to these regulatory requirements.

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2.3       Novelis Facilities

The former Alcan facilities that were transferred to Novelis in the Novelis Spin-off are the following:

Novelis Facilities
Locations			% of Ownership	Products / Services
Belgium.............		Flemalle	100	Rolled Products
Brazil.................		Pindamonhangaba	100	Rolled Products and Recycling
		Santo Andre (Utinga)	100	Rolled Products
		Ouro Preto†	100	Bauxite/Alumina, Primary Metal, Power
		Cubatao, Sao Paulo (Petrocoque) †	100	Calcined Coke
		Aratu†	100	Primary Metal
Canada..............		Kingston, Ontario	100	Rolled Products
		Saguenay, Quebec	100	Rolled Products
		Burnaby, British Columbia†	100	Rolled Products
		Toronto, Ontario†	100	Rolled Products
France..............		Annecy	100	Rolled Products
		Rugles	100	Rolled Products
Germany............		Göttingen	100	Rolled Products
		Nachterstedt	100	Rolled Products
		Norf	50	Rolled Products
		Ohle†	100	Rolled Products
		Ludenscheid	100	Rolled Products
		Berlin†	100	Rolled Products
Italy..................		Bresso	100	Rolled Products
		Borgofranco d'Ivrea	100	Recycling
		Pieve Emanuele	100	Rolled Products
Korea...............		Ulsan	68	Rolled Products
		Yeongju	68	Rolled Products
Luxembourg.......		Dudelange	100	Rolled Products
Malaysia............		Bukit Raja	59	Rolled Products
Switzerland.........		Sierre*	100	Rolled Products
United Kingdom...		Falkirk**	100	Rolled Products
		Rogerstone	100	Rolled Products
		Warrington (Latchford Locks)	100	Recycling
		Bridgnorth†	100	Rolled Products
United States.....		Berea, Kentucky	100	Recycling
		Fairmont, West Virginia	100	Rolled Products
		Greensboro, Georgia	100	Recycling
		Logan, Kentucky	40	Rolled Products
		Louisville, Kentucky	100	Rolled Products
		Oswego, New York	100	Rolled Products and Recycling
		Terre Haute, Indiana	100	Rolled Products
		Warren, Ohio	100	Rolled Products
†	Sites that were within Alcan Business Groups other than Rolled Products.
*	Shared site with the Engineered Products Business Group.
**	The facility was closed in December 2004.

Novelis manages its activities on the basis of geographical areas and is organized under four business groups, namely: Novelis North America; Novelis Europe; Novelis Asia; and Novelis South America.

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B.        ALCAN BUSINESS GROUPS

As of the date of this report, Alcan has four Business Groups: Bauxite and Alumina, Primary Metal, Engineered Products and Packaging. In 2004, prior to the Novelis Spin-off, Alcan had two additional Business Groups which appear in this Report: Rolled Products Americas and Asia and Rolled Products Europe.

1.         Bauxite and Alumina

The Bauxite and Alumina Business Group comprises all Alcan bauxite mines and deposits, smelter‑grade alumina refineries and specialty aluminas plants[1].

1.1       Products and Services / Business Units

1.1.1    Bauxite: Aluminum is one of the most abundant metals in the earth's crust but is never found in its pure form. Bauxite is the basic aluminum-bearing ore, mostly found in tropical and sub-tropical regions of the world. The bauxite mines send their output to supply the alumina plants.

1.1.2   Smelter-Grade Alumina: Alumina (aluminum oxide) is produced by a chemical process. Crushed bauxite is mixed with caustic soda under pressure at high temperatures to create sodium aluminate. Seeded with pure alumina trihydrate, the sodium aluminate is agitated and, through precipitation, the caustic soda is separated and reused. The resulting product is heated to extract water and becomes calcined alumina. Depending upon quality, between four and five tonnes of bauxite are required to produce approximately two tonnes of alumina.

1.1.3    Specialty Alumina: Alcan produces specialty aluminas including products for a wide array of applications including fire retardant products, refractory bricks, zeolite, alum, plastics, paper, solid surface products, absorbents and ceramics.

1.1.4     Services: Alcan generates additional revenues through the sale of engineering, technology and other services to both internal customers and third parties.

1.2        Sales and Operating Revenues

In 2004, the Bauxite and Alumina Business Group had intersegment sales and operating revenues of $1.6 billion and third party sales and operating revenues of $1.5 billion, the latter making up 6% of Alcan's 2004 sales and revenues. Average realized prices for alumina increased in 2004, when compared to 2003, in line with higher LME prices and higher demand in the alumina market. Higher alumina prices contributed to improved earnings in 2004, partially offset by a 14% production cost increase over 2003. Production cost increases were mainly due to higher raw material, freight and energy costs and foreign exchange fluctuations.

Alcan used 12.2 million tonnes of bauxite to produce 5.2 million tonnes of smelter-grade alumina, which were either transferred to its current smelting operations through swap agreements or direct intersegment sales or sold to third parties. The balance of the smelter requirements, 1.3 million tonnes, was purchased from third parties. Alcan also produced and sold, to third parties, 0.6 million tonnes of specialty aluminas.

For further information concerning the Bauxite and Alumina Business Group's sales to third parties, business group profit, total assets and the percentage of Alcan's total revenue contributed by the Bauxite and Alumina Business Group, see Note 34 to the Consolidated Financial Statements.

1.3        Production / Facilities

1.3.1    Canada: Alcan owns the Vaudreuil alumina facility at Jonquière, Quebec. Bauxite for its operation is obtained from Brazil, Guinea and Australia (see below). Alumina and specialty alumina produced at Vaudreuil supply, in part, the smelters in Quebec and are also sold in specialty alumina markets in the U.S. and Canada. Alcan also operates the Brockville specialty alumina plant in Ontario.

[1] Except where otherwise stated, all information excludes Aluminium de Grèce S.A., which is classified as discontinued operations.

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1.3.2    Australia: Alcan owns the Gove bauxite refinery and mine in Australia's Northern Territory. In 2004, the amount of bauxite mined at Gove was 5.8 million tonnes and the refinery produced 2.0 million tonnes of smelter-grade alumina, which was used at the Kitimat, Iceland, Quebec and Sebree smelters as well as being sold to third parties. On 9 September 2004, the Company announced the expansion of the Gove refinery to increase alumina capacity to 3.8 million tonnes per year. Alcan owns directly and indirectly 41.39% of Queensland Alumina Ltd. ("QAL"), which operates an alumina plant at Gladstone, Queensland, Australia. Each participant in that plant supplies bauxite for toll conversion. All of Alcan's bauxite processed by QAL is purchased from Comalco Limited ("Comalco") in Australia under a long-term mining and exchange agreement. Alcan's share of production from QAL is used to supply third parties. Alcan and Comalco have an agreement providing for the future development of Alcan's Ely bauxite mine in Cape York, Queensland, with Comalco's adjacent operations.

1.3.3    Brazil: Alcan purchased approximately 2.1 million tonnes of bauxite in 2004 from a 12.5% owned company, Mineração Rio do Norte S.A. ("MRN"). MRN's Porto Trombetas mine in the Amazon region has an operating capacity of about 16.7 million tonnes per year. Bauxite purchased from MRN is processed at the Vaudreuil plant (see above) and at the Alumar alumina refinery in São Luis, Brazil, which has an annual capacity of about 1.3 million tonnes; Alcan owns a 10% interest in Consorcio de Alumínio do Maranhao, the legal entity operating the Alumar refinery. Alcan Alumínio do Brasil Ltda. also has alumina facilities (and related bauxite mining facilities) at Ouro Preto with a capacity of about 135,000 tonnes of alumina per year and 500,000 tonnes of bauxite per year, which supply smelters in Brazil. The Ouro Preto facilities were transferred to Novelis.

1.3.4    France: Alcan owns a 100% interest in three plants, Gardanne, Beyrède and La Bâthie. The total production of these plants was approximately 0.6 million tonnes for 2004 of which one third was for smelter grade alumina (produced only at the Gardanne facility) and the balance for specialty aluminas. The smelter grade alumina is primarily shipped to the St. Jean de Maurianne smelter facility in France and specialty products are sold to third parties.

Alcan also has a 100% interest in Société Générale de Recherches et d'Exploitations Minières, owner of the Montroc/Paulinet fluorspar mine, which has an annual operating capacity of 70,000 tonnes.

1.3.5    Germany: Alcan owns a 100% interest in Alufin (Teutschental, Germany) which produces specialty alumina products from raw materials supplied by plants located in France. Total annual production for this plant is 17,000 tonnes.

1.3.6    Ghana: Alcan purchased about 0.5 million tonnes of bauxite in 2004 from Ghana Bauxite Co. Ltd., in which it holds an interest of 80% and whose bauxite mine is located in Awaso.

1.3.7    Greece: Alcan owns a 60.2% interest in Aluminium de Grèce S.A. ("AdG"), a publicly traded company, with 10% owned by the local government and the rest being widely held. The refinery produces annually 0.8 million tonnes of alumina. The refinery's bauxite needs are partially supplied by Delphi-Distomon (60% owned by Alcan) and third parties. Delphi's annual production is approximately 0.8 million tonnes. In December 2004, Alcan announced an agreement to sell its controlling interest in the Greek operations, and accordingly these operations have been classified as discontinued operations.

1.3.8    Guinea: Alcan and Alcoa World Alumina each hold a 45% interest in Halco (Mining) Inc. ("Halco"), which in turn is a 51% owner of Compagnie des Bauxites de Guinée S.A. ("CBG") that currently mines bauxite for export at Conakry, in the Boké region of the country. The Government of the Republic of Guinea holds the remaining 49% of CBG. CBG has exclusive rights through 2038 to bauxite reserves and resources in a 10,000 square mile area in the northwestern part of the country. Alcoa World Alumina, Alcan and other Halco shareholders acquire CBG bauxite for use in their individual businesses.

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Alcan purchased about 5.7 million tonnes of bauxite in 2004 under contracts in effect through 2011 from CBG, whose ore is processed at the Vaudreuil plant (see above) and is also sold to third parties. CBG has an annual operating capacity of about 13.5 million tonnes, of which 6.2 million tonnes are reserved for Alcan needs.

On 13 May 2004, Alcan and Alcoa World Alumina announced the signing of a memorandum of understanding to assess the feasibility of developing jointly a 1.5-million tonne per year alumina refinery in the Republic of Guinea. On 24 November 2004, Alcan announced that it had signed a protocol of negotiation with Alcoa and the Government of the Republic of Guinea setting out the items and framework for the alumina refinery project, which are in the process of negotiation with the Government. A final investment decision would be made following completion of a detailed feasibility study, before December 2005.

1.3.9     India: Alcan holds a 45% interest in the proposed Utkal bauxite and alumina project in Orissa, India. The planned project would include a 1.5-million tonne per year integrated alumina plant and associated bauxite mine, with potential to further expand production capacity.

            Alumina Plants

With respect to smelter-grade alumina and specialty alumina, Alcan operated the following production facilities:

Smelter-Grade Alumina Refineries
Locations			% of Ownership by Alcan	Annual Capacity (thousands of tonnes)
Australia.....................		QAL, Gladstone	41.4	1,610	*
		Gove, Northern Territory	100	1,980
Brazil..........................		Ouro Preto†	100	135
		Alumar, São Luis	10	135	*
Canada.......................		Vaudreuil, Quebec	100	1,169
France........................		Gardanne	100	200
Greece.......................		Saint Nicolas**	60.2	470	*
†	Transferred to Novelis.
*	Represents Alcan's share.
**	Classified as discontinued operations.

Specialty Alumina Plants
Locations			% of Ownership by Alcan	Annual Capacity (thousands of tonnes)
Brazil..........................		Ouro Preto†	100	10
Canada.......................		Brockville, Ontario	100	18
		Vaudreuil, Quebec	100	160
France........................		Gardanne	100	420
		Beyrède	100	43
		La Bâthie	100	28
Germany.....................		Teutschenthal	100	17
†	Transferred to Novelis.

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1.4        Source Materials

1.4.1    Bauxite: Alcan obtains its bauxite from mining Subsidiaries, Joint Ventures, consortium companies and third party suppliers. In 2004, the Company consumed 13.5 million tonnes of bauxite. Based on bauxite deposits in numerous locations around the world, Alcan has more than sufficient bauxite reserves to meet its needs and does not believe that availability of bauxite will constrain its operations in the foreseeable future.

Bauxite Mines / Deposits
Locations			% of Ownership by Alcan	Annual Capacity (thousands of tonnes)
Australia......................		Gove, Northern Territory	100	6,000
		Ely, Queensland	100	0	**
Brazil..........................		Porto Trombetas	12.5	2,100	*
		Ouro Preto†	100	500
Ghana.........................		Awaso	80	700	*
Greece.......................		Distomon***	60.2	494	*
Guinea........................		Conakry	22.9	6,200	*
India............................		Orissa	45	0	**
†	Transferred to Novelis.
*	Represents Alcan's share.
**	Bauxite extraction not yet in operation.
***	Classified as discontinued operations.

1.4.2    Chemicals and Other Materials: Certain chemicals and other materials required for the production of alumina, such as caustic soda, fuel oil, natural gas, lime and flocculents are purchased from third parties.

2.         Primary Metal

2.1       Products / Business Units

The Primary Metal Business Group represents all Alcan primary aluminum facilities and power generation installations worldwide, as well as technology sales, equipment sales and engineering operations[2].

2.1.1    Power Operations: The smelting of one tonne of aluminum requires between 13.5 and 18.5 megawatt hours of electric energy to separate the aluminum from the oxygen in alumina. Alcan produces electricity at its own generating plants in Canada, Brazil, the U.K., Norway and China.

2.1.2    Smelter Operations: Primary aluminum is produced through the electrolytic reduction of alumina. Approximately two tonnes of alumina yield one tonne of metal. Alcan operates and has interests in 24 smelters in 12 countries. Products include sheet ingot, extrusion billet, rod, foundry ingot and remelt ingot for conversion into fabricated products for end-use markets in consumer goods, transportation, construction and other industrial applications.

On 10 March 2004, the Company announced that it secured the necessary regulatory and government approvals to move forward with its previously announced definitive joint venture agreement with Qingtongxia Aluminium Company and the Ningxia Electric Power Development and Investment Co. Ltd. Under the agreement Alcan invested $110 million as of December 2004 for a 50% participation and for a secure power supply in an existing 150‑kilotonne modern pre-bake smelter located in the Ningxia autonomous region in the People's Republic of China.

[2] Except where otherwise stated, all information excludes Aluminium de Grèce S.A., which is classified as discontinued operations.

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In June 2004, Alcan announced the signing of a Memorandum of Understanding with Oman Oil Company S.A.O.C. ("OOC") and with the Abu Dhabi Water and Electricity Authority ("ADWEA") for a 20% equity interest in a proposed smelter in Sohar, Oman. On 23 February 2005, a shareholders' agreement was signed with OOC and ADWEA in the development of a proposed 325‑kilotonne per annum aluminum smelter project in Sohar, Oman. Under a technology transfer agreement, Alcan would provide Sohar Aluminium Company L.L.C. with a license and related technical services necessary to implement Alcan's AP35 Technology. ADWEA will be providing technical services and management support for a related power plant. Alcan would also have the option of acquiring up to a 60% interest in a second potline of similar capacity. The decision for the final approval of the project is expected in the second half of 2005, as well as final construction approval date. Construction would begin shortly thereafter, with full production expected by 2008.

On 18 November 2004, the Company launched a new feasibility study for the construction of a new aluminum smelter in Coega, Eastern Cape Province, South Africa, with the South African Government. The focus of this new study will be the use of the highly efficient and advanced AP30 or AP35 smelting technologies.

On 29 December 2004, the Company announced that it had entered into a binding agreement for the sale of its controlling interest in Aluminium de Grèce S.A. ("AdG") to Mytilineos Holdings S.A. of Greece. Under the terms of the agreement, Mytilineos Holdings S.A. and certain affiliated companies will be acquiring from Alcan a 53% equity position in AdG. The balance of Alcan's interest, some 7%, may be sold by Alcan to Mytilineos Holdings one year after the closing pursuant to a three-month put option. The AdG smelter has been classified as discontinued operations.

2.1.3   Electrometallurgy Operations: The electrometallurgy facilities produce ferroalloys, silicon, specialty silicon alloys and recycled magnesium. Some of these products are especially designed to upgrade the performance of steel, cast iron and light alloys.

On 30 December 2004, the Company announced that it had reached agreement in principle to sell the electrometallurgy business to Ferroatlántica, S.L., of Spain.

2.1.4    Trading: Alcan trading operations are conducted by wholly-owned Subsidiaries, which trade on behalf of other Alcan Subsidiaries. They also engage in limited aluminum and related trading activities for third parties. Trading services include several main activities: sales of excess raw materials, such as internal supplies, managing risk exposures through LME transactions and managing the supply logistics between smelters and fabricating plants. The Company's third party trading function focuses on aluminum transactions.

2.1.5     Technology Sales, Equipment Sales and Engineering Operations: This group sells smelter technology, equipment and engineering services to third parties and Subsidiaries. The main areas of activity are:

-    Technology Sales, Aluval, which is located in Voreppe, France, provides the advanced smelter technology in terms of productivity (production capacity and energy consumption), such as the AP18, AP22, AP30 and AP35 technology, to third parties. This sector is supported by a strong research and development program. The services include the sale of licenses of primary aluminum smelting technology, engineering and start-up support and technical assistance;

-    Equipment Sales, Électricité Charpente Levage (''ECL'') is a leading supplier of cranes and pot equipment for the aluminum industry. In addition, it provides cranes for baking furnaces and rodding shop equipment. The ECL operations are located in France, Canada, South Africa, Australia, the Netherlands, Mozambique and China; and

-    Engineering Services, Alcan Alesa Engineering provides services and custom-made engineering solutions on a global basis to Subsidiaries as well as third parties. Alesa subsidiaries maintain engineering offices in Switzerland and Canada. The main areas of activities include raw materials technologies, materials handling technologies and process automation.

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2.2        Sales and Operating Revenues

2.2.1    Smelter Operations: In 2004, the Primary Metal Business Group recorded intersegment sales and operating revenues of $4.3 billion and third-party sales and operating revenues of $4.3 billion, the latter making up 17% of Alcan's 2004 sales and operating revenues. In 2004, business group profit (as defined in the Management's Discussion and Analysis of Financial Condition and Results of Operations) from continuing operations improved significantly as compared to 2003 and reflected the contribution from the Pechiney Combination and synergy benefits, higher metal realizations, better product mix and lower foreign currency balance sheet translation losses. These favourable factors were partially offset by the adverse effects on costs of the strengthening of local currencies, higher alumina, energy and freight costs, fuel-related raw material prices, costs related to the Arvida shutdown, as well as a 2003 favourable adjustment for asset retirement obligations.

The Company is the second largest aluminum producer in the world, as well as the recognized leader and supplier of smelting technology. Approximately 50% of its primary metal is produced using company-owned power, constituting a major competitive advantage when compared to the industry average of 20%. With a sharp focus on cost reduction, productivity improvement and technology development, Alcan is continuously reinforcing its low cost primary metal position. Alcan believes that 75% of its production is produced at costs which are lower than the world average.

Approximately half of the primary aluminum produced in Alcan's North and South American smelters was sold at market prices to Alcan's fabricating facilities, including those that have been transferred to Novelis, primarily in the form of sheet ingot, rod, molten metal and remelt ingot. The remainder is sold to third party customers in North and South America as well as in Asia, in the form of value-added ingot, primarily extrusion billet, sheet ingot, rod, foundry ingot or remelt ingot. Over 50% of Alcan's European smelter production was consumed by Alcan's fabricating facilities in 2004, including those that have been transferred to Novelis.

Average ingot product realizations were $1,884 per tonne in 2004 compared to $1,605 per tonne in 2003 and $1,528 per tonne in 2002.

For further information concerning the Primary Metal Business Group's sales to third parties, business group profit, total assets and the percentage of Alcan's total revenue contributed by the Primary Metal Business Group, see Note 34 to the Consolidated Financial Statements.

2.3        Production Facilities and Sales Centres

2.3.1    Smelter Operations: As at 31 December 2004, Alcan operated and had interests in 24 primary aluminum smelters with a nominal rated annual capacity of 3.4 million tonnes (representing Alcan's share only). Nine of these smelters, having a total nominal rated capacity of 1.6 million tonnes, are located in Canada; the other smelters are located in Australia, Brazil, Cameroon, China, France, Iceland, the Netherlands, Norway, Switzerland, the U.K. and the U.S. During 2004, Alcan's smelters produced 3.4 million tonnes of primary aluminum: 1,561,400 tonnes in Canada, 196,900 tonnes in the U.S., 211,900 tonnes in the U.K., 108,800 tonnes in Brazil, 178,400 tonnes in Iceland, 82,200 tonnes in Norway, 44,900 tonnes in Switzerland, 442,200 tonnes in France, 217,800 tonnes in the Netherlands, 255,000 tonnes in Australia, 40,100 tonnes in Cameroon and 43,900 tonnes in China. The smelter operated by AdG has been reclassified as a discontinued operation.

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Primary Metal Smelter Locations
Locations			% of Ownership by Alcan	Annual Capacity (thousands of tonnes)
Australia.......		Tomago, New South Wales	51.5	263	*
Brazil...........		Ouro Preto**	100	51
		Aratu**	100	58
Cameroon....		Edea (Alucam)***	47	45	*
Canada........		Alma, Quebec	100	405
		Sept-Iles (Alouette), Quebec	40	98	*
		Beauharnois, Quebec	100	51
		Bécancour, Quebec	25	102	*
		Kitimat, British Columbia	100	277
		Grande-Baie, Quebec	100	196
		Laterrière, Quebec	100	219
		Shawinigan, Quebec	100	93
		Arvida, Quebec	100	163
China...........		Qingtongxia	50	75	*
France........		Dunkerque	100	256
		Lannemezan	100	50
		Saint-Jean-de-Maurienne	100	135
Greece.........		Saint Nicolas****	60.2	100	*
Iceland........		Reykjavik (ISAL)	100	176
The Netherlands...		Vlissingen	85	190	*
Norway........		Husnes (SORAL)	50	82	*
Switzerland.....		Steg	100	44
United Kingdom....		Lynemouth	100	169
		Lochaber	100	41
United States......		Sebree, Kentucky	100	196
Total Smelting Operations				3,535
Total Smelting Operations (excluding discontinued operations)				3,435
*	Represents Alcan's share.
**	Transferred to Novelis.
***	Alcan's direct ownership in Edea is 47%; however the Company obtains 100% of the production of the plant as the major industrial shareholder and manager of Alucam.
****	Classified as discontinued operations.

 

2.3.2      Electrometallurgy Operations (these operations have been reclassified as discontinued operations)

Electrometallurgy Locations
Locations		% of Ownership by Alcan	Annual Capacity 2004 (thousands of tonnes)	Principal Product
France...........	Chateau-Feuillet	100	48	(silicon, silicocalcium, ferrosilicon)
	Anglefort	100	32	(silicon)
	Les Clavaux	100	32	(silicon)
	Laudun	100	43	(ferrosilicon)
	Marignac	100	4	(magnesium)
	Montricher	100	24	(silicon)
	Pierrefitte	100	16	(ferrosilicon)
South Africa....	Polokwane	100	50	(silicon)
Total Electrometallurgy Operations			249

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2.3.3    Technology and Equipment Sales Centres

Technology and Equipment Sales Centres
Country	Location	Country	Location
Australia..........	Eagle Farm, Queensland	Mozambique.............	Matola
Canada...........	Quebec, Quebec	The Netherlands.........	Ritthem
	Montreal, Quebec	South Africa...............	Richards Bay
China.............	Shanghai	Switzerland................	Zurich
France............	Voreppe
	Ronchin

2.3.4    Other Aluminum Sources: Other sources of aluminum include the following: purchase of primary aluminum under contracts and spot purchases, purchases of UBCs and aluminum scrap for recycling and purchases of customer scrap returned against ingot or semi-fabricated product sales contracts. Such purchases are mainly from third party smelters, traders and, in the case of scrap, from customers and dealers.

2.4       Source Materials

2.4.1    Electrical Power: In Canada, Alcan's plants have an aggregate installed generating capacity of 3,583 megawatts, of which about 2,864 megawatts may be considered to be hydraulically available over the long-term. These facilities supply electricity to Alcan's Canadian smelters. All water rights pertaining to Alcan's hydroelectric installations are owned by Alcan, except for those relating to the Peribonka River in Quebec. An annual charge is payable to the Quebec provincial government based on total energy generation, escalating at the same rate as the Consumer Price Index in Canada. In 1984, Alcan and the Quebec provincial government signed a lease extending the Company's water rights relating to the Peribonka River to 31 December 2033 against an annual charge based on sales realizations of aluminum ingot, with an option to extend the term to 2058. In British Columbia, water rentals for electricity used in smelting and related purposes are directly tied to the sales realizations of aluminum produced at Kitimat. For electricity sold to third parties, Alcan pays provincial water rentals at rates that are fixed by the British Columbia provincial government, similar to those paid by B.C. Hydro, the provincially-owned electric utility.

One third of Alcan's installed hydroelectric capacity in Canada was constructed by 1943, another third by 1956 and the remainder by 1968. All these facilities are regularly maintained and are expected to remain fully operational over the foreseeable future.

In addition to electricity generated at its own plants, as described above, Alcan agreed to purchase, under a long-term agreement, between one and three billion kilowatthours of electrical energy annually from Hydro-Québec, the provincially-owned electric utility, beginning in 2001. The Aluminerie Alouette, which is 40% owned by Alcan, purchases its electricity needs from Hydro-Québec pursuant to two supply contracts. A long-term contract is currently in place for the existing smelter, whereas a new contract has been negotiated for the Expansion Project (Phase II), which is near completion. The Aluminerie de Becancour, which is 25% owned by Alcan since the Pechiney Combination, also purchases its electricity needs from Hydro-Québec.

Any electricity that is surplus to Alcan's needs is sold to neighbouring utilities or customers under both long-term and short-term arrangements.

For smelters located outside of Canada, electricity is obtained from a variety of sources. The smelters in England and Scotland operate their own coal-fired and hydroelectric generating plants, respectively. In Norway, the Vigelands metal refinery (owned 50% by Alcan) is provided its power needs from the Vigelands power stations. The smelters in Brazil obtain a portion of their electricity requirements from owned hydroelectric generating plants and purchase the balance. The smelter in the U.S. purchases electricity under a long-term contract through 2011 as well as short-term contracts. The smelter in Iceland is supplied with hydroelectric power from Iceland's national power company. The Norwegian smelter (owned 50% by Alcan) has a number of contracts for energy supply. The smelter in Switzerland is supplied with power under a short-term contract. The two larger smelters in France are supplied power under long-term contracts, whereas the Lannemezan smelter has a long-term contract expiring next year. The smelter in the Netherlands, which is 85% owned by Alcan, has a number of short to medium term contracts for energy supply. The Australian smelter, which is 51.55% owned by Alcan, purchases its power needs under two long-term contracts. The smelter in Cameroon, which is 46.7% owned by Alcan, is also supplied power under a long-term contract. Alcan's investment in China, which resulted in a 50% participation in a pre-bake smelter, has a secure power supply for its needs.

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Power Locations
Locations			% of Ownership by Alcan	Installed Capacity (MW)
Brazil.......		Ouro Preto Power Stations**	100	47
		Candonga Power Station**	50	70	*
Canada....		Quebec Power Stations	100	2,687
		Kemano, British Columbia	100	896
China.......		Daba power plant	21.8	261	*
Norway....		Vigelands	100	26
United Kingdom.....		Lynemouth (coal-fired)	100	420
		Highlands Power Stations	100	80
* **	Represents Alcan share. Transferred to Novelis.

2.4.2     Anodes: Anodes are used and consumed in the smelting process. Most of Alcan's smelters produce their anodes at their own on-site facilities. Anodes are also produced in a stand-alone facility in Aluminium & Chemie Rotterdam B.V., located in the Netherlands ("Aluchemie"). Alcan holds 53% of Aluchemie directly while Sor-Norge Aluminium A.S. ("SORAL"), its 50% Joint Venture, owns a further 11%. The remainder of the shares are held by Hydro Aluminum A.S.

Each of the shareholders of Aluchemie is entitled to a volume of anodes corresponding to its participation at prices determined by formula. Alcan's share of anodes produced by Aluchemie is currently used at the Alcan Iceland Ltd. and SORAL smelters or sold to third party customers.

The main raw materials for anode production are calcined petroleum coke and pitch. The production process involves the mixing of the raw materials followed by cold shaping of the anode and baking of the anode at elevated temperatures.

2.4.3     Chemicals and Other Materials: Certain chemicals and other materials (e.g., aluminum fluoride, required for the production of aluminum at Alcan's smelters) are also produced by its chemical operations. Other materials (e.g., caustic soda, fuel oil, fluorspar and petroleum coke) are purchased from third parties.

3.         Rolled Products Americas and Asia

3.1        Products

In 2004, through an extensive network of rolled products facilities in North and South America and Asia, the Rolled Products Americas and Asia Business Group manufactured aluminum sheet and light gauge products, including can stock, automotive sheet and industrial products and managed Alcan's global can sheet business. Substantially all of the operations of the Rolled Products Americas and Asia Business Group were transferred to Novelis on 6 January 2005.

3.2        Sales and Operating Revenues

In 2004, the Rolled Products Americas and Asia Business Group shipped 1.8 million tonnes of rolled products that included 217,000 tonnes of customer-owned metal. The Business Group's third-party sales and operating revenues for 2004 were $4.4 billion, representing 18% of Alcan's total sales and operating revenues for the year. Sales increases in 2004 were driven by the cost of higher-priced metal inputs being passed through to customers in addition to an increase of 10% in shipments. The weakening of the Dollar against other currencies, especially the euro, was also a factor in the sales increase. In 2004, record shipments in Asia and South America accompanied by an 7% increase in North America. The increases resulted from strong market demand and an increase in market share in South America. Volumes increased by 15% in Asia and 14% in South America.

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Principal markets are beverage can sheet, containers and packaging, transportation (including automotive), building products and other industrial applications.

For further information concerning the Rolled Products Americas and Asia Business Group's sales to third parties, business group profit, total assets and the percentage of Alcan's total revenue contributed by the Rolled Products Americas and Asia Business Group, see Note 34 to the Consolidated Financial Statements.

3.3        Production / Facilities

At the end of 2004, the annual rolled products manufacturing capacity in the Rolled Products Americas and Asia Business Group was:

-    North America, 1.25 million tonnes, divided among the following plants: Saguenay (Quebec), Kingston (Ontario), Louisville, Logan and Berea (Kentucky), Oswego (New York), Terre-Haute (Indiana), Fairmont (West Virginia), Warren (Ohio) and Greensboro (Georgia);

-     Asia, 460,000 tonnes, divided among the Yeongju and Ulsan (Korea) and Bukit Raja (Malaysia) plants; and

-     South America, 280,000 tonnes, divided among the Pindamonhangaba (Brazil) and Utinga (Brazil) plants.

3.4       Source Materials

3.4.1    Sheet and Primary Ingot: In 2004, 401,000 tonnes of sheet ingot were purchased from the Primary Metal Business Group and 190,000 tonnes were purchased from third party suppliers for the Rolled Products Americas and Asia Business Group. In addition, 220,000 tonnes of primary ingot were purchased from the Primary Metal Business Group and 301,000 tonnes were purchased from third party suppliers.

3.4.2    Recycling: As a matter of course, the Business Group operated facilities in many plants to recycle post consumer aluminum as well as scrap aluminum generated during the manufacturing process at customers' and Alcan's manufacturing facilities. Recycled metal is primarily utilized by Alcan's own rolling facilities to produce can sheet.

The Business Group had a dedicated UBC recycling plant, which has an ultimate capacity of 80,000 tonnes per year, at Pindamonhangaba, Brazil. In addition, the Business Group operated three specialized recycling plants in the U.S. for the recycling of UBCs and process scrap returned from customers. In the case of UBCs, the Business Group has a well-established North American recycling network. In 2004, its U.S. plants processed more than 24 billion UBCs.

4.         Rolled Products Europe

4.1        Products

In 2004, the Rolled Products Europe Business Group supplied markets with a variety of aluminum rolled products including bare and coated sheet, coil, plate and shate, which are used by customers for applications such as building, transport, cans and closures, lithographic, foils, automotive and industrial applications. On 6 January 2005, substantially all of the operations of the Rolled Products Europe Business Group were transferred to Novelis.

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4.2        Sales and Operating Revenues

In 2004, the Rolled Products Europe Business Group shipped 982,000 tonnes of rolled products to third parties, that included 198,000 tonnes of customer-owned metal. This Business Group's sales and operating revenues for 2004 were $3.2 billion, representing 13% of total Alcan sales and operating revenues for the year.

In 2004, market conditions were generally difficult in Europe, and the euro continued to strengthen versus the U.S. dollar, slowing down overseas exports. Sales and operating revenues rose by 31% and shipments by 21% in 2004. The impact of higher LME prices passed through to customers accounted for most of the improvement in sales and operating revenues, with higher shipments following the Pechiney Combination and foreign currency translation effects accounting for the remaining improvement. In response to the challenging conditions, Rolled Products Europe Business Group continued to optimize its product and market portfolio for increased efficiency, announcing the closure of the Falkirk and Flemalle plants. Production from these plants will be reallocated to other plants, allowing reduced costs and working capital, while improving customer service.

Principal markets are beverage can sheet, packaging, automotive and transportation, building products, lithographic sheet, electrical and other industrial applications.

For further information concerning the Rolled Products Europe Business Group's sales to third parties, business group profit, total assets and the percentage of Alcan's total revenue contributed by the Rolled Products Europe Business Group, see Note 34 to the Consolidated Financial Statements.

4.3        Production Facilities

At the end of 2004, the Rolled Products Europe Business Group's annual rolled products manufacturing capacity in Europe was 1.8 million tonnes of finished goods, divided among the following rolling plants: Flemalle (Belgium), Annecy and Rugles (France), Rogerstone (U.K.), AluNorf, Nachterstedt, Göttingen, Ludenscheid and Singen (Germany), Sierre (Switzerland), Dudelange (Luxembourg), Bresso and Pieve Emanuele (Italy).

AluNorf, in Neuss, Germany is the world's largest rolling plant and is operated as a 50% Joint Venture with Hydro Aluminum A.S. The other plants are wholly owned.

4.4        Source Materials

4.4.1     Sheet Ingot: In 2004, 403,000 tonnes of sheet ingot were purchased from the Primary Metal Business Group and 239,000 tonnes were purchased from third party suppliers.

4.4.2     Recycling: The Business Group operated a UBC collection system in the U.K., which supplies a specialized recycling plant for the recycling of UBCs and process scrap returned from customers, with a capacity of 87,000 tonnes per year.

The Rolled Products Europe Business Group played leading roles in joint industry programs to promote aluminum collection and recycling in many countries. Facilities in many plants recycle aluminum scrap generated internally by fabricating activities. A facility in the U.K. produces 65,000 tonnes per year of sheet ingot from aluminum scrap, and a secondary aluminum smelter in Borgofranco, Italy, which has a capacity of 70,000 tonnes per year, produces secondary aluminum from aluminum scrap.

            Recycled metal is primarily utilized by the rolling facilities to produce can sheet.

5.         Engineered Products

5.1        Products / Business Units

Alcan's Engineered Products Business Group manufactures composites and produces engineered or fabricated aluminum products for a broad range of applications. Engineered Products Business Group develops applications for its customers, especially those in the automotive, mass transportation, aerospace, marine and beverage container markets, while also supplying the architectural and building construction, electrical, machinery, display, leisure and wind power industries. In addition, the group includes a fully integrated manufacturer of aluminum cable, rod and strip products in North America. It also produces a wide range of soft and hard aluminum alloy extrusions as well as aluminum rolled products such as sheet, foil and plate.

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The Engineered Products Business Group's product range is divided into the following business units:

5.1.1    Aerospace, Transport & Industry ("ATI"): ATI serves customers in aerospace, marine, road and rail transportation and other engineering industries with plate, sheet, hard extrusions and castings. It offers production technical assistance, design and delivery of cast, rolled, extruded, rolled pre-cut or shaped parts and the recycling of customers' machining scrap.

5.1.2    Composites: This unit manufactures and supplies products including multi-material composites, for example, comprising an outer and inner skin of aluminum sheet surrounding a plastic core; foam plastic materials, covered, if required by specific market requirements, with paper or plastic layers; fibre-reinforced plastic components and balsa core materials. The main applications for composites include building facades, display and transportation, for which composites have a number of advantages over more traditional materials because of their low weight-to-stiffness ratio, ease of application and design variety.

5.1.3    Cable: This unit produces cable, whereby aluminum is cast and rolled into rod, which is then drawn into wire and stranded into cable for the transmission and distribution of electricity. Rod is also used for mechanical applications such as screen wire and strip finds application in cable armouring.

5.1.4    Extruded Products: This unit produces aluminum profiles by the extrusion process, which involves forcing hot metal through a die to create profiled shapes for the transportation, machine and building industries. Examples of end‑products using extrusions include parts for rail cars, buses, automotive application as well as industrial components.

5.1.5    Automotive Structures: This unit serves major automotive manufacturers with advanced automotive technology, producing advanced engineered shaped products including aluminum cockpit carriers, bumpers and structural parts.

5.1.6    Service Centres: The Service Centres typically offer various forms of fabricated aluminum including plates, extrusions and composite panels and perform value-added services for local customers such as cutting, shaping, machining and assembling.

5.1.7    Alcan International Network: This sales organization comprises nearly 40 offices in 36 countries that sell and source products in 60 countries. It provides marketing and sourcing services for both Alcan Business Groups and third party customers.

5.1.8    Ventures: Ventures comprises a number of different, generally smaller operations offering products such as capacitor foil, refrigeration panels and composite structures for transportation. Its mandate is to maximize value of existing businesses and to develop new growth opportunities.

5.1.9    Specialty Sheet: This business unit serves customers in the can stock, bright sheet, closures, automotive, building, foil stock and standard rolled products sectors with coils and sheet.

5.2        Sales and Operating Revenues

In 2004, the Engineered Products Business Group had third party sales and operating revenues of $5.2 billion, representing 21% of total Alcan sales and operating revenues for the year. Revenues were higher than in 2003 mainly due to the Pechiney Combination. In 2004, the group benefited from price increases, higher volumes and favourable exchange rates.

5.2.1    Aerospace Transport & Industry ("ATI"):  ATI had third-party sales and operating revenues of $1,154 million in 2004. Strong aerospace volumes led to higher revenues compared to prior years.

5.2.2    Composites: Composites had third party sales and operating revenues of $553 million in 2004. Volume was significantly higher than last year due to higher demand for its products and full year revenues from the Gator-cor and Baltek acquisitions made in 2003. The market segments for the composite products are display, architecture, transportation and industry.

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5.2.3    Cable: Cable had third party sales and operating revenues of $557 million in 2004. Strong demand, a better product mix and a 5% increase in production helped Cable increase revenues by more than 20%. Alcan Cable is one of the largest aluminum cable manufacturers in North America and supplies many sectors of the electrical industry and utilities, electrical distributors and original equipment manufacturers.

5.2.4    Extruded Products: Extruded Products had third party sales and operating revenues of $748 million in 2004. The Extruded Products business unit is a leading supplier of large and hard alloy extrusions with customers in rail, bus, marine, automotive and engineering applications. Extruded Products expanded its production of soft alloy extrusions with the extrusion plants acquired with the Pechiney Combination. Strong demand for these products helped offset the slower demand for large profile rail products.

5.2.5    Automotive Structures: Automotive had third party sales and operating revenues of $164 million in 2004. The Automotive business unit was reorganized in 2004 to focus on automotive structures and built two new operating facilities in North America.

5.2.6    Service Centres: The Service Centres had third-party sales and operating revenues of $432 million in 2004. Revenues include those of Almet Germany and Almet Belgium following the Pechiney Combination, as well as some components of Almet France. Alcan Service Centres supply mainly small and mid-sized industrial companies with specialist services and fabricated products such as sheet, plate, composite materials and extrusions. In 2004, management initiated the sale of certain general distributor operations in France.

5.2.7    Alcan International Network: The Alcan International Network had third party sales and operating revenues of $603 million in 2004. The Alcan International Network was previously part of the International Trade Division of Pechiney.

5.2.8     Ventures:  Ventures had third party sales and operating revenues of $166 million in 2004. In 2004, management announced the sale of its high purity aluminum smelting and rolling plants in France.

5.2.9    Specialty Sheet: In 2004, the Specialty Sheet business of the Neuf-Brisach, France, rolling mill had third party sales and operating revenues of $790 million. Specialty sheet's revenues benefited from strong demand for can stock and heat exchangers as well as from favourable exchange rates.

For further information concerning the Engineered Products Business Group's sales to third parties, business group profit, total assets and the percentage of Alcan's total revenue contributed by the Engineered Products Business Group, see Note 34 to the Consolidated Financial Statements.

5.3        Production and Services Facilities

Alcan's Engineered Products Business Group consists of 48 production facilities, 50 Service Centre facilities and 37 Alcan International Network commercial offices around the world. This number includes the plants located in Neuf-Brisach, France, and Ravenswood, West Virginia.

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Engineered Products Facilities
Locations			Products / Services
Brazil...............		Camacari	Composites
Canada...........		Lapointe, Quebec	Cable
		Saint-Maurice, Quebec	Cable
		Saguenay, Quebec	Automotive
China..............		Shanghai	Composites
Czech Republic...		Decin	Extruded Products
		Strojmetal	Automotive
Ecuador...........		Guayaquil	Composites
France..............		Saint-Florentin	Extruded Products
		Carquefou	Aerospace, Transportation & Industry
		Montreuil-Juigne	Aerospace, Transportation & Industry
		Issoire	Aerospace, Transportation & Industry
		Sabart	Aerospace, Transportation & Industry
		Ussel	Aerospace, Transportation & Industry
		Chambery	Ventures
		Goncelin	Ventures
		Mercus-Garrabet	Ventures
		Froges	Ventures
		Ham	Extruded Products
		Nuits-Saint-Georges	Extruded Products
		Neuf-Brisach	Specialty Sheet
Germany........		Dahenfeld	Automotive
		Gottmadingen	Automotive
		Markt Schwaben	Automotive
		Osnabruck	Composites
		Rastatt***	Automotive
		Singen*	Automotive, Composites, Extruded Products, Specialty Sheet
		Burg	Extruded Products
		Crailsheim	Extruded Products
		Landau	Extruded products
Slovenia..........		Koper	Automotive
Switzerland......		Altenrhein	Ventures
		Gunzgen****	Composites
		Sierre**	Extruded Products, Specialty Sheet
		Sins	Composites
		Zurich	Ventures
United Kingdom....		Chelmsford	Composites
		Workington	Aerospace, Transportation & Industry
United States......		Benton, Kentucky	Composites
		Glasgow, Kentucky	Composites
		Roseburg, Oregon	Cable
		Sedalia, Missouri	Cable
		Statesville, North Carolina	Composites
		Williamsport, Pennsylvania	Cable
		Northvale, New Jersey	Composites
		Novi, Michigan	Automotive
		Vernon, California	Aerospace, Transportation & Industry
		Ravenswood, West Virginia	Aerospace, Transportation & Industry
*	Shared site with the Packaging business group.
**	Shared site with Novelis.
***	Site closed in 2004.
****	Site sold in 2004.

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5.3.1    Aerospace Transport & Industry ("ATI"): The facilities are located in France (Carquefou, Montreuil-Juigne, Issoire, Sabart and Ussel), Switzerland (Sierre and Steg), in the U.K. (Workington) and in the U.S. (Vernon, California and Ravenswood, West Virginia).

5.3.2    Composites: Composites has the following 11 main plants: Shanghai (China), Camacari (Brazil), Guayaquil (Equador), Osnabrueck and Singen (Germany), Sins and Gunzgen (Switzerland), Chelmsford (U.K.) and Benton, Glasgow and Statesville (U.S.). The Singen site, also part of the Automotive and the Extruded Products business units, is shared with the Packaging Business Group.

5.3.3    Cable: Alcan's main wire, rod, strip and cable businesses are located in Canada and the U.S.: Lapointe and St. Maurice (Quebec), Roseburg (Oregon), Sedalia (Missouri), and Williamsport (Pennsylvania).

5.3.4    Extruded Products: Alcan produces extruded products at the following plants: Decin (Czech Republic), St. Florentin, Ham and Nuits-Saint-Georges (France), Singen, Burg, Crailsheim and Landau (Germany) and Sierre (Switzerland). The site located in Sierre is shared with Novelis, see above.

5.3.5     Automotive Structures: Among the product lines included in this business unit are extrusion-based safety systems and other structural automotive components, which are produced in Dahenfeld, Gottmadingen, Rastatt, Markt Schwaben and Singen (Germany), Koper (Slovenia), Novi, Michigan (U.S.) and Saguenay, Quebec (Canada).

5.3.6    Service Centres: The Service Centre network operates across most of Europe. Alcan Service Centres are established in: St. Johann im Pongau, Hallein, Leobersdorf and Vienna (Austria), Brussels and Jumet (Belgium), Charbonnières, Saint-Quentin-Fallavier, Nice, Poissy, Rive-de-Gier, Satolas, Blanquefort, Strasbourg, Seclin, Marseille, Bordeaux, Lyon, Nantes and Ozoir-la-Ferrière (France), Nurnberg, Hohenacker, Hamburg, Bad Salzungen, Duesseldorf, Fellbach, Hanover, Hebsack, Gera, Mannheim, Munich, Frankfurt, Immendingen and Cologne (Germany), Budapest (Hungary), Bologna, Florence, Milan, Padova, and Treviglio (Italy), Breda and Oss (the Netherlands), Lisbon (Portugal), Oradea (Romania), Ljubljana (Slovenia), Madrid and Molins de Rey (Spain), Niederglatt, Fribourg and Dagmersellen (Switzerland) and Wednesbury (U.K.).

5.3.7     Alcan International Network: The commercial offices of the Engineered Products Business Group have a global presence and are located at Algiers (Algeria), Melbourne and Victoria (Australia), Vienna (Austria), Brussels (Belgium), Sao Paulo (Brazil), Mississauga, Ontario (Canada), Beijing, Hong Kong, Taipei and Shanghai (China), Prague (Czech Republic), Copenhagen (Denmark), Cairo (Egypt), Paris (France), Düsseldorf (Germany), Athens (Greece), Budapest (Hungary), Milan (Italy), Tokyo (Japan), Seoul (Korea), Mexico City and Monterrey (Mexico), Amsterdam (the Netherlands), Oslo (Norway), Manila (Philippines), Lisbon (Portugal), Bucharest (Romania), Moscow (Russia), Singapore (Singapore), Danston (South Africa), Madrid and Barcelona (Spain), Bangkok (Thailand), Istanbul (Turkey), Dubai (United Arab Emirates), Slough (U.K.) and Stamford, Connecticut (U.S.).

5.3.8     Ventures: The Ventures operations are conducted at Chambery, Goncelin, Mercus-Gabarret and Froges (France), Altenrhein and Zurich (Switzerland) and Singen (Germany).

5.3.9     Specialty Sheet: Beginning in January 2005, the Specialty Sheet operations are conducted at Neuf-Brisach (France) and Singen (Germany).

5.4        Source Materials

Aluminum used to produce engineered products is purchased from the Primary Metal Business Group and from third party suppliers, which include producers and traders. Recycled metal is also purchased from customers and third party suppliers, which include traders.

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6.         Packaging

6.1        Products / Business Sectors

Alcan is a full-service packaging provider, with a worldwide presence in food flexible, pharmaceutical & medical, beauty & personal care, and tobacco packaging. A broad technical and geographical range of packaging solutions is offered using plastics, engineered films, aluminum, paper, paperboard and other materials.

In 2004, the Packaging Business Group was divided into six sectors:

6.1.1   Food Packaging Europe, 6.1.2 Food Packaging Americas and 6.1.3 Food Packaging Asia: Alcan Packaging manufactures a wide range of packaging products for the food, meat, dairy and beverage industries and is a leading producer of flexible and rigid specialty packaging in Europe, North America, South America and Asia, converting plastics, plastic film, foil and paper materials into value-added packaging. Alcan Packaging provides packaging solution expertise in wide ranging markets around the world, including beverages, biscuits/cookies/cereals, confectionery, dairy products, fresh and frozen food, instant products, pet food, retorted foods and snacks. It also produces caps and over caps for wine, champagne and liquor bottles.

The principal activities of these sectors are printing, coating and lamination of plastic film, aluminum foil and paper into primary packaging materials for food manufacturers. These sectors also produce their own engineered films. The main processes used are rotogravure and flexographic printing, lamination using adhesive, wax or plastic extrusion and various coating processes to add barrier properties, sealability or gloss. The Food Packaging sectors also produce capsules and closures in aluminum and tin and single and multi-layer injection and extrusion plastic bottles.

6.1.4    Global Pharmaceutical Packaging: Alcan Packaging is one of the world's leading suppliers of packaging to the pharmaceutical industry, with production sites and R&D expertise in Europe, Asia and the Americas. Products and services include flexible packaging, caps and closures, contract packaging, folding cartons, glass vials, ampoules and tubing products, medical flexible packaging, plastic bottles and science products.

6.1.5     Global Beauty Packaging: This unit is a world leader in the manufacture and supply of beauty packaging products for the make-up, fragrance and personal care markets, including collapsible tubes, mascara, lipstick, beauty promotional items, aluminum cans and bottles. Production facilities are maintained in Europe, North and South America and Asia.

6.1.6    Global Tobacco Packaging: Alcan Packaging is a leading supplier to the global tobacco industry with manufacturing operations around the world. Tobacco packaging products include folding cartons, flexible packaging, inner bundling and decorated tinplate containers.

6.2        Sales and Operating Revenues

Packaging sales to third parties were $6.1 billion in 2004. The Packaging Business Group's sales and operating revenues represented 25% of Alcan's total sales and operating revenues for the year.

Business group profit for 2004 was $303 million higher than in 2003 in large part due to the contribution of former Pechiney businesses and driven by strong organic volume growth, operational progress, synergies and favourable foreign exchange impacts. Substantial operating cost reductions were also achieved, resulting both from ongoing productivity programs and from the carry-over impact of prior year restructuring activities. These major operational advances more than offset a major raw material price rise that resulted in particular from the significant increase of plastic resin prices in the second half of the year. Full pass-through of these increased costs was not possible before year-end on account of the normal re-pricing time lag.  

6.2.1    Food Packaging Europe: The food sector is the largest in terms of sales distribution by market. Food Packaging Europe generated third party sales and operating revenues of $2.0 billion in 2004.

6.2.2     Food Packaging Americas: Third party sales and operating revenues were $1.5 billion in 2004.

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6.2.3     Food Packaging Asia: Third party sales and operating revenues were $0.2 billion in 2004.

6.2.4     Global Pharmaceutical Packaging: Third party sales and operating revenues were $0.8 billion in 2004.

6.2.5     Global Beauty Packaging: Third party sales and operating revenues were $1.1 billion in 2004.

6.2.6     Global Tobacco Packaging: Third party sales and operating revenues were $0.5 billion in 2004.

For further information concerning the Packaging Business Group's sales to third parties, business group profit, total assets and the percentage of Alcan's total revenue contributed by the Packaging Business Group, see Note 34 to the Consolidated Financial Statements.

6.3        Production Facilities

Alcan has 179 packaging plants in 27 countries.

6.3.1    Food Packaging Europe: Alcan produces an extensive range of products at its manufacturing facilities in the Czech Republic (1 plant), France (11 plants), Germany (5 plants), Ireland (1 plant), Italy (4 plants), Morocco (1 plant), the Netherlands (1 plant), Portugal (1 plant), Spain (4 plants), Switzerland (2 plants), Turkey (1 plant), the U.K. (2 plants), Chile (1 plant), Canada (1 plant) and the U.S. (1 plant).

6.3.2    Food Packaging Americas: Manufacturing facilities are located in the U.S. (19 plants), Argentina (2 plants), Brazil (1 plant), Canada (2 plants), Mexico (2 plants), France (1 plant) and the U.K. (1 plant).

6.3.3     Food Packaging Asia: The food markets are served from China (4 plants), Indonesia (1 plant), New Zealand (1 plant), Philippines (1 plant) and Thailand (2 plants).

6.3.4   Global Pharmaceutical Packaging: Alcan's pharmaceutical products are manufactured and sent from the U.S. (20 plants), Belgium (1 plant), Brazil (1 plant), Canada (1 plant), China (1 plant), France (7 plants), Germany (1 plant), Italy (1 plant), Puerto Rico (2 plants), Switzerland (1 plant) and the U.K. (1 plant).

6.3.5    Global Beauty Packaging: Alcan produces its beauty and personal care solutions in France (15 plants), Brazil (2 plants), Canada (1 plant), China (1 plant), Czech Republic (2 plants), Germany (1 plant), Indonesia (1 plant), Italy (5 plants), Mexico (3 plants), Poland (1 plant), Spain (2 plants), the U.K. (1 plant) and the U.S. (5 plants).

6.3.6   Global Tobacco Packaging: The production facilities are located in the U.K. (20 plants), Canada (1 plant), Germany (1 plant), Kazakhstan (1 plant), the Netherlands (2 plants), Turkey (1 plant) and the U.S. (2 plants).

6.4       Source Materials

Packaging is made from a variety of materials including aluminum, plastics, paper, paper board, glass and steel. Aluminum foil stock used in packaging is in part purchased from other Business Groups. Other source materials are purchased from many third party suppliers.

C.        INFORMATION BY GEOGRAPHIC AREAS

See Note 33 to the Consolidated Financial Statements for financial information by geographic areas.

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D.          RESEARCH AND DEVELOPMENT

Alcan's research and development ("R&D") comprises a global system of research laboratories, applied engineering centers and plant technical departments covering all major markets and regions. Alcan invested $239 million, $190 million and $115 million in R&D in 2004, 2003 and 2002, respectively. Pechiney invested €93 million and €90 million in R&D in 2003 and 2002, respectively.

With the Pechiney Combination, the Company's R&D capability was significantly strengthened by the addition of specialized laboratories and a leading R&D presence in the aerospace sector.

Alcan's R&D laboratories collaborate on projects with leading universities in various parts of the world and the Company's scientists and engineers regularly publish articles on research topics in peer-reviewed journals.

1.1       Research Laboratories relating to the Bauxite and Alumina Business Group are located in Gardanne (France), Saguenay, Quebec (Canada) and Brisbane (Australia).

1.2       Research Laboratories relating to the Primary Metal Business Group are located in the Saguenay, Quebec (Canada), Voreppe, Chambery and Saint-Jean-de-Maurienne (France).

1.3       Research Laboratories relating to the Rolled Products Americas and Asia Business Group are located in Kingston, Ontario (Canada), Spokane, Washington and Aurora, Illinois (U.S.).

1.4       Research Laboratories relating to the Rolled Products Europe Business Group are located in Voreppe (France) and Neuhausen (Switzerland).

1.5       Research Laboratories relating to the Engineered Products Business Group are located in Neuhausen (Switzerland), Kingston, Ontario (Canada) and Voreppe (France). Applied engineering center dedicated to the mass transportation industries is located in Zurich (Switzerland). The centers specialized in the automotive industry are located in Detroit, Michigan (U.S.) and Singen (Germany). These applied engineering centers support Alcan's overall research activities and focus on product applications and provide technical development support to customers. The applied engineering centers draw extensively on the resources and specific competencies of the central laboratories.

1.6       Research Laboratories relating to the Packaging Business Group are located in Neenah (U.S.) and Neuhausen (Switzerland).

In addition to innovations from operations personnel, the central laboratories are complemented by the technical departments in the various plants as well as from applied engineering centers located close to key markets and operating divisions.

E.         ENVIRONMENT, HEALTH & SAFETY

Alcan is subject to a broad range of environmental laws and regulations in each of the jurisdictions in which it operates. These laws and regulations, as interpreted by relevant agencies and the courts, impose increasingly stringent environmental protection standards regarding, among other things, air emissions, wastewater storage, treatment and discharges, the use and handling of hazardous or toxic materials, waste disposal practices, and the remediation of environmental contamination. The costs of complying with these, including participation in assessments and remediation of sites, could be significant. In addition, these standards can create the risk of substantial environmental liabilities, including liabilities associated with divested assets and past activities. Currently, Alcan is involved in a number of compliance efforts and legal proceedings concerning environmental matters.

The Company published its third corporate sustainability report in 2004. This report discusses the Company's challenges, goals, and successes related to building a sustainable and profitable future. For example, data is included on the significant Company-wide greenhouse gas reductions achieved through Alcan's ongoing TARGET program that was launched in 2001.

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The Company was selected as a member of the Dow Jones Sustainability World Index for the fourth time in the past five years. Furthermore, Alcan is actively involved in the World Business Council for Sustainable Development Project on Accountability and Reporting and the Company's President and Chief Executive Officer is chair of the World Economic Forum's Water Initiative aimed at protecting and managing the world's water resources.

In 2003, Alcan implemented the Alcan Integrated Management System ("AIMS"), built on three key components, namely Value Based Management, Continuous Improvement and EHS FIRST, which must ensure that the same focus on value, improvement and environment, health and safety is found in each of its operations.

Maximizing Value is Alcan's governing objective and Value Based Management is the framework for all strategic investment decisions.

EHS FIRST represents a focus on environment, health and safety throughout the Company, and is aligned with ISO 14001, a globally accepted environmental standard, and OHSAS 18001, an international occupational health and safety certification. All Alcan sites are well advanced towards the goal of full compliance by the end of 2005. Newly acquired facilities will have two years to comply. EHS capital expenditures in 2004 were $79 million and are projected to be $131 million and $157 million in 2005 and 2006, respectively. Expenditures charged against income for environmental protection were $175 million in 2004 and are expected to be $218 million and $193 million in 2005 and 2006, respectively.

Continuous Improvement initiatives at Alcan were formalized under a common system in 2003 with the aim of maximizing opportunities by improving the Company's competitive position and efficiency. Alcan's continuous improvement system integrates two complementary approaches, Lean Manufacturing and Six Sigma.

F.         PROPERTIES

Alcan believes that its properties, most of which are owned, are suitable and adequate for its operations.

G.         EMPLOYEES

As at 31 December 2004, before the Novelis Spin-off, Alcan employees were located as follows: approximately 27,800 in North America, 41,000 in Europe, 3,900 in South America, and 9,800 in Asia, Pacific and other areas. A majority of the hourly-paid employees are represented by labour unions.

There are 26 collective labour agreements in effect in Canada. Labour agreements for unionized employees at Alcan facilities in Quebec expire at the end of 2006 or in 2007. In British Columbia, the collective Labour Agreement at Kitimat expires in 2005.

In all other locations, collective agreements are negotiated on a site, regional or national level, and are of different durations.

Following the Pechiney Combination, France became the country where Alcan employs the largest number of employees. Employment conditions are defined by French law and by four national collective agreements relating to various industrial sectors: chemicals, mechanics, plastic transformation and cardboard transformation. Additional specific agreements exist at each individual company. Pension liabilities are not included in collective agreements, as pensions in France mostly result from a compulsory system managed at the national level. Complementary pensions for same individuals result from their specific contracts.

H.          PATENTS, LICENSES AND TRADEMARKS

Alcan owns, directly or through Subsidiaries, a large number of patents in Canada, the U.S., the European Union as well as in other countries, which relate to the products, uses and processes of its businesses. The life of a patent is most commonly 20 years from the filing of the patent application. Alcan is continually filing new patent applications. All significant patents will be maintained until their formal expiration. Therefore, at any point in time, the range of life of the Company's patents will be from one to 20 years.

32

Alcan owns a number of trademarks that are used to identify its businesses and products. The Company's trademarks have a term of three to ten years. As a result, at any point in time, the Company will have trademarks at the end of their term and others with a full ten-year term. At the end of their term, significant trademarks will be renewed for a further three to ten years.

Alcan has also acquired certain intellectual property rights under licenses from others for use in its businesses.

Alcan's patents, licenses and trademarks constitute valuable assets; however, the Company does not regard any single patent, license or trademark as being material to its sales and operations viewed as a whole. The Company has no material licenses or trademarks the duration of which cannot, in the judgment of management, be extended or renewed as necessary.

I.          COMPETITION AND GOVERNMENT REGULATIONS

The aluminum and packaging businesses are highly competitive in price, quality and service. The Company experiences competition from a number of companies in all major markets. In addition, aluminum products face competition from products fabricated from several other materials such as plastic, steel, iron, copper, glass, wood, zinc, lead, tin, titanium, magnesium, cement and paper. The Company believes that its competitive standing in aluminum production is enhanced by its ability to supply its own power to many smelters at low cost.

The operations of the Company, like those of other international companies, including its access to and cost of raw materials and repatriation of earnings, may be affected by such matters as fluctuations in monetary exchange rates, currency and investment controls, withholding taxes and changes in import duties and import restrictions. Imports of ingot and other aluminum products into certain markets may be subject to import regulations and import duties.  These affect the Company's sales realizations and may affect the Company's competitive position. Shipments of the Company's products are also subject to the anti‑dumping laws of some importing countries, which prohibit sales of imported merchandise at less than defined fair values.

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ITEM 3 LEGAL PROCEEDINGS

The responsibility for each case marked with an asterisk has been assumed by Novelis and will not be reported on by Alcan in the future. Many of the company names featured in these cases will be changed to reflect their being affiliates of Novelis.

A.        ENVIRONMENTAL MATTERS

1.         Cases

PAS Site*. Alcan's subsidiary, Alcan Aluminum Corporation ("Alcancorp"), and third parties were defendants in a lawsuit instituted in July 1987 by the U.S. Environmental Protection Agency ("EPA"), relating to the Pollution Abatement Services site, a third-party disposal site, in Oswego, New York. Alcancorp was alleged to have contaminated this site through the disposal of waste materials disposed by contractors employed by Alcancorp (and other companies). In January 1991, the U.S. District Court for the Northern District of New York found Alcancorp liable for a share of the clean-up costs for the site, and in December 1991 determined the amount of such share to be $3,175,683. Alcancorp appealed this decision to the United States Court of Appeals, Second Circuit. In April 1993, the Second Circuit reversed the District Court and remanded the case for a hearing on what liability, if any, might be assigned to Alcancorp depending on whether Alcancorp could prove that waste did not contribute to the costs of remediation at the site. This matter was consolidated with another case, instituted in October 1991 by the EPA against Alcancorp in the U.S. District Court for the Northern District of New York seeking clean-up costs in regard to the Fulton Terminals Superfund site in Oswego County, New York, which was also owned by PAS. The demand hearing was held in October 1999. The trial court re-instituted its judgment holding Alcancorp liable. The amount of the judgment plus interest was $13.5 million as of December 2000. The case was appealed and in the first quarter 2003, the Second Circuit affirmed the decision of the trial court. In 2004, Alcancorp paid $13.9 million in respect of the EPA claim, representing the full amount of the judgment plus interest, and $1.6 million to the State of New York, and is currently responsible for future oversight costs, which are currently estimated at approximately $600,000.

PAS Owego Site Performing Group*. Alcancorp has also been sued by 10 other potentially responsible parties ("PRPs") at the PAS Site seeking contribution from Alcancorp for costs they collectively incurred in cleaning up the PAS Site from 1990 to present.  The costs incurred by the PRPs to date total approximately $6.4 million plus accrued interest.  Based upon currently available record evidence, Alcancorp contests responsibility for costs incurred by the PRPs.

Butler Tunnel Site*. Alcancorp was a party in a 1989 EPA lawsuit before the U.S. District Court for the Middle District of Pennsylvania involving the Butler Tunnel Superfund site, a third party disposal site. In May 1991, the Court granted summary judgment against Alcancorp for alleged disposal of hazardous waste. In 1995, after unsuccessful appeals, Alcancorp paid the entire judgment plus interest.

The United States government filed a second cost recovery action against Alcan seeking recovery of expenses associated with the installation of an early warning system for potential future releases for the Butler site. The complaint does not disclose the amount of costs sought by the government. The case has been held in abeyance since shortly after it was filed, so there has been no opportunity for discovery to fully determine the type of remedial action, the total cost, the existence of other settlements or the existence of other non-settling PRPs that may exist for potential contribution. In December 2004, a motion for partial summary judgment was heard and is under advisement.

Tri-Cities Site*. In 1994, Alcancorp and other companies responded to an EPA inquiry concerning the shipment of old drums to Tri-Cities Inc. (New York). The company previously reprocessed barrels. In 1996, the EPA issued an administrative order directing the defendants to clean up the site. Alcancorp refused to participate claiming that the drums sent to Tri-Cities were empty at the time of delivery. In September 2002, notification was received from the EPA that it contended Alcancorp was responsible for past and future response costs with accrued interest and penalties for its violation of the administrative order. Alcancorp responded by a letter outlining its objections to the EPA's determination. The EPA has since indicated that the matter has been referred to the DOJ for enforcement. In December 2004, a consent decree was negotiated with the DOJ and the EPA. Under this consent agreement, Alcancorp will pay $360,000 as a civil penalty as well as $600,000 in past costs.  Future costs have been capped at a maximum payment of $800,000.

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Quanta Resources Facility*. In June 2003, the DOJ filed a Superfund costs recovery action in Federal Court for the Northern District of New York against Alcancorp and Russell Mahler, seeking unreimbursed response costs, stemming from the disposal of rolling oil emulsion at Quanta Resources facility in Syracuse, New York. The parties are in the process of discovery. In 2003, Alcancorp met with the DOJ and EPA who quantified potential liability for unreimbursed costs and penalties in the amount of $1,400,000.

Sealand Site*. New York State claims Alcancorp's waste sent to the Sealand, New York site is hazardous; Alcancorp disputes this. There are several PRPs. In 1993, Alcancorp declined a request to participate in a program to provide drinking water to area residents, contending that Alcancorp's waste did not cause or contribute to the harm caused at the site. In 2003, Alcan met with the DOJ and the EPA, who quantified the potential liability of unreimbursed costs at $2.6 million.

Omega Chemical Site. In February 1996, the Company's U.K. Subsidiary, British Alcan Aluminium plc ("British Alcan"), sold its investment in Luxfer USA Limited. As part of the sale, British Alcan agreed to indemnify the purchaser for certain liabilities, including those arising out of the following proceeding. Luxfer is a participant in a joint defense group being sued by the EPA in the District Court, Central District of California, in regard to waste Luxfer sent, from 1976 to 1991, to the Omega chemical waste Superfund site, a third party disposal site in Whittier, California. Large waste generators are cleaning up the site. Luxfer, being a small contributor, is discussing settlement offers. In 2000, Luxfer and other members of the joint defense group entered into a consent decree with the EPA to complete the remediation. There were no developments in 2004.

Pennsauken Landfill. Alcancorp is a third party defendant in a suit seeking response costs initiated in December 1995 by the State of New Jersey alleging that a disposal company that had been used by Alcancorp disposed of hazardous material in a landfill in Pennsauken. Including Alcancorp, there are 277 third party defendants in this action. Various discovery issues remain outstanding. In 2002, the court granted the third party defendants the right to conduct depositions of the other party's experts. The discovery process continued in 2003. There were no developments in 2004.

Diamond Alkali Superfund Site - Lower Passaic River Initiative*. In 2003, Alcancorp received a letter from the EPA regarding an investigation being launched into possible contamination of the Lower Passaic River in 1965. Alcancorp has been identified as a PRP arising from one of its plants in Newark, New Jersey which may have generated hazardous waste. A remedial investigation feasibility study is scheduled to be carried out over several years. Alcancorp has entered into a consent decree with other PRPs and will participate in a remedial feasibility study.

Jarl Extrusions (Rochester, NY)*. The Property was acquired in 1988 and operations were subsequently discontinued. The property was sold in December 1996.  Alcancorp retained liability under the terms of sale. Alcancorp entered into a consent decree with New York State under which evaluation of the site was performed in 1990-91.  Most of the contamination was determined to have come from an adjoining site. In its response to Alcancorp's investigation report, the State asked Alcancorp to admit to liability for off-site pollution (a Superfund site is located next door) and that hazardous sludge was dumped in the ponds behind the building. Alcan denied these allegations. In light of the State's failure to cooperate with Alcancorp in the remediation of this site under the consent decree, Alcancorp filed a notice of protest with the State. Alcancorp's appeal was denied, but the State later approved a new remedial investigation report negotiated between NYSDEC and Alcancorp. A feasibility study for site remediation was then approved by NYSDEC.  Negotiations on a consent order for remedial design construction were completed and the order will be finalized once restrictive deed covenants have been filed for the property. Most of the clean-up has been completed. NYSDEC approved a long-term operation and monitoring plan ("O&M"). Alcancorp continues to conduct O&M and has sought permission to decommission two monitoring wells. 

Millville, New Jersey Plant. In 1997, Wheaton USA Inc. ("Wheaton"), a wholly-owned Subsidiary, began building new furnaces at its Millville, New Jersey glass plant that were alleged to violate air emission regulations. The New Jersey Department of Environmental Protection ("NJDEP") issued a citation for violation of permits. The EPA issued an information request to which Alcan responded. Wheaton made modifications to the two furnaces. Wheaton is awaiting a review and approval from the NJDEP. There were no further developments in 2004.

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Clifton, New Jersey Facility. Lawson Mardon USA plc. ("LM USA"), a wholly-owned Subsidiary, is undertaking a site investigation and clean-up of the land at its Clifton, New Jersey plant, in compliance with a NJDEP permit. No court action was brought. According to studies, offsite contamination was not a result of LM USA's operations. LM USA has reached an agreement with the NJDEP for alleged on-site contamination whereby LM USA would isolate the area and would monitor the ground water for two years. LM USA completed the remediation and ground water monitoring in 2004 and is awaiting a final determination of the NJDEP.

LM Trentesaux Site. In 1999, an investigation was carried out at a site owned by a Subsidiary, Lawson Mardon Trentesaux SA ("LM Trentesaux"), at Tourcoing, France. The land was found to be contaminated by solvent, fuel and chemical products resulting from engraving and packaging activities. An estimate of the clean-up costs was established. The investigation was also conducted to determine whether the contamination was the sole responsibility of LM Trentesaux and whether the migration of the contamination was possible. Ground contamination caused by solvent was treated and further treatment for other substances may be required.

Algoods Ontario Remediation. Beginning in 1995, environmental investigations have been conducted into the presence of oil, gasoline and volatile organic compounds ("VOCs") in the soil and groundwater at the Algoods plant site in Ontario, Canada and third party properties adjacent to this site. Algoods was sold in 1996 and under the terms of the agreement, the Company retains liability for this case. A remediation plan was approved with the Ministry of Environment ("MOE") for the oil removal and recovery is approximately 85% complete. A gasoline recovery system was commissioned by Alcan and accepted by the owner of the affected property. MOE requested and has received from Alcan a delineation study with respect to VOCs in the surrounding area. In 2004, MOE advised the Company that additional work is required. The scope of this work is currently under discussion.

Howmet Sites. Under the stock purchase agreement between Pechiney and Blade Corporation for the divestiture of certain Pechiney subsidiaries (Pechiney Corporation, Howmet Corporation, Howmet Cercast) dated 12 October 1995, Pechiney agreed to indemnify Blade Corporation, without limitation in time or a ceiling on the indemnification amount, with respect to certain environmental matters (Howmet Sites) that exceeded a reserve of $6 million on the pro-forma 1995 balance sheet of Pechiney. Alcoa, the legal successor in interest to Blade Corporation and beneficiary of the indemnification clause, asked Pechiney in 2002 to pay for the remediation costs exceeding the $6 million provision concerning the environmental risks at several sites.

Omega Chemical Sites. In addition to Alcan's defense of Luxfer at this site, Howmet is also named as a PRP at the Omega Chemical site. Howmet entered into a consent decree, the total cost of which is estimated at $15 million to all PRPs. Howmet recently entered into a revocable assignment of contribution claims in favour of the Omega Chemical PRP Group, LLC.

Dover, New Jersey Site. In 1997, Howmet notified Pechiney of high PCB readings at Dover, New Jersey. There are other possible environmental concerns at the Dover site as well. In April 1991, Howmet entered into an administrative order with the State of New Jersey for a remedial investigation/feasibility study. That process is not complete and a remedy has yet to be selected. Additionally, Howmet received oral notification in January 2004 that the State of New Jersey was seeking natural resources damages ("NRD") for claimed impact on the site groundwater. The State of New Jersey is thus asking for money damages for the impact on the groundwater separate and above the remediation costs.

Combe Fill South Landfill. In 1998, the U.S. and the New Jersey Department of Environmental Protection sued Howmet and other parties for damages and response costs in response to the environmental conditions at the Combe Fill South Landfill in New Jersey. The governments claim both past costs for remediation and future costs. An alternative dispute resolution process is underway under the supervision of the U.S. District Court for the District of New Jersey. Howmet submitted its position paper on allocation on 15 January 2004. There are hundreds of parties involved in the suit and allocations are not yet final.

Holden Mine Site. In a 1993 settlement agreement, Pechiney had agreed to indemnify Alumax for certain claims, including in relation to environmental matters relating to the Holden Mine. Holden Mine was an underground copper mine that Howe Sound Company operated from 1936 until 1957. It is located in a remote wilderness area in the Wenatchee National Forest in the State of Washington. The U.S. Forest Service, together with officials of the State of Washington and the EPA, requested the performance of a remedial investigation. An administrative order was entered in 1997. The remedial investigation identified several remedial scenarios with a wide range in cost. Total site costs (including investigation costs) and NRDs may exceed $30 million. Alcan submitted its final draft feasibility study in February 2004 and meetings took place at several times in 2004. Alcan does not yet have an agreement with the agencies on the remedy or NRDs obtained.

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Blackbird Mine. In 1994 and 1995, Pechiney signed a consent decree, with the U.S. Forest Service, National Oceanic and Atmosphere Administration and the EPA, as well as the State of Idaho and two Administrative Orders with the EPA for a remedial investigation/feasibility study and early action clean-up of the Blackbird Mine. Pechiney must pay a significant portion of the total cost of the Blackbird Mine clean-up. The U.S. must pay a smaller portion of the remediation expenses with a cap. The removal actions, which began in 1995, are largely but not entirely complete. The U.S. investigated arsenic contamination at neighboring Panther Creek Inn and a soil removal remediation was performed in 1998. In August 2002, the EPA issued its proposed remedial plan for Blackbird Mine, which includes copper and cobalt actions. In Spring 2003, the EPA issued a record of decision ("ROD"), which the Company views as unfavourable and costly. Pechiney is also trying to negotiate a modification of the consent decree to extend the time for achieving water quality standards from 2002 to 2005. Negotiations with the various agencies concerning the ROD and the consent decree were held during 2003. The U.S. also issued a unilateral administrative order ("UAO") on 11 July 2003. The UAO became effective on 10 August 2003. The parties indicated their intent to comply on 14 August 2003. The EPA estimated the ROD remedy cost at $15.4 million present value in addition to what has already been paid. The EPA also demanded $25 million in financial assurance from the parties. The Company is vigorously opposing certain elements of the additional work.

Tungsten Mine Site. In April 2000, the North Carolina Department of Environment & Natural Resources, Division of Waste Management sought cooperation for the removal of drummed hazardous substances and for monitoring, testing, analyzing and reporting on the Tungsten Mine Site, in Vance County, North Carolina. Pechiney is the successor to Haile Mining Company, which it is believed mined the site from approximately 1945 through the late 1950s. A first meeting of PRPs took place in October 2001. In October 2004, the State of North Carolina met with the PRPs and presented a proposed remedial plan to which they must respond. Remedial action is expected to cost approximately $3 million for which the Company would be partially responsible.

Pohatcong Valley Site. The U.S. Department of Interior notified Pechiney Plastic Packaging Inc. ("PPPI") on 19 November 1999 that it wanted to geophysically log certain wells at the Washington, New Jersey facility as it seeks to identify possible contributors of a specific contaminant - TCE - to the Pohatcong Valley Superfund Site. This matter involves both an on-site remediation of the Washington Plant, which is near completion and a Superfund Site, which is in the early stages of investigation.

High Point Sanitary Landfill. PPPI is one of four parties that had entered into a 1998 consent order with the NJDEP for the remediation of a former landfill in Franklin County, New Jersey. Negotiations continue between the parties and the NJDEP, with the Company's share of remediation costs, if any, being undetermined.

2.        Reviews and Remedial Actions

From time to time, the Company is subject to environmental reviews and investigations. The Company has established procedures for reviewing environmental investigations and any possible remedial action on a regular basis. Although the Company cannot reliably estimate all of the costs which may ultimately be borne by it, the Company has no reason to believe that any remedial action will materially impair its operations, materially affect its financial condition or materially affect the Company's liquidity.

B.        OTHER MATTERS

Powerex Litigation. In 1997, as part of the claim settlement arrangements related to the British Columbia Government's cancellation of the Kemano Completion Project, the Company obtained the right to transfer a portion of a power supply contract with B.C. Hydro to a third party. The Company sold the right to supply this portion to Enron Power Marketing Inc. ("EPMI"), a subsidiary of Enron Corporation ("Enron"). To obtain the consent of B.C. Hydro, the Company was required to retain a residual obligation for EPMI's performance under the power supply contract in the event that EPMI became unable to perform, to a maximum aggregate amount of $100 million, with mitigation and subrogation rights. B.C. Hydro assigned its rights to receive the power to B.C. Hydro's affiliate, Powerex Corporation ("Powerex"). On 2 December 2001, EPMI and Enron filed for protection under Chapter 11 of the U.S. Bankruptcy Code and Powerex alleged that Alcan owed it a termination payment of more than $100 million. On 17 January 2003, an arbitrator confirmed Powerex's claim for $100 million. In 2003 and 2004, there were legal proceedings in Oregon and British Columbia related to the judicial review and enforcement of the 17 January 2003 arbitral award. On 7 October 2004, Alcan and Powerex agreed to terminate all legal proceedings and, on 23 December 2004, Alcan paid to Powerex $110 million in full and final payment of the claim (inclusive of accrued interest).

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Kaiser Aluminum Corporation. On 21 January 2004, Kaiser Aluminum Corporation and affiliated entities filed a motion before the U.S. Bankruptcy Court for the District of Delaware seeking to reject the five-year alumina supply agreement between Kaiser Aluminum International, Inc. ("KAII") and Pechiney Trading Company ("PTC"). The agreement provides for the supply of 300,000 tonnes of alumina per year to PTC, from January 2002 to the end of 2006. KAII assumed the agreement after it had entered into the U.S. Chapter 11 debtor protection status. The Court specifically authorized the assumption of the agreement under applicable provisions of the U.S. Bankruptcy Code at the request of the Kaiser debtors. PTC believes that the agreement is valid and enforceable, and filed objections to the motion as well as several motions of its own against the Kaiser entities. On 22 March 2004, the motion was definitively withdrawn and the alumina supply agreement remains valid and enforceable.

The Company is also involved in ordinary course litigation in jurisdictions throughout the world, none of which, in the Company's belief, could materially impair its operations, materially affect its financial condition or materially affect the Company's liquidity.

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ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

A Special Meeting of holders of Common Shares, Series C Preference Shares and Series E Preference Shares of Alcan was held on 22 December 2004 to approve the arrangement resolution in connection with the arrangement pursuant to which most of the aluminum rolled products businesses operated by Alcan were to be transferred to Novelis and the shares of Novelis were to be distributed to Common Shareholders of Alcan.

The Special Meeting was called to consider the arrangement resolution. On a vote by ballot, the arrangement resolution was carried, with 227,278,318 Shares voted FOR and 269,756 Shares voted AGAINST the arrangement resolution. The percentage of the vote in favour was 99.92%.

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PART II

ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

The principal markets for trading in Alcan's Common Shares are the New York and Toronto stock exchanges. The Common Shares are also traded on the London, Paris and Swiss stock exchanges. The transfer agents for the Common Shares are CIBC Mellon Trust Company in Montreal, Toronto, Winnipeg, Regina, Calgary and Vancouver, Mellon Investors Services L.L.C. in New York, and Capita IRG in England. Common Share dividends, if declared, are paid quarterly on or about the 20^th of March, June, September and December to Shareholders of record on or about the 20^th of February, May, August and November, respectively.

The number of holders of record of Common Shares on 2 March 2005 was approximately 17,470.

While the Company intends to pursue a policy of paying quarterly dividends, the level of future dividends will be determined by the Board of Directors in light of earnings from operations, capital requirements and the financial condition of the Company. The Company's cash flow is generated principally from operations and also by dividends and interest payments from Subsidiaries, Joint Ventures and Related Companies. These dividend and interest payments may be subject, from time to time, to regulatory or contractual restraints, withholding taxes and foreign governmental restrictions affecting repatriation of earnings.

Dividends paid on Common Shares held by non-residents of Canada will generally be subject to Canadian withholding tax which is levied at the basic rate of 25%, although this rate may be reduced depending on the terms of any applicable tax treaty. For residents of the U.S., the treaty-reduced rate is currently 15%.

	Dividend ($)	New York Stock Exchange ($)				Toronto Stock Exchange (CAN$)
2004 Quarter		High	Low	Close	Avg. Daily Volume	High	Low	Close	Avg. Daily Volume
First	0.150	49.32	40.36	44.79	1,854,861	66.08	53.75	58.29	1,459,467
Second	0.150	47.03	36.82	41.40	1,799,261	61.87	51.02	55.20	1,175,892
Third	0.150	47.93	38.07	47.80	1,022,138	60.74	50.71	60.50	934,561
Fourth	0.150	52.65	45.74	49.04	1,011,520	62.80	56.04	58.80	983,343
Year	0.600
2003 Quarter
First	0.150	32.09	26.25	27.90	759,193	49.61	38.77	41.15	865,840
Second	0.150	32.98	27.10	31.29	619,357	44.60	39.30	42.01	787,154
Third	0.150	39.83	29.68	38.26	1,341,545	53.80	40.86	52.40	1,129,083
Fourth	0.150	48.35	38.31	46.95	1,819,066	64.25	49.83	60.57	1,071,741
Year	0.600

*   The share prices are those reported as ''New York Stock Exchange - Consolidated Trading'' and reported by the Toronto Stock Exchange.

Equity Compensation Plan Information

The information required is incorporated by reference to the Proxy Circular in section entitled ''Securities Authorized for Issuance Under Equity Compensation Plans'' on page 26.

Sales of Unregistered Securities

In 2004, the Company issued 244,842 Common Shares to former holders of Pechiney options that resided outside the United States and Canada upon the exercise of such options.  These Common Shares were not registered under the Securities Act of 1933, as amended (the "Securities Act") in reliance on Regulation S.  The dates of sale and amounts of Common Shares are set forth below:

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2004 Exercises - Dates

Dates	Number of Shares	Dates	Number of Shares	Dates	Number of Shares
13-Jan-04	14	25-Jun-04	978	07-Oct-04	2,190
21-Jan-04	2,099	05-Jul-04	1,225	08-Oct-04	838
03-Feb-04	1,225	22-Jul-04	700	12-Oct-04	2,273
09-Feb-04	4,052	31-Aug-04	978	13-Oct-04	361
22-Mar-04	718	02-Sep-04	8,961	14-Oct-04	524
29-Mar-04	7	03-Sep-04	9,774	16-Oct-04	140
01-Apr-04	1,750	06-Sep-04	35,841	18-Oct-04	1,600
13-Apr-04	2,871	07-Sep-04	59,498	22-Oct-04	8,604
14-Apr-04	5	08-Sep-04	2,793	5-Nov-04	2,000
19-Apr-04	2,991	10-Sep-04	1,816	15-Nov-04	11,446
20-Apr-04	26	20-Sep-04	2,152	16-Nov-04	377
21-Apr-04	509	28-Sep-04	20,072	23-Nov-04	1,397
26-Apr-04	6	29-Sep-04	98	30-Nov-04	718
04-Jun-04	2,153	30-Sep-04	23,244	11-Dec-04	4,303
16-Jun-04	561	06-Oct-04	4,195

In addition, the Company's subsidiary Pechiney sold a total of 1,237,558 of the Company's Common Shares between 23 January 2004 and 30 January 2004 and between 25 June 2004 and 29 June 2004. The Common Shares had been acquired by Pechiney in connection with its tender of Pechiney common shares to the initial and follow up offers made by the Company between October 2003 and January 2004 to purchase Pechiney securities.  The sales were made through the facilities of the New York Stock Exchange without registration under the Securities Act or an applicable exemption from registration. The dates of sales and amounts of Common Shares are as follows: 185,000 Shares on 23 January 2004, 107,000 Shares on 26 January 2004, 87,500 Shares on 27 January 2004, 71,600 Shares on 28 January 2004, 104,600 Shares on 29 January 2004, 135,969 Shares on 30 January 2004, 146,700 Shares on 25 June 2004, 217,889 Shares on 28 June 2004 and 181,300 Shares on 29 June 2004; for a total of 1,237,558 Shares.

The aggregate proceeds of the unregistered sales of the Common Shares discussed above were approximately $52.3 million. These proceeds were used for general corporate purposes.

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ITEM 6 SELECTED FINANCIAL DATA

SELECTED HISTORICAL FINANCIAL DATA
(in millions of Dollars, except for per share amounts)

	Years ended 31 December
U.S. GAAP	2004	2003	2002	2001	2000
Sales and operating revenues	24,885	13,850	12,483	12,545	9,237
Income (Loss) from continuing operations	252	262	421	(60)	582
Income (Loss) from discontinued operations	6	(159)	(21)	(6)	-
Cumulative effect of accounting changes	-	(39)	(748)	(12)	-
Net income (Loss)	258	64	(348)	(78)	582
Earnings (Loss) per share:
Basic and diluted:
Income (Loss) from continuing operations	0.67	0.79	1.29	(0.21)	2.31
Loss from discontinued operations	0.02	(0.49)	(0.07)	(0.02)	-
Cumulative effect of accounting changes	-	(0.12)	(2.32)	(0.04)	-
Net income (Loss) per share	0.69	0.18	(1.10)	(0.27)	2.31
Cash dividends per share	0.60	0.60	0.60	0.60	0.60
Total assets	33,341	31,948	17,761	17,551	17,846
Long-term debt (including current portion)	6,914	7,778	3,369	3,411	3,423

Alcan has historically prepared and filed its financial statements in accordance with Canadian generally accepted accounting principles (GAAP) with a reconciliation to U.S. GAAP. On 1 January 2004, the Company adopted U.S. GAAP as its primary reporting standard for presentation of its Consolidated Financial Statements.   Historical Consolidated Financial Statements were restated in accordance with U.S. GAAP. Note 35 of the Consolidated Financial Statements, prepared in accordance with U.S. GAAP provides an explanation and reconciliation of differences between U.S. and Canadian GAAP.

The financial information for all prior periods has been reclassified for discontinued operations. For a description of the Company's discontinued operations and assets held for sale, see Note 5 to the Consolidated Financial Statements, prepared in accordance with U.S. GAAP. Unaudited pro forma condensed consolidated information of the Company as at and for the year ended 31 December 2004, giving effect to the Novelis Spin-off as at 1 January 2004 for the statement of income and as of 31 December 2004 for the balance sheet, is included in Note 7 to the Consolidated Financial Statements.

In 2003, the Company retroactively adopted Statement of Financial Accounting Standard (SFAS) No. 143, Asset Retirement Obligations.  An after-tax charge of $39 million for the cumulative effect of accounting change was recorded as a result of the new standard, relating primarily to costs for spent potlining disposal for pots currently in operation.  See Note 4 of the Consolidated Financial Statements, prepared in accordance with U.S. GAAP.

In 2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets.  An after-tax charge of $748 million for the cumulative effect of accounting change was recorded as a result of the new standard, relating to impairment of goodwill. See Note 4 of the Consolidated Financial Statements, prepared in accordance with U.S. GAAP.

42

In 2001, the Company adopted SFAS Nos. 133 and 138, Accounting for Derivative Instruments and Hedging Activities.  These standards require that all derivatives be recorded in the financial statements at fair value.  Unrealized gains and losses resulting from the valuation of derivatives at fair value are recognized in net income as the gains and losses arise and not concurrently with the recognition of the transactions being hedged.  An after-tax charge of $12 million for the cumulative effect of accounting change was recorded as a result of the new standard.

The accounting policies adopted by the Company during the years 2002 to 2004 are described in Note 4 of the Consolidated Financial Statements, prepared in accordance with U.S. GAAP.

The data presented above should also be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations.

ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management's Discussion and Analysis of Financial Condition and Results of Operations is filed as exhibit 99.3 and  is incorporated by reference.

ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Interest Rates

The impact of a 10% increase in interest rates on the Company's variable rate debt outstanding at 31 December 2004 and 31 December 2003 net of its invested surplus cash and time deposits at 31 December 2004 and 31 December 2003 would be to reduce net income by $7 million and $5 million, respectively. The fixed rate debt is expected to be outstanding until maturity as the Company does not intend to refinance its fixed rate debt prior to maturity. Transactions in interest rate financial instruments for which there is no underlying interest rate exposure to the Company are prohibited. For accounting policies for interest rate swaps used to hedge interest costs on certain debt, see Note 3 of the Consolidated Financial Statements.

Currency Derivatives

The schedule below presents fair value information and contract terms relevant to determining future cash flows categorized by expected maturity dates of the Company's currency derivatives (principally forward and option contracts) outstanding as at 31 December 2004.

43

(in US$ millions, except for average contract rate)		2005	2006	2007	2008	2009	2010	Total Nominal Amount	Fair Value
FORWARD CONTRACTS
To buy USD against the foreign currency
CHF	Nominal amount	64	28	2	2	1	-	97	(13)
	Average contract rate	1.307	1.294	1.287	1.261	1.238	-
GBP	Nominal amount	34	3	-	-	-	-	37	(1)
	Average contract rate	1.840	1.906	-	-	-	-
JPY	Nominal amount	6	-	-	-	-	-	6	-
	Average contract rate	108.7	-	-	-	-	-
ZAR	Nominal amount	1	-	-	-	-	-
	Average contract rate	4.38	-	-	-	-	-	1
To sell USD against the foreign currency
AUD	Nominal amount	36	-	-	-	-	-	36	-
	Average contract rate	0.775	-	-	-	-	-
GBP	Nominal amount	25	-	-	-	-	-	25	1
	Average contract rate	1.814	4.916	-	-	-	-
BRL	Nominal amount	3	-	-	-	-	-	3	-
	Average contract rate	2.810	-	-	-	-	-
EUR	Nominal amount	63	13	16	-	-	-	92	11
	Average contract rate	1.283	0.753	1.140	1.154	-	-
CHF	Nominal amount	1	-	-	-	-	-	1	-
	Average contract rate	1.107	-	-	-	-	-
To sell EUR against the foreign currency
USD	Nominal amount	654	129	76	12	6	-	877	(61)
	Average contract rate	1.281	1.240	1.210	1.088	1.125	-
USD	Nominal amount	-	1,355	-	-	-	-	1,355	(167)
	Average contract rate	-	1.1984	-	-	-	-
CHF	Nominal amount	65	31	5	4	3	-	108	(1)
	Average contract rate	1.522	1.495	1.461	1.443	1.427	-
GBP	Nominal amount	106	14	-	-	-	-	120	(1)
	Average contract rate	0.703	0.707	-	-	-	-
ZAR	Nominal amount	17	1	-	-	-	-	18	1
	Average contract rate	8.128	8.043	-	-	-	-

44

(in US$ millions, except for average contract rate)		2005	2006	2007	2008	2009	2010		Total Nominal Amount	Fair Value
FORWARD CONTRACTS (cont'd)
To buy EUR against the foreign currency
GBP	Nominal amount	127	13	2	-	-	-		142	3
	Average contract rate	0.699	0.716	0.736	-	-	-
AUD	Nominal amount	8	-	-	-	-	-		8	-
	Average contract rate	1.774	-	-	-	-	-
CHF	Nominal amount	12	-	-	-	-	-		12	-
	Average contract rate	1.528	-	-	-	-	-
JPY	Nominal amount	42	-	-	-	-	-		42	-
	Average contract rate	30.527	-	-	-	-	-
Other	Nominal amount	10	-	-	-	-	-		10	-
To sell GBP against the foreign currency
CHF	Nominal amount	21	-	-	-	-		-	21	-
	Average contract rate	2.17	-	-	-	-		-
Other	Nominal amount	12	-	-	-	-		-	12	-
OPTIONS
To sell USD against the foreign currency
EUR	Nominal amount	50	-	-	-	-		-	50	14
	Average contract rate	0.973	-	-	-	-		-
GBP	Nominal amount	4	-	-	-	-		-	4	-
	Average contract rate	1.710	-	-	-	-		-

The schedule below presents fair value information and contracts terms relevant to determining future cash flows categorized by expected maturity dates of the Company's currency derivatives (principally forward and option contracts) outstanding as at 31 December 2003.

45

(In US$ millions, except for average contract rate)		2004	2005	2006	2007	2008	2009	Total Nominal Amount	Fair Value
FORWARD CONTRACTS
To purchase USD against the foreign currency
CHF	Nominal amount	20	29	16	2	1	1	69	(11)
	Average contract rate	1.572	1.387	1.336	1.287	1.261	1.238
GBP	Nominal amount	11	8	3	-	-	-	22	-
	Average contract rate	1.740	1.686	1.587	-	-	-

To sell USD against the foreign currency
AUD	Nominal amount	118			-	-	-	-	-	118	31
	Average contract rate	0.577			-	-	-	-	-
GBP	Nominal amount	6			1	-	-	-	-	7	1
	Average contract rate	1.509			1.407	-	-	-	-
BRL	Nominal amount	2			-	-	-	-	-	2	-
	Average contract rate	2.9			-	-	-	-	-
EUR	Nominal amount	195			63	20	9	-	-	287	43
	Average contract rate	1.113			0.971	0.897	1.045	-	-
To sell EUR against the foreign currency
USD	Nominal amount	352		49		13	4	8	-	426	(32)
	Average contract rate	1.164		1.099		1.059	0.975	1.076	-
USD	Nominal amount	-		-		1,256	-	-	-	1,256	(44)
	Average contract rate	-		-		1.198	-	-	-	-
CHF	Nominal amount	41		10		8	4	4	3	70	-
	Average contract rate	1.535		1.511		1.487	1.461	1.443	1.427
ZAR	Nominal amount	30		6		-	-	-	-	36	-
	Average contract rate	8.590		8.305		-	-	-	-
To buy EUR against the foreign currency
GBP	Nominal amount	55		3		-	-	-	-	58	-
	Average contract rate	0.711		0.713		-	-	-	-
CHF	Nominal amount	2		-		-	-	-	-	2	-
	Average contract rate	1.511		-		-	-	-	-
JPY	Nominal amount	15		-		-	-	-	-	15	1
	Average contract rate	130.1		-		-	-	-	-
Other	Nominal amount		63	-		-	-	-	-	63	-

46

(In US$ millions, except for average contract rate)			2004				2005		2006		2007		2008		2009		Total Nominal Amount		Fair Value
To buy CHF against other foreign currency
Other	Nominal amount			1		-		-		-		-		-		1		-
To buy GBP against other foreign currency
Other	Nominal amount				36	-		-		-		-		-		36		-
OPTIONS
To sell USD against the foreign currency
AUD	Nominal amount	70				-		-		-		-		-		70		16
	Average contract rate	0.564
GBP	Nominal amount	9				-		-		-		-		-		9		-
	Average contract rate	1.710
EUR	Nominal amount	325				-		-		-		-		-		325		51
	Average contract rate	0.942

 

Any negative impact of currency movements on the currency contracts that the Company has taken out to hedge identifiable foreign currency commitments to buy or sell goods and services, would be offset by an equal and opposite favourable exchange impact on the commitments being hedged. Transactions in currency related financial instruments for which there is no underlying foreign currency exchange rate exposure to the Company are prohibited. For accounting policies relating to currency contracts, see Note 3 of the Consolidated Financial Statements.

Derivative Commodity Contracts

The effect of a reduction of 10% in aluminum prices on the Company's aluminum forward and options contracts outstanding at 31 December 2004 would be to increase net income over the period ending December 2006 by approximately $70 million ($59 million in 2005 and $11 million in 2006). As of 31 December 2003, such sensitivity was $26 million ($11 million in 2004 and $15 million in 2005). The results as of 31 December 2004 reflect a 10% reduction from the 31 December 2004, three-month LME aluminum closing price of $1,958 per tonne and assume an equal 10% drop has occurred throughout the aluminum forward price curve existing as at 31 December 2004. The Company's aluminum forward contract positions, producing the above results, are taken out to hedge future purchases of metal that are required for firm sales and purchase commitments to fabricated products customers and hedge future sales. Consequently, any negative impact of movements in the price of aluminum on the forward contracts would be offset by an equal and opposite impact on the sales and purchases being hedged.

47

Transactions in metal related financial instruments for which there is no underlying metal price exposure to the Company are prohibited, except for a small trading portfolio of metal forwards not exceeding 24,000 tonnes, which is marked to market. In addition, see page 23 of the Management's Discussion and Analysis of Financial Condition and Results of Operations.

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required is filed as exhibit 99.4 and is incorporated by reference and includes the Consolidated Financial Statements and Notes thereto and the "Auditors' Report" and the section entitled "Quarterly Financial Data".

The location of Financial Statements and other material required under this Item is found under Item 15 of this report.

ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

The Company has nothing to report under this Item.

ITEM 9A CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures:

As of 31 December 2004, an evaluation was carried out under the supervision and with the participation of the Company's management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of Alcan's disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934). As the control deficiency relating to the allocation of goodwill to one reporting unit acquired in a business combination as hereinafter described, was corrected after 31 December 2004 but prior to the completion of the financial statements, the Chief Executive Officer and Chief Financial Officer concluded that Alcan's disclosure controls and procedures provide reasonable assurance of effectiveness.

Management's report on internal control over financial reporting:

Management of Alcan is responsible for establishing and maintaining adequate internal control over financial reporting. Alcan's internal control over financial reporting is a process designed under the supervision of Alcan's principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external reporting purposes in accordance with U.S. GAAP.

As of 31 December 2004, management conducted an assessment of the effectiveness of the Company's internal control over financial reporting based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). This assessment identified one control deficiency in the Company's internal control over financial reporting that constitutes a material weakness, as defined by the Public Company Accounting Oversight Board's Auditing Standard No. 2, that existed as of 31 December 2004.  The deficiency in question was that the Company's methodology for allocating goodwill resulted in an excess allocation of goodwill to one reporting unit consisting of certain fabricating businesses acquired in the Pechiney Combination and for which the Company properly determined goodwill to be impaired in the fourth quarter of 2004.  The excess allocation of goodwill to the reporting unit resulted in an overstatement of the fourth quarter 2004 goodwill impairment charge of which $109 million related to this material weakness.  The appropriate corrections were made prior to the completion of the financial statements and resulted in an increase to the Company's net income for the year and for the fourth quarter of 2004, but did not have any effect on previously filed financial statements.  Because of the existence of the deficiency in question at year-end, management has concluded that the Company's internal control over financial reporting was ineffective as of 31 December 2004. 

48

Management's assessment of the effectiveness of the Company's internal control over financial reporting as of 31 December 2004 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing on pages 2 and 3 of the Consolidated Financial Statements, which expresses an unqualified opinion on management's assessment and, due to the control deficiency described above, an adverse opinion with respect to the effectiveness of the Company's internal control over financial reporting as of 31 December 2004.

Remediation of the deficiency

The deficiency in question was corrected by making appropriate changes to the Company's documented accounting policies and procedures for allocating goodwill to reporting units acquired in a business combination.

Management's report on Consolidated Financial Statements

Management has concluded that the consolidated financial statements present fairly, in all material respects, the financial position of the Company as at December 31, 2004, 2003 and 2002 and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 2004 in accordance with generally accepted accounting principles in the United States.  The consolidated financial statements have been audited by PricewaterhouseCoopers LLP as stated in their report which expressed an unqualified opinion thereon.

ITEM 9B OTHER INFORMATION

The Company has nothing to report under this Item.

49

PART III

Information in this part is based on information contained in the Company's Proxy Circular dated 2 March 2005.

ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

A.          IDENTIFICATION OF DIRECTORS

Alcan has a Worldwide Code of Employee and Business Conduct that governs all employees of Alcan as well as the Directors. As an annex to the Code and supplemental thereto, the Company has adopted a Code of Ethics for Senior Financial Officers including the Chief Executive Officer, the Executive Financial Officer and the Controller, which is available on the Company's website at www.alcan.com.

Supplemental information required by this item is incorporated by reference to the Proxy Circular on pages 9 to 15, in the section entitled ''Corporate Governance Practices''.

The term of office of each Director runs from the time of his or her election to the next succeeding annual meeting or until he or she ceases to hold office as such.

The following are nominees for election as Directors:

ROLAND BERGER, 67, Director since 2002; Munich, Germany.
Mr. Berger is non-executive chairman of Munich-based Roland Berger Strategy Consultants, one of the leading global strategy consultancies which he founded in 1967. He is also a member of various supervisory boards and consultant groups, pursues extensive commitments in the public sector and is an expert on corporate management and general economic and social issues.
(1), (3), (5)

L. DENIS DESAUTELS, o.c., f.c.a., 61, Director since 2003; Ottawa, Ontario.
Mr. Desautels is executive-in-residence at the School of Management of the University of Ottawa. He was Auditor General of Canada from 1991 to 2001, prior to which he had been a senior partner of the accounting firm of Ernst & Young LLP. Mr. Desautels is chairman of the Laurentian Bank of Canada, a director of The Jean Coutu Group (PJC) Inc., a leading distributor of pharmaceuticals and related products, and of Bombardier Inc. and a member of the Accounting Standards Oversight Council of the Canadian Institute of Chartered Accountants.

(1), (2*), (3)

TRAVIS ENGEN, 60, Director since 1996; New Canaan, Connecticut.
See Item 10 (B) ("Identification of Executive Officers") below.

L. YVES FORTIER, c.c., q.c., 69, Director since 2002; Montreal, Quebec.
Mr. Fortier is Chairman of the Board of Alcan and is chairman and a senior partner of the law firm Ogilvy Renault in Montreal. From 1988 to 1992, he was Ambassador and Permanent Representative of Canada to the United Nations. He is also governor of Hudson's Bay Company and a director of NOVA Chemicals Corporation and Nortel Networks Corporation. Mr. Fortier is a trustee of the International Accounting Standards Committee.
(1*), (4)

JEAN-PAUL JACAMON, 57, Director since 2004; Mareil-Marly, France.
Mr. Jacamon is non-executive chairman of Bonna Sabla, a leading manufacturer of precast concrete products, and of Gardiner Group, a distributor of electronic and surveillance systems. He was previously chief operating officer and director of Schneider Electric from 1996 to 2002. He is also a director of Le Carbone Lorraine, a world specialist in carbon and graphite products and their application, STACI, a leader in computer software for business to business on the web, and AMEC plc, an international engineering services company.
(1), (3)

50

WILLIAM R. LOOMIS, JR., 56, Director since 2002; Santa Barbara, California.
Mr. Loomis is involved in investment and academic activities. He was a limited managing director of Lazard LLC from January 2001 to March 2004. He was chief executive officer of Lazard LLC from November 2000 to December 2001. He was previously deputy chief executive officer from 1999 and a managing director from 1995 of Lazard Frères & Co. He is a director of Limited Brands, Inc. and Ripplewood Holdings LLC.
(1), (2), (4), (5*)

YVES MANSION, 54, Director since 2004; Paris, France.
Mr. Mansion is chairman and chief executive officer of Société Foncière Lyonnaise since March 2002 and a member of the French Collège de l'Autorité des marchés financiers. He was group managing director of Assurances Générales de France from 1990 to 2001. Mr. Mansion is a member of the supervisory board of Euler Hermes and deputy director of l'Entreprise de Recherche et d'activités pétrolières.
(1), (2)

CHRISTINE MORIN-POSTEL, 58, Director since 2003; Neuilly sur Seine, France.
Mrs. Morin-Postel was, until 2003, executive vice president in charge of human resources at Suez Group. She was previously chief executive officer of Société Générale de Belgique from 1998 to 2001. Mrs. Morin-Postel is a director of 3i Group plc, a world leader in venture capital, and Pilkington plc, a world leader in manufacturing of glass and glazing products. She is also a member of the supervisory board of Royal Dutch Shell Company.
(1), (2)

H. ONNO RUDING, 65, Director since 2004; Brussels, Belgium.
Dr. Ruding was Minister of Finance of the Netherlands and was an executive director of the International Monetary Fund in Washington, D.C. and a member of the Board of managing directors of AMRO Bank in Amsterdam. He was, until 2003, vice chairman of Citicorp and Citibank, N.A. Dr. Ruding is a director of Corning Inc, Holcim AG and RTL Group. He is chairman of BNG NV (Bank for the Netherlands Municipalities) and the Centre for European Policy Studies (CEPS) in Brussels. Dr. Ruding is also a member of the international advisory committees of Robeco Group, Citigroup and the Federal Reserve Bank of New York.
(1), (3)

GUY SAINT-PIERRE, c.c, 70, Director since 1994; Montreal, Quebec.
Mr. Saint-Pierre was, until 2004, chairman of the board of the Royal Bank of Canada. He was president and chief executive officer of SNC-Lavalin Group Inc., a leading engineering-construction firm, from 1989 to 1996 and chairman from 1996 to 2002. Mr. Saint-Pierre is a director of the Institute for Research on Public Policy.
(1), (2), (3), (5)

GERHARD SCHULMEYER, 66, Director since 1996; Greenwich, Connecticut.
Mr. Schulmeyer is professor of practice at MIT Sloan School of Management since 2002. From 1998 until 2001, he was president and chief executive officer of Siemens Corporation, a leading company in electronics and electrical engineering. He serves on the boards of Zurich Financial Services, Ingram Micro Inc., and Korn/Ferry International as well as the international advisory board of Banco Santander Central Hispano.
(1), (3*), (4)

PAUL M. TELLIER, p.c., c.c., q.c., 64, Director since 1998; Montreal, Quebec.
Mr. Tellier was, until December 2004, president and chief executive officer of Bombardier Inc. From 1992 to 2002, he was president and chief executive officer of the Canadian National Railway Company. He is a director of McCain Foods, Bell Canada and BCE Inc. He is former chairman of the Conference Board of Canada.
(1), (2), (4*)

MILTON K. WONG, c.m., 54, Director since 2003; Vancouver, British Columbia.
Mr. Wong is non-executive chairman of HSBC Asset Management (Canada) Limited since 1996 and Chancellor of Simon Fraser University in British Columbia. He was founder and chairman of M.K. Wong & Associates util it was sold in 1996 to HSBC. He serves as a director on the boards of the Aga Khan Foundation Canada, the Canada-U.S. Fulbright Program, the Pacific Salmon Endowment Society, Genome BC and the Pierre Elliott Trudeau Foundation. He is the founder and past-chairman of the Laurier Institution, a non-profit organization for advancing knowledge of the economics of cultural diversity.
(1), (4)

51

Committee Memberships

1.       Corporate Governance

2.       Audit

3.       Human Resources

4.       Environment, Health & Safety

5.       Nominating

*     Committee Chairman

B.         IDENTIFICATION OF EXECUTIVE OFFICERS

The following is certain information with respect to Alcan's Executive Officers:

TRAVIS ENGEN, 60, President and Chief Executive Officer and Director, Alcan Inc.
Mr. Engen has been President and CEO of Alcan since March 2001. Prior to joining the Company, Mr. Engen had been chairman and chief executive of ITT Industries, Inc. since 1995. Mr. Engen is a director of Lyondell Chemical Company and the Canadian Council of Chief Executives. He is vice chairman of the World Business Council for Sustainable Development and is chairman of the International Aluminium Institute and of The Prince of Wales International Business Leaders Forum.

RICHARD B. EVANS, 57, Executive Vice President, Office of the President, Alcan Inc.
Mr. Evans has held this position since 1 January 2002 and currently oversees two of Alcan's four Business Groups: Packaging and Engineered Products. Prior to the Novelis Spin-off from 2002 to 2004, he had similar responsibility for Bauxite and Alumina, Primary Metal and Engineered Products. From 2000 to 2001, Mr. Evans was based in Zurich and was responsible for the merger integration of the Company and Algroup. He has held several positions within the Company, including Executive Vice President, President, Aluminum Fabrication, Europe (March 1999) and Executive Vice President, Fabricated Products, North America. Prior to joining the Company in January 1997, Mr. Evans held senior management positions with Kaiser Aluminum & Chemical Corporation. Mr. Evans is a director of Bowater Incorporated and the International Aluminium Institute.

MICHAEL HANLEY, 39, Executive Vice President, Office of the President, Alcan Inc., President and Chief Executive Officer, Alcan Bauxite and Alumina.
Mr. Hanley oversees two of Alcan's Business Groups: Bauxite and Alumina and Primary Metal. He has held this position since 3 February 2005. Until a successor is named, he will maintain his responsibility as President and Chief Executive Officer, Alcan Bauxite and Alumina (January 2002). He has held several positions with the Company: Vice President, Investor Relations (September 2000), Vice President and Assistant Financial Controller, Global Fabrication (July 1999) and Director, Finance, Bauxite, Alumina and Chemicals Group (June 1998). Prior to joining the Company in June 1998, Mr. Hanley was vice president and chief financial officer of Gaz Metropolitain Inc.

GEOFFERY E. MERSZEI, 53, Executive Vice President and Chief Financial Officer, Alcan Inc.
Mr. Merszei joined the Company in September 2001. Prior to his current position, he was vice president and treasurer of The Dow Chemical Company. He worked for 24 years in senior financial positions with Dow in Europe, Asia-Pacific and North America.

DAVID L. McAUSLAND, 51, Executive Vice President, Corporate Development and Chief Legal Officer, Alcan Inc.
Mr. McAusland has held this position since February 2005 and his responsibilities include worldwide legal and regulatory affairs, mergers, acquisitions and major transactions as well as corporate development initiatives. He joined the Company in June 1999 as Vice President, Chief Legal Officer and Secretary. Prior to joining, he was managing partner at Byers Casgrain, a Montreal law firm, and was president of the Montreal Board of Trade. Mr. McAusland is a director of Cogeco Inc., Cogeco Cable Inc. and Cascades Inc.

DANIEL GAGNIER, 58, Senior Vice President, Corporate and External Affairs, Alcan Inc.
Mr. Gagnier's responsibilities include corporate communications, government relations and environment, health and safety. Mr. Gagnier was appointed Vice President, Corporate Affairs, in December 1994, and in 1995 his responsibilities were expanded to include environment, occupational health and safety issues for Alcan on a worldwide basis. Prior to joining Alcan, Mr. Gagnier held senior administrative positions with the Government of Canada.

52

GASTON OUELLET, 62, Senior Vice President, Human Resources, Alcan Inc.
Mr. Ouellet has held this position since October 2000. He was appointed Vice President, Human Resources in April 1993. Mr. Ouellet joined the Company in 1967.

CYNTHIA CARROLL, 48, Senior Vice President, Alcan Inc., President and Chief Executive Officer, Alcan Primary Metal.
Mrs. Carroll has held this position since 1 January 2002 and her responsibilities include Alcan primary metal facilities and power generation installations. She has held several positions with the Company: Vice President, President Bauxite, Alumina and Specialty Chemicals (1998), managing Director of Aughinish Alumina Limited (1996) and Vice President/General Manager of Alcan Foil Products (1991).

MICHEL JACQUES, 52, Senior Vice President, Alcan Inc., President and Chief Executive Officer, Alcan Engineered Products.
Mr. Jacques has held this position since 3 October 2003. Prior to the Pechiney Combination, Mr. Jacques was Vice President, Strategic Management Support, a position he held since 1 January 2002 and assisted the Office of the President and the executive management team in addressing high value at stake issues and providing expertise to business groups. He has also held various positions with the Company: Director, Corporate Development (September 2000), Vice President, Metal Management, Business Planning and Development, Alcan Europe (1997), and Director, Metal Management, Logistics and Information Technology (September 1996).

CHRISTEL BORIES, 40, Senior Vice President, Alcan Inc., President and Chief Executive Officer, Alcan Packaging.
Mrs. Bories has held this position since 3 December 2003. She joined Pechiney in April 1995 as Senior Vice President of Strategy and Control, and Secretary to the Executive Committee. In 1998, she became Executive Vice President, member of the Executive Committee of Pechiney. In January 1999, she was appointed head of the Packaging Sector of Pechiney. She also supervised Pechiney's General Procurement activities.

RHODRI J. HARRIES, 41, Vice President and Treasurer, Alcan Inc.
Mr. Harries joined the Company in August 2004. Prior to his current position, he was assistant treasurer of General Motors Corporation. He worked for over 15 years in treasury and finance positions with General Motors in Europe, North America and Asia-Pacific.

THOMAS J. HARRINGTON, 46, Vice President and Controller, Alcan Inc.
Prior to joining the Company in November 2002, Mr. Harrington was employed at General Electric Company, from 1997 to 2002, where he held several accounting and financial positions, leading to his role as global controller for GE Medical Systems. Prior to joining GE, Mr. Harrington was with Deloitte & Touche LLP, in California, from 1991 to 1997.

ROY MILLINGTON, 45, Corporate Secretary, Alcan Inc.
Mr. Millington has held this position since July 2001. As senior legal counsel, he was previously based in Zurich and was active in the global legal integration of the Company and Algroup. He has been a member of Alcan's legal department since 1989 and served with British Alcan Aluminium plc from 1995 to 1997.

53

ITEM 11 EXECUTIVE COMPENSATION

The information required is incorporated by reference to the Proxy Circular, pages 24 to 30, in the section entitled "Executive Officers' Compensation".

Human Resources Committee Interlocks and Insider Participation

No member of the Human Resources Committee has ever been an officer or employee of the Company or of any of its Subsidiaries. None of the Company's Executive Officers serves on the board of directors or on the compensation committee of any other entity, any officers of which served on either the Board or the Human Resources Committee.

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

Share Ownership of Certain Beneficial Owners

The following shareholder reported to the SEC on Schedule 13G that it owned more than five percent of Alcan's Common Shares. Except as set forth below, to Alcan's knowledge as of the date of this report, no person owned beneficially five percent or more of Alcan's Common Shares.

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership	Percent of Outstanding Common Shares Owned
Capital Group International Inc. 11100 Santa Monica Blvd. Los Angeles, CA  90025	22,087,290 (1)	6.0%

⁽¹⁾   Capital Group International, Inc. is the parent holding company of a group of investment management companies. It reported that it had sole power to vote 17,915,690 Shares, sole power to dispose of 22,087,290 Shares and shared power to vote or dispose of none of the Shares in a filing with the SEC on Form 13G on 11 February 2005.

Share Ownership of Directors and Executive Officers

Directors and Executive Officers as a group beneficially own 350,281 Common Shares (including shares over which control or direction is exercised). This represents 0.09% of Common Shares issued and outstanding. In addition, Executive Officers as a group have Options (as defined in the Proxy Circular) to purchase 3,759,918 Shares.

The following table lists ownership of Alcan's Common Shares by each Director, by each named executive officer in the executive officers' compensation table on page 24 of the Proxy Circular, and by all Directors and Executive Officers as a group as of 2 March 2005.

54

Name	Current Beneficial Holdings	Shares Subject to Options[1]	Stock Price Appreciation Units[2]	Number of Deferred Share Units	Total
Roland Berger (D)	-	N/A	N/A	5,185[3]	5,185
L. Denis Desautels (D)	573	N/A	N/A	3,3493	3,922
Travis Engen (D, O)	225,500	1,815,517	N/A	2,1923	2,043,209
L. Yves Fortier (D)	1,000	N/A	N/A	16,6333	17,633
Jean-Paul Jacamon (D)	136	N/A	N/A	1,795	1,931
William R. Loomis (D)	10,000	N/A	N/A	8,4063	18,406
Yves Mansion (D)	-	N/A	N/A	3,6753	3,675
Christine Morin-Postel (D)	-	N/A	N/A	5,2683	5,268
H. Onno Ruding (D)	112	N/A	N/A	4493	561
Guy Saint-Pierre (D)	16,170	N/A	N/A	8,9763	25,146
Gerhard Schulmeyer (D)	2,245	N/A	N/A	8,8093	11,054
Paul M. Tellier (D)	1,958	N/A	N/A	14,3343	16,292
Milton K. Wong (D)	40,000	N/A	N/A	6,2743	46,274
Richard B. Evans (O)	25,000	447,264	85,530	35,101[4]	667,895
Geoffery E. Merszei (O)	21,000	405,754	N/A	N/A	426,754
Cynthia Carroll (O)	-	245,433	N/A	N/A	245,433
All Directors and Officers as a group (25 individuals)	350,281	3,640,347	164,103	128,146	4,260,197

D - Director
O - Officer

The fifth named Executive Officer, Brian W. Sturgell has left the Company to become chief executive officer of Novelis.

[1]   Represents shares that may be acquired through the exercise of B, C, D, and E options as described in the Proxy Circular on pages 25 and 26.

[2]   Indicates number of units awarded under the Alcan Stock Price Appreciation Unit Plan. The Plan is described on page 28 of the Proxy Circular. The units are payable in cash.

[3]   Indicates number of deferred share units awarded under the Directors Deferred Share Unit Plan. The Plan is described on page 31 of the Proxy Circular. The units are payable in cash.

[4]   Mr. Evans holds 31,521 deferred shares units under the Executive Deferred Share Unit Plan, and 3,580 units under the Medium-Term Incentive Plan, which has been discontinued. The Executive Deferred Share Unit Plan is described on page 20 of the Proxy Circular. The units are payable in cash.

55

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS

The information required is incorporated by reference to the Proxy Circular, page 33, the section entitled "Indebtedness of Directors and Executive Officers".

The interest rate is currently nil on all outstanding option loans.

ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required is incorporated by reference to the Proxy Circular, pages 16 and 17, the sections entitled "Report of the Audit Committee" and "Auditors".

56

PART IV

ITEM 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

A.   1.   FINANCIAL STATEMENTS

            The information required is filed as exhibit 99.4 and is incorporated by reference herein.

            Unaudited pro forma condensed consolidated information of the Company as at and for the year ended 31 December 2004, giving effect to the Novelis Spin-off as of 1 January 2004 for the statement of income and as of 31 December 2004 for the balance sheet, is included in Note 7 to the Consolidated Financial Statements. This pro forma information complies with the requirements of Article 11 of Regulation S-X.

            List of Financial Statements Included under Item 8 of this Report:

            -  Auditors' Report

            -  Consolidated Statement of Income

            -  Consolidated Balance Sheet

            -  Consolidated Statement of Cash Flows

            -  Notes to Consolidated Financial Statements

            -  Quarterly Financial Data (unaudited)

            -  Eleven-Year Summary

2.   FINANCIAL STATEMENTS SCHEDULES

      The required information is shown in the Consolidated Financial Statements or Notes thereto.

3.   EXHIBITS

      References to documents filed by the Company prior to April 1987 are to SEC File No. 1-3555. References to documents filed by the Company after April 1987 are to SEC File No. 1-3677.

(3)      Articles of Incorporation and By-laws:

3.1       Restated Articles of Incorporation dated 6 January 2005. (Incorporated by reference to exhibit 3.1 to the Company's Current Report on Form 8-K filed on 7 January 2005.)

3.2        By-law No. 1A. (Restated). (Incorporated by reference to exhibit 3.1 to the Annual Report on Form 10-K of the Company for 2003.)

(4)       Instruments defining the rights of security holders:

4.1.1    Indenture, dated as of 15 May 1983 between Alcan Inc. and Bankers Trust Company, as Trustee. (Incorporated by reference to exhibit 4.1 to the Company's Registration Statement on Form S-3 (No. 33-29761) filed with the Commission on 7 July 1989.)

4.1.2    First Supplemental Indenture dated as of 1 January 1986 to the Indenture dated as of 15 May 1983 between Alcan Inc. and Bankers Trust Company, as Trustee. (Incorporated by reference to exhibit 4.2 to the Company's Registration Statement on Form S-3 (No. 33-29761) filed with the Commission on 7 July 1989.)

4.1.3    Second Supplemental Indenture dated as of 30 June 1989 to the Indenture dated as of 15 May 1983 between Alcan Inc. and Bankers Trust Company, as Trustee. (Incorporated by reference to exhibit 4.3 to the Company's Registration Statement on Form S-3 (No. 33-29761) filed with the Commission on 7 July 1989.)

4.1.4    Third Supplemental Indenture dated as of 19 June 1989 to the Indenture dated as of 15 May 1983 between Alcan Inc. and Bankers Trust Company, as Trustee. (Incorporated by reference to exhibit (4)(a) to the Company's Current Report on Form 8-K dated 26 July 1989 filed with the Commission on 26 July 1989 (Commission File Number 1-3677).)

57

4.1.5    Fourth Supplemental Indenture dated as of 17 July 1990 to the Indenture dated as of 15 May 1983 between Alcan Inc. and Bankers Trust Company, as Trustee. (Incorporated by reference to exhibit 4.5 to the Company's Registration Statement on Form S-3 (No. 333-35977) filed with the Commission on 20 July 1990.)

4.1.6    Fifth Supplemental Indenture dated as of 1 January 1995 to the Indenture dated as of 15 May 1983 between Alcan Inc. and Bankers Trust Company, as Trustee. (Incorporated by reference to exhibit 4.6 to the Company's Registration Statement on Form S-3 (No. 333-76535) filed with the Commission on 19 April 1999.)

4.1.7     Sixth Supplemental Indenture dated as of 8 April 2002 to the Indenture dated as of 15 May 1983 between Alcan Inc. and Bankers Trust Company, as Trustee. (Incorporated by reference to exhibit 4.7 to the Company's Registration Statement on Form S-3 (No. 333-85998) filed with the Commission on 11 April 2002.)

4.1.8    Form of Seventh Supplemental Indenture to the Indenture dated 15 May 1983 between Alcan Inc. and Bankers Trust Company, as Trustee. (Incorporated by reference to exhibit 4.8 to the Company's Registration Statement on Form S-3 (No. 333-105999) filed with the Commission on 10 June 2003.)

4.1.9    Form of Eighth Supplemental Indenture to the Indenture dated 15 May 1983 between Alcan Inc. and Bankers Trust Company, as Trustee. (Incorporated by reference to exhibit 4.9 to the Company's Registration Statement on Form S-3 (No. 333-110739) filed with the Commission on 25 November 2003.)

4.1.10   Specimen Form of Debt Security. (Incorporated by reference to exhibit 4.1 to Form 8-A filed with the Commission on 10 September 2002.)

4.2       Form of certificate for the Registrant's Common Shares. (Incorporated by reference to exhibit 4.2 to the Annual Report on Form 10-K of the Company for 1989.)

4.3       Shareholder Rights Agreement as re-confirmed on 25 April 2002 between Alcan Inc. and CIBC Mellon Trust Company as Rights Agent, which Agreement includes the form of Rights Certificates. (Incorporated by reference to exhibit 4 to the Quarterly Report on Form 10-Q for the quarter ended 30 June 2002.)

(10)     Material Contracts:

10.1      Employment Agreement, dated 23 February 2001, with Travis Engen. (Incorporated by reference to exhibit 10.14 to the Annual Report on Form 10-K of the Company for 2000.)

10.2      Employment Agreement, dated 31 December 2001, with Brian W. Sturgell. (Substantially similar agreements have been entered into with Richard B. Evans, Geoffery E. Merszei and Cynthia Carroll.) (Incorporated by reference to exhibit 10.19 to the Annual Report on Form 10-K of the Company for 2001.)

10.3     Alcan Executive Share Option Plan. (Incorporated by reference to the section entitled "The Plan" on pages 3 through 8 and on pages 3 through 7 of the Prospectuses dated 30 April 1990 and 28 April 1993, respectively, filed as part of the Company's Registration Statements on Form S-8 (Nos. 33‑34716 and 33-61790).)

10.4     Alcan Executive Performance Award Plan revised as of October 1994. (Incorporated by reference to exhibit 10.3 to the Annual Report on Form 10-K of the Company for 1994.)

10.5     Alcan Flexible Perquisites Program (Canada). (Incorporated by reference to exhibit 10.6 to the Annual Report on Form 10-K of the Company for 1995.)

58

10.6     Alcan Corporation Flexible Perquisites Program (U.S.), dated 1 January 2003. (Incorporated by reference to exhibit 10.6 to the Annual Report on Form 10-K of the Company for 2003.)

10.7     Alcan Corporation Executive Company Vehicle Program (U.S.), dated 7 November 2000. (Incorporated by reference to exhibit 10.7 to the Annual Report on Form 10-K of the Company for 2003.)

10.8    Alcan Pension Plan for Officers, dated 1 January 2003. (Incorporated by reference to exhibit 10.8 to the Annual Report on Form 10-K of the Company for 2003.)

10.9     B.C./Alcan Inc. 1997 Agreement. (Incorporated by reference to exhibit 10.12 to the Quarterly Report on Form 10-Q of the Company for the quarter ended 30 June 1997.)

10.10   Alcan Inc. Stock Price Appreciation Unit Plan, dated 27 September 2001. (Incorporated by reference to exhibit 99.1 to the Quarterly Report on Form 10-Q of the Company for the quarter ended 30 September 2001.)

10.11   Alcan Inc. 2001 Deferred Share Unit Plan for Non-Executive Directors dated 1 April 2001. (Incorporated by reference to exhibit 99.2 to the Quarterly Report on Form 10-Q of the Company for the quarter ended 30 September 2001.)

10.12    Total Shareholder Return Performance Plan as of 1 January 2002. (Incorporated by reference to exhibit 10.20 to the Annual Report on Form 10-K of the Company for 2001.)

10.13    Change of Control Agreement dated 1 August 2002 with Travis Engen. (Incorporated by reference to exhibit 10.18 to the Annual Report on Form 10-K of the Company for 2002.)

10.14    Change of Control Agreement dated 1 August 2002 with Richard B. Evans. (Substantially similar agreements have been entered into with Brian W. Sturgell, Geoffery E. Merszei and Cynthia Carroll.) (Incorporated by reference to exhibit 10.19 to the Annual Report on Form 10-K of the Company for 2002.)

10.15    Special award of restricted stock units dated 17 December 2003 for Brian W. Sturgell. (Incorporated by reference to exhibit 10.15 to the Annual Report on Form 10-K of the Company for 2003.)

10.16    Separation Agreement dated 31 December 2004 between Alcan Inc. and Novelis Inc. (Filed herewith.)

(14.1)  Worldwide Code of Employee and Business Conduct. (Incorporated by reference to exhibit 14.1 to the Annual Report on Form 10-K of the Company for 2003.)

(14.2)  Code of Ethics for Senior Financial Officers. (Incorporated by reference to exhibit 14.2 to the Annual Report on Form 10-K of the Company for 2003.)

(21)     Subsidiaries and Related Companies of the Company is on page 64. (Filed herewith.)

(23)     Consent of Independent Accountants is on page 63. (Attached hereto.)

59

(24)     Powers of Attorney. (Filed herewith.)

24.1           Power of Attorney of L. D. Desautels

24.2           Power of Attorney of L. Y. Fortier

24.3           Power of Attorney of J.-P. Jacamon

24.4           Power of Attorney of W. R. Loomis

24.5           Power of Attorney of Y. Mansion

24.6           Power of Attorney of C. Morin-Postel

24.7           Power of Attorney of G. Saint-Pierre

24.8           Power of Attorney of G. Schulmeyer

24.9           Power of Attorney of P. M. Tellier

24.10         Power of Attorney of M. K. Wong

(31.1)  Section 302 Certification signed by Travis Engen on 14 March 2005. (Filed herewith.)

(31.2)  Section 302 Certification signed by Geoffery E. Merszei on 14 March 2005. (Filed herewith.)

(32.1)  Section 906 Certification signed by Travis Engen on 14 March 2005. (Filed herewith.)

(32.2)  Section 906 Certification signed by Geoffery E. Merszei on 14 March 2005. (Filed herewith.)

(99.1)  Charter of the Audit Committee. (Filed herewith.)

(99.2)  Proxy Circular. (Filed herewith.)

(99.3)  Management's Discussion and Analysis of Financial Condition and Results of Operations (Filed herewith.)

(99.4)  Consolidated Financial Statements (Filed herewith.)

60

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

		ALCAN INC.
16 March 2005	By:	*
		L. Yves Fortier, Chairman of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities indicated, on 16 March 2005.

/s/ Travis Engen

Travis Engen, Director, President and
Chief Executive Officer

(Principal Executive Officer)

Roland Berger, Director

*

L. Denis Desautels, Director

*

L. Yves Fortier, Chairman of the Board

*

Jean-Paul Jacamon, Director

*

William R. Loomis, Jr., Director

*

Yves Mansion, Director

*

Christine Morin-Postel, Director

H. Onno Ruding, Director

*

Guy Saint-Pierre, Director

*

Gerhard Schulmeyer, Director

*

Paul M. Tellier, Director

61

*

Milton K. Wong, Director

/s/ Geoffery E. Merszei

Geoffery E. Merszei, Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

/s/ Thomas J. Harrington

Thomas J. Harrington, Vice President and Controller

(Principal Accounting Officer)

* By: Roy Millington as Attorney-in-fact

62

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 2‑78713, 333-83336, 333-105999 and 333-110739) and on Form S-8 (Nos. 333-06210, 333-89711 and 333-111555) of Alcan Inc., of our report, dated 16 March 2005 relating to the financial statements, management's assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, and our Comments by Auditors for on Canada‑U.S. Reporting Difference dated 16 March 2005 which appears in the Annual Report to Shareholders, which is incorporated by reference in this Annual Report on Form 10-K.  We also consent to the reference to us the heading "Controls and Procedures" in such Registration Statement.

Montreal, Canada
16 March 2005	/s/ PricewaterhouseCoopers LLP
	PricewaterhouseCoopers LLP

63

 

EX-10.16

EXECUTION COPY

SEPARATION AGREEMENT
 

between
 

ALCAN INC.

and

NOVELIS INC.

TABLE OF CONTENTS

Article I - INTERPRETATION	2
1.01         Definitions.........................................................................................................................	2
1.02         Schedules..........................................................................................................................	2
1.03         Exhibits.............................................................................................................................	2
1.04         Currency...........................................................................................................................	3
Article II - THE SEPARATION	3
2.01         Separation.........................................................................................................................	3
2.02         Implementation..................................................................................................................	3
2.03         Transfer of Separated Assets; Assumption of Assumed Liabilities.......................................	3
2.04         Separated Assets...............................................................................................................	4
2.05         Deferred Separated Assets................................................................................................	5
2.06         Excluded Assets................................................................................................................	5
2.07         Liabilities...........................................................................................................................	6
2.08         Disclaimer of Representations and Warranties....................................................................	7
2.09         Third-Party Consents and Government Approvals..............................................................	7
Article III - THE REORGANIZATION	8
3.01         Reorganization...................................................................................................................	8
3.02         Reorganization Transactions...............................................................................................	8
3.03         Effects of the Reorganization Transactions..........................................................................	8
3.04         Arcustarget Consideration..................................................................................................	8
3.05         Termination of Agreements................................................................................................	8
3.06         Ancillary Agreements.........................................................................................................	9
3.07         Resignations....................................................................................................................	10
3.08         Sole Discretion of Alcan..................................................................................................	10
3.09         Cooperation....................................................................................................................	10
3.10         Intercompany accounts between Alcan Group and Novelis Group....................................	10
Article IV - THE ARRANGEMENT	11
4.01         Plan of Arrangement........................................................................................................	11
4.02         Actions Prior to the Effective Date...................................................................................	11
4.03         Sole Discretion of Alcan..................................................................................................	11
4.04         Cooperation....................................................................................................................	12
Article V - DEFERRED SEPARATION TRANSACTIONS	12
5.01         Deferred Transfer Assets.................................................................................................	12
5.02         Unreleased Liabilities.......................................................................................................	13
5.03         Consideration..................................................................................................................	14

- ii -

Article VI - REPRESENTATIONS AND WARRANTIES	14
6.01         Mutual Representations and Warranties............................................................................	14
6.02         Representations and Warranties of Alcan.........................................................................	15
6.03         Representations and Warranties of Novelis.......................................................................	16
Article VII - COVENANTS	17
7.01         General Covenants..........................................................................................................	17
7.02         Covenants of Novelis.......................................................................................................	17
Article VIII - CONDITIONS	18
8.01         Actions Prior to the Completion of the Arrangement.........................................................	18
Article IX - MUTUAL RELEASES; INDEMNIFICATION	20
9.01         Release of Pre-Separation Claims....................................................................................	20
9.02         Indemnification by Novelis...............................................................................................	23
9.03         Indemnification by Alcan..................................................................................................	23
9.04         Method of Asserting Claims Etc.......................................................................................	23
9.05         Adjustments to Liabilities.................................................................................................	25
9.06         Payments.........................................................................................................................	25
9.07         Contribution....................................................................................................................	26
9.08         Litigation.........................................................................................................................	26
9.09         Remedies Cumulative.......................................................................................................	27
9.10         Survival of Indemnities.....................................................................................................	27
Article X - INSURANCE	28
10.01       Insurance Matters............................................................................................................	28
Article XI - EXCHANGE OF INFORMATION; CONFIDENTIALITY	29
11.01       Agreement for Exchange of Information; Archives............................................................	29
11.02       Ownership of Information................................................................................................	30
11.03       Compensation for Providing Information...........................................................................	30
11.04       Record Retention.............................................................................................................	30
11.05       Other Agreements Providing for Exchange of Information.................................................	31
11.06       Production of Witnesses; Records; Cooperation...............................................................	31
11.07       Confidentiality..................................................................................................................	32
11.08       Protective Arrangements..................................................................................................	33
11.09       Disclosure of Third Party Information...............................................................................	34
Article XII - DISPUTE RESOLUTION	34
12.01       Disputes..........................................................................................................................	34
12.02       Negotiation......................................................................................................................	34

- iii -

12.03       Mediation........................................................................................................................	34
12.04       Arbitration.......................................................................................................................	36
Article XIII - FURTHER ASSURANCES	37
13.01       Further Assurances..........................................................................................................	37
Article XIV - CERTAIN OTHER MATTERS	38
14.01       Auditors and Audits; Annual and Quarterly Financial Statements and Accounting..............	38
14.02       Non-Solicitation of Employees.........................................................................................	40
14.03       Non-Competition............................................................................................................	41
14.04       Change of Control with respect to Novelis.......................................................................	43
Article XV - TERMINATION	47
15.01       Termination.....................................................................................................................	47
Article XVI - MISCELLANEOUS	47
16.01       Limitation of Liability........................................................................................................	47
16.02       Counterparts...................................................................................................................	48
16.03       Entire Agreement.............................................................................................................	48
16.04       Construction....................................................................................................................	48
16.05       Signatures........................................................................................................................	49
16.06       Assignability....................................................................................................................	49
16.07       Third Party Beneficiaries..................................................................................................	49
16.08       Payment Terms................................................................................................................	50
16.09       Governing Law................................................................................................................	50
16.10       Notices...........................................................................................................................	50
16.11       Severability......................................................................................................................	51
16.12       Publicity..........................................................................................................................	51
16.13       Survival of Covenants......................................................................................................	51
16.14       Waivers of Default...........................................................................................................	52
16.15       Amendments...................................................................................................................	52
16.16       Controlling Documents.....................................................................................................	52
16.17       Language.........................................................................................................................	52
LIST OF SCHEDULES	54
SCHEDULE 1.01 - DEFINITIONS	55
LIST OF EXHIBITS	69

SEPARATION AGREEMENT (the "Agreement") entered into in the City of Montréal, Province of Quebec, dated as of December 31, 2004.

BETWEEN:	ALCAN INC., a corporation organized under the Canada Business Corporations Act ("Alcan");
AND:	NOVELIS INC., a corporation incorporated under the Canada Business Corporations Act ("Novelis").

RECITALS:

WHEREAS Alcan Group (as defined below) currently conducts the Alcan Businesses (as defined below);

WHEREAS Alcan has created Arcustarget Inc. (as defined below) in order to hold the Separated Businesses (as defined below) after giving effect to the Reorganization (as defined below);

WHEREAS it is proposed that, pursuant to a Plan of Arrangement (as defined below) and after giving effect to the Reorganization, inter alia, (i) Arcustarget would become a wholly-owned subsidiary of Novelis, (ii)  the holders of outstanding Alcan Common Shares (as defined below) would, as of the Effective Date (as defined below), exchange their Alcan Common Shares for an equivalent number of Alcan Class A Common Shares and Alcan Special Shares (as defined below), (iii) the holders of outstanding Alcan Special Shares would, as of the Effective Date, exchange their Alcan Special Shares for a specified number of Novelis Common Shares (as defined below), and (iv) Arcustarget and Novelis would amalgamate;

WHEREAS the Parties (as defined below) wish to set forth in this Agreement the terms on which, and the conditions subject to which, they wish to implement the measures described above;

WHEREAS Alcan and Novelis (1) intend that the Reorganization will (i) qualify for Canadian income tax purposes as a reorganization governed by paragraph 55(3)(b) of the Tax Act (as defined below) and as exchanges of shares by Alcan Common Shareholders (as defined below) pursuant to sections 85.1 and 86 of the Tax Act, such that no gain will be realized by Alcan, Novelis or Alcan Common Shareholders and (ii) qualify for United States federal income tax purposes as a reorganization within the meaning of Section 368(a)(1) of the Internal Revenue Code (as defined below), pursuant to which no gain or loss will be recognized for United States federal income tax purposes by Alcan, Novelis, Alcan Corporation, Alcan Aluminum Corporation or to the shareholders of Alcan under Section 355 of the Internal Revenue Code and the related provisions thereunder and (2) will treat and hereby adopt the Agreement as a plan of reorganization within the meaning of Section 368 of the Internal Revenue Code;

NOW THEREFORE, in consideration of the mutual agreements, covenants and other provisions set forth in this Agreement, the Parties hereby agree as follows:

 

2

Article I 
INTERPRETATION

1.01     Definitions

The capitalized words and expressions and variations thereof used in this Agreement or in its schedules, unless a clearly inconsistent meaning is required under the context, shall have the meanings ascribed to them in Schedule 1.01 - Definitions.

1.02     Schedules

The following schedules are attached to this Agreement and form part hereof:

Schedule 1.01 -	Definitions
Schedule 1.01 - "PA"	Plan of Arrangement
Schedule 1.01 - "SB"	Separated Businesses
Schedule 1.01 - "NBS"	Novelis Balance Sheet
Schedule 1.01 - "SE"	Separated Entities
Schedule 2.04(a)	Separated Assets
Schedule 2.06(a)	Excluded Assets
Schedule 2.07(a)	Assumed Liabilities
Schedule 2.07(b)	Liabilities of Separated Entities
Schedule 2.07(c)	Retained Liabilities
Schedule 2.07(g)	Reorganization Documents
Schedule 3.01	Reorganization Transactions
Schedule 3.05(b)	Agreements Not Terminated
Schedule 3.06(q)	Ancillary Agreements
Schedule 3.10	Intercompany Accounts
Schedule 4.02	Actions to be taken prior to Effective Time
Schedule 9.08(a)	Litigation Transferred to Novelis
Schedule 9.08(b)	Litigation to be Defended by Alcan at Novelis's Expense

1.03      Exhibits

             The following exhibits are attached to this Agreement and form part hereof:

Exhibit A	Alumina Supply Agreement
Exhibit B	By-laws of Novelis
Exhibit C	Certificate of Incorporation of Novelis
Exhibit D	Employee Matters Agreement
Exhibit E	Energy Agreement
Exhibit F	FoilStock Supply Agreement
Exhibit G	Foil Supply Agreements
Exhibit H	Foil Supply and Distribution Agreement
Exhibit I	Intellectual Property Agreements
Exhibit J	Joint Procurement of Goods and Services Protocol
Exhibit K	Metal Supply Agreements
Exhibit L	Neuhausen Agreements

3

Exhibit M	Ohle Agreement
Exhibit N	Sierre Agreements
Exhibit O	Tax Sharing and Disaffiliation Agreement
Exhibit P	Technical Services Agreements
Exhibit Q	Transitional Services Agreement
Exhibit R	Non Compete Undertaking

1.04     Currency

All references to currency herein are to lawful money of the United States unless otherwise specified.

Article II -
THE SEPARATION

2.01     Separation

Alcan and Novelis agree to implement the Separation for the purpose of causing the Separated Businesses to be transferred to Novelis Group and the Remaining Alcan Businesses to be held by Alcan or any other member of Alcan Group as of the Effective Time, on the terms and subject to the conditions set forth in this Agreement. The Parties acknowledge that the Separation is intended to result in Novelis, directly or indirectly, operating the Separated Businesses, owning the Separated Assets and assuming the Assumed Liabilities as set forth in this Article II.

2.02     Implementation

The Separation shall be completed in accordance with the agreed general principles, objectives and other provisions set forth in this Article II and shall be implemented in the following manner:

(a)        through the completion of the Reorganization, as described in Article III;

(b)        through the completion of the Arrangement, as described in Article IV;

(c)        through the completion from time to time following the Effective Time of the Deferred Transactions, as described in Section 13.01(a);

(d)        through the allocation from time to time following the Effective Time of the Deferred Transfer Assets as described in Section 5.01; and

(e)        through the performance by the Parties of all other provisions of this Agreement.

2.03     Transfer of Separated Assets; Assumption of Assumed Liabilities

On the terms and subject to the conditions set forth in this Agreement, and in furtherance of the Separation, with effect as of the Effective Time:

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(a)     Alcan agrees to cause the Separated Assets to be contributed, assigned, transferred, conveyed and delivered, directly or indirectly, to Novelis and Novelis agrees to accept from Alcan all of the Separated Assets and all of Alcan's rights, title and interest in and to all Separated Assets owned, directly or indirectly, by Alcan which, except with respect to the Deferred Separated Assets and Unreleased Liabilities, will result in Novelis owning, directly or indirectly, the Separated Businesses;

(b)     Novelis agrees to accept, assume and faithfully perform, discharge and fulfill all of the Assumed Liabilities in accordance with their respective terms; and

(c)     Novelis agrees to jointly elect with Alcan, in prescribed form and in a timely manner, to have the provisions of subsection 85(1) of Tax Act (and any applicable corresponding Canadian provincial provision) apply to the operations described in Section 2.03(a); the "agreed amount" for purposes of such election shall be equal to the cost amount, for purposes of the Tax Act, of the Arcustarget Common Shares at the time of the transfer of such shares to Novelis.

2.04     Separated Assets

For the purposes of this Agreement, "Separated Assets" shall mean, without duplication, the following Assets used or held for use exclusively or primarily in the conduct of the Separated Businesses or relating exclusively or primarily to a Separated Business or to a Separated Entity:

(a)     all Assets expressly identified in this Agreement or in any Ancillary Agreement or in any Schedule hereto or thereto, including those listed on Schedule 2.04(a), as Assets to be transferred to, or retained by, Novelis or any other member of Novelis Group;

(b)     the outstanding capital stock, units or other equity interests of the Separated Entities, as listed on Schedule 1.01 - "SE", the transfer of which pursuant to Section 2.03 will result in Novelis owning, directly or indirectly, all of the ownership interests in the Separated Entities  that are currently owned directly or indirectly by Alcan;

(c)      all Assets properly reflected on the Novelis Balance Sheet (Schedule 1.01 - - "NBS"), excluding Assets disposed of by Alcan or any other member of Alcan Group subsequent to the date of the Novelis Balance Sheet;

(d)     all Assets that have been written off, expensed or fully depreciated by Alcan or any other member of Alcan Group that, had they not been written off, expensed or fully depreciated, would have been reflected on the Novelis Balance Sheet in accordance with the same accounting principles and practices as those under which the Novelis Balance Sheet was prepared;

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(e)     all Assets acquired by Alcan or any other member of Alcan Group after the date of the Novelis Balance Sheet and that would be reflected on the balance sheet of Novelis as of the Effective Date (the "Novelis Opening Balance Sheet"), if such balance sheet were prepared using the same accounting principles and practices as those under which the Novelis Balance Sheet was prepared; and

(f)      all Assets transferred to Novelis Group pursuant to Section 13.01(a); provided, however, that any such transfer shall take effect under Section 13.01(a) and not under this Section 2.04.

Notwithstanding the foregoing, there shall be excluded from the definition of Assets under this Section 2.04 Business Records to the extent they are included in or primarily related to any Excluded Asset or Retained Liability or Remaining Alcan Business or their transfer is prohibited by Applicable Law or pursuant to agreements between Alcan or any other member of Alcan Group and Third Parties or otherwise would subject Alcan or any other member of Alcan Group to liability for such transfer.

2.05     Deferred Separated Assets

Notwithstanding anything to the contrary contained in Section 2.04 or elsewhere in this Agreement, Separated Assets shall not include the Deferred Separated Assets. The transfer to Novelis (or any other member of Novelis Group) of any such Deferred Separated Asset shall only be completed at the time, in the manner and subject to the conditions set forth in Section 5.01.

2.06     Excluded Assets

(a)     Notwithstanding anything to the contrary contained in Section 2.04 or elsewhere in this Agreement, the following Assets of Alcan or of any other relevant member of Alcan Group that would otherwise be included among the Separated Assets shall not be transferred to Novelis (or any other member of Novelis Group), shall not form part of the Separated Assets and shall remain the exclusive property of Alcan or the relevant member of Alcan Group on and after the Effective Time (the "Excluded Assets"):

(i)       any Asset expressly identified on Schedule 2.06(a);

(ii)      any Asset referred to in Section 2.06(b); and

(iii)     any Asset transferred to Alcan or to any other relevant member of Alcan Group pursuant to Section 13.01(a); provided, however, that any such transfers shall take effect under Section 13.01(a) and not under this Section 2.06.

(b)     For greater certainty, any Asset of Alcan or any other member of Alcan Group that is used in or relates in any manner to a Remaining Alcan Business shall not constitute a Separated Asset unless such Asset is specifically identified as a Separated Asset pursuant to Section 2.04.

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(c)     Notwithstanding anything to the contrary in this Agreement, Excluded Assets shall not include the Deferred Excluded Assets. The transfer to Alcan (or to the relevant member of Alcan Group) of any such Asset shall be completed at the time, in the manner and subject to the conditions set forth in Section 5.01.

2.07    Liabilities

For the purposes of this Agreement, Liabilities shall be identified as "Assumed Liabilities" or as "Retained Liabilities" under the following order of priority:

(a)     any Liability of a Separated Entity, whether arising or accruing prior to, on or after the Effective Time and whether the facts on which it is based occurred on, prior to or after the Effective Time and whether or not reflected on the Novelis Balance Sheet or on the Novelis Opening Balance Sheet, is an Assumed Liability, unless it is expressly identified in this Agreement (including on Schedule 2.07(b) or any other Schedule) or in any Ancillary Agreement as a Liability to be assumed or retained by Alcan or any other member of Alcan Group, in which case it is a Retained Liability;

(b)     any Liability relating to, arising out of, or resulting from the conduct of, a Separated Business or any Rolled Products Business (as conducted at any time prior to, on or after the Effective Time) or relating to a Separated Asset or a Deferred Separated Asset and whether or not arising or accruing prior to, on or after the Effective Time and whether the facts on which it is based occurred on, prior to or after the Effective Time and whether or not reflected on the Novelis Balance Sheet or the Novelis Opening Balance Sheet, is an Assumed Liability, unless it is expressly identified in this Agreement (including on Schedule 2.07(b) or any other Schedule) or in any Ancillary Agreement as a Liability to be assumed or retained by Alcan or any other member of Alcan Group, in which case it is a Retained Liability;

(c)     any Liability which is expressly identified on Schedule 2.07(a) is an Assumed Liability and any Liability which is expressly identified on Schedule 2.07(c) is a Retained Liability ;

(d)     any Liability which is reflected or otherwise disclosed as a liability or obligation of Novelis Group on the Novelis Balance Sheet is an Assumed Liability;

(e)     any Liability which would be reflected or otherwise disclosed on the Novelis Opening Balance Sheet, if such balance sheet were prepared using the same accounting principles and practices as those under which the Novelis Balance Sheet was prepared is an Assumed Liability;

(f)      any Liability of a Remaining Alcan Entity, whether arising or accruing prior to, on or after the Effective Time and whether the facts on which it is based occurred on, prior to or after the Effective Time, is a Retained Liability, unless it is determined to be an Assumed Liability pursuant to clauses (a), (b), (c), (d) or (e) above, in which case it is an Assumed Liability; and

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(g)      any Liability of Novelis or any other member of Novelis Group under this Agreement, any Ancillary Agreement or any Reorganization Document is an Assumed Liability and any Liability of Alcan or any other member of Alcan Group under this Agreement, any Ancillary Agreement or any Reorganization Document is a Retained Liability.

2.08    Disclaimer of Representations and Warranties

(a)     Each of the Parties (on behalf of itself and each other member of its respective Group) understands and agrees that, except as expressly set forth herein or in any Ancillary Agreement, no Party to this Agreement, any Ancillary Agreement or any other agreement or document contemplated by this Agreement, any Ancillary Agreement or otherwise, makes any representation or warranty, express or implied, regarding any of the Separated Assets, Separated Entities, Separated Businesses, Excluded Assets, Assumed Liabilities or Retained Liabilities including any warranty of merchantability or fitness for a particular purpose, or any representation or warranty regarding any Consents or Governmental Authorizations required in connection therewith or their transfer, regarding the value or freedom from Encumbrances of, or any other matter concerning, any Separated Asset or Excluded Asset, or regarding the absence of any defense or right of setoff or freedom from counterclaim with respect to any claim or other Separated Asset or Excluded Asset, including any Account Receivable of either Party, or as to the legal sufficiency of any assignment, document or instrument delivered hereunder to convey title to any Separated Asset or Excluded Asset upon the execution, delivery and filing hereof or thereof.

(b)     Except as may expressly be set forth herein or in any Ancillary Agreement, all Separated Assets and Excluded Assets are being transferred on an "as is, where is" basis, at the own risk ("aux risques et périls") of the respective transferees without any warranty whatsoever on the part of the transferor, formal or implicit, legal, statutory or conventional (and, in the case of any Real Property, by means of a quitclaim or similar form deed or conveyance) and the respective transferees shall bear the economic and legal risks that (i) any conveyance shall prove to be insufficient to vest in the transferee good and marketable title, free and clear of any Encumbrance, and (ii) any necessary Third-Party Consent or Governmental Authorization is not obtained or that any requirement of Applicable Law or any Order is not met.

2.09    Third-Party Consents and Government Approvals

To the extent that the Separation or any transaction contemplated thereby requires a Consent from any Third-Party (a "Third-Party Consent") or any Governmental Authorization, the Parties will use commercially reasonable efforts to obtain all such Third-Party Consents and Governmental Authorizations prior to the Effective Time. If the Parties fail to obtain any such Third-Party Consent or Governmental Authorization prior to the Effective Time, the matter shall be dealt with in the manner set forth in Section 5.01 or 5.02.

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Article III -
THE REORGANIZATION

3.01     Reorganization

            The Reorganization shall be implemented on the terms and subject to the conditions set forth in this Article III.

3.02     Reorganization Transactions

Subject to Section 3.08, Alcan agrees to cause the Reorganization Transactions to be completed substantially in the manner described on Schedule 3.01. Unless otherwise specified on Schedule 3.01, the Reorganization Transactions shall be completed on or before the Reorganization Date.

3.03     Effects of the Reorganization Transactions

After giving effect to the Reorganization Transactions:

(a)     all Separated Assets, other than the equity interests in the Separated Entities (which are addressed in (e) below), will be held by one or several Separated Entities;

(b)      all Assumed Liabilities will have been assumed or retained by one or several Separated Entities;

(c)      all Excluded Assets held by one or several Separated Entities will have been transferred to, or retained by, one or more Remaining Alcan Entities;

(d)      all Retained Liabilities incurred by any Separated Entity will have been assumed by one or several Remaining Alcan Entities; and

(e)      all of Alcan's right, title and interest in the capital or common stock of the Separated Entities (other than the shares of the share capital of Arcustarget) will have been transferred to Arcustarget.

3.04    Arcustarget Consideration

In consideration of the implementation of the Reorganization Transactions, Alcan, in addition to causing Arcustarget Group (or any member thereof) to assume the Assumed Liabilities, shall cause Arcustarget to (i) issue to Alcan, on or prior to the Reorganization Date, such number of Arcustarget common shares and such promissory notes as shall be necessary to complete the Reorganization Transactions and the Arrangement and (ii) issue to one or more Subsidiaries of Alcan as specified on Schedule 3.01 such promissory notes as shall be necessary to complete the Reorganization Transactions.

3.05     Termination of Agreements

(a)     Subject to Section 3.05(b), Novelis and Alcan agree that all agreements, arrangements, commitments and understandings, whether or not in writing, between any member or members of Novelis Group, on the one hand, and any member or members of Alcan Group, on the other hand, shall terminate without further action being required by any party thereto, with effect as of the Effective Time. No such terminated agreement, arrangement, commitment or understanding (including any provision thereof which purports to survive such termination) will be of any further force or effect as of and from the Effective Time. Alcan and Novelis shall sign all such documents and perform all such other acts, and they shall cause each other member of their respective Groups to sign all such documents and perform all such other acts, as may be necessary or desirable to implement or confirm such terminations.

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(b)    The provisions of Section 305(a) shall not apply to any of the following agreements, arrangements, commitments or understandings (or to any of the provisions thereof): (i) this Agreement and the Ancillary Agreements (and each other agreement or instrument expressly contemplated by this Agreement or any Ancillary Agreement to be entered into by either Party hereto or any of the members of their respective Groups); (ii) any agreement, arrangement, commitment or understanding listed or described or set forth on Schedule 3.05(b); (iii) any agreement, arrangement, commitment or understanding to which any Third Party is a party; and (iv) any other agreements, arrangements, commitments or understandings that this Agreement or any Ancillary Agreement contemplates will be in force beyond the Effective Date.

3.06     Ancillary Agreements

On or prior to the Effective Date, the Parties shall execute and deliver or, as applicable, cause the appropriate members of their respective Groups to execute and deliver, each of the following agreements (collectively, the "Ancillary Agreements"):

(a)	the Alumina Supply Agreement;
(b)	the Employee Matters Agreement;
(c)	the Energy Agreement;
(d)	the FoilStock Supply Agreement;
(e)	the Foil Supply Agreements;
(f)	the Foil Supply and Distribution Agreement;
(g)	the Intellectual Property Agreements;
(h)	the Joint Procurement of Goods and Services Protocol;
(i)	the Metal Supply Agreements;
(j)	the Nauhausen Agreements;

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(k)	the Ohle Agreement;
(l)	the Sierre Agreements;
(m)	the Tax Sharing and Disaffiliation Agreement;
(n)	the Technical Services Agreements;
(o)	the Transitional Services Agreement;
(p)	such other agreements and instruments as may relate to or be identified in any of the foregoing agreements; and
(q)	the agreements and instruments identified on Schedule 3.06(q).

3.07     Resignations

(a)      Alcan agrees to cause each Person who is a director or an officer of any Separated Entity and who will not become an employee of Novelis Group (or any member thereof) on the Effective Date to resign from such position with effect as of the Effective Date.

(b)     Novelis agrees to cause each Person who is a director or an officer of a Remaining Alcan Entity and who will become an employee of Novelis Group (or any member thereof) on the Effective Date to resign from such position with effect as of the Effective Date.

(c)     Each of Alcan and Novelis agrees to obtain all such letters of resignation or other evidence of such resignations as may be necessary or desirable in performing their respective obligations under this Section 3.07.

3.08    Sole Discretion of Alcan

Notwithstanding any other provision of this Article III, Alcan shall have the sole and absolute discretion:

(a)      to determine whether to proceed with all or any part of the Reorganization, including any Reorganization Transaction, and to determine the timing of and any and all conditions to the completion of the Reorganization or any part thereof; and

(b)     to amend or otherwise change, delete or supplement, from time to time, any term or element of the Reorganization, including any Reorganization Transaction.

3.09    Cooperation

Novelis shall cooperate with Alcan in all aspects of the Reorganization and it shall, at Alcan's request, sign all such documents and perform all such other acts as may be necessary or desirable to give full effect to the Reorganization; and Novelis shall cause each other member of Novelis Group to do likewise.

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3.10     Intercompany Accounts and Other Adjustments

Prior to the Effective Time, Alcan shall use commercially reasonable efforts to cause all balances related to indebtedness, including any intercompany indebtedness, loans, guarantees, receivables, payables or other accounts between a member of Alcan Group and a member of Novelis Group (including Arcustarget and its Subsidiaries), other than those balances related to indebtedness otherwise specifically provided for in this Agreement or any Ancillary Agreement (including those described in Schedule 3.10) ("Intercompany Accounts") to be settled, including by being contributed to capital in its discretion. To the extent that any Intercompany Account has not been settled or contributed to capital by the Effective Time, Novelis agrees to cause any Intercompany Account payable by any member of Novelis Group to be satisfied in full when due. Intercompany Accounts not contributed to capital or otherwise settled by the Effective Time shall be dealt with in the manner set forth in Schedule 3.10.  The Parties shall also perform such cash-balance, working capital and surplus asset adjustments as may be required as at the Effective Time in the manner set forth in Schedule 3.10

Article IV -
THE ARRANGEMENT

4.01     Plan of Arrangement

Each of Alcan and Novelis shall use commercially reasonable efforts to carry out the Plan of Arrangement and to cause the Arrangement to become effective on January 6, 2005, or on such later date as Alcan may determine, provided that if the Alcan Board decides to proceed with the Arrangement, Articles of Arrangement must be filed on or before April 28, 2005.

4.02     Actions Prior to the Effective Date

In addition to the covenants of Alcan provided for elsewhere in this Agreement, Alcan covenants and agrees, subject to Sections 3.08 and 4.03, that it shall cause the actions described on Schedule 4.02 to be taken prior to the Effective Time.

4.03     Sole Discretion of Alcan

Notwithstanding any other provision of this Article IV, Alcan shall have the sole and absolute discretion:

(a)      to determine whether to proceed with all or any part of the Arrangement and all the terms of the Plan of Arrangement and to determine the timing of and any and all conditions to the completion of the Arrangement or any part thereof, provided that if the Alcan Board decides to proceed with the Arrangement, Articles of Arrangement must be filed on or before April 28, 2005; and

(b)      to amend or otherwise change, delete or supplement, from time to time, any term or element of the Plan of Arrangement.

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Additionally, notwithstanding the adoption of the Arrangement Resolution by Alcan Shareholders, the Arrangement shall take effect only at such time as determined by further resolution of the Alcan Board, which shall also have the authority to revoke the Arrangement Resolution at any time prior to the issuance of the Certificate of Arrangement without further approval of the Alcan Shareholders.  If the Alcan Board decides to proceed with the Arrangement, Articles of Arrangement must be filed on or before April 28, 2005.

4.04     Cooperation

Novelis shall cooperate with Alcan in all aspects of the Arrangement and it shall, at Alcan's request, sign all such documents and perform all such other acts as may be necessary or desirable to carry out the Plan of Arrangement and give full effect to the Arrangement and Novelis shall cause each other member of Novelis Group to do likewise.

Article V -
DEFERRED SEPARATION TRANSACTIONS

5.01     Deferred Transfer Assets

(a)     If the transfer to, or retention by, Novelis Group (or the relevant member thereof) of any Asset (a "Deferred Separated Asset") that would otherwise constitute a Separated Asset or the transfer to, or retention by, Alcan Group (or the relevant member thereof) of any Asset (a "Deferred Excluded Asset", and together with a Deferred Separated Asset, a "Deferred Transfer Asset") that would otherwise constitute an Excluded Asset cannot be accomplished without giving rise to a violation of Applicable Law, or without obtaining a Third-Party Consent or a Governmental Authorization (collectively, a "Transfer Impediment") and any such Third-Party Consent or Governmental Authorization has not been obtained prior to the Effective Time, then such Asset shall be dealt with in the manner described in this Section 5.01.

(b)     Pending removal of such Transfer Impediment, the Person holding the Deferred Transfer Asset (the "Retaining Person") shall hold such Deferred Transfer Asset for the use and benefit, insofar as reasonably possible, of the Party to whom the transfer of such Asset could not be made at the Effective Time (the "Deferred Beneficiary"). The Retaining Person shall use commercially reasonable efforts to preserve such Asset and its right, title and interest therein and take all such other action as may reasonably be requested by the Deferred Beneficiary (in each case, at such Deferred Beneficiary's expense) in order to place such Deferred Beneficiary, insofar as reasonably possible, in the same position as it would be in if such Asset had been transferred to it or retained by it with effect as of the Effective Time and so that, subject to the standard of care set forth above, all the benefits and burdens relating to such Deferred Transfer Asset, including possession, use, risk of loss, potential for gain, and dominion, control and command over such Asset, are to inure from and after the Effective Time to such Deferred Beneficiary and the members of the Group to which it belongs. The provisions set forth in this Section 501(b) contain all the obligations of the Retaining Person vis-à-vis the Deferred Beneficiary with respect to the Deferred Transfer Asset and the Retaining Person shall not be bound vis-à-vis the Deferred Beneficiary by the obligations imposed by the Civil Code of Quebec on an administrator charged with the full administration of the property of others or by any analogous provision of any other Applicable Law.

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(c)     The Parties shall continue on and after the Effective Time to use commercially reasonable efforts to remove all Transfer Impediments; provided, however, that neither Party shall be required to make any unreasonable payment or assume any material obligations therefor. As and when any Transfer Impediment is removed, the relevant Deferred Transfer Asset shall forthwith be transferred to its Deferred Beneficiary at no additional cost and in a manner and on terms consistent with the relevant provisions of this Agreement and the Ancillary Agreements, including without limitation Section 2.08(b) hereof, and any such transfer shall take effect as of the date of its actual transfer.

(d)     Notwithstanding the foregoing or any provision of Applicable Law, a Retaining Person shall not be obligated, in connection with the foregoing, to expend any money in respect of a Deferred Transfer Asset unless the necessary funds are advanced by the Deferred Beneficiary of such Deferred Transfer Asset, other than reasonable attorneys' fees and recording or similar fees, all of which shall be promptly reimbursed by the Deferred Beneficiary of such Deferred Transfer Asset.

5.02    Unreleased Liabilities

If at any time on or after the Effective Time, any member of Alcan Group shall remain obligated to any Third Party in respect of any Assumed Liability or any member of Novelis Group shall remain obligated to any Third Party in respect of any Retained Liability, the following provisions shall apply. The liabilities referred to in this Section 5.02 are hereinafter referred to as the "Unreleased Liabilities" and the Person remaining obligated for such liability in a manner contrary to what is intended under this Agreement is hereinafter referred to as the "Unreleased Person."

(a)     Each Unreleased Person shall remain obligated to Third Parties for such Unreleased Liability as provided in the relevant Contract, Applicable Law or other source for such Unreleased Liability and shall pay and perform such Liability as and when required, in accordance with its terms.

(b)     Alcan shall indemnify, defend and hold harmless each Novelis Indemnified Party that is an Unreleased Person against any Liabilities arising in respect of each Unreleased Liability of such Person; and Novelis shall indemnify, defend and hold harmless each Alcan Indemnified Party that is an Unreleased Person against any Liabilities arising in respect of each Unreleased Liability of such Person. Alcan and Novelis shall take, and shall cause the members of their respective Groups to take, such other actions as may be reasonably requested by the other in accordance with the provisions of this Agreement in order to place Alcan and Novelis, insofar as reasonably possible, in the same position as they would be in if such Unreleased Liability had been fully contributed, assigned, transferred, conveyed, and delivered to, and accepted and assumed or retained, as applicable, by the other Party (or any relevant member of the Group to which it belongs) with effect as of the Effective Time and so that all the benefits and burdens relating to such Unreleased Liability, including possession, use, risk of loss, potential for gain, and dominion, control and command over such Unreleased Liability, are to inure from and after the Effective Time to the member or members of the Alcan Group or the Novelis Group, as the case may be.

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(c)     The Parties shall continue on and after the Effective Time to use commercially reasonable efforts to cause each Unreleased Person to be released from each of its Unreleased Liabilities.

(d)     If, as and when it becomes possible to delegate, novate or extinguish any Unreleased Liability in favor of an Unreleased Person, the Parties shall promptly sign all such documents and perform all such other acts, and shall cause each member of their respective Groups, as applicable, to sign all such documents and perform all such other acts, as may be necessary or desirable to give effect to such delegation, novation, extinction or other release without payment of any further consideration by the Unreleased Person.

5.03     Consideration

For the avoidance of doubt, the transfer or assumption of any Assets or Liabilities under this Article V shall be effected without any additional consideration by either Party hereunder.

Article VI -
REPRESENTATIONS AND WARRANTIES

6.01     Mutual Representations and Warranties

Each Party represents and warrants to and in favour of the other Party as follows and acknowledges that the other Party is relying upon such representations and warranties in connection with the matters contemplated by this Agreement:

(a)      it is duly incorporated, amalgamated or continued and is validly existing under the CBCA and has the corporate power and authority to own its Assets and to conduct its businesses and to perform its obligations hereunder;

(b)     the execution and delivery of this Agreement, of the Ancillary Agreements and of the Reorganization Documents by it and the completion by it of the transactions contemplated herein, in the Ancillary Agreements, in the Reorganization Documents, in the Plan of Arrangement and in the Tax Rulings do not and will not result in the breach of, or violate any term or provision of, its articles or by-laws;

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(c)      neither it nor, in the case of Novelis, any of its Group members is subject to any outstanding injunction, judgment or order, of any Governmental Authority which would prevent or materially delay the transactions contemplated by this Agreement, the Ancillary Agreements, the Reorganization Documents, the Plan of Arrangement or the Tax Rulings; there are no civil, criminal or administrative claims, actions, suits, demands, proceedings, hearings or investigations pending or, to the Party's knowledge,  threatened, at law, in equity or otherwise, in, before, or by, any Governmental Authority which (if successful) would prevent or materially delay the consummation of the transactions contemplated by this Agreement, the Ancillary Agreements, the Reorganization Documents, the Plan of Arrangement or the Tax Rulings;

(d)     the facts and other information which appear in the Rulings Applications relevant to it are accurate in all material respects and there has been no omission to state a material fact or to provide other material information relating to it that would be relevant to the granting of the Tax Rulings;

(e)     no dissolution, winding up, bankruptcy, liquidation or similar proceeding has been commenced, or is pending or proposed, in respect of it, except as contemplated by the Plan of Arrangement; and

(f)      the execution and delivery of this Agreement, of the Ancillary Agreements and of the Reorganization Documents and the completion of the transactions contemplated herein, in the Ancillary Agreements and in the Reorganization Documents, have been duly approved by its board of directors, and this Agreement, the Ancillary Agreements and the Reorganization Documents constitute legal, valid and binding obligations of such Party enforceable against it in accordance with its terms, subject to legislation relating to bankruptcy, insolvency, reorganization and other similar legislation of general application and other laws affecting the enforcement of creditors' rights generally, to general principles of equity and limitations upon the enforcement of indemnification for fines or penalties imposed by law and to the discretionary power of the courts as regards specific performance or injunctive relief.

6.02     Representations and Warranties of Alcan

Alcan represents and warrants to and in favour of Novelis as follows, and acknowledges that Novelis is relying upon such representations and warranties in connection with the matters contemplated by this Agreement:

(a)     the authorized capital of Alcan consists of an unlimited number of Alcan Common Shares and an unlimited number of preference shares issuable in series of which two series have been authorized. As of November 19, 2004, the issued and outstanding share capital without nominal or par value of Alcan consisted of 369,739,183 Alcan Common Shares, 5,700,000 Alcan Series C Preference Shares and 3,000,000 Alcan Series E Preference Shares;

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(b)     no Person holds any securities convertible into Alcan Common Shares or any other shares of Alcan or has any agreement, warrant, option or any other right capable of becoming an agreement, warrant or option for the purchase or other acquisition of any unissued shares of Alcan, other than options granted under the Alcan executive share option plan;

(c)      to the best of Alcan's knowledge, there is no "specified shareholder" of Alcan (as such term is defined for the purposes of paragraph 55(3.1)(b) of the Tax Act); and

(d)     the Alcan Proxy Circular, does not, as of its date, contain any untrue statement of a material fact, omit to state any fact that, if publicly disclosed, could reasonably be expected to have a material impact on the decision of an Alcan Shareholder to vote in favour of the Plan of Arrangement, or omit to state any material fact necessary in order to make the statements therein not misleading; provided, however, that Alcan makes no representations or warranties as to any statements of material fact concerning Novelis and the Separated Businesses (excluding, for greater certainty, facts relating to Alcan and the Remaining Alcan Businesses) that are made in the Alcan Proxy Circular.

6.03     Representations and Warranties of Novelis

Novelis represents and warrants to and in favour of Alcan as follows, and acknowledges that Alcan is relying upon such representations and warranties in connection with the matters contemplated by this Agreement:

(a)     the authorized capital of Novelis consists of an unlimited number of Novelis Common Shares, an unlimited number of Novelis Special Shares, an unlimited number of first preferred shares and an unlimited number of second preferred shares none of which is currently issued and outstanding;

(b)     no Person holds any securities convertible into Novelis Common Shares or any other shares of Novelis or has any agreement, warrant, option or any other right capable of becoming an agreement, warrant or option for the purchase or other acquisition of any unissued shares of Novelis except as contemplated by this Agreement or the Tax Rulings; and

(c)     the Prospectus will not, as of the date the Registration Statement is declared effective, contain any untrue statement of a material fact, omit to state any fact that, if publicly disclosed, could reasonably be expected to have a material impact on the market price or value of the Novelis Common Shares, or omit to state any material fact necessary in order to make the statements therein not misleading; provided, however, that Novelis makes no representations or warranties as to any statements or omissions made in respect of Alcan (excluding the Separated Businesses, the Separated Assets and the Assumed Liabilities) and the Remaining Alcan Businesses.

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Article VII -
COVENANTS

7.01     General Covenants

Each Party covenants with and in favour of the other Party that it shall, subject, in the case of Alcan, to Sections 3.08 and 4.03:

(a)     do and perform all such acts and things, and execute and deliver all such agreements, assurances, notices and other documents and instruments as may reasonably be required of it to facilitate the carrying out of the intent and purpose of this Agreement;

(b)     cooperate with and assist the other Party, both before and after the Effective Date, in dealing with transitional matters relating to or arising from the Reorganization, this Agreement, the Ancillary Agreements or the Arrangement;

(c)     cooperate prior to the Effective Date in applying for such amendments to the Tax Rulings, amending the Rulings Applications and making such amendments to this Agreement as may be necessary to obtain the Tax Rulings or to implement the Plan of Arrangement in the manner contemplated in the Tax Rulings or as may be desired by Alcan to enable it to carry out transactions deemed advantageous by it for the purposes of the Separation;

(d)     cooperate in preparing, and assisting Novelis in filing with the SEC, the Registration Statement and filing with the securities regulatory authorities in each of the provinces and territories of Canada the Prospectus, and such amendments or supplements thereto, as may be necessary in order to cause the same to become and remain effective as required by Applicable Law. Novelis shall use commercially reasonable efforts to cause the Registration Statement and the Prospectus to become effective under the Exchange Act and the applicable securities laws as soon as practicable but in any event prior to the Effective Time and will file any amendments to the Registration Statement as may be required by the SEC or such amendments to the Prospectus as may be required by the securities regulatory authorities in each of the provinces and territories of Canada; and

(e)     cooperate in preparing and filing all documentation (i) to effect all necessary applications, notices, petitions, filings and other documents; and (ii) to obtain as promptly as reasonably practicable all Consents and Governmental Authorizations necessary or advisable to be obtained from any Third Party and/or any Governmental Authority in order to consummate the transactions contemplated by this Agreement (including all approvals required under applicable antitrust laws).

7.02    Covenants of Novelis

In addition to the covenants of Novelis provided for elsewhere in this Agreement, Novelis covenants and agrees with and in favour of Alcan that it shall:

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(a)      use commercially reasonable efforts and do all things reasonably required of it to cause the Reorganization to be completed;

(b)     use commercially reasonable efforts and do all things reasonably required of it to cause the Arrangement to become effective on January 6, 2005 or such other date as Alcan may determine;

(c)     not perform any act or enter into any transaction that could interfere or be inconsistent with the completion of the Arrangement or the grant of the Tax Rulings or their effective application to the Arrangement except as provided in Section 7.02(d), and cause any other member of  Novelis Group to do likewise;

(d)     perform the obligations required to be performed by it under the Plan of Arrangement and do all such other acts and things as may be necessary or desirable and are within its power and control in order to carry out and give effect to the Arrangement and any transactions necessary for the effectiveness of the Tax Rulings, including co-operating with Alcan to obtain: (i) the Interim Order and the Final Order; (ii) the approval for the listing of the Novelis Common Shares on the New York Stock Exchange and the Toronto Stock Exchange; and (iii) such other consents, rulings, orders, approvals and assurances as its counsel may advise are necessary or desirable for the implementation of the Arrangement, including those referred to in Section 8.01; and (iv) satisfaction of the other conditions referred to in Section 8.01; and

(e)      perform and, as applicable, cause each member of Novelis Group to perform each of its and their respective obligations under each Ancillary Agreement.

Article VIII -
CONDITIONS

8.01     Actions Prior to the Completion of the Arrangement

(a)     In addition to, and without in any way limiting, Alcan's rights under Sections 3.08 and 4.03, completion of the Arrangement is subject to the fulfillment of each of the following conditions:

(i)      the Arrangement, either without amendment or with amendments approved by the Alcan Board, shall have been approved at the Alcan Meeting in accordance with the Interim Order;

(ii)      the Final Order shall have been obtained in form and substance satisfactory to Alcan;

(iii)     the Registration Statement shall have been filed with and declared effective by the SEC and the Prospectus shall have been filed with, and shall have received the appropriate approval by, the securities regulatory authorities in each of the provinces and territories of Canada and no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or threatened by the SEC and the actions and filings with regard to securities laws described in Sections 7.01(d) and 7.02(d) shall have been taken and, where applicable, have become effective or been accepted;

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(iv)     the Novelis Common Shares to be distributed pursuant to the Arrangement shall have been accepted for listing on the Toronto Stock Exchange and the New York Stock Exchange, Inc. subject to compliance with normal listing requirements;

(v)     the Toronto Stock Exchange, the New York Stock Exchange, Inc., and the London, Swiss and Euronext Paris stock exchanges shall have confirmed that the redesignated New Alcan Common Shares will continue trading as the Alcan Common Shares following the Effective Date;

(vi)     no Order or other legal restraint or prohibition preventing the consummation of the Reorganization, the Arrangement or any of the transactions contemplated by this Agreement or any Ancillary Agreement shall be threatened, pending or in effect;

(vii)    the Tax Rulings, in form and substance satisfactory to Alcan, shall have been received and remain in full force and effect;

(viii)   all of the transactions referred to in such Tax Rulings as occurring on or prior to the Effective Time shall have occurred, and all conditions or terms of such Tax Rulings shall have been satisfied;

(ix)     any Consents and Governmental Authorizations necessary to complete the Arrangement shall have been obtained and be in full force and effect;

(x)      the Alcan Board shall have approved the Arrangement and shall not have abandoned, deferred or modified the Arrangement at any time prior to the Effective Date;

(xi)      the Reorganization Transactions shall have been completed in a manner satisfactory to Alcan;

(xii)    each of the Ancillary Agreements shall have been duly executed and delivered by the parties thereto and shall be in effect;

(xiii)   the Alcan Board shall have received written opinions acceptable to the Alcan Board from Morgan Stanley & Co. Incorporated and from Lazard Canada Corporation that the Distribution is fair, from a financial point of view, to the Alcan Shareholders, which opinions shall not have been withdrawn or modified;

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(xiv)   this Agreement will not have been terminated as provided herein; and

(xv)   the Alcan Board shall have received such other opinions or reports as the Alcan Board may reasonably request in form and substance reasonably satisfactory to the Alcan Board as to accounting, tax and legal matters from PricewaterhouseCoopers LLP, Ernst & Young LLP, Sullivan & Cromwell LLP and Ogilvy Renault.

(b)     The foregoing conditions are for the sole benefit of Alcan and shall not give rise to or create any duty on the part of Alcan or the Alcan Board to waive or not to waive such conditions or in any way limit Alcan's right to terminate this Agreement as set forth in Article XV or alter the consequences of any such termination from those specified in such Article XV. Any determination made by Alcan prior to the Arrangement concerning the satisfaction or waiver of any or all of the conditions set forth in this Section 8.01 shall be final and conclusive.

Article IX -
MUTUAL RELEASES; INDEMNIFICATION

9.01    Release of Pre-Separation Claims

(a)      Except as provided in Section 9.01(c), effective as of the Effective Time, Novelis does hereby, on behalf of itself and each other member of Novelis Group, their respective Affiliates (other than any member of Alcan Group), successors and assigns, and all Persons who at any time prior to the Effective Time have been stockholders (other than any member of Alcan Group), directors, officers, agents or employees of any member of Novelis Group (in each case, in their respective capacities as such) (the "Novelis Releasors"), unequivocally, unconditionally and irrevocably release and discharge each of Alcan, the other members of Alcan Group, their respective Affiliates (other than any member of Novelis Group), successors and assigns, and all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of Alcan Group (in each case, in their respective capacities as such), and their respective heirs, executors, trustees, administrators, successors and assigns (the "Alcan Parties"), from any and all Actions, causes of action, choses in action, cases, claims, suits, debts, dues, damages, judgments and liabilities, of any nature whatsoever, in law, at equity or otherwise, whether direct, derivative or otherwise, which have been asserted against an Alcan Party or which, whether currently known or unknown, suspected or unsuspected, fixed or contingent, and whether or not concealed or hidden, the Novelis Releasors ever could have asserted or ever could assert, in any capacity, whether as partner, employer, agent or otherwise, either for itself or as an assignee, heir, executor, trustee, administrator, successor or otherwise for or on behalf of any other Person, against the Alcan Parties, relating to any claims or transactions or occurrences whatsoever, up to but excluding the Effective Time, including in connection with the transactions and all activities to implement the Separation (the "Novelis Claims"); and the Novelis Releasors hereby unequivocally, unconditionally and irrevocably agree not to initiate proceedings with respect to, or institute, assert or threaten to assert, any Novelis Claim.

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(b)     Except as provided in Section 9.01(c), effective as of the Effective Time, Alcan does hereby, on behalf of itself and each other member of Alcan Group, their respective Affiliates (other than any member of Novelis Group), successors and assigns, and all Persons who at any time prior to the Effective Time have been stockholders, directors, officers, agents or employees of any member of Alcan Group (in each case, in their respective capacities as such) (the "Alcan Releasors"), unequivocally, unconditionally and irrevocably release and discharge each of Novelis, the other members of Novelis Group, their respective Affiliates (other than any member of Alcan Group), successors and assigns, and all Persons who at any time prior to the Effective Time have been stockholders (other than any member of Alcan Group), directors, officers, agents or employees of any member of Novelis Group (in each case, in their respective capacities as such), and their respective heirs, executors, trustees, administrators, successors and assigns (the "Novelis Parties"), from any and all Actions, causes of action, choses in action, cases, claims, suits, debts, dues, damages, judgments and liabilities, of any nature whatsoever, in law, at equity or otherwise, whether direct, derivative or otherwise, which have been asserted against a Novelis Party or which, whether currently known or unknown, suspected or unsuspected, fixed or contingent, and whether or not concealed or hidden, the Alcan Releasors ever could have asserted or ever could assert, in any capacity, whether as partner, employer, agent or otherwise, either for itself or as an assignee, heir, executor, trustee, administrator, successor or otherwise for or on behalf of any other Person, against the Novelis Parties, relating to any claims or transactions or occurrences whatsoever, up to but excluding the Effective Time including in connection with the transactions and all activities to implement the Separation (the "Alcan Claims"); and the Alcan Releasors hereby unequivocally, unconditionally and irrevocably agree not to initiate proceedings with respect to, or institute, assert or threaten to assert, any Alcan Claim.

(c)      Nothing contained in Section 9.01(a) or 9.01(b) shall impair any right of any Person to enforce this Agreement, any Ancillary Agreement or any agreement, arrangement, commitment or understanding that is specified in Section 3.05(b) or in the applicable Schedules thereto, nor shall anything contained in those sections be interpreted as terminating as of the Effective Time any rights under any such agreements, contracts, commitments or understandings. For purposes of clarification, nothing contained in Section 9.01(a) or 9.01(b) shall release any Person from:

(i)       any Liability provided in or resulting from this Agreement or any of the Ancillary Agreements;

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(ii)      any Liability provided in or resulting from any agreement among any members of Alcan Group or Novelis Group that is specified in Section 3.05(b) or in the applicable Schedules thereto as not terminating as of the Effective Time (including for greater certainty, any Liability resulting or flowing from any breaches of such agreements that arose prior to the Effective Time), or any other Liability specified in such Section 3.05 as not to terminate as of the Effective Time;

(iii)     (a) with respect to Novelis, any Assumed Liability and (b) with respect to Alcan, any Retained Liability;

(iv)    any Liability that the Parties may have with respect to indemnification or contribution pursuant to Article V or this Article IX of this Agreement for Third-Party Claims;

(v)     any Liability for unpaid Intercompany Accounts; or

(vi)     any Liability the release of which would result in the release of any Person other than a Person released pursuant to this Section 9.01.

In addition, nothing contained in Section 9.01(a) shall release Alcan from honoring its existing obligations to indemnify any director, officer or employee of Novelis who was a director, officer or employee of Alcan or any other member of Alcan Group on or prior to the Effective Time, to the extent that such director, officer or employee becomes a named defendant in any litigation involving Alcan or any other member of Alcan Group and was entitled to such indemnification pursuant to then existing obligations.

(d)     Novelis shall not make, and shall not permit any other member of Novelis Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Alcan or any other member of Alcan Group or any other Person released pursuant to Section 9.01(a), with respect to any Liabilities released pursuant to Section 9.01(a). Alcan shall not make, and shall not permit any other member of Alcan Group to make, any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against Novelis or any other member of Novelis Group or any other Person released pursuant to Section 9.01(b), with respect to any Liabilities released pursuant to Section 9.01(b).

(e)      It is the intent of Alcan and Novelis by virtue of the provisions of this Section 9.01 to provide for a full and complete release and discharge of all Liabilities existing or arising from all acts and events occurring or failing to occur or alleged to have occurred or to have failed to occur and all conditions existing or alleged to have existed before the Effective Time, between or among Novelis or any other member of Novelis Group, on the one hand, and Alcan or any other member of Alcan Group, on the other hand (including any contractual agreements or arrangements existing or alleged to have existed between or among any such members before the Effective Time), except as expressly set forth in Section 9.01(c). At any time, at the request of any other Party, each Party shall, and shall cause each member of its Group to, promptly execute and deliver releases giving full effect to the provisions hereof.

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9.02     Indemnification by Novelis

Except as provided in Section 9.04 and subject to Section 16.01, Novelis shall, and shall cause the other members of Novelis Group to, solidarily indemnify, defend and hold harmless Alcan, each other member of Alcan Group and each of their respective directors, officers and employees, and each of the heirs, executors, trustees, administrators, successors and assigns of any of the foregoing (collectively, the "Alcan Indemnified Parties"), from and against any and all Liabilities of the Alcan Indemnified Parties relating to, arising out of or resulting from any of the following items (without duplication):

(a)      any Separated Business, any Separated Entity, any Separated Asset, any Assumed Liability or, subject to Section 5.01, any Deferred Separated Asset; and

(b)     any breach of, or any inaccuracy in, any representation or warranty or any breach of, or failure to perform or comply with, any covenant, undertaking or obligation of, this Agreement or any of the Ancillary Agreements, by Novelis or any other member of Novelis Group.

9.03    Indemnification by Alcan

Except as provided in Section 9.04 and subject to Section 16.01, Alcan shall indemnify, defend and hold harmless Novelis, each other member of Novelis Group and each of their respective directors, officers and employees, and each of the heirs, executors, trustees, administrators, successors and assigns of any of the foregoing (collectively, the "Novelis Indemnified Parties"), from and against any and all Liabilities of the Novelis Indemnified Parties relating to, arising out of or resulting from any of the following items (without duplication):

(a)     any Remaining Alcan Business or any Retained Liability; and

(b)     any breach of, or any inaccuracy in, any representation or warranty or any breach of, or failure to perform or comply with, any covenant, undertaking or obligation of, this Agreement or any of the Ancillary Agreements, by Alcan or any other member of Alcan Group.

9.04     Method of Asserting Claims Etc.

(a)     All claims for indemnification relating to a Third Party Claim by any indemnified party (an "Indemnified Party") hereunder shall be asserted and resolved as set forth in this Section 9.04.

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(b)     In the event that any written claim or demand for which an indemnifying party (an "Indemnifying Party") may have liability to any Indemnified Party hereunder, is asserted against or sought to be collected from any Indemnified Party by a Third Party (a "Third Party Claim"), such Indemnified Party shall promptly, but in no event more than ten (10) days following such Indemnified Party's receipt of a Third Party Claim, notify the Indemnifying Party in writing of such Third Party Claim, the amount or the estimated amount of damages sought thereunder to the extent then ascertainable (which estimate shall not be conclusive of the final amount of such Third Party Claim), any other remedy sought thereunder, any relevant time constraints relating thereto and, to the extent practicable, any other material details pertaining thereto (a "Claim Notice"); provided, however, that the failure to timely give a Claim Notice shall affect the rights of an Indemnified Party hereunder only to the extent that such failure has a material prejudicial effect on the defenses or other rights available to the Indemnifying Party with respect to such Third Party Claim. The Indemnifying Party shall have thirty (30) days (or such lesser number of days set forth in the Claim Notice as may be required by court proceeding in the event of a litigated matter) after receipt of the Claim Notice (the "Notice Period") to notify the Indemnified Party that it desires to defend the Indemnified Party against such Third Party Claim.

(c)     In the event that the Indemnifying Party notifies the Indemnified Party within the Notice Period that it desires to defend the Indemnified Party against a Third Party Claim, the Indemnifying Party shall have the right to defend the Indemnified Party by appropriate proceedings and shall have the sole power to direct and control such defense, with counsel reasonably satisfactory to the Indemnified Party at its expense. Once the Indemnifying Party has duly assumed the defense of a Third Party Claim, the Indemnified Party shall have the right, but not the obligation, to participate in any such defense and to employ separate counsel of its choosing. The Indemnified Party shall participate in any such defense at its expense unless (i) the Indemnifying Party and the Indemnified Party are both named parties to the proceedings and the Indemnified Party shall have reasonably concluded that representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them, or (ii) the Indemnified Party assumes the defense of a Third Party Claim after the Indemnifying Party has failed to diligently pursue a Third Party Claim it has assumed, as provided in the first sentence of this Section 9.04(c). The Indemnifying Party shall not, without the prior written consent of the Indemnified Party, settle, compromise or offer to settle or compromise any Third Party Claim on a basis that would result in (i) the imposition of a consent order, injunction or decree that would restrict the future activity or conduct of the Indemnified Party or any of its Affiliates, (ii) a finding or admission of a violation of Applicable Law or violation of the rights of any Person by the Indemnified Party or any of its Affiliates or (iii) a finding or admission that would have an adverse effect on other claims made or threatened against the Indemnified Party or any of its Affiliates.

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(d)     If the Indemnifying Party (i) elects not to defend the Indemnified Party against a Third Party Claim, whether by not giving the Indemnified Party timely notice of its desire to so defend or otherwise or (ii) after assuming the defense of a Third Party Claim, fails to take reasonable steps necessary to defend diligently such Third Party Claim within ten (10) days after receiving written notice from the Indemnified Party to the effect that the Indemnifying Party has so failed, the Indemnified Party shall have the right but not the obligation to assume its own defense; it being understood that the Indemnified Party's right to indemnification for a Third Party Claim shall not be adversely affected by assuming the defense of such Third Party Claim. The Indemnified Party shall not settle a Third Party Claim without the consent of the Indemnifying Party, which consent shall not be unreasonably withheld.

(e)     The Indemnified Party and the Indemnifying Party shall cooperate in order to ensure the proper and adequate defense of a Third Party Claim, including by providing access to each other's relevant business records and other documents, and employees; it being understood that the reasonable costs and expenses of the Indemnified Party relating thereto shall be Liabilities.

(f)      The Indemnified Party and the Indemnifying Party shall use commercially reasonable efforts to avoid production of confidential information (consistent with Applicable Law), and to cause all communications among employees, counsel and others representing any party to a Third Party Claim to be made so as to preserve any applicable attorney-client or work-product privileges.

9.05    Adjustments to Liabilities

(a)     If an Indemnified Party receives any payment from an Indemnifying Party in respect of any Liabilities and the Indemnified Party could have recovered all or a part of such Liabilities from a Third Party (a "Potential Contributor") based on the underlying claim or demand asserted against such Indemnifying Party, such Indemnified Party shall, to the extent permitted by Applicable Law, assign such of its rights to proceed against the Potential Contributor as are necessary to permit such Indemnifying Party to recover from the Potential Contributor the amount of such payment.

(b)    If notwithstanding Section 9.05(a) an Indemnified Party receives an amount from a Third Party in respect of a Liability that is the subject of indemnification hereunder after all or a portion of such Liability has been paid by an Indemnifying Party pursuant to this Article IX, the Indemnified Party shall promptly remit to the Indemnifying Party the excess (if any) of (i) the amount paid by the Indemnifying Party in respect of such Liability, plus the amount received from the Third Party in respect thereof, less (ii) the full amount of the Liability.

(c)     An insurer who would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of the indemnification provisions hereof, have any subrogation rights with respect thereto, it being expressly understood and agreed that no insurer or any other Third Party shall be entitled to a "wind-fall" (i.e., a benefit they would not be entitled to receive in the absence of the indemnification provisions) by virtue of the indemnification provisions hereof.

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9.06     Payments

The Indemnifying Party shall pay all amounts payable pursuant to this Article IX by wire transfer of immediately available funds, promptly following receipt from an Indemnified Party of a bill, together with all accompanying reasonably detailed back-up documentation, for a Liability that is the subject of indemnification hereunder, unless the Indemnifying Party in good faith disputes the Liability, in which event it shall so notify the Indemnified Party. In any event, the Indemnifying Party shall pay to the Indemnified Party, by wire transfer of immediately available funds, the amount of any Liability for which it is liable hereunder no later than three (3) days following any final determination of such Liability and the Indemnifying Party's liability therefor. A "final determination" shall exist when (i) the parties to the dispute have reached an agreement in writing, (ii) a court of competent jurisdiction shall have entered a final and non-appealable order or judgment, or (iii) an arbitration or like panel shall have rendered a final non-appealable determination with respect to disputes the parties have agreed to submit thereto.

9.07      Contribution

If the indemnification provided for in this Article IX shall, for any reason, be unavailable or insufficient to hold harmless the Indemnified Party hereunder in respect of any Liability, then each Indemnifying Party shall, in lieu of indemnifying such Indemnified Party, contribute to the amount paid or payable by such Indemnified Party as a result of such Liability, in such proportion as shall be sufficient to place the Indemnified Party in the same position as if such Indemnified Party were indemnified hereunder, the Parties intending that their respective contributions hereunder be as close as possible to the indemnification under Sections 9.02 and 9.03. If the contribution provided for in the previous sentence shall, for any reason, be unavailable or insufficient to put the Indemnified Party in the same position as if it were indemnified under Section 9.02 or 9.03, as the case may be, then the Indemnifying Party shall contribute to the amount paid or payable by such Indemnified Party as a result of such Liability, in such proportion as shall be appropriate to reflect the relative benefits received by and the relative fault of the Indemnifying Party on the one hand and the Indemnified Party on the other hand with respect to the matter giving rise to the Liability.

9.08     Litigation

(a)     Litigation Transferred to Novelis.   Notwithstanding anything to the contrary in this Article IX, at the Effective Time, responsibility for management of the litigation identified on Schedule 09.08(a) at the cost and expense of Novelis, which Schedule may be updated by Alcan on or prior to the Effective Time, shall be transferred  from Alcan (or any other member of Alcan Group) to Novelis. As of the Effective Time and thereafter, Novelis shall manage the defense of each such litigation, or prosecute same as applicable, and shall cause the applicable other members of Novelis Group to do the same. Alcan and the other members of Alcan Group must first obtain the prior consent of Novelis or the relevant member of Novelis Group for any action taken subsequent to the Effective Time in connection with the litigation identified on Schedule 9.08(a), which consent shall not be unreasonably withheld or delayed. All other matters relating to such litigation, including but not limited to indemnification for such claims, shall be governed by the provisions of Sections 9.01 through 9.07, 9.09 and 9.10.

 

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(b)    Litigation to be Defended by Alcan at Novelis's Expense.    Notwithstanding any contrary provisions in this Article IX, Alcan shall defend, and shall cause the relevant other members of Alcan Group to defend, or prosecute same as applicable, the litigation identified on Schedule 9.08(b), which Schedule may be updated by Alcan on or prior to the Effective Time, at the cost and expense of Novelis. Novelis shall be responsible for promptly reimbursing, or causing its Group members to promptly reimburse, to Alcan, or upon the request of Alcan (or any other member of Alcan Group) promptly advancing to Alcan (or any other member of Alcan Group), any of its costs, including attorneys' fees, incurred in defending such litigation. All other matters relating to such litigation, including but not limited to indemnification for such claims, shall be governed by the provisions of Sections 9.01 through 9.07, 9.09 and 9.10.

(c)     Cooperation.    Alcan and Novelis shall cooperate, and shall cause the other members of their respective Groups to cooperate, with each other in the defense of any litigation covered under this Section 9.08 and afford to each other reasonable access upon reasonable advance notice to witnesses and information that is reasonably required to defend or prosecute such litigation as set forth in this Article IX. The foregoing agreement to cooperate includes, but is not limited to, an obligation to provide access to qualified assistance, information, witnesses and documents to respond to discovery requests in specific lawsuits. In such cases, cooperation shall be timely so that the Party responding to discovery may meet any court-imposed deadlines. In connection with any matter contemplated by this Section 9.08, the Parties will enter into a mutually acceptable joint defense agreement so as to maintain to the extent practicable any applicable attorney-client privilege or work product immunity of any member of any Group.

(d)     No Assignment.    Nothing in this Section 9.08 shall be considered or interpreted as an assignment by Alcan or any other member of Alcan Group of any rights of action in contravention of Article II hereof.

9.09    Remedies Cumulative

The remedies provided in this Article IX shall be cumulative and, subject to the provisions of Article XII, shall not preclude assertion by any Indemnified Party of any other rights or the seeking of any and all other remedies against any Indemnifying Party.

9.10    Survival of Indemnities

The rights and obligations of each of Alcan and Novelis and their respective Indemnified Parties under this Article IX shall survive the distribution, sale or other transfer by any Party of any Assets or the delegation or assignment by it of any Liabilities.

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Article X -
INSURANCE

10.01   Insurance Matters

(a)     Novelis does hereby, for itself and each other member of Novelis Group, agree that no member of Alcan Group or any Alcan Indemnified Party shall have any liability whatsoever as a result of the insurance policies and practices of Alcan and its Affiliates as in effect at any time prior to the Effective Time, including as a result of the level or scope of any such insurance, the creditworthiness of any insurance carrier, the terms and conditions of any policy, the adequacy or timeliness of any notice to any insurance carrier with respect to any claim or potential claim or otherwise.

(b)     Alcan agrees to cause the interest and rights of Novelis and the other members of Novelis Group as of the Effective Time as insureds or beneficiaries or in any other capacity under occurrence‑based insurance policies and programs (and under claims‑made policies and programs to the extent a claim has been submitted prior to the Effective Time) of Alcan or any other member of Alcan Group in respect of periods prior to the Effective Time to survive the Effective Time for the period for which such interests and rights would have survived without regard to the transactions contemplated hereby to the extent permitted by such policies, and Alcan shall continue to administer such policies and programs on behalf of Novelis and the other members of Novelis Group, subject to Novelis reimbursement to Alcan and the other relevant members of Alcan Group for the actual out-of-pocket costs of such ongoing administration and the internal costs (based on the proportion of the amount of time actually spent on such matter to such employee's normal working time) of any employee or agent of Alcan of any other relevant member of Alcan Group who will be required to spend at least ten percent of their normal working time over any ten (10) Business Days working with respect to any such matter. Any proceeds received by Alcan of any other member of Alcan Group after the Effective Time under such policies and programs in respect of Novelis and the other members of Novelis Group shall be for the benefit of Novelis and the other members of Novelis Group. Notwithstanding the foregoing, such insurance proceeds payable in respect of Novelis and the other members of Novelis Group for periods prior to the Effective Time shall be for the benefit of Alcan and its Affiliates (excluding, for greater certainty, Novelis and the other members of Novelis Group) to the extent such proceeds relate to expenditures that have been made prior to the Effective Time.

(c)     This Agreement is not intended as an attempted assignment of any policy of insurance or as a contract of insurance and shall not be construed to waive any right or remedy of any member of Alcan Group in respect of any insurance policy or any other contract or policy of insurance.

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(d)     Nothing in this Agreement shall be deemed to restrict any member of Novelis Group from acquiring at its own expense any other insurance policy in respect of any Liabilities or covering any period.

Article XI -
EXCHANGE OF INFORMATION; CONFIDENTIALITY

11.01    Agreement for Exchange of Information; Archives

Without limiting any rights or obligations under any Ancillary Agreement between the Parties and/or any other member of their respective Groups relating to confidentiality, each of Alcan and Novelis agrees to provide, and to cause its Representatives, its Group members and its respective Group members' Representatives to provide, to the other Group and any member thereof (a "Requesting Party"), at any time before, on or after the Effective Date, subject to the provisions of Section 11.04 and as soon as reasonably practicable after written request therefor, any Information within the possession or under the control of such Party or one of such Persons which the Requesting Party reasonably needs (i) to comply with reporting, disclosure, filing or other requirements imposed on the Requesting Party (including under applicable securities laws) by a Governmental Authority having jurisdiction over the Requesting Party, (ii) for use in any other judicial, regulatory, administrative or other proceeding or in order to satisfy audit, accounting, claims, regulatory, litigation of the Requesting Party or similar requirements, in each case other than claims or allegations that one Party to this Agreement or any of its Group members has or brings against the other Party or any of its Group members, or (iii) subject to the foregoing clause (ii) above, to comply with its obligations under this Agreement or any Ancillary Agreement; provided, however, that in the event that any Party determines that any such provision of Information could be commercially detrimental, violate any Applicable Law or agreement, or waive any attorney‑client privilege, the Parties shall take all reasonable measures to permit the compliance with such obligations in a manner that avoids any such harm or consequence. More particularly, and without limitation to the generality of the foregoing sentence, the Parties agree that the provisions of the Tax Sharing and Disaffiliation Agreement shall govern with respect to the sharing of Information relating to Tax and to the extent governed thereby, the provisions of this Article XI shall not apply.

After the Effective Time, Novelis and the other members of Novelis Group shall have access during regular business hours (as in effect from time to time), and upon reasonable advance notice, to the documents and objects of historic significance that relate to the Separated Businesses, the Separated Assets or the Separated Entities and that are located in archives retained or maintained by Alcan or any other member of Alcan Group. Novelis and the other members of Novelis Group may obtain copies (but not originals) of documents for bona fide business purposes and may obtain objects for exhibition purposes for commercially reasonable periods of time if required for bona fide business purposes, provided that Novelis shall cause any such objects to be returned promptly, at Novelis's expense, in the same condition in which they were delivered to Novelis or any other member of Novelis Group and Novelis and the other members of Novelis Group shall comply with any rules, procedures or other requirements, and shall be subject to any restrictions (including prohibitions on removal of specified objects), that are then applicable to Alcan or such other member of Alcan Group. In any event, the foregoing shall not be deemed to restrict the access of Alcan or any other member of Alcan Group to any such documents or objects. Nothing herein shall be deemed to impose any Liability on Alcan or any other member of Alcan Group if documents or objects referred to in this Section 11.01 are not maintained or preserved by Alcan or any other member of Alcan Group.

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Alternatively, Alcan, acting reasonably, may request from Novelis and any other member of Novelis Group that they provide it, with reasonable advance notice, with a list of the requested Information that relates to the Separated Businesses, the Separated Assets or the Separated Entities and Alcan shall use, and shall cause the other members of Alcan Group who are in possession of the Information requested to use, commercially reasonable efforts to locate all requested Information that is owned or possessed by Alcan or any of its Group members or Representatives. Alcan will make available all such Information for inspection by Novelis or any other relevant member of Novelis Group during normal business hours at the place of business reasonably designated by Alcan. Subject to such confidentiality or security obligations as Alcan or the other relevant members of its Group may reasonably deem necessary, Novelis and the other relevant members of Novelis Group may have all requested Information duplicated. Alternatively, Alcan or the other relevant members of Alcan Group may choose to deliver to Novelis, at Novelis's expense, all requested Information in the form reasonably requested by Novelis or any other member of Novelis Group. At Alcan's request, Novelis shall cause such Information when no longer needed to be returned to Alcan at Novelis's expense.

11.02   Ownership of Information

Any Information owned by a Party or any of its Group members and that is provided to a requesting party pursuant to Section 11.01 shall be deemed to remain the property of the providing party. Unless specifically set forth herein or in any Ancillary Agreement, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such Information.

11.03  Compensation for Providing Information

The Party requesting Information agrees to reimburse the other Party for the reasonable costs, if any, of creating, gathering and copying such Information, to the extent that such costs are incurred for the benefit of the Requesting Party. Except as may be otherwise specifically provided elsewhere in this Agreement, in the Ancillary Agreements, or in any other agreement between the Parties, such costs shall be computed in accordance with the providing Party's standard methodology and procedures.

 

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11.04   Record Retention

To facilitate the possible exchange of Information pursuant to this Article XI and other provisions of this Agreement after the Effective Time, the Parties agree to use commercially reasonable efforts to retain, and to cause the members of their respective Group to retain, all Information in their respective possession or control on the Effective Date in accordance with the policies of Alcan Group as in effect on the Effective Date or such other policies as may be reasonably adopted by the appropriate Party after the Effective Date.

No Party will destroy, or permit any member of its Group to destroy, any Information which the other Party or any member of its Group may have the right to obtain pursuant to this Agreement prior to the fifth (5^th) anniversary of the Effective Date without first using commercially reasonable efforts to notify the other Party of the proposed destruction and giving the other Party the opportunity to take possession of such Information prior to such destruction.

11.05   Other Agreements Providing for Exchange of Information

The rights and obligations granted or created under this Article XI are subject to any specific limitations, qualifications or additional provisions on the sharing, exchange, retention or confidential treatment of Information set forth in any Ancillary Agreement.

11.06   Production of Witnesses; Records; Cooperation

(a)      After the Effective Time, but only with respect to a Third-Party Claim, each Party hereto shall use commercially reasonable efforts to, and shall cause the other relevant members of its Group to use commercially reasonable efforts to, make available to the other Party or any member of the Group to which belongs the other Party, upon written request, its then former and current Representatives (and the former and current Representatives of its respective Group members) as witnesses and any books, records or other documents within its control (or that of its respective Group members) or which it (or its respective Group members) otherwise has the ability to make available, to the extent that any such person (giving consideration to business demands of such Representatives) or books, records or other documents may reasonably be required in connection with any Action in which the Requesting Party may from time to time be involved, regardless of whether such Action is a matter with respect to which indemnification may be sought hereunder. The Requesting Party shall bear all costs and expenses in connection therewith.

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(b)     If a Party, being entitled to do so under this Agreement, chooses to defend or to seek to settle or compromise any Third-Party Claim, the other Party shall use commercially reasonable efforts to make available to such Party, upon written request, its then former and current Representatives and those of its respective Group members as witnesses and any books, records or other documents within its control (or that of its respective Group members) or which it (or its respective Group members) otherwise has the ability to make available, to the extent that any such person (giving consideration to business demands of such Representatives) or books, records or other documents may reasonably be required in connection with such defense, settlement or compromise, as the case may be, and shall otherwise cooperate in such defense, settlement or compromise, as the case may be.

(c)     Without limiting the foregoing, the Parties shall cooperate and consult, and shall cause their respective Group members to cooperate and consult, to the extent reasonably necessary with respect to any Actions (except in the case of an Action by one Party against the other).

(d)     The obligation of the Parties to provide witnesses pursuant to this Section 11.06 is intended to be interpreted in a manner so as to facilitate cooperation and shall include the obligation to provide as witnesses inventors and other employees without regard to whether the witness or the employer of the witness could assert a possible business conflict (subject to the exception set forth in the first sentence of Section 11.06(a)).

(e)     In connection with any matter contemplated by this Section 11.06, the Parties will enter into, and shall cause all other relevant members of their respective Groups to enter into, a mutually acceptable joint defense agreement so as to maintain to the extent practicable any applicable attorney-client privilege or work-product privileges of any member of any Group.

11.07  Confidentiality

(a)     Subject to Section 11.08, each of Alcan and Novelis shall hold, and shall cause its respective Group members and its respective Affiliates (whether now an Affiliate or hereafter becoming an Affiliate) and its Representatives to hold, in strict confidence, with at least the same degree of care that applies to Alcan's confidential and proprietary Information pursuant to policies in effect as of the Effective Date, all confidential and proprietary Information concerning the other Group (or any member thereof) that is either in its possession (including Information in its possession prior to the date hereof) or furnished by the other Group (or any member thereof) or by any of its Affiliates (whether now an Affiliate or hereafter becoming an Affiliate) or their respective Representatives at any time pursuant to this Agreement or any Ancillary Agreement or the transactions contemplated hereby or thereby (any such Information referred to herein as "Confidential Information"), and shall not use, and shall cause its respective Group members, Affiliates and Representatives not to use, any such Confidential Information other than for such purposes as shall be expressly permitted hereunder or thereunder. Notwithstanding the foregoing, Confidential Information shall not include Information that is or was (i) in the public domain other than by the breach of this Agreement or by breach of any other agreement relating to confidentiality between or among the Parties and/or their respective Group members, their respective Affiliates or Representatives, (ii) lawfully acquired by such Party (or any member of the Group to which such Party belongs or any of such Party's Affiliates) from a Third Party not bound by a confidentiality obligation, or (iii) independently generated or developed by Persons who do not have access to, or descriptions of, any such confidential or proprietary Information of the other Party (or any member of the Group to which such Party belongs).

 

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(b)     Each Party shall maintain, and shall cause its respective Group members to maintain, policies and procedures, and develop such further policies and procedures as will from time to time become necessary or appropriate, to ensure compliance with this Section 11.07(a).

(c)     Each Party agrees not to release or disclose, or permit to be released or disclosed, any Confidential Information to any other Person, except its Representatives who need to know such Confidential Information (who shall be advised of their obligations hereunder with respect to such Confidential Information), except in compliance with Section 11.08. Without limiting the foregoing, when any Information furnished by the other Party after the Effective Time pursuant to this Agreement or any Ancillary Agreement is no longer needed for the purposes contemplated by this Agreement or any Ancillary Agreement, each Party will promptly, after request of the other Party and at the election of the Party receiving such request, return to the other Party all such Information in a printed or otherwise tangible form (including all copies thereof and all notes, extracts or summaries based thereon) and destroy all Information in an electronic or otherwise intangible form and certify to the other Party that it has destroyed such Information (and such copies thereof and such notes, extracts or summaries based thereon). Notwithstanding the foregoing, the Parties agree that to the extent some Information to be destroyed or returned is retained as data or records for the purpose of business continuity planning or is otherwise not accessible in the Ordinary Course of Business, such data or records shall be destroyed in the Ordinary Course of Business in accordance, if applicable, with the business continuity plan of the applicable Party.

11.08   Protective Arrangements

In the event that any Party or any member of its Group or any Affiliate of such Party or any of their respective Representatives either determines on the advice of its counsel that it is required to disclose any Confidential Information (the "Disclosing Party") pursuant to Applicable Law or receives any demand under lawful process or from any Governmental Authority to disclose or provide Confidential Information of the other Party (or any member of the Group to which such Party belongs), the Disclosing Party shall, to the extent permitted by Applicable Law, promptly notify the other Party prior to the Disclosing Party disclosing or providing such Confidential Information and shall use commercially reasonable efforts to cooperate with the Requesting Party so that the Requesting Party may seek any reasonable protective arrangements or other appropriate remedy and/or waive compliance with this Section 11.08. All expenses reasonably incurred by the Disclosing Party in seeking a protective order or other remedy will be borne by the Requesting Party. Subject to the foregoing, the Disclosing Party may thereafter disclose or provide such Confidential Information to the extent (but only to the extent) required by such Applicable Law (as so advised by legal counsel) or by lawful process or by such Governmental Authority and shall promptly provide the Requesting Party with a copy of the Confidential Information so disclosed, in the same form and format as disclosed, together with a list of all Persons to whom such Confidential Information was disclosed.

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11.09  Disclosure of Third Party Information

Novelis acknowledges that it and the other members of Novelis Group may have in its or their possession confidential or proprietary Information of Third Parties that was received under confidentiality or non-disclosure agreements with such Third Party while part of Alcan Group. Novelis will hold, and will cause the other members of its Group and its and their respective Representatives to hold, in strict confidence the confidential and proprietary Information of Third Parties to which Novelis or any other member of Novelis Group has access, in accordance with the terms of any agreements entered into prior to the Effective Time between one or more members of Alcan Group (whether acting through, on behalf of, or in connection with, the Separated Businesses) and such Third Parties.

Article XII -
DISPUTE RESOLUTION

12.01   Disputes

The provisions of this Article XII shall govern all disputes, controversies or claims (whether arising in contract, delict, tort or otherwise) between the Parties that may arise out of, or relate to, or arise under or in connection with, this Agreement or the transactions contemplated hereby (including all actions taken in furtherance of the transactions contemplated hereby on or prior to the date hereof), or the commercial or economic relationship of the Parties relating hereto or thereto (a "Dispute").

12.02   Negotiation

The Parties hereby undertake to attempt in good faith to resolve any Dispute by way of negotiation between senior executives who have authority to settle such Dispute. In furtherance of the foregoing, any Party may initiate the negotiation by way of a notice (an "Escalation Notice") demanding an in-person meeting involving representatives of the Parties at a senior level of management of the Parties (or if the Parties agree, of the appropriate strategic business unit or division within such Party). A copy of any Escalation Notice shall be given to the Chief Legal Officer of each Party (which copy shall state that it is an Escalation Notice pursuant to this Agreement). Any agenda, location or procedures for such negotiation may be established by the Parties from time to time; provided, however, that the negotiation shall be completed within thirty (30) days of the date of the Escalation Notice or within such longer period as the Parties may agree in writing prior to the expiration of the initial thirty-day period.

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12.03   Mediation

(a)        If the Dispute has not been resolved by negotiation as provided in Section 12.02 within thirty (30) days of the date of the Escalation Notice or such extended period as may be agreed by the Parties, or should the Parties fail to meet within the said thirty-day period, the Parties shall endeavour to settle the Dispute by mediation. The Party wishing to refer a Dispute to mediation shall give written notice to the other (the "Mediation Notice") describing the Dispute, requiring that the Dispute be submitted to mediation and proposing the name of a suitable person to be appointed mediator.

(b)       If the other Party rejects the proposed mediator and the Parties are unable to agree on a mediator within fifteen (15) days of the Mediation Notice, then either Party may request the CPR Institute for Dispute Resolution to appoint a mediator from the CPR Panel of Distinguished Neutrals.

(c)        The mediator shall be entitled to make recommendations to the Parties which, unless the Parties agree otherwise, shall not be binding upon them.

(d)       The mediation shall continue until the earliest to occur of the following: (i) the Parties reach agreement as to the resolution of the Dispute, (ii) the mediator makes a finding that there is no possibility of resolution through mediation, or (iii) sixty (60) days have elapsed since the appointment of the mediator.

(e)       Each Party shall bear its own costs in connection with the mediation; the fees and disbursements of the mediator shall be borne equally by the Parties.

(f)        If the Parties accept any recommendation made by the mediator or otherwise reach agreement as to the resolution of the Dispute, such agreement shall be recorded in writing and signed by the Parties, whereupon it shall become binding upon the Parties and have, as between them, the authority of a final judgment or arbitral award (res judicata).

(g)       The mediation shall be confidential and neither the Parties (including their auditors and insurers) nor their counsel and any Person necessary to the conduct of the mediation nor the mediator or any other neutral involved in the mediation shall disclose the existence, content (including submissions made, positions adopted and any evidence or documents presented or exchanged), or outcome of any mediation hereunder without the prior written consent of the Parties, except as may be required by Applicable Law or the applicable rules of a stock exchange.

(h)       In the event that a Dispute is referred to arbitration in accordance with Section 12.04 below, the mediator or any other neutral involved in the mediation shall not take part in the arbitration, whether as a witness or otherwise, and any recommendation made by him in connection with the mediation shall not be relied upon by either Party without the consent of the other Party and of the mediator or neutral, and neither Party shall make use or rely upon information supplied, positions adopted, or arguments raised, by the other Party in the mediation.

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(i)        Subject to the right of the Parties to seek interim or conservatory relief from a court of competent jurisdiction, as provided below in Section 12.04(e), neither Party shall be entitled to refer a Dispute to arbitration unless the dispute has first been the subject of an Escalation Notice and been referred to mediation in accordance with Sections 12.02 and 12.03.

12.04    Arbitration

(a)     Any Dispute which has not been resolved by negotiation or mediation as provided herein shall, upon the request of either Party, be referred to and finally resolved by arbitration in accordance with the Arbitration Rules of the London Court of International Arbitration ("LCIA") then in force (the "LCIA Rules").

(b)     The arbitral tribunal shall consist of three arbitrators. The place of arbitration shall be Montréal, Canada.  The language of the arbitration shall be English.

(c)     The costs of the arbitration shall be specified by the arbitral tribunal and shall be borne by the unsuccessful Party, unless the arbitral tribunal, in its discretion, determines a different apportionment, taking all relevant circumstances into account. The costs of arbitration include, in addition to the costs of the arbitration as determined by the LCIA Court under Article 28.1 of the LCIA Rules, the legal and other costs incurred by the Parties, including: (i) the reasonable travel and other expenses of witnesses; (ii) the reasonable fees and expenses of expert witnesses; and (iii) the costs of legal representation and assistance, to the extent that the arbitral tribunal determines that the amount of such costs is reasonable.

(d)     The arbitral tribunal shall endeavour to issue its award within sixty (60) days of the last hearing of the substantive issues in dispute between the Parties; however, the arbitral tribunal shall not lose jurisdiction if it fails to respect this delay.  The arbitral award shall be final and binding.

(e)     For the purposes of any interim or conservatory measure that may be sought in aid of the arbitration proceedings, including for the purpose of enforcing the non-solicitation and non-competition provisions and other covenants of Sections 14.02, 14.03 and 14.04, the Parties hereby irrevocably submit to the non-exclusive jurisdiction of the competent court in the judicial district of Montréal, Canada, and waive any right to invoke, and they hereby agree not to invoke, any claim of forum non conveniens, inconvenient forum, or transfer or change of venue.  Without prejudice to such interim or conservatory remedies as may be obtained from a competent court, the arbitral tribunal shall have full authority to grant interim or conservatory remedies and to award damages for the failure of any Party to respect the arbitral tribunal's orders to that effect.

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(f)      Neither the Parties (including their auditors and insurers) nor their counsel and any Person necessary to the conduct of the arbitration nor the arbitrators shall disclose the existence, content (including submissions and any evidence or documents presented or exchanged), or outcome of any arbitration hereunder without the prior written consent of the Parties, except as may be required by Applicable Law or the applicable rules of a stock exchange.

Article XIII -
FURTHER ASSURANCES

13.01  Further Assurances

(a)      Except as provided in Sections 3.08 and 4.03, each Party covenants with and in favour of the other Party as follows:

(i)      prior to, on and after the Effective Date, each Party hereto shall, and shall cause the other relevant members of its Group to, cooperate with the other Party, and without any further consideration, but at the expense of the requesting Party, to execute, acknowledge and deliver, or use commercially reasonable efforts to cause to be executed and delivered, all instruments, assurances or documents, including instruments of conveyance, assignments and transfers, and to make all filings with, and to obtain all consents, approvals or authorizations of, any Governmental Authority or any other Person under any permit, license, agreement, indenture or other instrument (including any Consents or Governmental Authorizations), and to take all such other actions as such Party may reasonably be requested to take by the other Party hereto (or any member of its Group) from time to time, consistent with the terms of this Agreement and the Ancillary Agreements, in order to give effect to the provisions, obligations and purposes of this Agreement and the Ancillary Agreements and the transfers of the Separated Businesses and of the Separated Assets and the assignment and assumption of the Assumed Liabilities and the other transactions contemplated hereby and thereby;

(ii)      To the extent that Alcan or Novelis discovers at any time during the two (2) years following the Effective Time any Asset with respect to which there is clear and convincing evidence that such Asset  was intended to be transferred to Novelis or any other member of Novelis Group pursuant to this Agreement was not so transferred at the Effective Time, Alcan shall, or shall cause the other relevant members of its Group to promptly, assign and transfer to Novelis or any other member of Novelis Group reasonably designated by Novelis such Asset and all right, title and interest therein in a manner and on the terms consistent with the relevant provisions of this Agreement, including, without limitation, Section 2.08(b). Similarly, to the extent that Alcan or Novelis discovers at any time during the two (2) years following the Effective Time any Asset with respect to which there is clear and convincing evidence that such Asset  was intended to be retained by Alcan or any other member of Alcan Group was not so retained at the Effective Time, Novelis shall, or shall cause the other relevant members of its Group to promptly to, assign and transfer to Alcan or any other member of Alcan Group reasonably designated by Alcan such Asset and all right, title and interest therein in a manner and on the terms consistent with the relevant provisions of this Agreement, including, without limitation, Section 2.08(b). For the avoidance of doubt, the transfer of any Assets under this paragraph (a) shall be effected without any additional consideration by either Party hereunder (such deferred transfers being referred to as "Deferred Transactions").

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(b)     On or prior to the Effective Date, Alcan and Novelis, in their respective capacities as direct and indirect parent companies of the members of their respective Groups, shall each approve or ratify any actions of the members of their respective Groups as may be necessary or desirable to give effect to the transactions contemplated by this Agreement and the Ancillary Agreements.

(c)     Prior to the Effective Date, if a Party identifies any commercial or other service that is needed to assure a smooth and orderly transition of the businesses in connection with the consummation of the transactions contemplated hereby, and that is not otherwise governed by the provisions of this Agreement or any Ancillary Agreement, the Parties will cooperate in determining whether there is a mutually acceptable arm's-length basis on which the other Party can provide such service.

Article XIV -
CERTAIN OTHER MATTERS

14.01   Auditors and Audits; Annual and Quarterly Financial Statements and Accounting

Each Party agrees that during the one hundred and twenty (120) days following the Effective Time and in any event solely with respect to the preparation and audit of each of Alcan's and Novelis' financial statements for the year ended December 31, 2004, the printing, filing and public dissemination of such financial statements, the audit of Alcan's internal control over financial reporting and management's assessment thereof and management's assessment of Alcan's disclosure controls and procedures, in each case made as of December 31, 2004:

(a)     Date of Auditors' Opinion.   Novelis shall use commercially reasonable efforts to enable Novelis's Auditors ("Novelis's Auditors") to complete their audit such that they will date their opinion on Novelis's audited annual financial statements on the same date that Alcan's auditors ("Alcan's Auditors") date their opinion on Alcan's audited annual financial statements, and to enable Alcan to meet its timetable for the printing, filing and public dissemination of Alcan's annual financial statements.

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(b)    Annual Financial Statements.   Novelis shall provide to Alcan on a timely basis all Information that Alcan reasonably requires to meet its schedule for the preparation, printing, filing, and public dissemination of Alcan's annual financial statements and for management's assessment of the effectiveness of Alcan's disclosure controls and procedures and Alcan's internal control over financial reporting in accordance with Items 307 and 308, respectively, of Regulation S-K and Alcan's Auditors' audit of Alcan's internal control over financial reporting and management's assessment thereof in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 and the SEC's and Public Company Accounting Oversight Board's rules and auditing standards thereunder (such assessments and audit being referred to as the "2004 Internal Control Audit and Management Assessments"). Without limiting the generality of the foregoing, Novelis will provide all required financial and other Information with respect to Novelis and its Subsidiaries to Novelis's Auditors in a sufficient and reasonable time and in sufficient detail to permit Novelis's Auditors to take all steps and perform all reviews necessary to provide sufficient assistance to Alcan's Auditors with respect to Information to be included or contained in Alcan's annual financial statements and to permit Alcan's Auditors and Alcan's management to complete the 2004 Internal Control Audit and Management Assessments. Similarly, Alcan shall provide to Novelis on a timely basis all Information that Novelis reasonably requires to meet its schedule for the preparation, printing, filing, and public dissemination of Novelis's annual financial statements. Without limiting the generality of the foregoing, Alcan will provide all required financial Information with respect to Alcan and its Subsidiaries to Alcan's Auditors in a sufficient and reasonable time and in sufficient detail to permit Alcan's Auditors to take all steps and perform all reviews necessary to provide sufficient assistance to Novelis's Auditors with respect to Information to be included or contained in Novelis's annual financial statements.

(c)     Access to Personnel and Books and Records.   Novelis shall authorize Novelis's Auditors to make available to Alcan's Auditors both the personnel who performed or are performing the annual audits of Novelis and work papers related to the annual audits of Novelis, in all cases within a reasonable time prior to Novelis's Auditors' opinion date, so that Alcan's Auditors are able to perform the procedures they consider necessary to take responsibility for the work of Novelis's Auditors as it relates to Alcan's Auditors' report on Alcan's financial statements, all within sufficient time to enable Alcan to meet its timetable for the printing, filing and public dissemination of Alcan's annual financial statements. Similarly, Alcan shall authorize Alcan's Auditors to make available to Novelis's Auditors both the personnel who performed or are performing the annual audits of Alcan and work papers related to the annual audits of Alcan, in all cases within a reasonable time prior to Alcan's Auditors' opinion date, so that Novelis's Auditors are able to perform the procedures they consider necessary to take responsibility for the work of Alcan's Auditors as it relates to Novelis's Auditors' report on Novelis's financial statements, all within sufficient time to enable Novelis to meet its timetable for the printing, filing and public dissemination of Novelis's annual financial statements. Novelis shall make available to Alcan's Auditors and Alcan's management Novelis' personnel and Novelis books and records in a reasonable time prior to Alcan's Auditors' opinion date and Alcan's management's assessment date so that Alcan's Auditors and Alcan's management are able to perform the procedures they consider necessary to conduct the 2004 Internal Control Audit and Management Assessments.

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(d)     Reports Generally.   Each Novelis Group member that files information with the SEC will deliver to Alcan a substantially final draft, as soon as the same is prepared, of the first report to be filed with the SEC that includes Novelis's audited financial statements for the year ended December 31, 2004 (the "Novelis Annual Report"); provided, however, that Novelis may continue to revise such Novelis Annual Report prior to the filing thereof in order to make corrections and non-substantive changes which corrections and changes will be delivered to Alcan as soon as practicable; provided, further, that Alcan's and Novelis's personnel will actively consult with each other regarding any changes (whether or not substantive) which Novelis may consider making to the Novelis Annual Report and related disclosures prior to the anticipated filing with the SEC, with particular focus on any changes which would have an effect upon Alcan's financial statements or related disclosures.

Nothing in this Section 14.01 shall require Novelis to violate any agreement with any Third Party regarding the confidentiality of confidential and proprietary Information relating to that Third Party or its business; provided, however, that in the event that Novelis is required under this Section 14.01 to disclose any such Information, such Party shall use commercially reasonable efforts to seek to obtain such Third Party Consent to the disclosure of such Information.

14.02   Non-Solicitation of Employees

Each Party covenants, agrees and undertakes for itself and each other member of the Group to which such Party belongs, that, except with the written approval of the other Party, no Party nor any member of the Group to which such Party belongs shall, for a period of two (2) years following the Effective Date, (a) directly or indirectly solicit for employment or recruit the employees of the other Party or the employees of any member of the Group to which such other Party belongs, or induce or attempt to induce any employee of the other Party or any employee of any member of the Group to which such other Party belongs, to terminate or cease his or her relationship with such other Party or with such member of the Group to which such other Party belongs, or (b) enter into any employment, consulting, independent contractor or similar arrangement with any employee or former employee of the other Party or employee or former employee of any member of the Group to which such other Party belongs, until one (1) year after the effective date of the termination of such employee's employment with the other Party or with any member of the Group to which such other Party belongs, provided that the foregoing subclause (b) shall not apply to former employees whose employment has been terminated (x) by the employer (with or without cause) or (y) by mutual agreement between the employee and employer. For greater certainty, nothing herein shall prevent Novelis or any other member of Novelis Group from employing employees in accordance with the terms of the Employee Matters Agreement.

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The prohibition on solicitation and inducement set out in the foregoing subclause (a) shall not apply to actions taken by a Party or by any member of the Group to which such Party belongs (i) as a result of an employee's affirmative response to a general recruitment effort carried out through a public solicitation or a general solicitation for employment including through the use of a recruitment agent provided that the name of a specific employee or group of employees is not given to such agency or (ii) as a result of an employee's initiative.

Each Party understands and agrees that the other Party shall suffer irreparable and substantial harm in the event that such Party breaches any of its obligations under this Section 14.02 and that monetary damages shall be inadequate to compensate for the breach.  Accordingly, each Party agrees that, in the event of a breach or threatened breach by such Party of any of the provisions of this Section 14.02, the other Party, in addition to and not in limitation of any other rights, remedies or damages available to the other Party under Applicable Law or in equity, shall be entitled to equitable remedies, including provisional, interlocutory and permanent injunctive relief in order to prevent or to restrain any such breach by such Party or by any or all of such Party's Group members, employees, agents, representatives and any and all Persons directly or indirectly acting for, on behalf of or with such Party.

14.03   Non-Competition

(a)     Novelis covenants, agrees and undertakes, for itself and each other member of Novelis Group (whether now a member of Novelis Group or hereafter becoming a member of Novelis Group), and it shall cause any such member, not to engage, directly or indirectly, in any manner whatsoever, in any of the following businesses or activities, either alone or in concert or in conjunction with any other Person, in any capacity whatsoever, including as a shareholder, partner, provider of funds, advisor of, employer, principal, mandator, agent, mandatary, joint venturer, consultant, supplier or through any form of Business Concern in which it has an economic interest, during the Standstill Period and the Restricted Period:

(i)        the Aerospace Products Business; and

(ii)       the Plate Business.

(b)     In the event that Novelis refuses, neglects or fails to comply with any of its obligations pursuant to Section 14.03(a) and such default is not remedied within forty-five (45) days following the receipt of a notice signed by Alcan indicating the default complained of (a "Non Compete Breach"), then Alcan may, at its option and without prejudice to any other recourse which may be available to Alcan under Applicable Law or in equity by reason of the occurrence of a Non Compete Breach, terminate any or all of the following, upon notice to Novelis, and the termination shall take effect immediately upon Alcan providing such notice to Novelis:

(i)       any or all of the Metal Supply Agreements;

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(ii)      any or all of the intellectual property licenses granted or to be granted to Novelis or any other member of Novelis Group or any Affiliates of Novelis in the Intellectual Property Agreements;

(iii)     the Transitional Services Agreement with respect to any one or more specific Services (and the corresponding Transition Service Schedules) provided by Alcan or any other member of Alcan Group or all of the Services provided by Alcan or any other member of Alcan Group under the Transitional Services Agreement; and

(iv)     any or all of the Technical Services Agreements.

(c)     Novelis understands and agrees that Alcan shall suffer irreparable and substantial harm in the event that Novelis breaches any of its obligations under this Section 14.03 and that monetary damages shall be inadequate to compensate for the breach. Accordingly, Novelis agrees that, in the event of a breach or threatened breach by Novelis of any of the provisions of this Section 14.03, Alcan, in addition to and not in limitation of any other rights, remedies or damages available to Alcan under Applicable Law or in equity, shall be entitled to equitable remedies, including provisional, interlocutory and permanent injunctive relief in order to prevent or to restrain any such breach by Novelis, or by any or all of Novelis' Group members, partners, co-venturers, employees, agents, representatives and any and all Persons directly or indirectly acting for, on behalf of or with Novelis.

(d)    Novelis has carefully considered the nature and extent of the restrictive covenants set forth in this Section 14.03 and agrees that the same are reasonable, including with respect to duration and scope of activity, in light of the circumstances as they exist on the date upon which this Agreement is executed, including, but not limited to, Alcan's and Novelis's material economic interest in the transactions contemplated in this Agreement, and that the restrictive covenants set forth in this Section 14.03 are necessary to protect Alcan's legitimate interests. Novelis acknowledges (i) that Alcan would not have proceeded with the Arrangement had Novelis not agreed to the restrictive covenants set forth in this Section 14.03, and (ii) that Alcan would be irreparably damaged if Novelis were to breach the restrictive covenants set forth in this Section 14.03.

(e)     In the event that a court of competent jurisdiction should conclude that any of the covenants in Section 14.03(a) are too long in duration or too broad in scope, the Parties hereto agree that said court may reduce its duration and/or scope to the maximum duration and/or scope it deems reasonable to protect the interests of Alcan instead of invalidating such covenant and as of such ruling the said covenant shall be deemed to be modified accordingly.

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(f)      Without limiting the foregoing, the Parties agree that each of the provisions in this Section 14.03 shall be deemed to be separate and distinct and if, for any reason whatsoever, any of the provisions in this Section 14.03 are held null or unenforceable by the final determination of a court of competent jurisdiction and all appeals therefrom shall have failed or the time for such appeals shall have expired, such provision shall be deemed deleted from this Agreement without affecting the validity or enforceability of such provision in any other jurisdiction or any other provision hereof which shall remain in full force and effect.

14.04   Change of Control with respect to Novelis

(a)      For the purposes of this Section 14.04, the following terms shall have the following meanings:

(i)      "Change of Control Event" means the acquisition by any Person or group of Persons acting jointly or in concert, other than an Affiliate of such Person (collectively or individually, the "Third Party Acquirer"), by way of acquisition, exchange, lease, merger, amalgamation, consolidation or otherwise, directly or indirectly, of any of the Designated Assets or of (A) with respect to a corporation, a direct or indirect interest in more than 30% of the voting securities (whether outstanding or from treasury and including securities convertible into voting securities) or of direct or indirect rights to acquire more than 30% of any such voting securities of, (B) with respect to a trust, a partnership or any Person other than a partnership, the power to administer and direct the business, management or policies of such trust, partnership or Person, directly or indirectly, in any manner (including through one or more trusts or one or more corporations, partnerships or other Persons Controlled by such Person) or that a Person is entitled, directly or indirectly, to over 30% of the profits or a share of over 30% of the losses of, or (C) all or substantially all the assets of:

a.       Novelis,

b.       any other member of Novelis Group,

c.       any Business Concern which then owns, directly or indirectly, the Separated Businesses or a material portion of the Separated Businesses (the "Targeted Entity"),

d.      any successor (by way of merger, amalgamation, consolidation or otherwise) to Novelis, any other member of Novelis Group, or the Targeted Entity, or

e.       any successor (by way of merger, amalgamation, consolidation or otherwise) to any Person in Control of Novelis, any other member of Novelis Group, or the Targeted Entity.

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(ii)     "Control" means (i) with respect to a corporation at a given date, that a Person beneficially owns (within the meaning of the CBCA), directly or indirectly, in any manner (including through one or more trusts or one or more corporations, partnerships or other Persons Controlled by such Person) other than as a creditor, at least a majority of the securities having by the terms thereof ordinary voting power to elect at least a majority of the board of directors with respect to such corporation, and (ii) with respect to a trust, a partnership or any Person other than a partnership, that a Person is empowered to administer and direct the business, management or policies of such trust, partnership or Person, directly or indirectly, in any manner (including through one or more trusts or one or more corporations, partnerships or other Persons Controlled by such Person) or that a Person is entitled, directly or indirectly, to over thirty percent (30%) of the profits or a share of over thirty (30%) of the losses of such trust, partnership or Person.

(b)     Novelis covenants, agrees and undertakes, for itself and each other member of Novelis Group, and it shall cause any such member, not to create, incur nor undergo a Change of Control Event during the Standstill Period.

(c)     Novelis covenants, agrees and undertakes, for itself and each other member of Novelis Group and for their respective successors by way of acquisition, merger, amalgamation, consolidation or otherwise, that, if a Change of Control Event occurs during the Restricted Period, it shall provide to Alcan, no later than thirty (30) days following the occurrence of the Change of Control Event, (x) a written undertaking of the Third Party Acquirer (including, for greater certainty, the Third Party Acquirer's successors by way of acquisition, merger, amalgamation, consolidation or otherwise) that the Third Party Acquirer shall be bound by the restrictive covenants set forth in Section 14.03 during the Restricted Period or the remainder thereof, to the same extent as if the Third Party Acquirer (including, for greater certainty, the Third Party Acquirer's successors by way of acquisition, merger, amalgamation, consolidation or otherwise) had been a signatory thereto, and (y) the written undertaking of the Third Party Acquirer (1) to cause each of its Affiliates (including Novelis and Novelis's Affiliates) to deliver to Alcan a similar covenant to be bound by the restrictive covenants set forth in Section 14.03 during the Restricted Period or the remainder thereof and (2) to cause each of the Persons who thereafter at any time during the remainder of the Restricted Period becomes an Affiliate of the Third Party Acquirer, to deliver to Alcan within a 30-day period, undertakings similar to the ones set forth in subclauses (x) and (y) as if such Person were the Third Party Acquirer, the whole for the purpose of protecting the rights and interests of Alcan pursuant to this Agreement. The undertaking required by this Section 14.04(c) shall be substantially in the form attached hereto as Exhibit R (the "Non Compete Undertaking").

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(d)     Novelis covenants, agrees and undertakes, that, in the event of the acquisition by any Person or group of Persons acting jointly or in concert, other than an Affiliate of such Person, by way of acquisition, merger, amalgamation, consolidation or otherwise, of Control of any Third Party Acquirer or of all or substantially all of the assets that were acquired in the Change of Control Event or any of the Designated Assets (the "Novelis COC Assets") during the Restricted Period, it shall cause any such Person or group of Persons to provide to Alcan, no later than thirty (30) days following the acquisition of Control of any such Third Party Acquirer or of substantially all of the Novelis COC Assets (which, for purposes of clarity, includes any of the Designated Assets) by any such Person or Persons, (x) a written undertaking of such Person or Persons that they (and their respective successors, by way of acquisition, merger, amalgamation, consolidation or otherwise) (collectively or individually, "Third Party Acquirer Controller") shall be bound by the restrictive covenants set forth in Section 14.03 during the Restricted Period or the remainder thereof, to the same extent as if they had been signatories thereto, and (y) the written undertaking of the Third Party Acquirer Controller (1) to cause each of its Affiliates to deliver to Alcan a similar covenant to be bound by the restrictive covenants set forth in Section 14.03 during the Restricted Period or the remainder thereof and (2) to cause each of the Persons who thereafter at any time during the remainder of the Restricted Period becomes an Affiliate of the Third Party Acquirer Controller, to deliver to Alcan within a 30-day period, undertakings similar to the ones set forth in subclauses (x) and (y) as if any such Person were the Third Party Acquirer Controller, the whole for the purpose of protecting the rights and interest of Alcan pursuant to this Agreement. The undertaking required by this Section 14.04(d) shall be substantially in the form attached hereto as Exhibit R.

(e)     If a Change of Control Event occurs at any time during the Standstill Period or the Restricted Period and (i) the Third Party Acquirer (or the Third Party Acquirer's successors, as applicable, by way of acquisition, merger, amalgamation, consolidation or otherwise) or any of its Affiliates (whether now an Affiliate or hereafter becoming an Affiliate) fails or refuses, for whatever reason or cause, to execute and deliver to Alcan the Non Compete Undertaking within the 30-day period provided for in Section 14.04(c), or (ii) the Third Party Acquirer (or the Third Party Acquirer's successors, as applicable, by way of acquisition, merger, amalgamation, consolidation or otherwise) executes and delivers to Alcan the Non Compete Undertaking within the said 30-day period but, at any time during the remainder of the Restricted Period, the Third Party Acquirer (or the Third Party Acquirer's successors, as applicable, by way of acquisition, merger, amalgamation, consolidation or otherwise) or any of its Affiliates (whether now an Affiliate or hereafter becoming an Affiliate) (including Novelis and Novelis's Affiliates, whether now an Affiliate or hereafter becoming an Affiliate) refuses, neglects or fails to comply with any of its obligations pursuant to the Non Compete Undertaking, or (iii) the Third Party Acquirer Controller, if any (or its successors, as applicable, by way of acquisition, merger, amalgamation, consolidation or otherwise) or any of its Affiliates (whether now an Affiliate or hereafter becoming an Affiliate) fails or refuses, for whatever reason or cause, to execute and deliver to Alcan the Non Compete Undertaking within the 30-day period provided for in Section 14.04(d), or the Third Party Acquirer Controller (or its successors, as applicable, by way of acquisition, merger, amalgamation, consolidation or otherwise) executes and delivers to Alcan the Non Compete Undertaking within the said 30-day period but, at any time during the remainder of the Restricted Period, the Third Party Acquirer Controller (or the Third Party Acquirer Controller's successors, as applicable, by way of acquisition, merger, amalgamation, consolidation or otherwise) or any of its Affiliates (whether now an Affiliate or hereafter becoming an Affiliate) refuses, neglects or fails to comply with any of its obligations pursuant to the Non Compete Undertaking (each, a "Change of Control Non Compete Breach"), then Alcan may, at its option and without prejudice to any other recourse which may be available to Alcan under Applicable Law or in equity by reason of the occurrence of the foregoing, terminate any or all of the following, upon notice to Novelis, and the termination shall take effect immediately upon Alcan providing such notice to Novelis:

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(i)       any or all of the Metal Supply Agreements;

(ii)      any or all of the intellectual property licenses granted or to be granted to Novelis or any other member of Novelis Group in the Intellectual Property Agreements;

(iii)     the Transitional Services Agreement with respect to any one or more specific Services (and the corresponding Transition Service Schedules) provided by Alcan or any other member of Alcan Group or all of the Services provided by Alcan or any other member of Alcan Group under the Transitional Services Agreement; and

(iv)     any or all of the Technical Services Agreements.

(f)      Novelis understands and agrees that Alcan shall suffer irreparable and substantial harm in the event that Novelis breaches any of its obligations under this Section 14.04 and that monetary damages shall be inadequate to compensate for the breach. Accordingly, Novelis agrees that, in the event of a breach or threatened breach by Novelis of any of the provisions of this Section 14.04, Alcan, in addition to and not in limitation of any other rights, remedies or damages available to Alcan under Applicable Law or in equity, shall be entitled to equitable remedies, including provisional, interlocutory and permanent injunctive relief in order to prevent or to restrain any such breach by Novelis, or by any or all of Novelis' Group members, Affiliates, partners, co-venturers, employees, agents, representatives and any and all Persons directly or indirectly acting for, on behalf of or with Novelis.

(g)    Novelis consents and agrees that any dispute, controversy or claim that may arise out of, or relate to, or arise under or in connection with this Section 14.04 or the Non Compete Undertaking, and involving a Third Party Acquirer, a Third Party Acquirer Controller (including, for greater certainty, the Third Party Acquirer' and the Third Party Acquirer Controller' respective successors by way of acquisition, merger, amalgamation, consolidation or otherwise), or an Affiliate (whether now an Affiliate or hereafter becoming an Affiliate) of the Third Party Acquirer or of the Third Party Acquirer Controller, shall be referred to and finally settled in a single, multi-party arbitration by three (3) arbitrators, as provided in and in accordance with the provision of, the Non Compete Undertaking.

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(h)     Novelis has carefully considered the nature and extent of the provisions set forth in this Section 14.04 and agrees that the same are reasonable in light of the circumstances as they exist on the date upon which this Agreement is executed, including, but not limited to, Alcan's and Novelis's material economic interest in the transactions contemplated in this Agreement, and that the provisions set forth in this Section 14.04 are necessary to protect Alcan's legitimate interests. Novelis acknowledges (i) that Alcan would not have proceeded with the Arrangement had Novelis not agreed to the provisions set forth in this Section 14.04, and (ii) that Alcan would be irreparably damaged if Novelis were to breach the provisions set forth in this Section 14.04.

(i)      Each of the provisions in this Section 14.04 shall be deemed to be separate and distinct and if, for any reason whatsoever, any of the provisions in this Section 14.04 are held null or unenforceable by the final determination of a court of competent jurisdiction and all appeals therefrom shall have failed or the time for such appeals shall have expired, such provision shall be deemed deleted from this Agreement without affecting the validity or enforceability of such provision in any other jurisdiction or any other provision hereof which shall remain in full force and effect.

Article XV -
TERMINATION

15.01   Termination

This Agreement and all Ancillary Agreements may be terminated and the Arrangement may be amended, supplemented, modified or abandoned at any time prior to the Effective Date by and in the sole and absolute discretion of Alcan without the approval of Novelis or of the Alcan shareholders. In the event of such termination, no Party shall have any liability of any kind to the other Party or any other Person. After the Effective Date, this Agreement may not be terminated except by an agreement in writing signed by the Parties.

Article XVI -
MISCELLANEOUS

16.01   Limitation of Liability

In no event shall any member of Alcan Group or Novelis Group be liable to any member of the other Group for any special, consequential, indirect, collateral, incidental or punitive damages or lost profits or failure to realize expected savings or other commercial or economic loss of any kind, however caused and on any theory of liability, (including negligence) arising in any way out of this Agreement, whether or not such Person has been advised of the possibility of any such damages; provided, however, that the foregoing limitations shall not limit either Party's indemnification obligations for Liabilities with respect to Third-Party Claims as set forth in Article IX or either Party's Liabilities for the breach or failure to perform or comply with the covenants set forth in Sections 14.02, 14.03 and 14.04.

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16.02   Counterparts

This Agreement and each Ancillary Agreement may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the parties thereto and delivered to the other party or parties.

16.03   Entire Agreement

This Agreement, the Ancillary Agreements, and the Schedules and Exhibits hereto and thereto and the specific agreements contemplated herein or thereby contain the entire agreement between the Parties with respect to the subject matter hereof and supersede all previous agreements, oral or written, negotiations, discussions, writings, understandings, commitments and conversations with respect to such subject matter. No agreements or understandings exist between the Parties other than those set forth or referred to herein or therein.

16.04   Construction

In this Agreement and each of the Ancillary Agreements, unless a clear contrary intention appears:

(a)     the singular number includes the plural number and vice versa;

(b)     reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are not prohibited by this Agreement or the relevant Ancillary Agreement, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually;

(c)      reference to any gender includes each other gender;

(d)     reference to any agreement, document or instrument means such agreement, document or instrument as amended, modified, supplemented or restated, and in effect from time to time in accordance with the terms thereof subject to compliance with the requirements set forth herein or in the relevant Ancillary Agreement;

(e)     reference to any Applicable Law means such Applicable Law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder, and reference to any section or other provision of any Applicable Law means that provision of such Applicable Law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision;

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(f)      "herein", "hereby", "hereunder", "hereof", "hereto" and words of similar import shall be deemed references to this Agreement or to the relevant Ancillary Agreement as a whole and not to any particular Article, Section or other provision hereof or thereof;

(g)       "including" (and with correlative meaning "include") means including without limiting the generality of any description preceding such term;

(h)       the Table of Contents and headings are for convenience of reference only and shall not affect the construction or interpretation hereof or thereof;

(i)        with respect to the determination of any period of time, "from" means "from and including" and "to" means "to but excluding"; and

(j)        references to documents, instruments or agreements shall be deemed to refer as well to all addenda, exhibits, schedules or amendments thereto.

16.05  Signatures

Each Party acknowledges that it and the other Party (and the other members of their respective Groups) may execute certain of the Ancillary Agreements by facsimile, stamp or mechanical signature. Each Party expressly adopts and confirms each such facsimile, stamp or mechanical signature made in its respective name (or that of the applicable member of its Group) as if it were a manual signature, agrees that it will not assert that any such signature is not adequate to bind such Party to the same extent as if it were signed manually and agrees that at the reasonable request of the other Party at any time it will as promptly as reasonably practicable cause each such Ancillary Agreement to be manually executed (any such execution to be as of the date of the initial date thereof).

16.06   Assignability

Except as set forth in any Ancillary Agreement, this Agreement and each Ancillary Agreement shall be binding upon and inure to the benefit of the Parties hereto and thereto, respectively, and their respective successors and assigns; provided, however, that except as specifically provided in any Ancillary Agreement, no Party hereto or thereto may assign its respective rights or delegate its respective obligations under this Agreement or any Ancillary Agreement without the express prior written consent of the other parties hereto or thereto.

16.07    Third Party Beneficiaries

Except for the indemnification rights under this Agreement of any Alcan Indemnified Party or any Novelis Indemnified Party in their respective capacities as such and for the release under Section 9.01 of any Person provided therein and except as specifically provided in any Ancillary Agreement, (a) the provisions of this Agreement and each Ancillary Agreement are solely for the benefit of the parties hereto and thereto and their respective successors and permitted assigns and are not intended to confer upon any Person, except the parties hereto and thereto and their respective successors and permitted assigns, any rights or remedies hereunder and (b) there are no third-party beneficiaries of this Agreement or any Ancillary Agreement; and neither this Agreement nor any Ancillary Agreement shall provide any Third Party with any remedy, claim, liability, reimbursement, claim of action or other right in excess of those existing without reference to this Agreement or any Ancillary Agreement.

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16.08   Payment Terms

(a)     Any amount to be paid or reimbursed by one Party to the other under this Agreement shall be paid or reimbursed hereunder within thirty (30) days after presentation of an invoice or a written demand therefor and setting forth, or accompanied by, reasonable documentation or other reasonable explanation supporting such amount.

(b)     Except as expressly provided to the contrary in this Agreement or in any Ancillary Agreement, any amount not paid when due pursuant to this Agreement (and any amount billed or otherwise invoiced or demanded and properly payable that is not paid within thirty (30) days of such bill, invoice or other demand) shall bear interest at a rate per annum equal to the Prime Rate plus 2%, calculated for the actual number of days elapsed, accrued from and excluding the date on which such payment was due up to and including the date of the actual receipt of payment.

For the purpose of the Interest Act (Canada) and disclosure thereunder, whenever interest to be paid hereunder is to be calculated on the basis of a year of 360 days or any other period of time that is less than a calendar year, the yearly rate of interest to which the rate determined pursuant to such calculation is equivalent is the rate so determined multiplied by the actual number of days in the calendar year in which the same is to be ascertained and divided by either 360 or such other period of time, as the case may be.

16.09   Governing Law

This Agreement and, unless expressly provided therein, each Ancillary Agreement, shall be governed by and construed and interpreted in accordance with the laws of the Province of Quebec and the laws of Canada applicable therein, irrespective of conflict of laws principles under Quebec law, as to all matters, including matters of validity, construction, effect, enforceability, performance and remedies.

16.10   Notices

All notices or other communications under this Agreement and, unless expressly provided therein, each Ancillary Agreement, shall be in writing and shall be deemed to be duly given when  delivered in person or successfully transmitted by facsimile, addressed as follows:

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If to Alcan, to:

Alcan Inc.
1188 Sherbrooke Street West
Montréal, Quebec
H3A 3G2
Fax: 514-848-8115

Attention:          Chief Legal Officer

If to Novelis, to:

Novelis Inc.
Suite 3800
Royal Bank Plaza, South Tower
P.O. Box 84
200 Bay Street
Toronto, Ontario  M5J 2Z4
Fax: 416-216-3930

Attention:  Chief Executive Officer

Any Party may, by notice to the other Party as set forth herein, change the address or fax number  to which such notices are to be given.

16.11   Severability

If any provision of this Agreement or any Ancillary Agreement or the application thereof to any Person or circumstance is determined by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions hereof or thereof, or the application of such provision to Persons or circumstances or in jurisdictions other than those as to which it has been held invalid or unenforceable, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby, so long as the economic or legal substance of the transactions contemplated hereby or thereby, as the case may be, is not affected in any manner adverse to any party hereto or thereto. Upon such determination, the Parties shall negotiate in good faith in an effort to agree upon such a suitable and equitable provision to effect the original intent of the Parties.

16.12   Publicity

Prior to the Effective Date, Alcan shall be responsible for issuing any press releases or otherwise making public statements with respect to the Reorganization, the Arrangement or any of the other transactions contemplated hereby and Novelis shall not make such statements without the prior written consent of Alcan. Prior to the Effective Date, Alcan and Novelis shall each consult with the other prior to making any filings with any Governmental Authority with respect thereto.

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16.13   Survival of Covenants

Except as expressly set forth in this Agreement or any Ancillary Agreement, the covenants, representations and warranties contained in this Agreement and each Ancillary Agreement, and liability for the breach of any representations, warranties or obligations contained herein or therein, shall survive the Reorganization and the Arrangement and shall remain in full force and effect.

16.14   Waivers of Default

Waiver by any Party of any default by the other Party of any provision of this Agreement or any Ancillary Agreement shall not be deemed a waiver by the waiving Party of any subsequent or other default, nor shall it prejudice the rights of the other Party.  No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege.

16.15   Amendments

No provisions of this Agreement or any Ancillary Agreement shall be deemed waived, amended, supplemented or modified by any Party, unless such waiver, amendment, supplement or modification is in writing and signed by the authorized representative of the Party against whom it is sought to enforce such waiver, amendment, supplement or modification.

16.16   Controlling Documents

To the extent that the provisions of the Alumina Supply Agreement, Employee Matters Agreement, FoilStock Supply Agreement, Foil Supply Agreements, Foil Supply and Distribution Agreement, Intellectual Property Agreements, Metal Supply Agreements, Neuhausen Agreements, Ohle Agreement, Sierre Agreements, Tax Sharing and Disaffiliation Agreement, Technical Services Agreements or Transitional Services Agreement conflict with the provisions of this Agreement, the provisions of such other agreement shall govern.

16.17   Language

The Parties confirm that it is their wish that this Agreement as well as all other documents, including communications relating hereto, have been and shall be drawn up in the English language only. Les parties aux présentes confirment leur volonté que cette convention de même que tous les documents, y compris tout avis, s'y rattachant, soient rédigés en anglais seulement.

[The remainder of this page is intentionally blank.]

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IN WITNESS WHEREOF, the Parties have caused this Separation Agreement to be executed by their duly authorized representatives.

ALCAN INC.

By:       /s/ David McAusland                                                        

            Name:  David McAusland
            Title:     Senior Vice President, Mergers and Acquisition
                        and Chief Legal Officer of Alcan Inc.

NOVELIS INC.

By:       /s/ Brian Sturgell                                                                

            Name:  Brian Sturgell
            Title:     Chief Executive Officer of Novelis

 

LIST OF SCHEDULES

Schedule 1.01 -	Definitions
Schedule 1.01 - "PA"	Plan of Arrangement
Schedule 1.01 - "SB"	Separated Businesses
Schedule 1.01 - "NBS"	Novelis Balance Sheet
Schedule 1.01 - "SE"	Separated Entities
Schedule 2.04(a)	Separated Assets
Schedule 2.06(a)	Excluded Assets
Schedule 2.07(a)	Assumed Liabilities
Schedule 2.07(b)	Liabilities of Separated Entities
Schedule 2.07(c)	Retained Liabilities
Schedule 2.07(g)	Reorganization Documents
Schedule 3.01	Reorganization Transactions
Schedule 3.05(b)	Agreements Not Terminated
Schedule 3.06(q)	Ancillary Agreements
Schedule 3.10	Intercompany Accounts
Schedule 4.02	Actions to be taken prior to Effective Time
Schedule 9.08(a)	Litigation Transferred to Novelis
Schedule 9.08(b)	Litigation to be Defended by Alcan at Novelis's Expense

SCHEDULE 1.01 - DEFINITIONS

"2004 Internal Control Audit and Management Assessments" has the meaning set forth in Section 14.01(b).

"Accounts Receivable" means in respect of any Person, (a) all trade accounts and notes receivable and other rights to payment from customers and all security for such accounts or rights to payment, including all trade accounts receivable representing amounts receivable in respect of goods shipped or products sold or otherwise disposed of or services rendered to customers, (b) all other accounts and notes receivable and all security for such accounts or notes, and (c) any claim, remedy or other right relating to any of the foregoing.

"Action" means any demand, action, suit, countersuit, arbitration, inquiry, proceeding or investigation by any Person or any Governmental Authority or before any Governmental Authority or any arbitration or mediation tribunal.

"Aerospace Industry" means the production of aircraft, spacecraft and satellites and similar craft for manned or unmanned flight.

"Aerospace Products" means any product destined or intended for use in, or principally related to, the Aerospace Industry.

"Aerospace Products Business" means any business engaged, in whole or in part, in the manufacturing, production, marketing or sale of one or more Aerospace Products.

"Affiliate" of any Person means any other Person that, directly or indirectly, controls, is controlled by, or is under common control with such first Person as of the date on which or at any time during the period for when such determination is being made.  For purposes of this definition, "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by contract or otherwise, and the terms "controlling" and "controlled" have meanings correlative to the foregoing.

"Agreement" means this Separation Agreement, including all of the Schedules and Exhibits hereto.

"Alcan" means Alcan Inc., a corporation organized under the CBCA.

"Alcan Board" means the board of directors of Alcan.

"Alcan Businesses" means the Separated Businesses and the Remaining Alcan Businesses.

"Alcan Claims" has the meaning set forth in Section 9.01(b).

"Alcan Class A Common Shares" or "New Alcan Common Shares" means the class A common shares of Alcan which Alcan will be authorized to issue upon the Arrangement becoming effective and which are to be issued under the Arrangement to Alcan Common Shareholders in exchange, in part, for Alcan Common Shares, and to be redesignated as Alcan common shares once the current Alcan Common Shares have been deleted from the share capital of Alcan;

"Alcan Common Shareholders" means the holders of Alcan Common Shares.

"Alcan Common Shares" means the voting common shares of Alcan.

"Alcan Group" means Alcan and its Subsidiaries, whether held directly or indirectly; for greater certainty, (i) prior to the Effective Time, "Alcan Group" includes Arcustarget Group, (ii) on and after the Effective Time, "Alcan Group" excludes Arcustarget Group, and (iii) in all circumstances "Alcan Group" excludes Novelis.

"Alcan Indemnified Parties" has the meaning set forth in Section 9.02.

"Alcan Meeting" means the special meeting of Alcan Shareholders held on December 22, 2004 to consider the Plan of Arrangement, and any adjournment or postponement thereof.

"Alcan Parties" has the meaning set forth in Section 9.01(a).

"Alcan Preference Shareholders" means the holders of Alcan Preference Shares.

"Alcan Preference Shares" means the Alcan Series C Preference Shares and the Alcan Series E Preference Shares of Alcan.

"Alcan Proxy Circular" means the management proxy circular of Alcan dated November 23, 2004 sent to Alcan Shareholders in connection with the Alcan Meeting.

"Alcan Releasors" has the meaning set forth in Section 9.01(b).

"Alcan's Auditors" has the meaning set forth in Section 14.01(a).

"Alcan Shareholders" means, collectively, the Alcan Common Shareholders and the Alcan Preference Shareholders.

"Alcan Special Shares" means the non-voting, redeemable, retractable, special shares of Alcan which Alcan will be authorized to issue upon the Arrangement becoming effective and which are to be issued pursuant to the Arrangement to Alcan Common Shareholders in exchange, in part, for Alcan Common Shares.

"Alumina Supply Agreement" means, individually or collectively, the Alumina Supply Agreements substantially in the forms attached as Exhibit A.

 

"Ancillary Agreements" has the meaning set forth in Section 3.06.

"Applicable Law" means any applicable law, statute, rule or regulation of any Governmental Authority or any outstanding order, judgment, injunction, ruling or decree by any Governmental Authority.

"Appurtenances" means, in respect of any Land, all privileges, rights, easements, servitudes, hereditaments and appurtenances and similar interests belonging to or for the benefit of such Land, including all easements and servitudes appurtenant to and for the benefit of any Land (a "Dominant Parcel") for, and as the primary means of, access between, the Dominant Parcel and a public way, or for any other use upon which lawful use of the Dominant Parcel for the purposes for which it is presently being used is dependent, and all rights existing in and to any streets, alleys, passages and other rights-of-way included therein or adjacent thereto.

"Arcustarget" means Arcustarget Inc., a wholly-owned subsidiary of Alcan incorporated under the CBCA and designated by Alcan to own the Separated Businesses on the Effective Date prior to its amalgamation to Novelis pursuant to the Plan of Arrangement.

"Arcustarget Common Shares" means the voting common shares of Arcustarget to be transferred by Alcan to Novelis in exchange for Novelis Special Shares pursuant to the Plan of Arrangement.

"Arcustarget Group" means Arcustarget and its Subsidiaries, whether held directly or indirectly.

"Arrangement" means the proposed arrangement under the provisions of section 192 of the CBCA on, and subject to, the terms and conditions set forth in the Plan of Arrangement.

"Arrangement Resolution" means the plan of arrangement resolution, the text of which is set out as a schedule to the Alcan Proxy Circular.

"Asset-Related Claims" means, in respect of any Asset, all claims of the owner against Third Parties relating to such Asset, whether choate or inchoate, known or unknown, absolute or contingent, disclosed or non-disclosed.

"Assets" means assets, properties and rights (including goodwill), wherever located (including in the possession of owners or Third Parties or elsewhere), whether real, personal or mixed, tangible or intangible, movable or immovable, in each case whether or not recorded or reflected or required to be recorded or reflected on the books and records or financial statements of a Person, including the following:

(a)                Real Property;
(b)                Tangible Personal Property;
(c)                Inventories;
(d)                Accounts Receivable;
(e)                Contractual Assets;

(f)                 Governmental Authorizations;
(g)                 Business Records;
(h)                 Intangible Property Rights;
(i)                  Insurance Benefits;
(j)                  Asset-Related Claims; and
(k)                 Deposit Rights.

"Assumed Liabilities" has the meaning set forth in Section 2.07.

"Business Concern" means any corporation, company, limited liability company, partnership, joint venture, trust, unincorporated association or any other form of association.

"Business Day" means any day excluding (i) Saturday, Sunday and any other day which, in the City of Montréal (Canada) or in the City of New York (United States) is a legal holiday or (ii) a day on which banks are authorized by Applicable Law to close in the City of Montréal (Canada) or in the City of New York (United States).

"Business Records" means, in respect of any Person, all data and Records relating to such Person, including client and customer lists and Records, referral sources, research and development reports and Records, cost information, sales and pricing data, customer prospect lists, customer and vendor data, production reports and Records, service and warranty Records, equipment logs, operating guides and manuals, financial and accounting Records, personnel Records (subject to Applicable Law), creative materials, advertising materials, promotional materials, studies, reports, correspondence and other similar documents and records.

"By-laws" means the By-laws of Novelis, substantially in the form attached hereto as Exhibit B.

"CBCA" means the Canada Business Corporations Act.

"Certificate of Incorporation" means the Certificate of Incorporation of Novelis in the form attached hereto as Exhibit C.

"Change of Control Event" has the meaning set forth in Section 14.04(a).

"Change of Control Non Compete Breach" has the meaning set forth in Section 14.04(e).

"Claim Notice" has the meaning set forth in Section 9.04(b).

"Confidential Information" has the meaning set forth in Section 11.07(a)

"Consent" means any approval, consent, ratification, waiver or other authorization.

"Contract" means any contract, agreement, lease, purchase and/or commitment, license, consensual obligation, promise or undertaking (whether written or oral and whether express or implied) that is legally binding on any Person or any part of its property under Applicable Law, including all claims or rights against any Person, choses in action and similar rights, whether accrued or contingent with respect to any such contract, agreement, lease, purchase and/or commitment, license, consensual obligation, promise or undertaking, but excluding this Agreement and any Ancillary Agreement save as otherwise expressly provided in this Agreement or in any Ancillary Agreement.

"Contractual Asset" means, in respect of any Person, any Contract of, or relating to, such Person, any outstanding offer or solicitation made by, or to, such Person to enter into any Contract, and any promise or undertaking made by any other Person to such Person, whether or not legally binding.

"Control" has the meaning set forth in Section 14.04(a).

"Court" means the Quebec Superior Court.

"CRA" means the Canada Revenue Agency.

"Deferred Beneficiary" has the meaning set forth in Section 5.01(b).

"Deferred Excluded Asset" has the meaning set forth in Section 5.01(a).

"Deferred Separated Asset" has the meaning set forth in Section 5.01(a).

"Deferred Transactions" has the meaning set forth in Section 13.01(a).

"Deferred Transfer Asset" has the meaning set forth in Section 5.01(a).

"Deposit Rights" means rights relating to deposits and prepaid expenses, claims for refunds and rights of set-off in respect thereof.

"Designated Assets" means any of Novelis' rolling facilities at Oswego, New York, Logan, Kentucky, Norf, Germany, Ulsan, Korea, Yeongju, Korea or Pindamonhangaba, Brazil.

"Disclosing Party" has the meaning set forth in Section 11.08.

"Dispute" has the meaning set forth in Section 12.01.

"Distribution" means the pro rate distribution of New Alcan Common Shares and Novelis Common Shares to Alcan Common Shareholders, as contemplated in the Plan of Arrangement.

"Effective Date" means the effective date of the Arrangement, being the date shown on the certificate of arrangement issued by the director under the CBCA giving effect to the Arrangement, which date the Parties currently expect to be January 6, 2005.

"Effective Time" means 12:00:01 a.m. E.S.T. on the Effective Date.

"EHS Liabilities" means any Liability arising from or under any Environmental Law or Occupational Health and Safety Law.

"Employee Matters Agreement" means the Employee Matters Agreement substantially in the form attached hereto as Exhibit D.

"Encumbrance" means, with respect to any asset, mortgages, liens, hypothecs, pledges, charges, security interests or encumbrances of any kind in respect of such asset, whether or not filed, recorded or otherwise perfected under Applicable Law.

"Energy Agreement" means the Energy Agreement substantially in the form attached hereto as Exhibit E.

"Environmental Law" means any Applicable Law from any Governmental Authority (A) relating to the protection of the environment (including air, water, soil and natural resources) or (B) the use, storage, handling, release or disposal of Hazardous Substances.

"Escalation Notice" has the meaning set forth in Section 12.02.

"Exchange Act" means the United States Securities Exchange Act of 1934.

"Excluded Assets" has the meaning set forth in Section 2.06(a).

"Final Order" means the final order of the Court made in connection with the approval of the Arrangement and the fairness of the terms and conditions thereof.

"Foilstock Supply Agreement" means, individually or collectively, the Foilstock Supply Agreements substantially in the forms attached as Exhibit F.

"Foil Supply Agreement" means, individually or collectively, the Foil Supply Agreements substantially in the forms attached as Exhibit G.

"Foil Supply and Distribution Agreement" means the Foil Supply and Distribution Agreement substantially in the form attached as Exhibit H.

"Governmental Authority" means any court, arbitration panel, governmental or regulatory authority, agency, stock exchange, commission or body.

"Governmental Authorization" means any Consent, license, certificate, franchise, registration or permit issued, granted, given or otherwise made available by, or under the authority of, any Governmental Authority or pursuant to any Applicable Law.

"Ground Lease" means any long-term lease (including any emphyteotic lease) of Land in which most of the rights and benefits comprising ownership of the Land and the Improvements thereon or to be constructed thereon, if any, and the Appurtenances thereto for the benefit thereof, are transferred to the tenant for the term thereof.

"Ground Lease Property" means, in respect of any Person, any Land, Improvement or Appurtenance of such Person that is subject to a Ground Lease.

"Group" means Alcan Group or Novelis Group, as the context requires.

"Hazardous Substance" means any substance to the extent presently listed, defined, designated or classified as hazardous, toxic or radioactive under any applicable Environmental Law, including petroleum and any derivative or by-products thereof.

"Improvements" means, in respect of any Land, all buildings, structures, plants, fixtures and improvements located on such Land, including those under construction.

"Indemnified Party" has the meaning set forth in Section 9.04(a).

"Indemnifying Party" has the meaning set forth in Section 9.04(b).

"Information" means any information, whether or not patentable or copyrightable, in written, oral, electronic or other tangible or intangible forms, stored in any medium, including studies, reports, test procedures, research, records, books, contracts, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, manufacturing techniques, manufacturing variables, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, products, product plans, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other software, marketing plans, customer information, customer services, supplier information, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), and other technical, financial, employee or business information or data.

"Insurance Benefits" means, in respect of any Asset or Liability, all insurance benefits, including rights to Insurance Proceeds, arising from or relating to such Asset or Liability.

"Insurance Proceeds" means those monies (in each case net of any costs or expenses incurred in the collection thereof and net of any applicable premium adjustments (including reserves and retrospectively rated premium adjustments)):

(a)           received by an insured from an insurance carrier; or

(b)           paid by an insurance carrier on behalf of the insured.

"Intangible Property Rights" means, in respect of any Person, all intangible rights and property of such Person, including IT Assets, going concern value and goodwill.

"Intellectual Property Agreement" means, individually or collectively, the Intellectual Property Agreements substantially in the forms attached hereto as Exhibit I.

"Intercompany Accounts" has the meaning set forth in Section 3.10.

"Interim Order" means the interim order of the Court dated November 22, 2004 in connection with the approval of the Arrangement providing for, among other things, the holding of the Alcan Meeting, as the same may be amended, supplemented or varied by the Court.

"Internal Revenue Code" means the United States Internal Revenue Code of 1986.

"Inventories" means, in respect of any Person, all inventories of such Person wherever located, including all finished goods, (whether or not held at any location or facility of such Person or in transit to or from such Person), work in process, raw materials, spare parts and all other materials and supplies to be used or consumed by the Person in production of finished goods.

"IRS" means the United States Internal Revenue Service.

"IT Assets" means computers, computer software, firmware, middleware, servers, workstations, routers, hubs, switches, data communications lines, all other information technology equipments and all associated documentation.

"Joint Procurement of Goods and Services Protocol" means the Joint Procurement of Goods and Services Protocol substantially in the form attached as Exhibit J.

"Land" means, in respect of any Person, all parcels and tracts of land in which the Person has an ownership interest.

"Liability" means, with respect to any Person, any and all losses, claims, charges, debts, demands, actions, causes of action, suits, damages, obligations, payments, costs and expenses, sums of money, accounts, reckonings, bonds, specialties, indemnities and similar obligations, exoneration covenants, contracts, controversies, agreements, promises, doings, omissions, variances, guarantees, make whole agreements and similar obligations, and other liabilities and requirements, including all contractual obligations, whether absolute or contingent, matured or unmatured, liquidated or unliquidated, accrued or unaccrued, known or unknown, joint or several, whenever arising, and including those arising under any Applicable Law, Action, threatened or contemplated Action (including the costs and expenses of demands, assessments, judgments, settlements and compromises relating thereto and attorneys' fees and any and all costs and expenses, whatsoever reasonably incurred in investigating, preparing or defending against any such Actions or threatened or contemplated Actions) or Order of any Governmental Authority or any award of any arbitrator or mediator of any kind, and those arising under any contract, commitment or undertaking, in each case, whether or not recorded or reflected or otherwise disclosed or required to be recorded or reflected or otherwise disclosed, on the books and records or financial statements of any Person, including any Specified Financial Liability, EHS Liability or Liability for Taxes.

"Mediation Notice" has the meaning set forth in Section 12.03(a).

"Metal Supply Agreement" means, individually or collectively, the Metal Supply Agreements substantially in the forms attached as Exhibit K.

"Neuhausen Agreement" means, individually or collectively, the agreements substantially in the forms attached as Exhibit L.

"Non Compete Breach" has the meaning set forth in Section 14.03(b).

"Non Compete Undertaking" has the meaning set forth in Section 14.04(c).

"Notice Period" has the meaning set forth in Section 9.04(b).

"Novelis" means Novelis Inc., a corporation incorporated under the CBCA formed to acquire under the Arrangement and independently carry on most of the aluminum rolled products businesses operated by Alcan.

"Novelis Annual Report" has the meaning set forth in Section 14.01(d).

"Novelis Balance Sheet" means the audited combined balance sheet of "the Novelis Group", including the notes thereto, as of September 30, 2004, substantially in the form attached as Schedule 1.01 - "NBS".

"Novelis Claims" has the meaning set forth in Section 9.01(a).

"Novelis COC Assets" has the meaning set forth in Section 14.04(d).

"Novelis Common Shares" means the voting common shares of Novelis to be issued to holders of Alcan Special Shares under the Arrangement in exchange for such Alcan Special Shares.

"Novelis Group" means Novelis and its Subsidiaries, whether held directly or indirectly; for greater certainty, (i) prior to the Effective Time, "Novelis Group" excludes Arcustarget Group, and (ii) on and after the Effective Time, "Novelis Group" includes Arcustarget Group.

"Novelis Indemnified Parties" has the meaning set forth in Section 9.03.

"Novelis Opening Balance Sheet" has the meaning set forth in Section 2.04(e).

"Novelis Parties" has the meaning set forth in Section 9.01(b).

"Novelis Releasors" has the meaning set forth in Section 9.01(a).

"Novelis Special Shares" means the non-voting redeemable, retractable, special shares, Series 1, of Novelis which Novelis will be authorized to issue upon the Arrangement becoming effective and which are to be issued by Novelis to Alcan in consideration for the transfer by Alcan to Novelis of the Arcustarget Common Shares, as contemplated by the Plan of Arrangement.

"Novelis's Auditors" has the meaning set forth in Section 14.01(a).

"Occupational Health and Safety Law" means any Applicable Law designed to provide safe and healthful working conditions and to reduce occupational safety and health hazards, and any program, whether governmental or private (such as those promulgated or sponsored by industry associations and insurance companies), designed to provide safe and healthful working conditions.

"Ohle Agreement" means the Agreement substantially in the form attached as Exhibit M.

"Order" means any order, injunction, judgment, decree, ruling, assessment or arbitration award of any Governmental Authority or arbitrator.

"Ordinary Course of Business" means any action taken by a Person that is in the ordinary course of the normal, day-to-day operations of such Person and is consistent with the past practices of such Person.

"Parties" means the parties to this Agreement and, in the singular, means either of them.

"Person" means any individual, Business Concern or Governmental Authority.

"Plan of Arrangement" means the plan of arrangement set out as Schedule 1.01 - "PA", as the same may be amended from time to time.

"Plate Business" means any business engaged, in whole or in part, in the manufacturing, production, marketing or sale of Plate Products.

"Plate Product" means any rolled and/or cast aluminum products having a thickness greater than 6.5 millimeters in the case of cast aluminum or 12 millimeters in the case of rolled aluminum, and that is not intended for further rolling (reroll) to a gauge of 6.5 millimeters or less.

"Potential Contributor" has the meaning set forth in Section 9.05(a).

"Prime Rate" means the floating rate of interest established from time to time by the Royal Bank of Canada (the "Bank") as the reference rate of interest the Bank will use to determine rates of interest payable by its borrowers on [US] dollar commercial loans made by the Bank to such borrowers [in Canada] and designated by the Bank as its "prime rate" and which shall change from time to time as changed by the Bank.

"Prospectus" means the amended preliminary non-offering prospectus filed with the securities regulatory authorities in each of the provinces and territories of Canada on November 23, 2004, and included as exhibit 99.1 of the Registration Statement, together with all amendments or supplements thereto.

"Provincial Revenue Authority" means the applicable department or other division of the provincial government of any relevant Canadian province that is charged with the responsibility for the administration of provincial taxation statutes.

"Real Property" means any Land and Improvements and all Appurtenances thereto and any Ground Lease Property.

"Record" means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

"Registration Statement" means the registration statement on Form 10, file number 001‑32312, filed with the SEC under the Exchange Act, together with all amendments or supplements thereto.

"Regulation S‑K" means Regulation S‑K of the General Rules and Regulations promulgated by the SEC pursuant to the Securities Act.

"Remaining Alcan Businesses" means all Alcan Businesses other than the Separated Businesses.

"Remaining Alcan Entity" means any Business Concern that is a member of Alcan Group on and after the Effective Time.

"Reorganization" means the measures described in Article III, including the Reorganization Transactions.

"Reorganization Date" means, unless otherwise indicated on the final closing agenda relating to the Reorganization and the Arrangement, December 31, 2004, or such earlier or later date as the Alcan Board may determine as the date by which all of the Reorganization Transactions (other than non-material transactions the performance of which shall have been waived by Alcan, with or without conditions) shall have been completed.

"Reorganization Documents" means the agreements described on Schedule 2.07(g) of this Agreement and, in the singular, means any one of them.

"Reorganization Time" means, unless otherwise indicated on the final closing agenda relating to the Reorganization and the Arrangement, 11:59:59 p.m. E.S.T. on the Reorganization Date.

"Reorganization Transactions" means the transactions described on Schedule 3.01 of this Agreement and, in the singular, means any one of them.

"Representatives" means, with respect to any Person, any of such Person's directors, officers, employees, agents, consultants, advisors, accountants or attorneys.

"Requesting Party" has the meaning set forth in Section 11.01.

"Restricted Period" means the period of four (4) years commencing immediately after the expiry of the Standstill Period.

"Retained Liabilities" has the meaning set forth in Section 2.07.

"Retaining Person" has the meaning set forth in Section 5.01(b).

"Rolled Products Business" means the businesses and operations relating to the manufacturing, production, research, development, marketing and sale of aluminum sheet, light gauge products, automotive, can and lithographic sheet, plate and foil stock, that will be owned by Novelis or any other member of Novelis Group as of the Effective Time or that was but is no longer conducted by Alcan or any other member of Alcan Group both as owned and operated by Novelis or any other member of Novelis Group and as owned and operated by Alcan or any other member of Alcan Group at any time prior to the Effective Time whether or not still conducted at the date of this Agreement; provided, however, that in no event shall "Rolled Products Business" include any business operated by Alcan Group following the Effective Time.

"Rulings Applications" means all the applications for an advance tax ruling or letter submissions made to the CRA, any Provincial Revenue Authority or the IRS concerning the subject matter hereof (including, for greater certainty, any aspect of the Plan of Arrangement) prior to the date of this Agreement, and all such letter submissions made on or after the date hereof and prior to the Effective Date.

"Securities Act" means the United States Securities Act of 1933.

"SEC" means the United States Securities and Exchange Commission.

"Separated Assets" has the meaning set forth in Section 2.04.

"Separated Businesses" means those Alcan Businesses specifically identified on Schedule 1.01 - "SB" and, in the singular, means any one of them.

"Separated Entities" means those Business Concerns forming part of Alcan Group which are identified on Schedule 1.01 - - "SE" and which (i) on and after the Reorganization Time form part of Arcustarget Group, and (ii) on and after the Effective Time form part of Novelis Group.

"Separation" means the multi-step process by which the Separated Businesses shall be  transferred, directly or indirectly, from Alcan to Novelis and includes the Reorganization and the Arrangement.

"Services" has the meaning ascribed thereto in the Transitional Services Agreement.

"Sierre Agreement" means the Sierre Master Agreement, including all individual agreements referred to therein as forming part thereof, substantially in the form attached hereto as Exhibit N.

"Specified Financial Liabilities" or "SFLs" mean, in respect of any Person, all liabilities, obligations, contingencies, instruments and other Liabilities of a financial nature with Third Parties of, or relating to, such Person, including any of the following:

(a)                foreign exchange contracts;

(b)               letters of credit;

(c)               guarantees of Third-Party loans;

(d)               surety bonds (excluding surety for workers' compensation self-insurance);

(e)               interest support agreements on Third Party loans;

(f)                performance bonds or guarantees issued by Third Parties;

(g)               swaps or other derivatives contracts;

(h)               recourse arrangements on the sale of receivables or notes; and

(i)                indemnities for damages for any breach of, or any inaccuracy in, any representation or warranty or any breach of, or failure to perform or comply with, any covenant, undertaking or obligation.

"Standstill Period" means a period of twelve (12) months commencing on the Effective Date.

"Subsidiary" of any Person means any corporation, partnership, limited liability entity, joint venture or other organization, whether incorporated or unincorporated, of which a majority of the total voting power of capital stock or other interests entitled (without the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof, is at the time owned or controlled, directly or indirectly, by such Person.

"Tangible Personal Property" means, in respect of any Person, all machinery, equipment, tools, furniture, office equipment, supplies, materials, vehicles and other items of tangible personal or movable property (other than Inventories and IT Assets) of every kind and wherever located that are owned or leased by the Person, together with any express or implied warranty by the manufacturers, sellers or lessors of any item or component part thereof and all maintenance Records and other documents relating thereto.

"Targeted Entity" has the meaning set forth in Section 14.04(a).

"Tax" means any income, profit, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium property, environmental, windfall profit, customs, vehicle, airplane, boat, vessel or other title or registration, capital, capital stock, franchise, employees' income withholding, foreign or domestic withholding, social security, unemployment, disability, real property, personal property, sales, use, goods and service, transfer, value added, alternative, add-on, minimum and other tax, fee, assessment, levy, tariff, charge, contribution to any governmental plan, or duty of any kind whatsoever and any interest, penalty, addition or additional amount thereon imposed, assessed or collected by or under the authority of any Governmental Authority or payable under any tax-sharing agreement or any other Contract.

"Tax Act" means the Income Tax Act (Canada).

"Tax Rulings" means the advance income tax ruling and opinions received by Alcan from the CRA dated December 15, 2004 and December 23, 2004, and any similar advance income tax rulings received by Alcan from a Provincial Revenue Authority or the IRS, and any amendments thereto, confirming the Canadian federal income tax consequences of certain aspects of the Arrangement and certain other transactions.

"Tax Sharing and Disaffiliation Agreement" means the Tax Sharing and Disaffiliation Agreement substantially in the form attached hereto as Exhibit O.

"Technical Services Agreement" means, individually or collectively, the Technical Services Agreements substantially in the forms attached hereto as Exhibit P.

"Third Party" means a Person that is not a Party to this Agreement, other than a member of Alcan Group or a member of Novelis Group and that is not an Affiliate thereof.

"Third Party Acquirer" has the meaning set forth in Section 14.04(a).

"Third Party Acquirer Controller" has the meaning set forth in Section14.04(d).

"Third Party Claim" has the meaning set forth in Section 9.04(b).

"Third Party Consent" has the meaning set forth in Section 2.09.

"Transfer Impediment" has the meaning set forth in Section 5.01(a).

"Transition Service Schedule" has the meaning set forth in the Transitional Services Agreement.

"Transitional Services Agreement" means the Transitional Services Agreement substantially in the form attached hereto as Exhibit Q.

"United States" means the United States of America.

"Unreleased Liabilities" has the meaning set forth in Section 5.02.

"Unreleased Person" has the meaning set forth in Section 5.02.

LIST OF EXHIBITS

Exhibit A	Alumina Supply Agreement
Exhibit B	By-laws of Novelis
Exhibit C	Certificate of incorporation of Novelis
Exhibit D	Employee Matters Agreement
Exhibit E	Energy Agreement
Exhibit F	FoilStock Supply Agreement
Exhibit G	Foil Supply Agreements
Exhibit H	Foil Supply and Distribution Agreement
Exhibit I	Intellectual Property Agreements
Exhibit J	Joint Procurement of Goods and Services Protocol
Exhibit K	Metal Supply Agreements
Exhibit L	Neuhausen Agreements
Exhibit M	Ohle Agreement
Exhibit N	Sierre Agreements
Exhibit O	Tax Sharing and Disaffiliation Agreement
Exhibit P	Technical Services Agreements
Exhibit Q	Transitional Services Agreement
Exhibit R	Non Compete Undertaking

EX-21

EXHIBIT NO. 21:  SUBSIDIARIES, RELATED COMPANIES, ETC.

With the exception of a number of Subsidiaries which, considered in the aggregate, would not constitute a significant Subsidiary, the Subsidiaries of Alcan, as of 15 February 2005, are listed below.  All Subsidiaries and Joint Ventures named below are consolidated in the financial statements incorporated by reference in this report.  The list also includes several Related Companies for which Alcan reports its interest in the net income or loss of such companies. Alcan is the direct owner of the stock of each Subsidiary or Related Company, except where the name is indented.  Indentation signifies that the principal ownership by Alcan is through the company under which the indentation is made; where there is additional ownership through another company also listed below, that additional ownership is described in the end-note on page 10.

ALCAN INC.
Subsidiaries, Related Companies, Etc.	Organized Under the Laws of	% of Voting Shares Held by Immediate Owner
3712001 CANADA INC.	Canada	100.00
9121-5988 QUÉBEC INC.	Quebec	100.00
ALCAN ALUMINIUM QUEBEC AND COMPANY, LIMITED PARTNERSHIP	Quebec	99.00 (1)
9121-5996 QUÉBEC INC.	Quebec	100.00
ALCAN-SPROSTONS LIMITED	Jamaica	100.00
ALCAN ADMINCO (2000) INC.	Canada	100.00
ALCAN ALESA TECHNOLOGIES LTD.	Canada	100.00
ALCAN ALUMINIO (AMÉRICA LATINA) INC.	Canada	100.00
ALCAN ASIA PACIFIC LIMITED	Canada	100.00
ALCAN HOLDINGS FINANCE LLC	Delaware	100.00
ALCAN CORPORATION	Texas	100.00
ALCAN ALUMINUM EXPORT, INC.	Georgia	100.00
ALCAN CONNECTICUT, INC.	Connecticut	100.00
ALCAN MANAGEMENT SERVICES USA INC.	Ohio	100.00
ALCAN PECHINEY CORPORATION	Texas	100.00
PECHINEY CORK & SEAL OF CALIFORNIA, LLC	California	100.00
PECHINEY METALS LLC	Delaware	100.00
HOWMET INSURANCE COMPANY, INC.	Vermont	100.00
PECHINEY PLASTIC PACKAGING TEXAS, INC.	Delaware	100.00
CEBAL MEXICANA LP	Texas	99.00 (27)
PECHINEY PLASTIC PACKAGING, INC.	Delaware	100.00
GUARDIAN PLASTICOTE LIMITED	India	17.00
PECHINEY PLASTIC PACKAGING RECEIVABLES CORPORATION	Delaware	100.00
PECHINEY PLASTIC PACKAGING (CANADA) INC.	Ontario	100.00
VENTURE PACKAGING, INC.	North Carolina	100.00
PECHINEY ROLLED PRODUCTS, LLC	Delaware	100.00
PECHINEY CAST PLATE, INC.	Delaware	100.00
PECHINEY WORLD TRADE (USA), INC.	New York	92.88 (59)
BRANDEIS SERVICES, INC.	Delaware	100.00
PECHINEY BÉCANCOUR, INC.	Delaware	100.00
PECHINEY REYNOLDS QUEBEC INC.	Nebraska	50.25
ALUMINERIE DE BÉCANCOUR, INC.	Quebec	50.10
PECHINEY SALES CORPORATION	Delaware	100.00
PECHINEY CANADA, INC.	Canada	100.00
PECHINEY HOLDINGS, INC.	Delaware	100.00
PECHINEY PERU	Peru	98.00
PMC LEASE COMPANY	Delaware	100.00
PRP PROPERTY & EQUIPMENT, LLC	Illinois	100.00
TECHPACK AMERICA LLC	Delaware	100.00
HENLOPEN MANUFACTURING CO. INC.	New York	100.00

1

ALCAN INC.
Subsidiaries, Related Companies, Etc.	Organized Under the Laws of	% of Voting Shares Held by Immediate Owner
COSMETECH MABLY INTERNATIONAL, LLC	New York	100.00
COSMETECH MABLY INTERNATIONAL (H.K.) LTD.	Hong Kong	51.00
CT PACK, LLC	New York	100.00
TECHPACK AMERICA COSMETIC PACKAGING, L.P.	Texas	99.50 (78)
TECHPACK LATIN AMERICA S.A.	Venezuela	100.00
TPI MEXICANA S.A. de C.V.	Mexico	99.98 (80)
TPI MOLPLASTIC Ltda	Brazil	100.00
TPI PLASTIMEC S.A.	Argentina	51.00
ALCAN POWER MARKETING, INC.	Ohio	100.00
ALCAN PRIMARY PRODUCTS CORPORATION	Texas	100.00
ALCAN PRODUCTS CORPORATION	Texas	100.00
ALCAN BALTEK CORPORATION	Delaware	100.00
BALSA DEVELOPMENT CORPORATION	New Jersey	100.00
BALSA ECUADOR LUMBER CORPORATION	New Jersey	100.00
BALTEK FOREIGN SALES CORPORATION	US Virgin Islands	100.00
BALTEK INTERNATIONAL CORPORATION	Delaware	100.00
BALTEK LIMITED	England	100.00
PACIFIC TIMBER LIMITED	England	100.00
BALTEK MERCOSUR, L.L.C.	New Jersey	100.00
COMPANIA ECUATORIANA DE BALSA S.A.	Ecuador	100.00
CRUSTACEA CORPORATION	Delaware	100.00
CRYOGENIC STRUCTURES CORPORATION	Delaware	94.00
PLANTATIONES DE BALSA S.A.	Ecuador	49.90 (60) (61) (62) (63)
POUCNST S.A.	Ecuador	100.00
PRODUCTOS DEL PACIFICO S.A.	Ecuador	100.00
BALMANTA S.A.	Ecuador	67.93 (25)
MADERAS SECAS C.A.	Ecuador	57.08 (52) (53)
SANLAM CORPORATION	New York	100.00
ALCAN EUROPE LIMITED	England	100.00
ALCAN FINANCES B.V.	The Netherlands	100.00
ALCAN FINANCES (Bda) LTD.	Bermuda	100.00
ALCAN ASIA LIMITED	Hong Kong	100.00
ALCAN NIKKEI CHINA LIMITED	Hong Kong	49.00
ALCAN NINGXIA HOLDINGS LIMITED	Bermuda	100.00
ALCAN NINGXIA ALUMINIUM  COMPANY LIMITED	China	50.00
ALCAN PACKAGING MALAYSIA SDN BHD	Malaysia	100.00
ALCAN PACKAGING PUERTO RICO INC.	New Jersey	100.00
ALCAN (BERMUDA) LIMITED	Bermuda	100.00
ALCAN SHIPPING (BERMUDA) LIMITED	Bermuda	100.00
CHAMPLAIN INSURANCE COMPANY LTD.	Bermuda	100.00
HALCO (MINING) INC.	Delaware	34.53 (49)
BOKÉ INVESTMENT COMPANY	Delaware	100.00
COMPAGNIE DES BAUXITES DE GUINÉE	Delaware	51.00
NONFEMET INTERNATIONAL (China-Canada-Japan) ALUMINIUM COMPANY LIMITED	China	27.00
QUADREM INTERNATIONAL HOLDINGS,  LTD.	Bermuda	9.02 (66)
ALCAN FINANCES (IRELAND) LIMITED	Canada	100.00
ALCAN ALUMINIUM AG	Switzerland	100.00
ALCAN PACKAGING RORSCHACH AG	Switzerland	100.00
ALCAN HOLDINGS CANADA LIMITED	Canada	100.00
ALCAN FINANCES (IRELAND) COMPANY	Ireland	100.00

2

ALCAN INC.
Subsidiaries, Related Companies, Etc.	Organized Under the Laws of	% of Voting Shares Held by Immediate Owner
ALCAN HOLDINGS AUSTRALIA PTY LIMITED	Australia	100.00
ALCAN SOUTH PACIFIC PTY LTD	Australia	100.00
ALCAN GOVE DEVELOPMENT PTY LIMITED	Australia	100.00
ALCAN NORTHERN TERRITORY ALUMINA PTY LIMITED	Australia	100.00
GOVE ALUMINIUM LIMITED	Australia	100.00
ALCAN GOVE PTY LIMITED	Australia	50.00 (5)
ALCAN QUEENSLAND SMELTER PTY LTD	Australia	100.00
NABALCO PTY LIMITED	Australia	100.00
QUEENSLAND ALUMINA LIMITED	Australia	21.39 (67)
QUEENSLAND ALUMINA SECURITY CORPORATION	Delaware	20.00
TRANS TERRITORY PIPELINE PTY LIMITED	Australia	100.00
ALCAN HOLDING ITALIA S.p.A.	Italy	100.00
ALCAN PACKAGING ITALIA S.r.l.	Italy	89.00 (11)
bp EUROPACK S.r.l.	Italy	100.00
ALCAN HOLDINGS SWITZERLAND AG (SA/LTD.)	Switzerland	100.00
AL HOLDING  USA LLC	Delaware	100.00
ALA (NEVADA) INC.	Nevada	100.00
ALCAN COMPOSITES USA INC.	Missouri	100.00
ALCAN GATOR-COR HOLDINGS, LLC	Delaware	59.44 (3) (4)
ALCAN GATOR-COR COMPANY, LLC	Delaware	100.00
NEVAMAR FINANCING, LLC	Delaware	100.00
NEVAMAR OFFSHORE ACQUISITION CORPORATION	Delaware	100.00
NEVAMAR TE ACQUISITION CORPORATION	Delaware	100.00
ALCAN GLOBAL PHARMACEUTICAL PACKAGING INC.	New Jersey	100.00
HBE FERMENTATION SYSTEMS INC.	California	10.00

INTERNATIONAL GLASS EQUIPMENT LTD.	Bahamas	100.00
POLAR MATERIALS INC.	Pennsylvania	86.21
PC MATERIALS INC.	Pennsylvania	50.00
POLYPLASMA INC.	Canada	100.00
ALCAN PACKAGING FOOD AND TOBACCO INC.	Delaware	100.00
ALCAN PACKAGING PHARMA CENTER INC.	Delaware	100.00
ALCAN PACKAGING THERMAPLATE INC.	New Jersey	100.00
ALUSUISSE ALUMINUM USA INC.	Delaware	100.00
VAW FLEXIBLE PACKAGING INC.	Delaware	100.00
ALCAN AIREX AG	Switzerland	100.00
ALCAN ALESA ENGINEERING AG	Switzerland	100.00
ALCAN ALLEGA AG	Switzerland	100.00
ALCAN ALUCOBOND (FAR EAST) PTE LTD.	Singapore	100.00
ALCAN ALUMINIO ESPAÑA, S.A.	Spain	100.00
ALCAN ALUMINIO PORTUGAL LDA.	Portugal	98.00
ALCAN ALUMINIUM VALAIS SA	Switzerland	100.00
ALCAN AUSTRIA GmbH	Austria	100.00
ALCAN ALPE ADRIA D.O.O.	Slovenia	100.00
ALCAN HUNGARIA Kft.	Hungary	100.00
ALCAN ROMANIA SRL.	Romania	100.00
ALCAN CAPITAL JERSEY LIMITED	The Island of Jersey	100.00
ALCAN FINANCE JERSEY LIMITED	The Island of Jersey	100.00
ALCAN DÉCIN EXTRUSIONS s.r.o.	Czech Republic	100.00
ALCAN HOLDINGS EUROPE B.V.	The Netherlands	100.00
A-L FINANCIAL PRODUCTS LTD.	England	100.00
ALCAN DISTRIBUZIONE srl	Italy	100.00
ALCAN HOLDINGS FRANCE S.A.	France	100.00

3

ALCAN INC.
Subsidiaries, Related Companies, Etc.	Organized Under the Laws of	% of Voting Shares Held by Immediate Owner
ALCAN CMIC SAS	France	100.00
ALCAN FRANCE EXTRUSIONS SAS	France	100.00
ALCAN PACKAGING FRANCE SAS	France	100.00
ALCAN PACKAGING GLASS PHARMA	France	100.00
ALCAN PACKAGING SAINT MAUR	France	100.00
CIVILE IMMOBILIÈRE CELI	France	99.50 (32)
ALCAN PACKAGING SARREBOURG SAS	France	100.00
LAWSON MARDON TRENTESAUX SA	France	99.99
SOCIÉTÉ ALSACIENNE D'ALUMINIUM	France	100.00
VAW INTERNATIONAL CAPSULES S.A.	France	100.00
ALCAN HOLDINGS GERMANY GmbH	Germany	99.24 (7)
ALCAN AUTOMOTIVE KAMENICE s.r.o.	Czech Republic	100.00
ALCAN BDW BETEILIGUNGS GmbH	Germany	100.00
ALCAN BDW GmbH & CO. KG	Germany	100.00
ALCAN COMPOSITES LTD, SHANGHAI	China	100.00
ALCAN KAPA GmbH	Germany	100.00
ALCAN PACKAGING NEUMUNSTER GmbH	Germany	100.00
ALCAN PACKAGING SINGEN GmbH	Germany	99.90 (12)
TSCHEULIN-ROTHAL GmbH	Germany	97.17
ALCAN PACKAGING MOSKAU OOO	Russia	100.00
ALCAN SINGEN GmbH	Germany	100.00
CONSORTIUM STROJMETAL A.S. KAMENICE & ALCAN SINGEN GmbH (Unincorporated)	Czech Republic	50.00
ALCAN TOMOS d.o.o.	Slovenia	66.66
ALMET AG	Germany	63.64
ALCAN HOLDINGS NEDERLAND B.V.	The Netherlands	100.00
ALCAN NEDERLAND B.V.	The Netherlands	100.00
S.A. ALCAN BELGIUM N.V.	Belgium	99.37 (77)
ALCAN PACKAGING AMSTERDAM BV	The Netherlands	100.00
ALCAN PACKAGING BRABANT BV	The Netherlands	100.00
ALCAN PACKAGING ZUTPHEN BV	The Netherlands	100.00
ALU-VASTGOED B.V.	The Netherlands	100.00
ALUMINIUM & CHEMIE ROTTERDAM B.V.	The Netherlands	53.30 (24)
ALCAN HOLDINGS UK LIMITED	England	100.00
ALCAN PACKAGING CRAMLINGTON LTD.	England	100.00
LAWSON MARDON PACKAGING LTD.	England	100.00
ALCAN PACKAGING UK LTD	England	100.00
KOTERS (LIVERPOOL) LIMITED	England	100.00
LAWSON MARDON FIBRENYLE LTD.	England	100.00
FIBRENYLE (CORBY) LIMITED	England	100.00
LAWSON MARDON FLEXIBLE LIMITED	England	100.00
MARDON FLEXIBLE PACKAGING (KENTON) LIMITED	England	100.00
LAWSON MARDON SMITH BROTHERS LTD.	England	100.00
ALCAN PACKAGING SUTTON LTD.	England	100.00
MARDON PELOREX LIMITED	England	100.00
LMG IRIDON LIMITED	England	100.00
LAWSON MARDON THERMOPLASTICS LTD.	England	100.00
WHEATON UK LTD.	England	100.00
LAWSON MARDON NORTHERN LIMITED	England	100.00
LAWSON MARDON READING LTD.	England	100.00
STALCON PLASTICS LIMITED	England	100.00
ALCAN PACKAGING (UK SALES) LTD.	England	100.00
HEADLEY (READING) LIMITED	England	100.00
CELLOGLAS HOLDINGS LTD.	England	100.00
ALCAN PRINT FINISHERS LTD.	England	100.00

4

ALCAN INC.
Subsidiaries, Related Companies, Etc.	Organized Under the Laws of	% of Voting Shares Held by Immediate Owner
FIVE STAR CORPORATION LIMITED	England	100.00
PROTECTA PRINT LIMITED	England	100.00
QUALICOAT LIMITED	England	100.00
UNIVERSAL COATINGS LIMITED	England	100.00
WEST MIDLANDS FOIL BLOCKING LIMITED	England	100.00
LUSTRETEX LTD.	England	100.00
THE UV COMPANY LIMITED	England	100.00
UVIPAK (FINISHING) LIMITED	England	100.00
LAWSON MARDON GROUP INTERNATIONAL LIMITED	England	100.00
ALCAN PACKAGING IZMIR GRAVUR BASKILI KARTON SANAYI VE TICARET A.S.	Turkey	100.00
ALCAN PACKAGING KAZAKHSTAN LLP	Kazakhstan	100.00
ROTOPAK MATBAACILIK AMBALAJ SANAYI VE TICARET A.S.	Turkey	100.00
ROTOPAS AMBALAJ PAZARLAMA VE DAGITIM A.S.	Turkey	100.00
VAW EUROPACK IBERICA, S.L.	Spain	100.00
LAWSON MARDON PACKAGING SALES LTD.	England	100.00
ALCAN JAPAN LTD.	Japan	100.00
ALCAN PRODOTTI SPECIALI spa	Italy	100.00
LMG (IRELAND) LIMITED	Ireland	100.00
ALCAN PACKAGING DUBLIN LTD	Ireland	100.00
WCL FLEXIBLE PACKAGING LIMITED	Ireland	100.00
VERAMIC S.A.	Belgium	100.00
WAXED CARTONS (EXPORT) LIMITED	Ireland	100.00
ZITELI LIMITED	Ireland	100.00
ALCAN HOLDINGS INVESTMENT LLC	Delaware	100.00
ALCAN ICELAND LTD.	Iceland	100.00
ENDURVINNSLAN LTD.	Iceland	7.00
ALCAN MASS TRANSPORTATION SYSTEMS AUSTRALIA PTY. LTD.	Australia	100.00
ALCAN PACKAGING CANADA LIMITED	Ontario	100.00
LAWSON MARDON PACKAGING OVERSEAS (BRISTOL) LIMITED	England	99.00 (51)
ALCAN PACKAGING KREUZLINGEN AG (SA/LTD.)	Switzerland	100.00
ALCAN PACKAGING SERVICES AG (SA/LTD.)	Switzerland	100.00
ALCAN TECHNOLOGY & MANAGEMENT AG (SA/LTD.)	Switzerland	100.00
ALCAN TRADING AG (SA/LTD.)	Switzerland	100.00
ALUFLUOR AB	Sweden	50.00
ALUSUISSE OF AUSTRALIA LIMITED	Australia	100.00
ALCAN ENGINEERING PTY LIMITED	Australia	100.00
SWISS ALUMINIUM AUSTRALIA LIMITED	Australia	100.00
GOVE JOINT VENTURE (THE)	Australia	70.00 (48)
ALUSUISSE SERVICIOS S.A., Panama	Panama	100.00
ALUSUISSE SERVICIOS S.A., Venezuela	Venezuela	100.00
IGORA-GENOSSENSCHAFT FUR ALUMINIUM-RECYCLING	Switzerland	5.60
METALLICA S.A.	Switzerland	35.00
METALLWERKE REFONDA AG	Switzerland	100.00
SOCIÉTÉ MINIÈRE ET DE PARTICIPATIONS GUINÉE-ALUSUISSE	Guinea	50.00
SOR-NORGE ALUMINIUM AS	Norway	50.00
ALCAN HOLDINGS (THAILAND) LIMITED	Thailand	100.00
ALCAN INTERNATIONAL LIMITED	Canada	100.00
ALCAN MANAGEMENT SERVICES CANADA LIMITED	Canada	100.00

ALCAN PACKAGING  PROPACK CO. LIMITED	Hong Kong	65.00
ALCAN PROPACK CHENGDU CO LTD	China	40.00
EVERWEAL INTERNATIONAL LIMITED	Hong Kong	100.00
HUIZHOU PROPACK PLASTIC LIMITED	China	100.00

5

ALCAN INC.
Subsidiaries, Related Companies, Etc.	Organized Under the Laws of	% of Voting Shares Held by Immediate Owner
JIANGYIN PROPACK ADVANCED PACKING CO., LIMITED	China	100.00
JIANGYIN PROPACK PACKING CO., LIMITED	China	99.05
PROPACK HUIZHOU LIMITED	China	73.47 (64)
PROPACK HUIZHOU NEW MATERIAL CO LTD	China	100.00
VPS PROPACK BEIJING CO., LTD.	China	55.00 (82)
ALCAN PACKAGING STARPACK CORPORATION	Philippines	100.00
SPC REALTY CORPORATION	Philippines	40.00
ALCAN PACKAGING STRONGPACK PUBLIC COMPANY LIMITED	Thailand	49.00 (13)
ALCAN PACKAGING STRONGTHAIPACK COMPANY LIMITED	Thailand	100.00
ALCAN PARTICIPAÇÕES LTDA.	Brazil	100.00
ALCAN ALUMINA LTDA.	Brazil	100.00
CONSÓRCIO DE ALUMÍNIO DO MARANHÃO ("CONSÓRCIO ALUMAR")	Brazil	10.00
ALCAN COMPOSITES BRASIL S.A.	Brazil	70.00
ALCAN EMBALAGENS DO BRASIL LTDA.	Brazil	100.00
ALCAN PACKAGING DO BRASIL LTDA.	Brazil	83.00 (10)
MINERAÇÃO RIO DO NORTE S.A.	Brazil	12.50
ALCAN REALTY LIMITED	Canada	100.00
ALCAN SHIPPING SERVICES LIMITED	Canada	100.00
ALCAN SMELTERS AND CHEMICALS LIMITED	Canada	100.00
ALUMINERIE ALOUETTE INC.	Quebec	20.00 (16)
ALUMINUM COMPANY OF CANADA LIMITED	Canada	100.00
ALCAN FINANCES USA LLC	Delaware	100.00
BRITISH ALCAN ALUMINIUM plc	England	100.00
ALCAN CHEMICALS EUROPE LIMITED	England	100.00
ALCAN CHEMICALS LIMITED	England	100.00
ALCAN FARMS LIMITED	England	100.00
TBAC LIMITED	England	100.00
ALCAN ALUMINIUM UK LIMITED	England	85.00 (2)
BRITISH ALCAN OVERSEAS INVESTMENTS LIMITED	England	100.00
SARATOGA RESOURCES N.V.	Netherland Antilles	20.00
VIGELAND METAL REFINERY A/S	Norway	50.00
GHANA BAUXITE COMPANY LIMITED	Ghana	80.00
VIGELANDS BRUG A/S	Norway	100.00
THE BOWLING BACK LAND COMPANY LIMITED	England	50.00
PECHINEY	France	100.00
ALCAN ALPHA 2004	France	99.76
ALCAN BETA 2004	France	100.00
ALCAN CENTRE DE RECHERCHES DE VOREPPE	France	100.00
ALCAN DELTA 2004	France	100.00
ALCAN EPSILON 2004	France	100.00
ALCAN GAMMA 2004	France	100.00
ALUMINIUM DUNKERQUE S.A.	France	100.00
ALUMINIUM PECHINEY	France	98.75 (20)
AFFIMET	France	100.00
ALUCAM - COMPAGNIE CAMEROUNAISE DE L'ALUMINIUM	Cameroun	46.67
ALUBASSA	Cameroun	70.09 (14)
ALUCONGO	Congo	55.86 (15)

6

ALCAN INC.
Subsidiaries, Related Companies, Etc.	Organized Under the Laws of	% of Voting Shares Held by Immediate Owner
CENTRE MÉDICAL DES ENTREPRISES DE LA SANAGA	Cameroun	74.89 (30) (31)
COLALU	Centre Africa	57.35 (33)
HOSTELLERIE DE LA SANAGA	Cameroun	67.50
SOCATRAL - SOCIÉTÉ CAMEROUNAISE DE TRANSFORMATION DE L'ALUMINIUM	Cameroun	52.55 (68)
SOTRALGA - SOCIÉTÉ DE TRANSFORMATION DE L'ALUMINIUM AU GABON	Gabon	38.33 (75)
ALUMINIUM PECHINEY SERVICE	France	99.36 (22)
ALUMINIUM PECHINEY SPV	France	99.96 (23)
ALUMINIUM PECHINEY UO 5	France	100.00
BAOTOU PECHINEY AND BAOLU HIGH PURITY ALUMINIUM COMPANY LIMITED	China	51.00
CIE IVOIRIENNE DE L'ALUMINIUM   (IVOIRAL)	Ivory Coast	10.00
ÉLECTRIFICATION CHARPENTE LEVAGE - E.C.L.	France	100.00
ECL SCES AFRICA ENGINEERING	South Africa	100.00
ECL SERVICES MIDDLE EAST W.L.L.	Bahrain	90.00 (37)
ECL SERVICES NL BV	The Netherlands	100.00
ECL SERVICES PTY LIMITED	Australia	100.00
ECL SERVICES, INC.	Quebec	100.00
ECL SERVICOS LIMITADA	Mozambique	85.71 (38)
ECL SHANGHAI	China	100.00
PECHINEY ALUMINA RESOURCES INDIA PRIVATE LTD	India	100.00
PECHINEY PHILIPPINES INC	Philippines	99.99
PECHINEY TECHNOLOGY LTD.	Quebec	100.00
PECHINEY VÉNÉZUELA, S.A.	Venezuela	100.00
PECHINEY SERVICIOS	Venezuela	100.00
PEM ABRASIFS-RÉFRACTAIRES	France	100.00
SOCIÉTÉ FINANCIÈRE POUR LE DÉVELOPPEMENT DE L'ALUMINIUM - S.F.D.A.	France	100.00
ALUMINIUM DE GRÈCE S.A.I.C.	Greece	41.10 (17) (18)
DELPHES & DISTOMON (SOCIÉTÉ MINIÈRE DE)	Greece	99.98
SOCIÉTÉ IMMOBILIÈRE ALPES PROVENCE - SIAP	France	89.44 (73)
SOCIÉTÉ MAURIENNAISE DE TRANSFORMATION - S M T	France	100.00
SOCIÉTÉ MINIÈRE DES BAUX	France	99.90
SOCIÉTÉ POUR LE DÉVELOPPEMENT DE L'AFRIQUE CENTRALE ET DE L'OUEST - SODAFE	France	62.85 (74)
BRANDEIS (BROKERS) LIMITED	England	100.00
CARBONE SAVOIE	France	30.00
CARBONE SAVOIE BRAZIL HOLDING SA	Brazil	97.87
CARBONE SAVOIE BRAZIL SA	Brazil	99.98
COMPAGNIE GÉNÉRALE D'ÉLECTROLYSE DU PALAIS	France	100.00
FONDERIE DE CUIVRE DU PALAIS	France	100.00
COMPAGNIE GÉNÉRALE DE PARTICIPATION INDUSTRIELLE ET FINANCIÈRE	France	100.00
CEBAL AMERICA RECURSOS HUMANOS S. de R.L. de C.V	Mexico	99.00
CEBAL AMERICAS DE REYNOSA S. de R.L. de C.V.	Mexico	99.00
CEBAL BRASIL LIMITADA	Brazil	100.00
CEPILLOS DE MATAMOROS, S.A. de C.V.	Mexico	100.00
EMIROLL	United Arab Emirates	30.00
ENVARIL PLASTIC PACKAGING s.r.l.	Argentina	100.00
ENVARIL PLASTIC PACKAGING URUGUAY SA	Uruguay	100.00
NOVACEL S.A. DE C.V.	Mexico	100.00
CELPLY S.A. DE C.V.	Mexico	100.00
PECHINEY BRIDLICNA s.r.o.	Czech Republic	100.00
PECHINEY HOLDINGS UK LTD	England	100.00
ALCAN INTERNATIONAL NETWORK UK LIMITED	England	100.00
ALCAN INTERNATIONAL NETWORK  LIMITED	England	100.00
ALCAN INTERNATIONAL NETWORK GULF LIMITED	England	100.00
ALUMINIUM PECHINEY (UK) LIMITED	England	100.00
PECHINEY UK LIMITED	England	100.00

7

ALCAN INC.
Subsidiaries, Related Companies, Etc.	Organized Under the Laws of	% of Voting Shares Held by Immediate Owner
BRANDEIS LIMITED	England	100.00
CEBAL UK LTD	England	100.00
FEEP HOLDINGS UK LIMITED	England	100.00
PET PLAS PACKAGING LIMITED	England	100.00
KENPAK (EUROPE) LIMITED	England	100.00
PECHINEY AVIATUBE LTD.	England	100.00
PECHINEY CEBAL PACKAGING LTD	England	100.00
PECHINEY TRADING LIMITED	England	100.00
TECHPACK (UK) LIMITED	England	100.00
DEUTSCHE ALUMINIUM VERPACKUNG RECYCLING GmbH	Germany	16.67 (36)
FINANCIÈRE EUROPÉENNE D'EMBALLAGES PECHINEY	France	100.00
ALCAN PACKAGING SKRIVANY s.r.o.	Czech Republic	100.00
CEBAL S.A.S.	France	97.94 (29)
CEBAL AÉROSOL FRANCE	France	100.00
CEBAL CR, A.S.	Czech Republic	99.45
CEBAL ITALIANA SPA	Italy	99.87
CEBAL MINMETAL S.R.L.	Italy	99.67 (28)

CEBAL MEXICO	Mexico	100.00
CEBAL SVENSKA AB	Sweden	100.00
CEBAL TUBA SP ZO.O.	Poland	80.00
CEBAL ZHONGSHAN CO. LTD	China	60.00
COPAL SAS	France	51.00
COTUPLAS	France	76.96 (35)
PECHINEY MANUFACTURE MAROCAINE D'ALUMINIUM - M.M.A.	Morocco	49.39 (56)
AL WIFAQ 5	Morocco	99.95
SOCIÉTÉ MÉTALLURGIQUE DE MOHAMMEDIA - S.M.M.	Morocco	79.00
SOCIÉTÉ MANUFACTURE MAROCAINE DE MOHAMMEDIA - S.M.M.M.	Morocco	99.94
CEBAL VERPACKUNGEN GmbH	Germany	100.00
CEBALSOL s.r.o.	Czech Republic	100.00
DANAFLEX PACKAGING CORPORATION LIMITED	New Zealand	100.00
PECHINEY BOUTEILLES PLASTIQUES	France	100.00
PECHINEY CAPSULES	France	100.00
PECHINEY CAPALUX INC.	Canada	100.00
INVERSIONES PECHINEY CHILE LIMITADA	Chile	99.99 (50)
ENOCAP CHILE S.A.	Chile	100.00
PECHINEY CELOGRAF S.L.	Spain	100.00
ALCAN PACKAGING ALZIRA SAU	Spain	100.00
CEBAL ENTEC S.A.	Spain	100.00
INDUSTRIAS METALICAS CASTELLO S.A.	Spain	100.00
PRECIS, S.A.	Spain	100.00
PECHINEY ESPANA, S.A.	Spain	100.00
POLIBOL S.A.	Spain	100.00
GUARDIAN ESPANOLA S.A.	Spain	100.00
SOPLARIL Portugal	Portugal	99.99
PECHINEY EMBALLAGE FLEXIBLE EUROPE	France	100.00
ALCAN LEBENSMITTEL VERPACKUNGEN GmbH	Germany	100.00
ALUFIN GmbH TABULAROXID	Germany	100.00
PECHINEY SCHEUCH BETRIEBS-UND VERWALTUNGS GmbH	Germany	100.00
PECHINEY SCHEUCH GmbH & Co KG	Germany	100.00
SCHEUCH UNTERSTUTZUNGSKASSE GmbH	Germany	100.00
SOCIÉTÉ DE FINANCEMENT DES RISQUES INDUSTRIELS - SOFIRI	Luxembourg	90.00 (72)
SOPLARIL	France	100.00
AVENIR PRINT SERVICE	France	100.00
SOPLARIL ITALIA S.p.A.	Italy	100.00

8

ALCAN INC.
Subsidiaries, Related Companies, Etc.	Organized Under the Laws of	% of Voting Shares Held by Immediate Owner
FINANCIÈRE TECHPACK	France	100.00
TECHPACK INTERNATIONAL	France	99.99
AIRLESSYSTEMS	France	50.00
BENSON SRL	Italy	100.00
COSMETECH MABLY EUROPE	France	85.47 (34)
DECOPLAST	France	99.91
LAFFON SPA	Italy	100.00
LIR France	France	100.00
MT PACKAGING	France	100.00
NOVELIS DISTRIBUTIONS AG	Switzerland	100.00
PT TECHPACK ASIA	Indonesia	95.00
SFG - SOCIÉTÉ FRANÇAISE DE GALVANOPLASTIE	France	100.00
TECHPACK DEUTSCHLAND GmbH	Germany	100.00
TECHPACK FINANCEMENT	France	100.00
FRANCE ALUMINIUM RECYCLAGE SA	France	39.99 (39)
INTERFILIÈRES MATÉRIAUX	France	20.00
GIE - PECHINEY RECHERCHE	France	92.00 (40) (41) (42) (43) (44) (45) (46) (47)
INVESTRIA	France	98.74
PECHINEY CONSOLIDATED AUSTRALIA PTY LIMITED	Australia	55.52 (54)
ALCAN PRIMARY METAL AUSTRALIA (PTY) LTD	Australia	100.00
ALUMINIUM PECHINEY HOLDINGS PTY LTD	Australia	99.00 (21)
JOHCATH HOLDINGS PTY LIMITED	Australia	100.00
CATHJOH HOLDINGS PTY LIMITED	Australia	50.00 (26)
PECHINEY RESOURCES PTY, LIMITED	Australia	100.00
PECHINEY AUSTRALU PTY LIMITED	Australia	100.00
TOMAGO ALUMINIUM COMPANY PTY LTD	Australia	50.00
TOMAGO ALUMINIUM JOINT-VENTURE	Australia	36.05 (79)
PECHINEY ÉLECTROMÉTALLURGIE	France	100.00
INVENSIL	France	100.00
INVENSIL FREE STATE (Pty) LTD	South Africa	100.00
SILICON SMELTERS (Pty) Ltd	South Africa	100.00
VAAL SILICON SMELTERS (Pty) LTD	South Africa	74.90
SOCIÉTÉ DE PRODUITS INDUSTRIELS DU RHÔNE	France	99.94
PECHINEY KHI 99	France	99.76 (55)
PECHINEY MANHATTAN	France	100.00
SAVOIE SERVICE Y.K.	Japan	100.00
PECHINEY NEDERLAND, N.V.	Netherlands	100.00
PECHINEY NEDERLANDS & CO ALUMINIUM PRODUCTIE BEDRIEJF, C.V.	The Netherlands	85.00
PECHINEY PHI 2000	France	100.00
PECHINEY RHENALU	France	100.00
ALCAN ALUMINIUM-PRESSWERK GMBH	Germany	100.00
ALCAN ALUMINIUM-PRESSWERK BURG GmbH	Germany	100.00
ALCAN ALUMINIUM-PRESSWERK PFALZ GMBH	Germany	100.00
ALMET	France	100.00
ALUMINIUM DU MAROC S.A.	Morocco	15.69 (19)
PECHINEY AVIATUBE	France	100.00
PECHINEY BÂTIMENT	France	100.00
PECHINEY SERVICES FINANCE	France	46.53 (57) (58)
PECHINEY SOFTAL	France	100.00
RHENAROLL S.A.	France	49.85
PECHINEY WORLD TRADE S.A.	France	100.00
ALCAN HELLAS S.A.	Greece	99.46 (6)
ALCAN INTERNATIONAL NETWORK AUSTRALASIA (PTY) LIMITED	Australia	100.00

9

ALCAN INTERNATIONAL NETWORK BELGIUM S.A.	Belgium	100.00
ALMET BELGIUM SA	Belgium	99.34
DE CLEEN & VEREECKEN N.V.	Belgium	99.60
ALCAN INTERNATIONAL NETWORK DEUTSCHLAND GmbH	Germany	100.00
COFRANEX Gesellschaft für Industrielle Importe und Dienstleistungen mbH	Germany	100.00
ALCAN INTERNATIONAL NETWORK EURASIA LLC	Russian Federation	100.00
ALCAN INTERNATIONAL NETWORK HANDELSGESELLSCHAFT m.b.H.	Austria	100.00
ALCAN INTERNATIONAL NETWORK ITALY	Italy	99.99 (8)
OXIMET SRL	Italy	66.67
ALCAN INTERNATIONAL NETWORK JAPAN	Japan	100.00
ALCAN INTERNATIONAL NETWORK NORDIC AS	Denmark	100.00
ALCAN INTERNATIONAL NETWORK PORTUGAL LDA	Portugal	99.87 (9)
ALCAN INTERNATIONAL NETWORK SA  (Pty) Ltd	South Africa	100.00
CHROMEX MINING CO (PTY) LIMITED	South Africa	100.00
PECHINEY APPROVISIONNEMENTS ALUMINE	France	100.00
PECHINEY A.I.M.	France	100.00
PECHINEY BRASIL LTDA	Brazil	100.00
PECHINEY CHILE LIMITADA	Chile	99.00
PECHINEY DIS TICARET LIMITED SIRKETI	Turkey	99.99
PECHINEY FAR EAST LIMITED	Hong Kong	99.90
PECHINEY (SHANGHAI) WORLD TRADE LTD	China	100.00
PECHINEY MEXICANA SA de CV	Mexico	99.96
PECHINEY NORGE A/S	Norway	100.00
PECHINEY SINGAPORE PTE LTD	Singapore	100.00
PECHINEY SVERIGE AB	Sweden	100.00
PECHINEY TAIWAN INC.	Taiwan	99.92
PECHINEY TRADING FRANCE	France	100.00
PECHINEY VERKOOP B.V.	The Netherlands	100.00
SEFRANEX DUBAI LTD	England	100.00
SEFRANEX	France	100.00
SOCIÉTÉ COMMERCIALE PECHINEY EGYPTE SAE	Egypt	90.00 (69)
QUIMICA E METALURGICA MEQUITAL LTDA	Brazil	100.00
SATMA	France	100.00
SOCIÉTÉ D'ASSURANCE DE RISQUES INDUSTRIELS - S.A.R.I.	France	99.80 (70) (71)
SOCIÉTÉ D'ENTREPRISES, CARRIÈRES ET MINES DE L'ESTEREL - S.E.C.M.E.	France	100.00
SOCIÉTÉ DE FINANCEMENT POUR AIDER À LA CONVERSION DANS LES BASSINS       D'EMPLOI DE PECHINEY	France	100.00
SOCIÉTÉ DES FONDERIES D'USSEL	France	100.00

SOCIÉTÉ GÉNÉRALE DE RECHERCHES ET D'EXPLOITATIONS MINIÈRES - SOGEREM	France	100.00
UGINA	Morocco	99.92 (81)
PT INTERKEMAS FLEXIPACK	Indonesia	99.99 (65)
SOCIÉTÉ DES ALUMINES ET BAUXITES DE PROVENCE SARL	France	100.00
SUBTANEE HOLDING COMPANY LIMITED	Thailand	98.20 (76)
SANGTHIEN HOLDING COMPANY LIMITED	Thailand	100.00
THE ROBERVAL AND SAGUENAY RAILWAY COMPANY	Quebec	100.00
UTKAL ALUMINA INTERNATIONAL LIMITED	India	45.00

END-NOTE:  ADDITIONAL OWNERSHIP (%) THROUGH THE FOLLOWING SUBSIDIARIES

(1) 9121-5996 QUÉBEC INC.  1.00

(2) BRITISH ALCAN ALUMINIUM plc  15.00

(3) NEVAMAR TE ACQUISITION CORPORATION  37.69

10

(4) NEVAMAR OFFSHORE ACQUISITION CORPORATION  2.87

(5) SWISS ALUMINIUM AUSTRALIA LIMITED  50.00

(6) SEFRANEX  0.54

(7) ALCAN HOLDINGS SWITZERLAND AG (SA/LTD.)  0.76

(8) PECHINEY A.I.M.  0.01                                                                                                                                                  

(9) PECHINEY A.I.M.  0.13

(10) ALCAN HOLDINGS SWITZERLAND AG (SA/LTD.)  17.00                                                                                               

(11) bp EUROPACK S.r.l.  11.00                                                                                                                                           

(12) ALCAN SINGEN GmbH  0.10                                                                                                                                        

(13) SANGTHIEN HOLDING COMPANY LIMITED  25.61                                                                                                     

(14) SOCIÉTÉ POUR LE DÉVELOPPEMENT DE L'AFRIQUE CENTRALE ET DE L'OUEST - SODAFE  12.64                           

(15) SOCIÉTÉ POUR LE DÉVELOPPEMENT DE L'AFRIQUE CENTRALE ET DE L'OUEST - SODAFE  25.00                           

(16) ALCAN ALUMINIUM QUEBEC AND COMPANY, LIMITED PARTNERSHIP  20.00                                                       

(17) PECHINEY  10.00                                                                                                                                                         

(18) ALUMINIUM PECHINEY  9.08                                                                                                                                      

(19) PECHINEY MANUFACTURE MAROCAINE D'ALUMINIUM - M.M.A.  5.97                                                                  

(20) PECHINEY RHENALU  1.25                                                                                                                                         

(21) ALUMINIUM PECHINEY  1.00                                                                                                                                      

(22) FINANCIÈRE EUROPÉENNE D'EMBALLAGES PECHINEY  0.64                                                                                

(23) COMPAGNIE GÉNÉRALE DE PARTICIPATION INDUSTRIELLE ET FINANCIÈRE  0.04                                               

(24) SOR-NORGE ALUMINIUM AS  10.50                                                                                                                            

(25) COMPANIA ECUATORIANA DE BALSA S.A.  32.07                                                                                                     

(26) ALCAN PRIMARY METAL AUSTRALIA (PTY) LTD  50.00                                                                                               

(27) PECHINEY PLASTIC PACKAGING, INC.  1.00                                                                                                            

(28) CEBAL S.A.S.  0.33                                                                                                                                                       

(29) PECHINEY  2.06                                                                                                                                                           

(30) HOSTELLERIE DE LA SANAGA  0.05                                                                                                                            

(31) SOCATRAL - SOCIÉTÉ CAMEROUNAISE DE TRANSFORMATION DE L'ALUMINIUM  0.07                                        

(32) ALCAN HOLDINGS FRANCE S.A.  0.50                                                                                                                       

(33) SOCIÉTÉ POUR LE DÉVELOPPEMENT DE L'AFRIQUE CENTRALE ET DE L'OUEST - SODAFE  25.00                           

(34) LIR FRANCE  14.53                                                                                                                                                       

(35) CEBAL VERPACKUNGEN GmbH  5.00                                                                                                                        

(36) ALCAN HOLDINGS GERMANY GmbH  16.67                                                                                                               

(37) ECL SERVICES, INC.  10.00                                                                                                                                         

(38) ECL SCES AFRICA ENGINEERING   14.29                                                                                                                  

(39) ALCAN HOLDINGS FRANCE S.A.  20.00                                                                                                                      

(40) ALMET  1.00                                                                                                                                                                  

(41) ALUMINIUM PECHINEY  1.00                                                                                                                                      

(42) PECHINEY AVIATUBE  1.00                                                                                                                                         

(43) PECHINEY ÉLECTROMÉTALLURGIE  1.00                                                                                                                  

(44) PECHINEY RHENALU  1.00                                                                                                                                         

(45) PECHINEY SOFTAL  1.00                                                                                                                                             

(46) SATMA  1.00                                                                                                                                                                 

(47) SOCIÉTÉ DES FONDERIES D'USSEL  1.00                                                                                                                  

(48) GOVE ALUMINIUM LIMITED  30.00                                                                                                                              

(49) ALUMINIUM PECHINEY  10.47                                                                                                                                    

(50) PECHINEY CORK & SEAL OF CALIFORNIA, LLC  0.01                                                                                               

(51) LAWSON MARDON PACKAGING LTD.  1.00                                                                                                                

(52) COMPANIA ECUATORIANA DE BALSA S.A.  41.67                                                                                                     

(53) BALMANTA S.A.  1.25                                                                                                                                                   

(54) PECHINEY HOLDINGS, INC.  44.48                                                                                                                             

(55) COMPAGNIE GÉNÉRALE DE PARTICIPATION INDUSTRIELLE ET FINANCIÈRE  0.04                                               

(56) SOCIÉTÉ MANUFACTURE MAROCAINE DE MOHAMMEDIA - S.M.M.M.  13.45                                                         

(57) ALUMINIUM PECHINEY  45.63                                                                                                                                    

(58) ALCAN CENTRE DE RECHERCHES DE VOREPPE  7.84                                                                                            

(59) COMPAGNIE GÉNÉRALE DE PARTICIPATION INDUSTRIELLE ET FINANCIÈRE  7.12                                               

(60) BALMANTA S.A.  20.01                                                                                                                                                 

(61) COMPANIA ECUATORIANA DE BALSA S.A.  10.03                                                                                                     

(62) PRODUCTOS DEL PACIFICO S.A.  10.03                                                                                                                     

(63) MADERAS SECAS C.A.   10.03                                                                                                                                    

(64) EVERWEAL INTERNATIONAL LIMITED  23.65                                                                                                               

(65) ALUMINUM COMPANY OF CANADA LIMITED  0.01                                                                                                    

11

(66) COMPAGNIE GÉNÉRALE DE PARTICIPATION INDUSTRIELLE ET FINANCIÈRE  6.01                                               

(67) PECHINEY RESOURCES PTY, LIMITED  20.00                                                                                                            

(68) ALUMINIUM PECHINEY  5.44                                                                                                                                      

(69) SEFRANEX  10.00                                                                                                                                                         

(70) FINANCIÈRE EUROPÉENNE D'EMBALLAGES PECHINEY  0.03                                                                                

(71) COMPAGNIE GÉNÉRALE DE PARTICIPATION INDUSTRIELLE ET FINANCIÈRE  0.03                                               

(72) COMPAGNIE GÉNÉRALE DE PARTICIPATION INDUSTRIELLE ET FINANCIÈRE  10.00                                             

(73) PECHINEY  10.56                                                                                                                                                         

(74) UGINA  1.95                                                                                                                                                                  

(75) SOCIÉTÉ POUR LE DÉVELOPPEMENT DE L'AFRIQUE CENTRALE ET DE L'OUEST - SODAFE  25.00                           

(76) ALCAN HOLDINGS (THAILAND) LIMITED  1.80                                                                                                             

(77) ALCAN HOLDINGS SWITZERLAND AG (SA/LTD.)  0.62                                                                                                 

(78) HENLOPEN MANUFACTURING CO. INC.  0.50                                                                                                          

(79) CATHJOH HOLDINGS PTY LIMITED  15.50                                                                                                                   

(80) HENLOPEN MANUFACTURING CO. INC.  0.02                                                                                                          

(81) SOCIÉTÉ GÉNÉRALE DE RECHERCHES ET D'EXPLOITATIONS MINIÈRES - SOGEREM  0.02                                     

(82) ALCAN INC.  20.00                                                                                                                                                       

12

EX-23

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 2‑78713, 333-83336, 333-105999 and 333-110739) and on Form S-8 (Nos. 333-6210, 333-89711 and 333-111555) of Alcan Inc., of our report, dated 16 March 2005 relating to the financial statements, management's assessment of the effectiveness of internal control over financial reporting and the effectiveness of internal control over financial reporting, and our Comments by Auditors for U.S. Readers on Canada‑U.S. Reporting Difference dated 16 March 2005 which appears in the Annual Report to Shareholders, which is incorporated by reference in this Annual Report on Form 10-K.

Montreal, Canada
16 March 2005	/s/ PricewaterhouseCoopers LLP
	PricewaterhouseCoopers LLP

EX-24.1

Exhibit 24.1

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS

WHEREAS, ALCAN INC., a Canadian corporation (the "Company"), proposes shortly to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934 as amended (the "Act"), the Annual Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.

WHEREAS, the undersigned is an Officer and/or a Director of the Company as indicated below;

NOW, THEREFORE, the undersigned hereby constitutes and appoints R. Millington, D. McAusland and P. Chenard and each of them, as attorneys for the undersigned and in the undersigned's name, place and stead, and in each of the undersigned's offices and capacities as an Officer and/or a Director of the Company, to execute and file such Annual Report on Form 10-K, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of March 2005.

Signed:   /s/  L. Denis Desautels                                                              
Name:    L. Denis Desautels
Title:       Director

EX-24.2

Exhibit 24.2

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS

WHEREAS, ALCAN INC., a Canadian corporation (the "Company"), proposes shortly to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934 as amended (the "Act"), the Annual Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.

WHEREAS, the undersigned is an Officer and/or a Director of the Company as indicated below;

NOW, THEREFORE, the undersigned hereby constitutes and appoints R. Millington, D. McAusland and P. Chenard and each of them, as attorneys for the undersigned and in the undersigned's name, place and stead, and in each of the undersigned's offices and capacities as an Officer and/or a Director of the Company, to execute and file such Annual Report on Form 10-K, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of March 2005.

Signed:   /s/ L. Yves Fortier    
Name:    L. Yves Fortier
Title:       Director

EX-24.3

Exhibit 24.3

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS

WHEREAS, ALCAN INC., a Canadian corporation (the "Company"), proposes shortly to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934 as amended (the "Act"), the Annual Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.

WHEREAS, the undersigned is an Officer and/or a Director of the Company as indicated below;

NOW, THEREFORE, the undersigned hereby constitutes and appoints R. Millington, D. McAusland and P. Chenard and each of them, as attorneys for the undersigned and in the undersigned's name, place and stead, and in each of the undersigned's offices and capacities as an Officer and/or a Director of the Company, to execute and file such Annual Report on Form 10-K, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of March 2005.

Signed:   /s/ Jean-Paul Jacamon                                                                
Name:    Jean-Paul Jacamon
Title:       Director

EX-24.4

Exhibit 24.4

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS

WHEREAS, ALCAN INC., a Canadian corporation (the "Company"), proposes shortly to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934 as amended (the "Act"), the Annual Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.

WHEREAS, the undersigned is an Officer and/or a Director of the Company as indicated below;

NOW, THEREFORE, the undersigned hereby constitutes and appoints R. Millington, D. McAusland and P. Chenard and each of them, as attorneys for the undersigned and in the undersigned's name, place and stead, and in each of the undersigned's offices and capacities as an Officer and/or a Director of the Company, to execute and file such Annual Report on Form 10-K, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of March 2005.

Signed:   /s/  William R. Loomis, Jr. 
Name:    William R. Loomis, Jr.
Title:       Director

EX-24.5

Exhibit 24.5

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS

WHEREAS, ALCAN INC., a Canadian corporation (the "Company"), proposes shortly to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934 as amended (the "Act"), the Annual Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.

WHEREAS, the undersigned is an Officer and/or a Director of the Company as indicated below;

NOW, THEREFORE, the undersigned hereby constitutes and appoints R. Millington, D. McAusland and P. Chenard and each of them, as attorneys for the undersigned and in the undersigned's name, place and stead, and in each of the undersigned's offices and capacities as an Officer and/or a Director of the Company, to execute and file such Annual Report on Form 10-K, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of March 2005.

Signed:   /s/ Yves Mansion            
Name:    Yves Mansion
Title:       Director

EX-24.6

Exhibit 24.6

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS

WHEREAS, ALCAN INC., a Canadian corporation (the "Company"), proposes shortly to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934 as amended (the "Act"), the Annual Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.

WHEREAS, the undersigned is an Officer and/or a Director of the Company as indicated below;

NOW, THEREFORE, the undersigned hereby constitutes and appoints R. Millington, D. McAusland and P. Chenard and each of them, as attorneys for the undersigned and in the undersigned's name, place and stead, and in each of the undersigned's offices and capacities as an Officer and/or a Director of the Company, to execute and file such Annual Report on Form 10-K, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of March 2005.

Signed:   /s/ Christine Morin-Postel        
Name:    Christine Morin-Postel
Title:       Director

EX-24.7

Exhibit 24.7

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS

WHEREAS, ALCAN INC., a Canadian corporation (the "Company"), proposes shortly to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934 as amended (the "Act"), the Annual Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.

WHEREAS, the undersigned is an Officer and/or a Director of the Company as indicated below;

NOW, THEREFORE, the undersigned hereby constitutes and appoints R. Millington, D. McAusland and P. Chenard and each of them, as attorneys for the undersigned and in the undersigned's name, place and stead, and in each of the undersigned's offices and capacities as an Officer and/or a Director of the Company, to execute and file such Annual Report on Form 10-K, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of March 2005.

Signed:   /s/ Guy Saint-Pierre             
Name:    Guy Saint-Pierre
Title:       Director

EX-24.8

Exhibit 24.8

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS

WHEREAS, ALCAN INC., a Canadian corporation (the "Company"), proposes shortly to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934 as amended (the "Act"), the Annual Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.

WHEREAS, the undersigned is an Officer and/or a Director of the Company as indicated below;

NOW, THEREFORE, the undersigned hereby constitutes and appoints R. Millington, D. McAusland and P. Chenard and each of them, as attorneys for the undersigned and in the undersigned's name, place and stead, and in each of the undersigned's offices and capacities as an Officer and/or a Director of the Company, to execute and file such Annual Report on Form 10-K, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of March 2005.

Signed:   /s/ Gerhard Schulmeyer      
Name:    Gerhard Schulmeyer
Title:       Director

EX-24.9

Exhibit 24.9

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS

WHEREAS, ALCAN INC., a Canadian corporation (the "Company"), proposes shortly to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934 as amended (the "Act"), the Annual Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.

WHEREAS, the undersigned is an Officer and/or a Director of the Company as indicated below;

NOW, THEREFORE, the undersigned hereby constitutes and appoints R. Millington, D. McAusland and P. Chenard and each of them, as attorneys for the undersigned and in the undersigned's name, place and stead, and in each of the undersigned's offices and capacities as an Officer and/or a Director of the Company, to execute and file such Annual Report on Form 10-K, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of March 2005.

Signed:   /s/ Paul M. Tellier             
Name:    Paul M. Tellier
Title:       Director

EX-24.10

Exhibit 24.10

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS

WHEREAS, ALCAN INC., a Canadian corporation (the "Company"), proposes shortly to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934 as amended (the "Act"), the Annual Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.

WHEREAS, the undersigned is an Officer and/or a Director of the Company as indicated below;

NOW, THEREFORE, the undersigned hereby constitutes and appoints R. Millington, D. McAusland and P. Chenard and each of them, as attorneys for the undersigned and in the undersigned's name, place and stead, and in each of the undersigned's offices and capacities as an Officer and/or a Director of the Company, to execute and file such Annual Report on Form 10-K, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

IN WITNESS WHEREOF, I have hereunto set my hand this 11th day of March 2005.

Signed:   /s/  Milton K. Wong             
Name:    Milton K. Wong
Title:       Director

EX-31.1

CERTIFICATION

I, Travis Engen, President and Chief Executive Officer of Alcan Inc. ("Alcan"), certify that:

1.	I have reviewed this annual report on Form 10‑K of Alcan;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
 

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: 14 March 2005	/s/ Travis Engen
	Travis Engen President and Chief Executive Officer

EX-31.2

CERTIFICATION

I, Geoffery E. Merszei, Executive Vice President and Chief Financial Officer of Alcan Inc. (''Alcan''), certify that:

1.	I have reviewed this annual report on Form 10‑K of Alcan;
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a‑15(e) and 15d‑15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 

a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)	Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)	Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)	Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function):
 

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date: 14 March 2005	/s/ Geoffery E. Merszei
	Geoffery E. Merszei
	Executive Vice President and
	Chief Financial Officer

EX-32.1

Certification

                      Pursuant to 18 U.S.C. § 1350, the undersigned officer of Alcan Inc. (the "Company"), hereby certifies, to such officer's knowledge, that the Company's Annual Report on Form 10-K for the year ended December 31, 2004 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: 14 March 2005	/s/ Travis Engen
	Travis Engen
	President and Chief Executive Officer

EX-32.2

Certification

                      Pursuant to 18 U.S.C. § 1350, the undersigned officer of Alcan Inc. (the "Company"), hereby certifies, to such officer's knowledge, that the Company's Annual Report on Form 10-K for the year ended December 31, 2004 (the "Report") fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: 14 March 2005	/s/ Geoffery E. Merszei
	Geoffery E. Merszei
	Executive Vice President and
	Chief Financial Officer

EX-99.1

ALCAN INC. AUDIT COMMITTEE CHARTER

I.        Statement of Policy:

The Audit Committee of the Board of Directors of Alcan Inc. (the "Committee") shall provide assistance to the Board of Directors in fulfilling the Board's oversight responsibility with respect to the Company.  Such assistance shall relate to the Company's financial statements and the financial reporting process, the systems of internal accounting and financial controls, the internal audit function, the annual independent audit of the Company's financial statements, the selection of the independent auditors (the ''Auditors'') and the other functions set out in this Charter.  In so doing, it shall insist on maintaining free and open communication between the Committee, the Auditors, the internal auditors and Management of the Company.  In discharging its oversight role, the Committee is empowered to investigate any matter brought to its attention with full access to all books, records, facilities, and personnel of the Company and to retain assistance for this purpose.

II.       Composition and Organization of the Audit Committee:

The Committee shall consist of at least three Directors, each of whom the Board of Directors has determined to be unrelated or independent in respect of the Company as contemplated by the laws, regulations and listing requirements to which the Company is subject and in accordance with the Guidelines on the Independence of the Directors of Alcan. The Board shall also determine each Committee Member's financial literacy, and whether he or she has accounting or related financial management expertise, as such qualifications are interpreted by the Board of Directors in accordance with its business judgment and applicable regulations.

Members shall be appointed by the Board based on nominations recommended by the Company's Corporate Governance Committee or a sub-committee thereof, and shall serve for such term as the Board may determine.

The Committee shall designate one Member of the Committee to act as its Chairman.  The Secretary or an Assistant Secretary of the Company shall act as secretary to the Committee.

III.      Meetings of the Audit Committee:

The Committee shall meet regularly at least four times a year, or more frequently if circumstances so dictate and shall meet quarterly to review the Company's annual and quarterly releases of financial results.

At each regular meeting, the Committee shall meet separately with senior Management, the Chief Internal Auditor and the Auditors to discuss any matters that the Committee or any of these parties believe should be discussed privately. The Committee may request any officer or employee of the Company or the Auditors to attend a meeting of the Committee or to meet with any Members of the Committee.  In addition, the members of senior Management, the Chief Internal Auditor and the Auditors shall have access to the Committee to bring forward matters requiring urgent attention.

The Committee shall meet in camera, as necessary.

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IV.        Division of Responsibilities of the Audit Committee, the Auditors and Management:

The primary responsibility of the Committee is to oversee the Company's financial reporting process on behalf of the Board and report the results of its activities to the Board.  The Management of the Company is responsible for the preparation, presentation and integrity of the Company's financial statements and for the effectiveness of internal control over financial reporting. Management and the internal audit department are responsible for maintaining appropriate accounting and financial reporting principles and policies as well as internal controls and procedures that provide for compliance with accounting standards and applicable laws and regulations. The Auditors are responsible for planning and carrying out audits of the Company's annual financial statements in accordance with generally accepted auditing standards, reviewing the Company's quarterly financial statements prior to the filing of each quarterly report, annually auditing management's assessment of the effectiveness of internal control over financial reporting and other auditing procedures.

The Committee shall have a clear understanding with Management and the Auditors that the Auditors are accountable to the Board and the Committee, as representatives of the Company's Shareholders.  The Committee shall recommend the appointment of the Auditors to the Board for ultimate approval by the Shareholders.  The Auditors' audit engagement letter shall be signed by the Chairman of the Committee on behalf of the Company, having been previously approved by the Committee.

V.        Duties and Powers of the Audit Committee:

To carry out its responsibilities, the Committee shall have the following duties and powers in respect of which it shall be entitled to full support and cooperation from Management:

1.        In respect of the Auditors:

(i)	to recommend the retention or termination of the Auditors, having evaluated their performance;
(ii)	to oversee the work of the Auditors (including the resolution of any disagreement between management and the Auditors regarding financial reporting) who shall report to the Committee;
(iii)	to approve all audit engagement fees and terms, as well as all significant non‑audit fees;
(iv)	to require the Auditors to submit a formal written statement describing their quality control procedures and any material issues raised thereby;
(v)	to consider any reports or communications (and Management's responses thereto) submitted to the Committee by the Auditors as required by or referred to in applicable auditing standards;
(vi)	to require the Auditors to submit a report relating to the Company's annual audited financial statements describing all critical accounting policies and practices as required by relevant regulations;
(vii)	to discuss with the Auditors any relationships or services that may impact the quality of audit services or the objectivity and independence of the Auditors;

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(viii)	to discuss any significant matters arising from any audit and any errors, difficulties or serious differences of opinion encountered in the course of the audit and Management's response thereto;
(ix)	to review the annual Auditors' Report to Shareholders;
(x)	to review and pre-approve, or to adopt appropriate procedures to pre-approve, the Auditors' provision of audit and any non‑audit services to the Company;
(xi)	to discuss and review the scope and plan of the annual audit;
(xii)	to review and evaluate the qualifications and performance of the relevant personnel of the Auditors;
(xiii)	to review the process for the rotation of the lead audit partner, the concurring partner and any other audit engagement team partner;
(xiv)	to review and approve any procedures on the hiring of employees or former employees of the Auditors, with a view to preserving Auditor independence;
( xv)	to obtain from the Auditors assurance that the audit was conducted in a manner consistent with applicable laws and regulations;
(xvi)	to discuss with the Auditors the quality, not just acceptability, of the Company's accounting principles, including all critical accounting policies and practices used, any alternative treatments of financial information that have been discussed with Management, the implications of their use, as well as any other material communications with Management.
(xvii)	to remind the Auditors that they are accountable to the Board and the Committee, as representatives of the Shareholders and that the Committee expects to be advised on any areas that require its attention.

2.         In respect to the Internal Audit Function:

(i)	to review and approve the appointment of the Chief Internal Auditor;
(ii)	to advise the Chief Internal Auditor that he is expected to provide to the Committee summaries of the significant issues and practices relating to accounting principles and policies, financial reporting and internal control over financial reporting prepared by the internal audit department for Management and Management's responses thereto;
(iii)	to receive a report on the activities of the internal audit function;
(iv)	to review the Company's internal audit plan;
(v)	to review the degree of independence of the internal audit function and the adequacy of staffing and compensation;
(vi)	to review senior employee expenses and perquisites on an annual basis.

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3.         In respect of Disclosure and Internal Controls:

(i)	to advise Management, the internal audit function and the Auditors that they are expected to provide the Committee with a timely disclosure and analysis of transactions and other events that would materially impact the Company's financial statements;
(ii)	to discuss guidelines and policies governing the process by which Management assesses and manages the Company's exposure to risk (including insurance coverage), and to discuss the Company's major financial risk exposures and the steps Management has taken to monitor and control such exposures;
(iii)	on a regular basis to review policies and practices of the Company, including those related to pension governance, funding and investments, metal and other commodity hedging activities, insurance and foreign exchange, and to receive updates as to current status;
(iv)	to prepare any report required to be included in the Company's management proxy circular;
(v)	to review all financial statements requiring Board approval and report thereon to the Board;
(vi)	to review the Company's annual report and annual regulatory filings and disclosures before they are filed with securities authorities;
(vii)	to review the Company's disclosure under Management's Discussion and Analysis of Financial Condition and Results of Operation;
(viii)	to ensure that the Company's disclosure policy and practices meet applicable regulatory requirements and the needs of the Company;
(ix)	to review the quarterly earnings press releases with unaudited consolidated financial statements prepared by Management before their release to the public; including a discussion of compliance with generally accepted accounting principles and other disclosure requirements as well as a discussion with the Auditors of their review of the quarterly financial statements;
(x)	to review and approve the Company's quarterly report and quarterly regulatory filings and disclosures before they are filed with securities authorities including the Management's Discussion and Analysis of Financial Condition and Results of Operation;
(xi)	to review any off-balance sheet items;
(xii)	to discuss the kinds of financial information and earnings guidance provided, and the types of presentations made to analysts and rating agencies;
(xiii)	to review the Legal Proceedings Report prepared by Management with a view to ensuring that all potential material claims against the Company have been properly evaluated, accounted for and disclosed;
(xiv)	to discuss with the Company's Chief Legal Officer any significant legal, compliance or regulatory matters that may have a material effect on the financial statements or the Company's business;

4

(xv)	to review the Company's processes for monitoring compliance with the Worldwide Code of Employee and Business Conduct and the Code of Ethics for Senior Financial Officers;
(xvi)	to review the adequacy of the Company's disaster recovery plan to ensure the ability to resume operations as rapidly and efficiently as possible in the event of a disaster;
(xvii)	to review significant tax exposures and tax planning initiatives with a view to ensuring full compliance while minimizing tax costs;
(xviii)	to review the results of the Company's joint ventures and investments;
(xix)	to receive reports on major accounting issues that have arisen and expected changes in accounting standards and processes that might have an impact on the Company;
(xx)	to review Management's determination of goodwill impairment, if any, as required by accounting standards;
(xxi)	to review any use of pro forma or non-generally accepted accounting principles information by the Company in any documents other than the financial statements;
(xxii)	to inquire of the Company's Chief Executive Officer and Chief Financial Officer as to the Company's disclosure controls and procedures and as to the existence of any significant deficiencies or material weakness in the design or operation of internal control over financial reporting and any fraud that involves  employees who have a significant role in the Company's internal control over financial reporting.

4.         In respect of Financial Matters and Securities:

(i)	to review any proposed material financial and capital transactions;
(ii)	to review the impact of the Company's financing plan on capital structure and credit rating;
(iii)	to review proposals from the Company's Chief Financial Officer in respect of any issue of securities previously approved by the Board;
(iv)	to review and recommend to the Board the text of any registration or offering document that may be required to be issued;
(v)	to review Management's recommendations regarding the Company's dividend policy and make recommendations thereon to the Board.

5.         In respect of Corporate Governance:

(i)	to prepare any report or other disclosures, including any recommendation of the Committee, required by applicable laws and regulations to be included in the Company's reports to Shareholders;
(ii)	to review periodically the content and application of the Code of Ethics for Senior Financial Officers of the Company;

5

(viii)	to report its activities to the Board on a regular basis and to make such recommendations with respect to the above and other matters as the Committee may deem necessary or appropriate;
(ix)	to prepare and review with the Board an annual performance evaluation of the Committee and its Members, which evaluation must compare the performance of the Committee with the requirements of this Charter; the performance evaluation by the Committee shall be conducted in such manner as the Committee deems appropriate;
(x)	to review and recommend to the Board the appointment of senior financial officers;
(xi)	to review the adequacy and competence of the Company's finance personnel;
(xii)	to regularly review the independence, financial literacy and financial expertise of the Committee Members;
(xiii)	to review this Charter at least annually and recommend any changes to the Board.

VI.        Delegation to Subcommittee:

The Committee may, in its discretion and as appropriate, delegate duties and responsibilities to a Member or to a subcommittee of the Committee.

VII.       Resources and Authority Function of the Committee:

The Committee shall have the resources and authority appropriate to discharge its duties and responsibilities, including the authority to retain counsel, accountants or other experts, as it deems appropriate, without seeking approval of the Board or Management.

6

The function of the Committee is oversight. It is not the duty or responsibility of the Committee or its Members (i) to plan or conduct audits, (ii) to determine that the Company's financial statements are complete and accurate and are in accordance with generally accepted accounting principles or (iii) to conduct other types of auditing or accounting reviews or similar procedures or investigations. The Committee, its Chairman and its financial expert Members are Members of the Board, appointed to the Committee to provide broad oversight of the financial, risk and control related activities of the Company, and are specifically not accountable or responsible for the day to day operation or performance of such activities.  In particular, the Member or Members identified as financial experts shall not be accountable for giving professional opinions on the internal or external audit of the Company's financial information, but only for providing expertise in the Committee's oversight thereof.

Absent actual knowledge to the contrary (which shall be promptly reported to the Board), each Member of the Committee shall be entitled to rely on (i) the integrity of those persons or organizations within and outside the Company from which it receives information, (ii) the accuracy of the financial and other information provided to the Committee by such persons or organizations and (iii) representations made by Management and the Auditors as to any non-audit services provided by the Auditors to the Company and its subsidiaries.

7

EX-99.2

Alcan Inc.

Notice of Annual Meeting
of Shareholders

28 April 2005

Proxy Circular

Dear Shareholder:

You are cordially invited to attend the 103^rd Annual Meeting of Shareholders of Alcan Inc., which will take place on Thursday, 28 April 2005, in the Assembly Hall, International Civil Aviation Organization, 999 University Street (Atrium entrance), Montreal, Quebec, Canada at 10:00 a.m.

At the Meeting, the Shareholders will be asked to consider the matters set out in the enclosed Notice of Annual Meeting.

Your vote is important.  Please complete, sign and date the form of proxy and return it in the enclosed envelope, whether or not you plan to attend the Meeting.  Returning the proxy will not limit your right to vote in person if you attend the Meeting.

The Meeting will be webcast on Alcan's web site (www.alcan.com).

If you have any questions regarding the matters to be dealt with at the Meeting or require additional copies of this material, please call Alcan's transfer agent, CIBC Mellon Trust Company, at 1-800-387-0825 (toll free) or collect at 416-643-5500.

Yours sincerely,

L. Yves Fortier
Chairman of the Board of Alcan Inc.
2 March 2005

Proxy Circular 2005 (i) Alcan Inc.

	What's Inside:
1	Notice of Annual Meeting of Shareholders of Alcan Inc.
2	Proxy Circular
2	Definitions
3	Questions & Answers on Voting and Proxies
6	Business to be Transacted at the Meeting
7	Nominees for Election as Directors
9	Corporate Governance Practices
16	Report of the Audit Committee
17	Auditors
19	Report on Executive Compensation
23	Performance Graph
24	Executive Officers' Compensation
31	Employment Agreements
31	Directors' Compensation
33	Indebtedness of Directors, Executive Officers and Employees
33	Directors' and Officers' Liability Insurance
34	Additional Information
34	Approval of the Board of Directors
35	Schedule A: Resolution - Shareholder Rights Plan
36	Schedule B: Summary - Shareholder Rights Plan
39	Schedule C: Resolution - Alcan Executive Share Option Plan
40	Schedule D: Summary - Alcan Executive Share Option Plan

La version française du présent document ainsi que le formulaire de procuration qui l'accompagne seront envoyés aux actionnaires sur demande.  Veuillez communiquer avec la Compagnie Trust CIBC Mellon, en appelant au 1 800-387-0825 (sans frais) ou à frais virés au (416) 643-5500.

Proxy Circular 2005 (ii) Alcan Inc.

Notice of Annual Meeting of Shareholders of Alcan Inc.

  The 103^rd Annual Meeting of the holders of the Common Shares of Alcan Inc. will be held on Thursday, 28 April 2005 at 10:00 a.m. in the Assembly Hall, International Civil Aviation Organization, 999 University Street (Atrium entrance), Montreal, Quebec, Canada, for the following purposes: 1.    receiving the financial statements and the Independent Auditors' Report for the year ended 31 December 2004, 2.    electing Directors, 3.    appointing Auditors and authorizing the Directors to fix their remuneration,   4.    re-confirming the Shareholder Rights Plan and approving amendments thereto as described in the attached Proxy Circular, and 5.    approving certain amendments to the Alcan Executive Share Option Plan, including the reservation of an additional 12,000,000 Common Shares for issuance under the Alcan Executive Share Option Plan as described in the attached Proxy Circular. Shareholders who cannot attend the Annual Meeting may submit their proxies in accordance with the procedures set  out in the attached Proxy Circular. By order of the Board of Directors, Roy Millington
Corporate Secretary
  Montreal, Canada
2 March 2005

Proxy Circular 2005 1 Alcan Inc.

Proxy Circular
(As of 2 March 2005, except as otherwise provided)

This Proxy Circular is furnished in connection with the solicitation of proxies by the Board of Directors and management of Alcan Inc. for use at the Annual Meeting of Shareholders to be held in Montreal on 28 April 2005 (and at any adjournment thereof) for the purposes set out in the attached Notice of Annual Meeting.

Definitions

Unless stated otherwise, the following expressions used in this Proxy Circular have the meanings indicated:

"Alcan" or "Company" means Alcan Inc.,

"Algroup" means Alusuisse Group Ltd. (now Alcan Holdings Switzerland Ltd.), a Subsidiary of Alcan following the Algroup Combination,

"Algroup Combination" means the process by which Algroup became a Subsidiary of Alcan on 17 October 2000, through the completion of a share exchange offer by Alcan for the shares of Algroup,

"Auditors" means Alcan's external auditors PricewaterhouseCoopers LLP,

"Board" or "Board of Directors" means the board of directors of Alcan,

"CBCA" means the Canada Business Corporations Act,

"Chairman" means the Chairman of the Board of Directors of Alcan,

"CEO" means the Chief Executive Officer of Alcan,

"CIBC Mellon" means CIBC Mellon Trust Company,

"Circular" means this proxy circular prepared in connection with the Meeting,

"Director" means a director of Alcan,

"Executive Officers" means the President and Chief Executive Officer, the Executive Vice Presidents, the Senior Vice Presidents and the Vice Presidents of Alcan,

"Meeting" means the Annual Meeting of Shareholders to be held on 28 April 2005 and any adjournment thereof,

"Non-Executive Director" means a Director of Alcan who is not an employee of Alcan or its Subsidiaries or related companies,

"Notice" means the attached Notice of Annual Meeting,

"Novelis" means Novelis Inc., a corporation incorporated under the CBCA and formed to acquire, pursuant to the Novelis Spin-off, the businesses contributed by Alcan,

"Novelis Spin-off" means the transfer to Novelis of substantially all of the aluminum rolled products businesses held by Alcan prior to the Pechiney Combination and Novelis becoming an independent publicly-traded company on 6 January 2005,

"Option Plan" means the Alcan Executive Share Option Plan described on page 25,

"Pechiney" means Pechiney, a French société anonyme, a Subsidiary of the Company following the Pechiney Combination,

"Pechiney Combination" means the process by which Pechiney became a Subsidiary of Alcan on 15 December 2003, through the completion of a cash and Shares offer by Alcan for the securities of Pechiney,

"Share" or "Common Share" means a common share in the capital of Alcan,

"Shareholder" means a holder of the Shares,

"SOX" means the U.S. Sarbanes-Oxley Act of 2002, and the rules thereunder,

"Subsidiary" means a company controlled, directly or indirectly, by Alcan, and

"$", except where otherwise indicated, means U.S. Dollars.

Proxy Circular 2005 2 Alcan Inc.

Questions & Answers on Voting and Proxies

If you are not a registered Shareholder, please also refer to page 5 "Voting by Non-Registered Shareholders" for a description of the procedure to be followed to vote your Shares.

Q: Who is soliciting my proxy?

A: This Circular is furnished in connection with the solicitation by Alcan of Shareholder proxies to be used at the Meeting to vote your Shares. The solicitation of proxies will be made primarily by mail, but may also be made by electronic means, by telephone or in person. The cost of soliciting proxies will be borne by Alcan.  Georgeson Shareholder Communications Canada and Morrow & Co., Inc. have been retained by Alcan in Canada and the United States, respectively, to assist in the solicitation of proxies from Shareholders.  For these services, Georgeson Shareholder Communications Canada and Morrow & Co., Inc. are expected to receive, from Alcan, fees of approximately Can. $25,000 and $15,000, respectively, plus reimbursement of reasonable expenses. In addition, employees of Alcan may solicit proxies without compensation.  CIBC Mellon is responsible for the tabulation of proxies.

Q:  What am I voting on?

A:   Shareholders will be voting on the:

• Election of Directors;

• Appointment of PricewaterhouseCoopers LLP as the Auditors and authorization given to the Directors to fix the Auditors' remuneration;

• Re-confirmation of the Shareholder Rights Plan; and

• Approval of amendments to the Option Plan.

Q:  How will these matters be decided at the meeting?

A:  A simple majority of the votes cast, by proxy or in person, will constitute approval of each of the matters specified in this Circular.

Q:  What documents are available to shareholders?

A: Shareholders will receive the Alcan 2004 annual report to Shareholders, which includes the audited consolidated financial statements, management's discussion and analysis thereof and this Circular.  Registered Shareholders will also receive the form of proxy and a consent form for electronic delivery of documents.

Copies of Alcan's annual report on Form  10-K and audited consolidated financial statements filed with the Canadian and U.S. securities regulators can be found on the Company's Internet site at www.alcan.com or may be obtained, without charge, on request from the Corporate Secretary of Alcan, 1188 Sherbrooke St. West, Montreal, Quebec, Canada, H3A 3G2.

Q:  Who is entitled to vote?

A: On 2 March 2005, 370,037,313 Shares were outstanding. Shareholders of record as of the close of business on that date ("Record Date") are entitled to receive notice of the Meeting and either they or their duly appointed proxyholders will be entitled to attend the Meeting and vote.

Each holder of Shares is entitled to one vote at the Meeting for each Share registered in his or her name at the close of business on the Record Date.

Q:  How do I vote?

A: There are four ways that you can vote your Shares if you are a registered Shareholder. (1) You may vote in person at the Meeting, (2) you may complete and sign the enclosed form of proxy appointing the named persons or another person you choose to represent you and to vote your Shares at the Meeting, (3) you may forward your proxy electronically, or (4) you may forward your proxy by telephone.

Completing, signing and returning your form of proxy does not preclude you from attending the Meeting in person.  If you do not wish to attend the Meeting or do not wish to vote in person, your proxy will be voted or be withheld from voting, in accordance with your wishes as specified on your proxy, on any ballot that may be called at the Meeting.  If the Shareholder is a body corporate or association, the form of proxy must be signed by a person duly authorized by that body corporate or association. 

To forward your proxy electronically, you must go to the following Internet site: www.eproxyvoting.com/alcan, enter your personalized e-voting control number located on your form of proxy and follow the instructions.

If your Shares are registered in the name of a nominee, please see "Voting by Non-Registered Shareholders" on page 5.

Proxy Circular 2005 3 Alcan Inc.

Q:  What if I plan to attend the meeting and vote in person?

A: If you plan to attend the Meeting on 28 April 2005 and wish to vote your Shares in person at the Meeting, it is not necessary for you to complete or return the form of proxy.  Your vote will be taken and counted at the Meeting.  Please register with the transfer agent, CIBC Mellon, upon arrival at the Meeting. Your participation in person in a vote by ballot at the Meeting would automatically revoke any proxy that you had previously given in respect of businesses covered by that vote. Non-registered Shareholders wishing to attend the Meeting should refer to "Voting by Non-Registered Shareholders" on page 5.

Q:  What happens when I sign and return the form of proxy?

A: Signing the enclosed proxy gives authority to the named proxyholders on the form, or to another person you have appointed, to vote your Shares at the Meeting in accordance with the voting instructions you provide.

Q:  Can I appoint someone other than the named proxyholders to vote my shares?

A: Yes. Write the name of your chosen person, who need not be a Shareholder, in the blank space provided in the form of proxy.  It is important to ensure that any other person you appoint is attending the Meeting and is aware that his or her appointment has been made to vote your Shares. Proxyholders should, upon their arrival at the Meeting, present themselves to a representative of CIBC Mellon.  Please note that if you choose to forward your proxy electronically, only the named proxyholders may be appointed.

Q: What do I do with my completed form of proxy?

A: Return it to the transfer agent, CIBC Mellon, in the envelope provided, or forward it by telecopier to (416) 368-2502, so that it arrives no later than 5:00 p.m. EDT on 27 April 2005. All Shares represented by a properly executed proxy received by CIBC Mellon prior to such time will be voted or be withheld from voting, in accordance with your instructions as specified in the proxy, on any ballot that may be called at the Meeting.

Q:  How will my shares be voted if I return my proxy?

A: The persons named in the form of proxy will vote or withhold from voting your Shares in accordance with your instructions. In the absence of such instructions, however, your Shares will be voted FOR the election of the Directors, FOR the appointment of the Auditors, FOR the re-confirmation of the Shareholder Rights Plan and FOR the approval of amendments to the Option Plan.

Q:  If I change my mind, can I take back my proxy once I have given it?

A: Yes. A Shareholder who has given a proxy may revoke it with an instrument in writing which includes another proxy with a later date, executed by the Shareholder or by the Shareholder's attorney authorized in writing and delivered to CIBC Mellon, 200 Queen's Quay East, Unit 6, Toronto, Ontario, M5A 4K9, Canada or by telecopier at (416) 368-2502, no later than 5:00 p.m. EDT on 27 April 2005, or to the chairman of the Meeting on the day of the Meeting or any adjournment thereof.

    The participation in person by a Shareholder in a vote by ballot at the Meeting would automatically revoke any proxy that has been previously given by the Shareholder in respect of business covered by that vote.

Q:  What if amendments are made to these matters or if other matters are brought before the meeting?

A: The persons named in the form of proxy will have discretionary authority with respect to amendments or variations to matters identified in the Notice of Annual Meeting and to other matters which may properly come before the Meeting. As of the date of this Circular, the management of Alcan knows of no such amendment, variation or other matter expected to come before the Meeting. If any other matters properly come before the Meeting, the persons named in the form of proxy will vote on them in accordance with their best judgment.

Q:  How can I contact the transfer agent?

A:   You can contact the transfer agent at:

         CIBC Mellon Trust Company
         320 Bay Street, 3^rd floor
         Toronto, Ontario, Canada M5H 4A6
         Telephone: (416) 643-5500
                         1-800-387-0825
(toll free throughout Canada and the U.S.)
Telecopier: (416) 643-5501

Q:  What is the final date to submit a shareholder proposal for the 2006 annual meeting?

A:   The final date for submitting Shareholder proposals to Alcan is 1 December 2005.

Proxy Circular 2005 4 Alcan Inc.

Q:  Who are the principal shareholders of the company?

A: To the knowledge of the Directors and Executive Officers of the Company, no person or company beneficially owns or exercises control or direction over more than 10% of the outstanding Shares of the Company. Capital Group International Inc. has reported to the U.S. Securities and Exchange Commission that they owned 6.0% of Alcan Shares on 31 December 2004.

Voting by non-registered shareholders

Q:  If my shares are not registered in my name but are held in the name of an intermediary (a bank, trust company, securities broker, trustee, etc.), how do I vote my shares?

A:  Non-registered or beneficial Shareholders are not personally listed in Alcan's Share register. Their Shares are held in the name of an intermediary or a "nominee", which is usually a trust company, securities broker or other financial institution. If you are a non-registered Shareholder, there are two ways that you can vote your Shares held in the name of your nominee:

1)  By providing voting instructions to your nominee

Applicable securities laws require your nominee to seek voting instructions from you in advance of the Meeting.  Accordingly, you will receive or have already received from your nominee either a request for voting instructions or a form of proxy for the number of Shares you hold. Every nominee has its own mailing procedures and provides its own signing and return instructions, which should be carefully followed by non-registered Shareholders to ensure that their Shares are voted at the Meeting.

2)  By attending the Meeting in person

The Company generally does not have access to the names of its non-registered Shareholders. Therefore, if you attend the Meeting, the Company will have no record of your shareholdings or of your entitlement to vote unless your nominee has appointed you as proxyholder.

If you wish to vote in person at the Meeting, insert your own name in the space provided on the request for voting instructions or form of proxy to appoint yourself as proxyholder. Then follow the signing and return instructions provided by your nominee. Non-registered Shareholders who instruct their nominee to appoint themselves as proxyholders should, at the Meeting, present themselves to a representative of CIBC Mellon.

Proxy Circular 2005 5 Alcan Inc.

Business to be transacted at the Meeting
(See Notice of Annual Meeting of Shareholders of Alcan Inc.)

1.     Presentation of Financial Statements

The consolidated financial statements for the year ended 31 December 2004 and the Independent Auditors' Report for 2004 will be submitted to Shareholders at the Meeting, but no vote with respect thereto is required or proposed to be taken.  The consolidated financial statements are included in the Alcan 2004 annual report that is being mailed to Shareholders with the Notice of Annual Meeting and this Circular.

2.     Election of Directors

Thirteen Directors are to be elected to serve until the close of the next annual meeting of the Company or until they cease to hold office as such.  The Board of Directors and management recommend the election of the nominees listed on pages 7 and 8.

3.      Appointment of Auditors

Auditors are to be appointed to serve until the close of the next annual meeting of the Company, and the Directors are to be authorized to fix the remuneration of the Auditors so appointed.

The Board of Directors and management, on the advice of the Audit Committee, recommend that PricewaterhouseCoopers LLP, Montreal, Canada, be appointed as Auditors.

A representative of PricewaterhouseCoopers LLP will be present at the Meeting and will have the opportunity to make a statement should he desire to do so. He will also be available to answer questions.

4.      Re-confirmation of Shareholder Rights Plan

As an item of special business, the Shareholders will be asked at the Meeting to adopt a resolution, as set out in Schedule A hereto, re-confirming the Shareholder Rights Plan ("Rights Plan") which is embodied in the Shareholder Rights Agreement ("Plan Agreement") that was re-confirmed on 25 April 2002. Under the terms of the Plan Agreement, the Rights Plan must be submitted to the Shareholders at every third annual meeting for re-confirmation until its expiration in 2008.

The Rights Plan is being submitted for re-confirmation with certain minor amendments as explained in this Circular.  A summary of the Plan Agreement is set out in Schedule B hereto.

The primary objective of the Rights Plan is to provide the Board with sufficient time to explore and develop alternatives for maximizing Shareholder value if a take-over bid is made for Alcan and to provide all Shareholders with an equal opportunity to participate in such bid.  Alcan has no knowledge at the present time of any take-over bid or intended take-over.

To be adopted, the resolution must be approved by a majority of the votes cast on the matter at the Meeting.

5.      Approval of Amendments to the Option Plan

As an item of special business, the Shareholders will be asked at the Meeting to adopt a resolution, as set out in Schedule C hereto, approving certain amendments to the Option Plan, including the reservation of an additional 12,000,000 Common Shares for issuance under the Option Plan. A summary of the Option Plan is set out in Schedule D hereto.

To be adopted, the resolution must be approved by a majority of the votes cast on the matter at the Meeting.

Proxy Circular 2005 6 Alcan Inc.

Nominees for Election as Directors

Roland Berger	67, Director since 2002 Munich, Germany	L. Yves Fortier, c.c., q.c.	69, Director since 2002 Montreal, Quebec
	Mr. Berger is non-executive chairman of Munich-based Roland Berger Strategy Consultants, one of the leading global strategy consultancies, which he founded in 1967. He is also a member of various supervisory boards and consultant groups, pursues extensive commitments in the public sector and is an expert on corporate management and general economic and social issues. (1), (3), (5) 5,185 Deferred Share Units		Mr. Fortier is Chairman of the Board of Alcan and is chairman and a senior partner of the law firm Ogilvy Renault in Montreal.  From 1988 to 1992, he was Ambassador and Permanent Representative of Canada to the United Nations.  He is also governor of Hudson's Bay Company and a director of NOVA Chemicals Corporation and Nortel Networks Corporation†.  Mr. Fortier is a trustee of the International Accounting Standards Committee. (1*), (4) 1,000 Common Shares 16,633 Deferred Share Units
L. Denis Desautels, o.c., f.c.a.	61, Director since 2003 Ottawa, Ontario	Jean-Paul Jacamon	57, Director since 2004 Mareil-Marly, France
	Mr. Desautels is executive-in-residence at the School of Management of the University of Ottawa.  He was Auditor General of Canada from 1991 to 2001, prior to which he had been a senior partner of the accounting firm of Ernst & Young LLP.  Mr. Desautels is chairman of the Laurentian Bank of Canada, a director of The Jean Coutu Group (PJC) Inc. and of Bombardier Inc. and a member of the Accounting Standards Oversight Council of the Canadian Institute of Chartered Accountants. (1), (2*), (3) 573 Common Shares 3,349 Deferred Share Units		Mr. Jacamon is non-executive chairman of Bonna Sabla and of Gardiner Group.  He was previously chief operating officer and director of Schneider Electric from 1996 to 2002. He is also a director of Le Carbone Lorraine, STACI and AMEC plc.  (1), (3) 136 Common Shares 1,795 Deferred Share Units
Travis Engen	60, Director since 1996 New Canaan, Connecticut	William R. Loomis, Jr.	56, Director since 2002 Santa Barbara, California
	Mr. Engen has been President and CEO of Alcan since March 2001. Prior to joining the Company, Mr. Engen had been chairman and chief executive of ITT Industries, Inc. since 1995. Mr. Engen is a director of Lyondell Chemical Company and the Canadian Council of Chief Executives. He is vice chairman of the World Business Council for Sustainable Development and is chairman of the International Aluminium Institute and of The Prince of Wales International Business Leaders Forum. 225,500 Common Shares 2,192 Deferred Share Units 1,815,517 Options to purchase Shares		Mr. Loomis is involved in investment and academic activities. He was a limited managing director of Lazard LLC from January 2001 to March 2004. He was chief executive officer of Lazard LLC from November 2000 to December 2001. He was previously deputy chief executive officer from 1999 and a managing director from 1995 of Lazard Frères & Co. He is a director of Limited Brands, Inc. and Ripplewood Holdings LLC. (1), (2), (4), (5*) 10,000 Common Shares 8,406 Deferred Share Units

Proxy Circular 2005 7 Alcan Inc.

Yves Mansion	54, Director since 2004 Paris, France	Gerhard Schulmeyer	66, Director since 1996 Greenwich, Connecticut
	Mr. Mansion is chairman and chief executive officer of Société Foncière Lyonnaise and a member of the French Collège de l'Autorité des marchés financiers. He was group managing director of Assurances Générales de France from 1990 to 2001. Mr. Mansion is a member of the supervisory board of Euler Hermes and deputy director of l'Entreprise de Recherche et d'activités pétrolières. (1), (2) 3,675 Deferred Share Units		Mr. Schulmeyer is professor of practice at the MIT Sloan School of Management.  From 1998 until 2001, he was president and chief executive officer of Siemens Corporation.  He serves on the boards of Zurich Financial Services, Ingram Micro Inc., and Korn/Ferry International as well as the international advisory board of Banco Santander Central Hispano. (1), (3*), (4) 2,245 Common Shares 8,809 Deferred Share Units
Christine Morin- Postel	58, Director since 2003 Neuilly sur Seine, France	Paul M. Tellier, p.c., c.c., q.c.	65, Director since 1998 Montreal, Quebec
	Mrs. Morin-Postel was, until 2003, executive vice-president in charge of human resources at Suez Group. She was previously chief executive officer of Société Générale de Belgique from 1998 to 2001. Mrs. Morin-Postel is a director of 3i Group plc and Pilkington plc. She is also a member of the supervisory board of Royal Dutch Shell Company. (1), (2) 5,268 Deferred Share Units		Mr. Tellier was, until December 2004,  president and chief executive officer of Bombardier Inc.  From 1992 to 2002, he was president and chief executive officer of the Canadian National Railway Company.  He is a director of McCain Foods, Bell Canada and BCE Inc.  He is former chairman of the Conference Board of Canada. (1), (2), (4*) 1,958 Common Shares 14,334 Deferred Share Units
H. Onno Ruding	65, Director since 2004 Brussels, Belgium Dr. Ruding was Minister of Finance of the Netherlands and was an executive director of the International Monetary Fund in Washington, D.C. and a member of the Board of managing directors of AMRO Bank in Amsterdam. He was, until 2003, vice chairman of Citicorp and Citibank, N.A. Dr. Ruding is a director of Corning Inc, Holcim AG and RTL Group. He is chairman of BNG NV (Bank for the Netherlands Municipalities) and the Centre for European Policy Studies (CEPS) in Brussels. Dr. Ruding is also a member of the international advisory committees of Robeco Group, Citigroup and the Federal Reserve Bank of New York. (1), (3) 112 Common Shares 449 Deferred Share Units	Milton K. Wong, c.m.	66, Director since 2003 Vancouver, British Columbia
			Mr. Wong is non-executive chairman of HSBC Asset Management (Canada) Ltd. and Chancellor of Simon Fraser University in British Columbia.  He was founder and chairman of M. K. Wong and Associates until it was sold in 1996 to HSBC. He serves as a director on the boards of the Aga Khan Foundation Canada, the Canada-U.S. Fulbright Program, the Pacific Salmon Endowment Society, Genome BC, and the Pierre Elliott Trudeau Foundation.  He is a member of the National Advisory Committee to the World Urban Forum and the Canadian Judicial Council. He is the founder and past-chairman of the Laurier Institution, a non-profit organization for advancing knowledge of the economics of cultural diversity. (1), (4) 40,000 Common Shares 6,274 Deferred Share Units
Guy Saint-Pierre, c.c.	70, Director since 1994 Montreal, Quebec	Committee Memberships 1.  Corporate Governance 2.  Audit 3.  Human Resources 4.  Environment, Health & Safety 5.  Nominating *    Committee chairman †   Mr. Fortier is a director of Nortel Networks Corporation and, along with all Nortel directors and officers, was subject to a cease trade order in relation to Nortel securities. The order was issued on 17 May 2004 as a result of Nortel's failure to file financial statements and is still in effect.
	Mr. Saint-Pierre was, until 2004, chairman of the board of the Royal Bank of Canada.  He was president and chief executive officer of SNC-Lavalin Group Inc. from 1989 to 1996 and chairman from 1996 to 2002.  Mr. Saint-Pierre is a director of the Institute for Research on Public Policy. (1), (2), (3), (5) 16,170 Common Shares 8,976 Deferred Share Units

Proxy Circular 2005 8 Alcan Inc.

Corporate Governance Practices

Alcan is committed to the highest levels of corporate governance practices, which are essential to the success of the Company and to the enhancement of Shareholder value.  The Common Shares are listed on the Toronto, New York, London, Paris and Swiss stock exchanges and Alcan, in addition to making the required filings with Canadian securities regulators, files periodic and current reports with the United States Securities and Exchange Commission.  Accordingly, Alcan is subject to a variety of corporate governance and disclosure requirements.  Alcan's corporate governance practices meet or exceed the Toronto Stock Exchange Corporate Governance Guidelines ("TSX Guidelines") and other applicable stock exchange and regulatory requirements and ensure transparency and effective governance of the Company. 

On 29 October 2004, the Canadian Securities Administrators ("CSA") published for comment proposed National Policy 58-201 "Corporate Governance Guidelines" and proposed National Instrument 58-101 "Disclosure of Corporate Governance Practices". The Company's governance practices are in compliance with the CSA's proposed governance guidelines. Alcan's Board regularly reviews its corporate governance practices in light of developing requirements in this field.  As new provisions come into effect, the Board will reassess its corporate governance practices and implement changes where appropriate.

The following is an overview of Alcan's corporate governance practices with footnotes referencing the TSX Guidelines.

The Board of Directors

The Board has the responsibility for the stewardship of the Company, including the responsibility to ensure that it is managed in the interest of its Shareholders as a whole, while taking into account the interests of other stakeholders.¹

The Board supervises the management of the business and affairs of the Company and discharges its duties and obligations in accordance with the provisions of (a) the CBCA, (b) the Company's articles of incorporation and by-laws, (c) the Company's Worldwide Code of Employee and Business Conduct, (d) the charters of the Board and Board Committees, and (e) other applicable legislation and Company policies.

The Company's corporate governance practices require that, in addition to its statutory duties, the following matters be subject to Board approval: (1) capital expenditure budgets and significant investments and divestments, (2) the Company's strategic and value-maximizing plans², (3) the number of Directors within the limits provided in the Company's articles of incorporation, and (4) any matter which may have the potential for important impact on the Company.

Composition of the Board

The Nominating Committee, a sub-committee of the Corporate Governance Committee described below, recommends candidates for election to the Board.  Nominees are selected as potential representatives of Shareholders as a whole and not as representatives of any particular Shareholder or group of Shareholders.  Alcan does not have a significant or controlling Shareholder.

The Board's objective, in respect to its composition, is to have members possessing an appropriate mix of skills, knowledge and experience and to have an understanding of the regions in which the Company operates. The Board's expectations in relation to its members and a statement of its corporate governance principles are set out in the Board charter. The Board is satisfied that its number of Directors enables effective decision-making.³  The charter of the Board of Directors is posted on Alcan's Internet site (www.alcan.com).

According to their mandates as set out in their charters, the Board and each of its Committees may engage outside advisors at the expense of the Company.⁴

The Board charter provides that Directors who reach the age of 72 prior to the annual meeting of Shareholders in any year shall retire at that meeting.

Independence of the Board

Care is taken to ensure that the Board of Directors is constituted of a substantial majority of individuals who qualify as Directors who are unrelated to and independent of management, in accordance with stock exchange requirements.⁵

Proxy Circular 2005 9 Alcan Inc.

To assist in determining the independence of its members, the Board has established Guidelines on the Independence of the Directors of Alcan Inc. ("Guidelines on Independence"), a copy of which is available on Alcan's Internet site (www.alcan.com).

The definition of an Independent Director under the Guidelines on Independence encompasses both the definition of an "unrelated" director within the meaning of the TSX Guidelines and of an "independent" Director within the meaning of the rules of the New York Stock Exchange. Such a Director must not have any material relationship with Alcan, either directly or as a partner, shareholder or officer of a company that has a relationship with Alcan and has no interest or relationship which could reasonably be perceived to interfere with his or her ability to act with a view to the best interests of Alcan (an "Independent Director").⁶

The Guidelines on Independence also establish an additional, more stringent, definition of independence for members of the Audit, Human Resources and Nominating Committees. This heightened definition of independence corresponds to the audit committee member independence qualification within the meaning of the SOX. To meet the SOX audit committee qualification, a director must not, directly or indirectly, accept any consulting, advisory or other compensatory fee from the company and not be an affiliated person of the company or any subsidiary other than in such director's capacity as a member of the board or any committee.

The present Board is composed of thirteen Directors.  Travis Engen is President and CEO of Alcan.  Except for Mr. Engen, all Directors are Independent Directors. In particular, the Board has determined that Mrs. Morin-Postel and Messrs. Berger, Desautels, Fortier, Jacamon, Loomis, Mansion, Ruding, Saint-Pierre, Schulmeyer, Tellier and Wong are Independent Directors.

Mr. Fortier is a senior partner of Ogilvy Renault, one of a number of law firms that provide legal services for the Company. Ogilvy Renault had provided legal services to the Company for many years prior to Mr. Fortier becoming a Director and Mr. Fortier is not involved in any legal services rendered to Alcan. Ogilvy Renault has confirmed that all legal services rendered by it for Alcan in each of the past five years amounts to less than 2% of Ogilvy Renault's annual revenues. Accordingly, the relationship with the law firm is not considered to be material in accordance with applicable stock exchange rules. The Board has determined, in accordance with the Guidelines on Independence, that the services rendered are not material to the Company or to Ogilvy Renault and, accordingly, that Mr. Fortier is an Independent Director. However, because of the Company's relationship with Ogilvy Renault and retention of the SOX audit committee qualification for members of the Audit, Human Resources and Nominating Committees, Mr. Fortier is not a member of those committees.

Mr. Loomis was a limited managing director of Lazard LLC until March 2004, one of a number of investment banks that provide services to the Company.  Lazard had confirmed to the Company that any compensation determination made by it in respect of Mr. Loomis was not based directly or indirectly on any fees paid to Lazard by the Company. Mr. Loomis has now retired from Lazard. The Board has determined therefore, in accordance with the Guidelines on Independence, that Mr. Loomis is an Independent Director.

The Guidelines on Independence establish that no more than two Directors may serve together on the board of another publicly traded company. None of the Directors currently serve together on the board of any other publicly traded company.

The Board has a non-executive Chairman (Mr. Fortier); the Board has had a non-executive Chairman since 1995 and believes that the separation of the positions of CEO and Chairman contributes to allowing the Board to function independently of management.⁷  The Board charter describes the responsibilities of the Chairman.

Committees

The Board has established four Committees, each of which is constituted by its own charter, by which the Board delegates certain of its functions as hereinafter set out.  Each Committee is made up solely of Independent Directors.⁸

The Committees of the Board are: the Corporate Governance Committee, the Audit Committee, the Human Resources Committee and the Environment, Health & Safety Committee.  The Nominating Committee is constituted as a sub-committee of the Corporate Governance Committee.

Proxy Circular 2005 10 Alcan Inc.

The Committee charters are posted on Alcan's Internet site (www.alcan.com).

Corporate Governance Committee

The Corporate Governance Committee has the broad responsibility of regularly reviewing corporate governance practices in general within Alcan.⁹

One of the Committee's main duties is to maintain an overview of the composition and size of the Board.  The charter of the Corporate Governance Committee provides that a sub-committee, as hereinafter described, is responsible for nominating new Directors.¹⁰  The Committee develops position descriptions for the Board of Directors, the Chairman and the CEO and approves the latter's corporate objectives.¹¹

The Corporate Governance Committee assesses and ensures on an annual basis the effectiveness of the Board as a whole, of each Committee of the Board and of the contribution of individual Directors, including the CEO.¹²  Each Director completes a survey of Board and Committee effectiveness on an annual basis which covers the subjects under the categories of Board composition, responsibility, meetings and committees. As part of this survey, each Director also completes a self-evaluation and an evaluation of other individual members of the Board. The results of these evaluations are compiled by an outside consultant.  The Committee also assesses the Board's relationship with management and recommends, where necessary, limits on management's authority to act without explicit Board approval.

The Committee's mandate also includes recommending levels of Directors' compensation.  To this end, the Committee considers recommendations from the Human Resources Committee and considers factors such as time commitment, risks and responsibilities.¹³  See page 31 for a description of Directors' Compensation.

Nominating Committee

The Nominating Committee is a sub-committee of the Corporate Governance Committee, composed entirely of Independent Directors. It reviews candidates for nomination as Directors and these nominees will be recommended as candidates for election to the Board. The delegation of power to the Committee is provided in the charter of the Corporate Governance Committee. The Committee when reviewing candidates takes into consideration factors such as judgment, independence, skill, diversity and business experience of the individual candidates and their expected contribution to the skills set of the Board as a whole. The minimum qualifications to be met by Directors are established in the Board charter. The Committee may employ, and has done so in the past, third-party search firms for identifying and evaluating nominees.

Alcan does not have a specific policy regarding Board nominees put forward by Shareholders because Shareholders representing five per cent of the Shares may propose nominees for election as Directors by following the procedure set out in the CBCA.

Mr. Ruding was recommended by the Committee as a nominee because he was well known to the Committee as having been a long standing director of Pechiney. His candidature was the subject of a review by the Committee which then recommended his appointment as Director, in 2004.

Audit Committee

This Committee is established in accordance with the requirements of the CBCA, stock exchange rules and applicable securities laws and regulations and is composed entirely of Independent Directors.  Its roles and responsibilities are set out in its charter. The Committee's main objective is to provide an effective overview of the Company's financial reporting process and internal control functions.¹⁴  It assists the Board in fulfilling its functions relating to corporate accounting and reporting practices, as well as overseeing financial and accounting controls and reviewing and approving financial statements and proposals for the issuance of securities.  The Committee also identifies the principal risks of the Company's business such as volatility in metal prices, raw material and energy costs and foreign exchange rates and oversees the implementation of appropriate measures to manage such risks, including policies and standards relating to risk management.¹⁵

Proxy Circular 2005 11 Alcan Inc.

With respect to compliance and disclosure matters, the Committee ensures that the Company makes timely disclosure of activities that would materially impact its financial statements, that all potential material claims against the Company have been properly evaluated, accounted for and disclosed, and that regular updates are received regarding certain policies and practices of the Company.¹⁶

The Committee reviews financial information prepared in accordance with generally accepted accounting principles ("GAAP") and non-GAAP financial information in its various forms, including quarterly earnings releases.  It reviews major accounting issues that arise and expected changes in accounting standards and processes that may impact the Company. 

The Committee has direct communication with the Company's Auditors and internal auditors and meets privately on a regular basis with each of the Auditors, internal auditors and senior members of the Company's financial management.  The Audit Committee reviews the Auditors' audit plans, determines their independence and makes recommendations to the Shareholders for the appointment of auditors.  The chairman of the Committee reviews the terms of engagement of the Auditors and signs the Auditor's audit engagement letter.  The Committee also discusses with the Auditors the quality and not just the acceptability of the Company's accounting principles and obtains their assurance that the audit was conducted in a manner consistent with applicable laws and regulations.¹⁷ The Committee receives regular reports from the Auditors at each of their meetings.  The Company has a formal procedure that establishes rules on the Company's employment of the former Auditors' employees.

The Board determines each Audit Committee member's financial literacy and whether he or she has accounting or related financial expertise.  All members of the Audit Committee have been determined to have the requisite level of financial literacy, being the ability to understand fully balance sheets, income statements, cash flow statements and related notes to financial statements.

The Board has determined that at least one member of the Audit Committee, Mr. Desautels, is an audit committee financial expert for the purposes of s. 407 SOX.

Mr. Desautels serves on the audit committees of four public companies, including Alcan's. The Board has determined that his simultaneous service on other audit committees does not impair his ability to effectively serve on the Company's Audit Committee because he has the required time available to him to serve fully and effectively on the four audit committees in question. The Company believes that Mr. Desautels' service on those other audit committees is of significant benefit to it because of the experience it provides.  No other Director member of the Audit Committee serves on more than two other audit committees of public companies.

The Audit Committee ensures that its process for monitoring compliance and dealing with violations of Alcan's Worldwide Code of Employee and Business Conduct is established and updated.  In particular, the Audit Committee has established procedures through the Ombudsman's office in relation to complaints or concerns received by the Company involving accounting or audit matters, including the confidential and anonymous handling of such complaints and concerns from employees. The Ombudsman's office has direct contact with the Audit Committee. See Code of Conduct on page 14 and Report of the Audit Committee on page 16.

Human Resources Committee

The Human Resources Committee has the broad responsibility to review all human resources policy and employee relations matters and to make recommendations with respect to such matters to the Board or the CEO, as appropriate.  It is composed entirely of Independent Directors and its specific roles and responsibilities are set out in its charter.  The Committee will periodically review the effectiveness of the Company's overall management organization structure and succession planning for senior management¹⁸, review recommendations for the appointment of Executive Officers, and review and make recommendations to the Board based on trends and developments in the area of human resource management.

Proxy Circular 2005 12 Alcan Inc.

The Committee establishes the Company's general compensation philosophy and oversees the development and implementation of compensation policies and programs.  It also reviews and approves the level of and/or changes in the compensation of individual Executive Officers, taking into consideration individual performance and competitive compensation practices (see Report on Executive Compensation on page 19).

Environment, Health & Safety Committee

This Committee has the responsibility to review the policy, management practices and performance of Alcan in environmental, health and safety matters and make recommendations to the Board on such matters in light of current and changing requirements.  The Committee also reviews, assesses and provides advice to the Board on worldwide policy and legal, regulatory and consumer trends and developments related to the environment, as they impact the Company, its employees, businesses, processes and products.

Meetings of the Board and Committees

The Board and the Committees meet at pre-set times throughout the year and as needed. In 2004, several special Board meetings were held in connection with the Novelis Spin-off.

Board and Committee Meetings held in 2004:

Board (1)	15
Corporate Governance Committee	6
Audit Committee(2)	10
Human Resources Committee	5
Environment, Health and Safety Committee	2
Nominating Committee(3)	5

(1)       Includes 5 telephone conference Board meetings.
(2)       Includes 5 telephone conference Audit Committee meetings.
(3)       Includes 1 telephone conference Nominating Committee meetings.

Attendance of current Directors in 2004:

Directors	Board Meetings Attended	Committee Meetings Attended
Roland Berger	14 of 15	16 of 16
L. Denis Desautels	15 of 15	21 of 21
Travis Engen	15 of 15	*
L. Yves Fortier	15 of 15	8 of 8
Jean-Paul Jacamon(1)	13 of 14	10 of 10
William R. Loomis	15 of 15	18 of 18
Yves Mansion(1)	14 of 14	15 of 15
Christine Morin-Postel	13 of 15	15 of 16
H. Onno Ruding(2)	4 of 4	6 of 6
Guy Saint-Pierre	15 of 15	26 of 26
Gerhard Schulmeyer	14 of 15	22 of 23
Paul M. Tellier	13 of 15	17 of 18
Milton K. Wong	15 of 15	8 of 8

(1)     Appointed on 15 February 2004.
(2)     Appointed on 23 September 2004.
*       Mr. Engen attends Committee meetings at the request of the Committees, excluding the executive sessions thereof.

All Directors have attended at least 90% of the Board and Committee meetings in 2004.

The Board and the Committees regularly invite members of management to attend meetings to report on relevant subjects and facilitate communication between the Directors and management. With respect to the Company's strategic planning process, the Board discusses and reviews the Company's strategic plans regularly. At Board meetings, business group or unit strategic plans or corporate development matters are presented by management and reviewed and approved by the Board.²

There is no executive committee of the Board.  At the next Board meeting following each meeting of a Committee, the chairman of the Committee reports to the Board on the Committee's activities.  Minutes of Committee meetings are provided to all Directors and Directors have open invitations to attend meetings of Committees on which they do not sit.

At every in‑person meeting of the Board, the Non-Executive Directors meet in executive session, presided by the Chairman, without management present.⁷

The Directors are expected to attend the annual meetings of Shareholders; all Directors attended the 2004 annual meeting of Shareholders.

Proxy Circular 2005 13 Alcan Inc.

Information to the Board

Alcan's Corporate Secretary maintains a Directors' Manual which includes information on Company policies and Director responsibilities and liabilities, which is updated as necessary.  Detailed current information on the Company, its finances and its operations are sent on a monthly basis to the Directors. Particularly important information requiring urgent attention is conveyed immediately.  New Directors spend time with members of senior management, including those involved in Alcan's business operations, so that they can become rapidly familiar with the Company, its issues, businesses and operations. 

Care is taken to ensure that new Directors understand the roles and responsibilities of the Board and its Committees, as well as the commitment level that Alcan expects of its Directors.  Extensive meetings are held annually involving the Board and management, lasting several days, so that the Directors may become well acquainted with the Company's businesses and managers. The Company funds Director education via seminars offered by third parties.

Director visits to Alcan plants and business locations are organized to give additional insight into Alcan's business and operations.¹⁹

Code of Conduct

Alcan has a Worldwide Code of Employee and Business Conduct that governs all employees of Alcan as well as the Directors. As an annex to the Code and supplemental thereto, the Company has adopted a Code of Ethics for Senior Financial Officers including the CEO, the Chief Financial Officer and Controller.  Copies of those documents are posted on the Company's Internet site (www.alcan.com). Alcan will promptly disclose any future amendments to the codes on its Internet site.

The Company has "whistleblower" procedures so that an employee can anonymously report concerns that he or she may have regarding compliance with corporate policies, the Worldwide Code of Employee and Business Conduct, applicable laws or auditing and accounting matters, by contacting the Ombudsman's office as provided on the Company's intranet site. The Ombudsman's office can also assist the Audit Committee in the protection of any employee who complains of retaliation for acting as a whistleblower.

Disclosure Controls and Procedures and Internal Controls

In accordance with SOX and recent Canadian regulatory requirements, the CEO and the Chief Financial Officer each certify the accuracy and fair presentation of the information contained in annual and quarterly reports that are filed with regulatory authorities.

Applicable rules also require the design and maintenance of disclosure controls and procedures to ensure that material Company information is communicated to the certifying officers on a timely basis. The CEO and Chief Financial Officer certifications also require that the certifying officers disclose to the Audit Committee and Auditors any significant deficiencies and material weaknesses in the design or operation of internal control over financial information that are reasonably likely to adversely affect financial reporting.

To assist in the certification process, an extensive system of recording and evaluating disclosure controls and procedures is in place, using business group and central function risk assessments and back-up certifications. In addition, a disclosure committee has been constituted with responsibility for the accuracy and timeliness of the disclosure of material information.

The annual report on Form 10-K for the year ended 31 December 2004 contains the required s. 404 SOX assessment of the effectiveness of Alcan's internal control over financial reporting by management. Management has evaluated the effectiveness of these controls and the Auditors have provided an attestation of management's evaluation of internal control over financial reporting.

Role of Management

The Board is not involved in the day-to-day management and functioning of the Company.  It gives senior management this responsibility, subject to the Board's overall stewardship responsibilities.

Alcan management is responsible for conducting the business and operations of the Company in accordance with a business strategy approved by the Board.

Proxy Circular 2005 14 Alcan Inc.

Management's authority to act in certain matters that may have the potential for important impact on the Company, including decisions by the CEO, is subject to prior Board approval as described above. Before being submitted to the Board, certain matters such as dividends, securities issues, annual reports and significant investment/divestment proposals are prepared and reviewed by management with external professional advice, as necessary.

Shareholder/Investor Communications

In order to respond to Shareholders' questions and concerns, Alcan maintains an experienced investor relations staff whose responsibility is to provide accurate, timely and non-selective information and analysis to the investing community in accordance with Alcan's disclosure policy.  This policy has been established in compliance with applicable legal disclosure requirements in Canada and in the United States and is regularly reviewed.  The investor relations staff meets periodically with investors and analysts and is accessible to Shareholders by telephone during business hours.  The quarterly earnings conference calls with analysts and institutional investors are broadcast live and are accessible on Alcan's Internet site at www.alcan.com. These services facilitate the receiving of Shareholder comments.

Shareholders and other interested parties may communicate with the Board by contacting the Corporate Secretary's office, including in relation to any complaints regarding accounting, internal accounting controls or auditing matters. All communications received will be reviewed and, as appropriate, delivered to members of the Board, including the Chairman. The process for communication with the Corporate Secretary's office is posted on Alcan's Internet site at www.alcan.com.

Corporate Governance Documents on the Web

The charters of the Board and each of the Committees, the Worldwide Code of Employee and Business Conduct, the Code of Ethics for Senior Officers and the Guidelines on Independence as well as contact details are posted on Alcan's Internet site (www.alcan.com).

The Corporate Governance Committee

L. Yves Fortier, chairman of the Committee
Roland Berger
L. Denis Desautels
Jean-Paul Jacamon
William R. Loomis, Jr.
Yves Mansion
Christine Morin-Postel
H. Onno Ruding
Guy Saint-Pierre
Gerhard Schulmeyer
Paul M. Tellier
Milton K. Wong

Note 1: refers to TSX Guideline 1.
Note 2: refers to TSX Guideline 1(a).
Note 3: refers to TSX Guideline 7.
Note 4: refers to TSX Guideline 14.
Note 5: refers to TSX Guideline 2.
Note 6: refers to TSX Guideline 3.
Note 7: refers to TSX Guideline 12.
Note 8: refers to TSX Guideline 9.
Note 9: refers to TSX Guideline 10.
Note 10: refers to TSX Guideline 4.
Note 11: refers to TSX Guideline 11.
Note 12: refers to TSX Guideline 5.
Note 13: refers to TSX Guideline 8.
Note 14: refers to TSX Guideline 1(e).
Note 15: refers to TSX Guideline 1(b).
Note 16: refers to TSX Guideline 1(d).
Note 17: refers to TSX Guideline 13.
Note 18: refers to TSX Guideline 1(c).
Note 19: refers to TSX Guideline 6.

Proxy Circular 2005 15 Alcan Inc.

Report of the Audit Committee

In accordance with its charter, the Audit Committee of the Board is responsible for providing an effective overview of Alcan's financial reporting process and internal control functions, as specified on pages 11 and 12.

Management has the primary responsibility for the financial reporting process and the system of internal controls.  The Auditors have the responsibility to express an opinion on the financial statements based on their audit in accordance with generally accepted auditing standards.  The Audit Committee has the responsibility to monitor and oversee the foregoing.

In accordance with the CBCA, the Shareholders appoint the Company's Auditors.  In carrying out its responsibilities, the Audit Committee has recommended to the Board that it, in turn, recommend to the Shareholders that PricewaterhouseCoopers LLP, Montreal, Canada be appointed as Auditors at the Meeting.

The Auditors discuss with the Audit Committee and provide written disclosures on: (1) the independence of the Auditors from Alcan; (2) all critical accounting policies and practices used in the audit; (3) all alternative treatments of financial information within GAAP; (4) the quality and not just the acceptability of the Company's accounts; and (5) the matters required to be communicated under generally accepted auditing standards.

The Audit Committee has reviewed and approved the fees paid for audit services and fees paid to the Auditors for other services (see Auditors on pages 17 and 18) and has considered whether the fees paid for such other services are compatible with maintaining the Auditors' independence.

The Audit Committee regularly meets separately with the Auditors and with Alcan's chief internal auditor, without management present, to review the results of their audits, their evaluation of internal controls, the quality of Alcan's accounting and financial reporting and other appropriate matters.

The Audit Committee reviews the Company's audited and unaudited financial statements and discusses them with management and the Auditors. In the case of the annual audited financial statements, the Committee recommends them to the Board for approval and inclusion in the Company's annual report on Form 10-K.  In the case of the unaudited interim financial statements, the Committee approves the Corporation's quarterly earnings releases and quarterly reports on Form 10‑Q.

The Audit Committee

L. Denis Desautels, chairman of the Committee
William R. Loomis, Jr.
Yves Mansion
Christine Morin-Postel
Guy Saint-Pierre
Paul M. Tellier

Proxy Circular 2005 16 Alcan Inc.

Auditors

PricewaterhouseCoopers LLP and its predecessor (Price Waterhouse) have been Alcan's Auditors since 1936.

In addition to performing the audit of Alcan's consolidated financial statements, PricewaterhouseCoopers LLP provided other services to the Company and its Subsidiaries.

Fees by category for each of 2003 and 2004 are:

	2003 ($'000)	2004 ($'000)
Audit Fees	8,942	27,624
Audit-Related Fees	2,201	172
Tax Fees	417	67
All Other Fees	0	20
Total	11,560	27,833

"Audit fees" include professional services for the audit of consolidated financial statements and local statutory audit work. Included in the audit fees for 2004 are fees incurred in connection with audit work related to Alcan ($12 million), audit work related to Pechiney ($5 million), registration work related to Novelis ($1 million) and the assessment of internal controls over financial reporting in accordance with s. 404 of SOX ($9.6 million). The Company does not expect this level of fees related to SOX will continue in future years, as a considerable initial effort in relation to the implementation of the s. 404 SOX measures will not have to be repeated on an annual basis.  "Audit-related fees" include fees for financial due diligence, internal control reviews and the audit of the Company's pension benefit plans.  "Tax fees" include tax compliance services and tax advisory services. "All other Fees" include a subscription to tax publications from the Auditors.

The Audit Committee has considered whether the provision of services other than audit services is compatible with maintaining the Auditors' independence and has concluded that it is.  The Audit Committee approved a procedure that prohibits the Company from engaging the Auditors for certain non-audit services prohibited by the rules of the U.S. Securities and Exchange Commission (the "SEC").  In addition, all submitted Auditors' services are pre-approved by the Audit Committee through established procedures.  Even though such procedures are in place, the following occurrences are to be noted.

In early February 2005, the Auditors reported to the Audit Committee certain tax representation services that an entity contractually affiliated with one of the Auditors' member firms in France ("PwC Affiliate") had provided to certain of the Company's Subsidiaries in Europe.  These services were not in accordance with the auditor independence standards of the SEC and of the Public Company Accounting Oversight Board.  The PwC Affiliate provided services related to French value-added tax ("VAT") to three of Alcan's European Subsidiaries during fiscal years 2002, 2003 and 2004 and until February 2005, which included making remittances of VAT on behalf of one of the Subsidiaries, and was the tax representative of each of those Subsidiaries in France.  Under French law, a tax representative has joint and several liability in the event the taxpayer fails to pay taxes, which is inconsistent with independence under the SEC's auditor independence rules.  By making remittances of VAT on behalf of one Subsidiary, the PwC Affiliate had custody of the Subsidiary's assets in violation of the SEC's independence rules. 

The Audit Committee did not pre-approve the provision of the services by the PwC Affiliate as the Company was not aware of the PwC Affiliate's relationship with the Auditors.  There is no reference to the name of the Auditors in the PwC Affiliate's name, and the Auditors had not advised the Company of the affiliation. The tax services were terminated in February 2005, and the aggregate fees billed by the PwC Affiliate for these services (approximately $100,000 in total) are being returned to the Subsidiaries.

Once the matters were brought to its attention, the Audit Committee oversaw an investigation of the relevant facts and circumstances and considered them in its evaluation of the Auditors' independence.  In addition, the Audit Committee considered why the violations of the SEC's independence rules had occurred.

The Auditors advised the Audit Committee that they considered the impact these non‑audit services may have had on the Auditors' independence with respect to the Company and concluded that there has been no impairment of the Auditors' independence for the 2002, 2003 or 2004 audit.  The Audit Committee also considered the matter and concluded there has been no impairment of independence for those periods.  Both the Audit Committee and the Auditors considered, among other things, the de minimis and ministerial nature of the services provided and the related fees, and the Auditors' statement that at no time prior to notification by the Auditors' Global Independence Office in February 2005 was the audit team, including the lead engagement partner and auxiliary engagement partner, aware of the services.  The Audit Committee also noted steps that are being taken to prevent the reoccurrence of such issues.

Proxy Circular 2005 17 Alcan Inc.

On 10 March 2005, the Auditors issued an independence letter to the Audit Committee that reported that the Auditors are independent public accountants with respect to the Company within the meaning of the securities acts administered by the SEC and the requirements of the Independence Standards Board, and that the Auditors have been independent throughout the course of their audit.

The Company's annual audit of consolidated financial statements is approved by the Audit Committee on an annual basis. The audit engagement letter is signed by the chairman of the Audit Committee. All permitted Auditors' services are pre-approved by the Audit Committee through established procedures; these are limited to audit services, audit related services, tax services and other permitted services. The Company's Auditors are only retained for tax services and other permitted services when there are particular reasons for preferring the Auditors over other service providers. Significant audit and non-audit services are subject to specific pre-approval. Management makes regular updates to the Audit Committee of the services rendered by the Auditors.

The Audit Committee reviews with the Auditors and Alcan's chief internal auditor the overall scope and specific plans for their audits of the Company and its Subsidiaries.

The Auditors, the Audit Committee and management maintain regular and open communication in relation to the audit of the Company's financial statements. There were no disagreements between the Auditors, the Audit Committee and management on matters affecting the audit of the Company's financial statements.

In addition, the Auditors reviewed Alcan's unaudited 2004 quarterly financial statements and have discussed these and the quarterly earnings releases with management and members of the Audit Committee prior to their issuance.

Proxy Circular 2005 18 Alcan Inc.

Report on Executive Compensation

General

The Human Resources Committee of the Board ("Committee") conducts annual comprehensive reviews of the compensation of the Company's executives around the world and the effectiveness of its policies to meet the needs of the Company.  The Committee is assisted by an independent consultant in its study of other global companies based in North America and Europe. 

The Committee has concluded that for certain Executive Officers, their home country should be regarded as being of secondary importance in setting remuneration levels.  In order to ensure greater equity among these Executive Officers, compensation will be set against U.S. competitive compensation practices, irrespective of the countries in which the Executive Officers work.

The total direct compensation policy, which covers base salary, annual incentives (bonus) and long-term incentives, is aligned with prevalent U.S. competitive median compensation practices. U.S. compensation data is obtained from two different compensation surveys: (1) a peer group of 20 companies which are comparable in size - these companies are capital intensive or consumer product related and have a global presence; and (2) a group composed of 730 large multinational companies which is representative of the general market. The use of historical data has the effect of placing the Company's compensation policy slightly below the current median of U.S. compensation data.

More importantly, both the short-term and long-term incentive plans are aligned with the Company's governing objective to maximize value over time.  The details of Alcan's incentive programs, which came into effect in 2002, are outlined hereunder.

Compensation of the executive officers

Total direct compensation levels reflect both the responsibility of each position (internal equity) and competitive market levels (external competitiveness). The total compensation policy is targeted at the median of the compensation peer groups.

Base Salary

The target base salary is the mid-point of a salary range for an Executive Officer and reflects the competitive level of similar positions in the compensation peer groups.  Actual base salaries for Executive Officers reflect the individual's performance and contribution to the Company.   Base salaries of Executive Officers are therefore reviewed annually and any proposed changes are approved by the Committee before implementation.

The base salaries for Executive Officers other than for the CEO, depending on positions held, are between 17% and 38% of the target total direct compensation (base salary, target annual incentives and target long‑term incentives).

Short-Term (Annual) Incentive Plan

The Company's short-term incentive plan, known as the Executive Performance Award ("EPA") Plan, is administered by the Committee. For each position, a target award is set (expressed as a percent of target base salary) reflecting both the responsibilities of the position and competitive compensation levels. The short-term incentive plan has two components, each based on a different aspect of performance: 

1.   Economic Value Added ("EVA" - a registered trademark of Stern Stewart & Co.). 90% of the incentive compensation opportunity of an Executive Officer is based on the overall profitability of the Company as measured against the quantifiable financial metric EVA.  The incentive compensation for Executive Officers who are part of corporate head office is contingent upon performance versus the pre-established EVA target for the Company, while the incentive compensation for Executive Officers who are responsible for a business group is contingent on meeting the pre-established EVA objectives of their respective business group.

2.   Environment, Health and Safety ("EHS") objectives.  10% of the incentive compensation opportunity of an Executive Officer is based on the achievement of the EHS objectives as measured against pre-established targets.  The objectives are set by the Committee for the Company and the business groups.

Proxy Circular 2005 19 Alcan Inc.

The overall award paid is the sum of the weighted results of each component (i.e., EVA and EHS) modified by rating for the individual performance and contribution to the Company.  The award paid may vary from zero when the results achieved are less than the minimum threshold set by the Committee, to 200% of the target award when the results achieved are at or exceed the maximum level which was set by the Committee.  For 2004, the Committee approved EPA awards for Executive Officers that were generally above the target amounts reflecting performance that was above target.

Under the terms of the Executive Deferred Share Unit Plan ("EDSU Plan"), Executive Officers based in Canada may elect, prior to the beginning of any particular year, to receive Executive Deferred Share Units ("EDSUs") with a value between 10% and 100% of their EPA award for that year, instead of a cash payment.

The number of EDSUs is determined by dividing the amount elected by the average share price on the Toronto and New York stock exchanges at the end of the preceding year. 

Additional EDSUs, which correspond to dividends declared on Shares, are credited to each holder.  The EDSUs are redeemable only upon termination of employment (retirement, resignation or death). The cash amount to be paid by the Company upon redemption will be calculated by multiplying the accumulated balance of EDSUs by the average share price on the said exchanges at the time of redemption. Under the terms of the EDSU Plan, discretionary EDSUs may be granted as determined by the Board.

Under the terms of the Non-Qualified Deferred Compensation Plan, Executive Officers based in the U.S. may elect, prior to the beginning of any particular year, to defer up to 75% of their base salary and up to 90% of their EPA for that year, instead of receiving a cash payment.

The short‑term incentive plan for Executive Officers other than for the CEO, depending on positions held, are between 14% and 21% of the target total direct compensation.

Long-Term Incentive Plan

Long-term incentive compensation for the most senior executives is provided through (1) the Alcan Total Shareholder Return Performance Plan ("TSR Plan") and (2) the Alcan Executive Share Option Plan ("Option Plan"). In 2004, Executive Officers received half of their target long-term incentive compensation value from each of these two plans.   The details for the two plans are described below.

1.   The Company's TSR Plan aligns the interests of executives with those of Shareholders by rewarding the former for maximizing value over time through relative Share price increases.

The TSR Plan is a cash incentive plan that provides performance awards to eligible employees based on the Company's Share price and cumulative dividend yield performance relative to the performance of the companies included in the S&P Industrial Composite Index over a three-year period ("Performance Period"). 

The award amount, if any, is based on the Company's relative Total Shareholder Return performance, as defined in the TSR Plan, and ranking of the Company against the other companies in the S&P Industrial Composite Index at the end of the Performance Period.  If the Company's Total Shareholder Return performance ranks below the 30^th percentile, the employee will not receive any award for that Performance Period.  At the 30^th percentile rank, the employee will be paid an award equal to 60% of the target for that Performance Period.  At the 50^th percentile rank, the employee will earn a payout of 100% of the target, and at or above the 75^th percentile rank, the employee will earn a payout of 300% (i.e. the maximum payout).  The actual amount of award (if any) will be prorated between the percentile rankings.  In 2004, a total target cash award of $17,341,050 was granted to 102 key employees around the world. The amount of the award is expensed throughout the three-year period through an accounting accrual.  For more details on the target cash performance awarded, see page 28.

Proxy Circular 2005 20 Alcan Inc.

Under the terms of the EDSU Plan, Executive Officers based in Canada may elect, at least 12 months prior to the end of the Performance Period, to receive EDSUs with a value between 10% and 100% of their Total Shareholder Performance award for that Performance Period, instead of a cash payment. See above for a description of the EDSU Plan.

2.   The Option Plan also encourages key employees to align their interests with those of Shareholders by providing an incentive to further the Company's growth and development and assists in retaining and attracting executives critical to the success of the Company.

The Option Plan provides for the granting of Options to key employees of the Company and its Subsidiaries to purchase Common Shares.  The Committee, which administers the Option Plan, may determine at its sole discretion which employees of the Company and its Subsidiaries are eligible to be granted Options. In 2004, all options granted were performance-based "C" Options. For more details on the different Options granted, see pages 25 and 26.

Certain Executive Officers participated in the Alcan Stock Price Appreciation Unit Plan ("SPAU Plan") instead of the Option Plan due to certain local conditions of their country of residence (see description on page 28).

Executive Officers that were identified as being transferred to Novelis following the Novelis Spin-off received their target long-term incentive compensation value from the Option Plan. Following the Novelis Spin-off, all Options to purchase Common Shares of Alcan were converted into options to purchase common shares of Novelis for these Executive Officers. In addition, following the Novelis Spin-off, all Options and SPAUs of other Executive Officers and former Executive Officers were adjusted in terms of the number and exercise price to preserve the economic value of the Options and SPAUs. The adjustment was made using the trading price of the Alcan Share before and after the Novelis Spin-off.

The TSR Plan and the Option Plan for Executive Officers other than for the CEO, depending on positions held, are between 40% and 70% of the target total direct compensation.

Compensation of the Chief Executive Officer

The CEO's annual compensation is administered by the Board, based on recommendations from the Committee according to the policies described above. Mr. Engen became CEO on 12 March 2001 and entered into an employment agreement, with a five-year term, which can be renewed annually thereafter. The Board of Directors initially set Mr. Engen's compensation on a competitive level with other U.S. chief executive officers of global companies of similar size and also provided Mr. Engen with a comparable level of compensation to that received from his previous employer.  Since then, his compensation has reflected developments in the compensation offered by comparable U.S. companies. Decisions pertaining to the CEO's compensation are based on the Board evaluation of the CEO's performance against pre-determined financial and strategic objectives which are consistent with the performance metrics of the EPA (see page 19).  These objectives are set and approved annually at the beginning of the year.

Given the quality of the leadership provided as well as the progress made on the strategic direction of the Company, the Committee recommended to the Board that the CEO's total direct compensation (base salary, target annual incentives and target long-term incentives) be set at the 75^th percentile of the U.S. market. The overall outstanding performance was reflected in establishing the compensation of the CEO.

In 2004, Mr. Engen's base salary (representing 11% of his target total direct compensation) was $1,350,000 and will be increased to $1,500,000 for 2005. An annual EPA award (representing 11% of his target total direct compensation) based on an established target and on performance objectives was paid. For 2004, the target was 100% of the base salary and this target was increased to 167% of the base salary for 2005. The actual amount paid for 2004 was $2,031,750 given that the 2004 results exceeded the pre-established performance objectives.

Mr. Engen received 348,000 C Options (see page 25) as part of his annual compensation (representing 39% of his target total direct compensation). These Options were granted on 22 September 2004 at an exercise price of Can. $58.15 per Share.  These Options will remain outstanding and exercisable for the full 10-year period.  He also received a TSR Plan target cash award of $5,000,000 payable at the end of the three-year Performance Period (30 September 2007) under the terms and conditions of the TSR Plan (representing 39% of his target total direct compensation) (see page 28).

Proxy Circular 2005 21 Alcan Inc.

Mr. Engen's employment agreement provides for a retirement adjustment program under which he will be entitled to the same level of retirement benefits he would have received had he remained employed with his previous employer. Under this program, the monthly pension is calculated by multiplying $6,432 by the number of years of service with Alcan from 1 April 2001 for a maximum of five years.

The portion of Mr. Engen's compensation attributable to services rendered in Canada is adjusted so that his net income after taxes is the same as it would have been in the United States.

Mr. Engen is eligible for a termination payment in the event his employment is terminated by the Company without cause or by him for defined reasons. Mr. Engen would receive an amount equal to three times the sum of his highest annualized base salary and target bonus.  Mr. Engen would also be entitled to the acceleration of vesting of all Options and would be entitled to continuation of employee benefits and additional service credits to total five years.

In addition, Mr. Engen and the Company have entered into a change of control agreement which is effective upon the occurrence of two events: (1) a change of control of the Company; and (2) the termination of employment either by the Company without cause or by him for defined reasons. In such cases, Mr. Engen would be entitled to an amount equal to 36 times the sum of his (a) monthly base salary on the date of termination, (b) EPA guideline amount in effect at the date of termination, and (c) other applicable incentive plan guideline amounts at the date of termination.

Approval of this Report on Executive
Compensation

The Committee, whose members are set forth below, has approved the issue of this report and its inclusion in this Circular.

Gerhard Schulmeyer, chairman of the Committee
Roland Berger
L. Denis Desautels
Jean-Paul Jacamon
H. Onno Ruding
Guy Saint-Pierre

Mr. Schulmeyer was named chairman of the Committee on 1 January 2005 to replace Mr. Newall who resigned to join the board of directors of Novelis. Mr. Jacamon joined the Committee on 15 February 2004. Mr. Ruding joined the Committee on 23 September 2004.

 

Proxy Circular 2005 22 Alcan Inc.

Performance Graph

The following graph compares the cumulative total Shareholder return on Can. $100 invested in Shares with the cumulative total return of the Standard & Poor's/Toronto Stock Exchange Composite Index, assuming reinvestment of all dividends.

Additional comparisons are provided with respect to two U.S. Dollar-based indices, the Standard & Poor's Diversified Metals & Mining Index and the Standard & Poor's Industrials Index. The Board believes the comparisons with the additional indices are appropriate.

Canadian Dollar Data: amounts in the following table are expressed in Canadian dollars and reflect the data in the above graph.

31 December	1999	2000	2001	2002	2003	2004
Alcan Inc.	$100	$87	$99	$82	$109	$107
S&P/TSX Composite Index	$100	$107	$94	$82	$104	$119
S&P Industrials Index	$100	$87	$81	$62	$65	$66
S&P Diversified Metals & Mining Index	$100	$71	$66	$72	$145	$149
All amounts are expressed in Canadian dollars.

U.S. Dollar Data: for purposes of comparison, amounts in the following table show cumulative total returns in U.S. dollars with differences from the Canadian dollar data attributable to the relative differences in the values of the two currencies over the period presented.

31 December	1999	2000	2001	2002	2003	2004
Alcan Inc.	$100	$85	$90	$75	$123	$130
S&P TSX Composite Index	$100	$102	$83	$72	$109	$132
S&P Industrials Index	$100	$84	$74	$57	$73	$80
S&P Diversified Metals & Mining Index	$100	$68	$60	$66	$162	$180
All amounts are expressed in U.S. dollars.

Proxy Circular 2005 23 Alcan Inc.

Executive Officers' Compensation

The following table sets out the compensation for the CEO, the Chief Financial Officer and the three other most highly compensated Executive Officers (collectively, the "Named Executive Officers") for the year ended 31 December 2004 and for each of the two preceding years.

Summary Compensation Table
		Annual Compensation					Long-term Compensation Awards
Name and Principal Position	Year	Salary ($)	Bonus (Executive Performance Award) (1) ($)		Other Annual Compensation (2) ($)		Shares Under Options Granted (3) (#		Shares or Restricted Share Units (4) (5) (#)		All Other Compensation (2) ($)
Travis Engen President and Chief Executive Officer	2004 2003 2002	1,350,000 1,300,000 1,225,000	2,031,750 2,008,100 1,605,000	(6)	402,073 1,272,151 17,592	(7)	348,000 312,000 353,000	(8) (8) (8)	0 0 0		96,031 77,411 52,217	(9)
Richard B. Evans Executive Vice President	2004 2003 2002	781,200 600,000    575,000	932,257 210,704 297,500	(10) (12)	656,598 440,907 520,091	(7)	110,700 69,600 10,000 84,900	(8) (8) (11) (8)	0 18,067 8,337	(10) (12)	32,966 65,061 13,160
Brian W. Sturgell(13) Executive Vice President	2004 2003 2002	781,200 600,000   575,000	932,257 561,845 595,000		280,686 254,115 219,182	(7) (8)	221,100 69,600 84,900	(8) (8) (8)	0 7,175 0	(14)	41,301 29,679 56,055	(9)
Geoffery E. Merszei Executive Vice President and Chief Financial Officer	2004 2003 2002	622,400 522,500   485,000	759,474 627,032 490,000		383,264 77,921 238,891	(7) (8)	63,600 49,500 62,700	(8) (8) (8)	15,000 0 0	(15)	21,364 57,233 19,502
Cynthia Carroll Senior Vice President and President and Chief Executive Officer, Primary Metal Group	2004 2003 2002	542,000  455,000  425,000	645,331 556,138 751,433		275,466 427,335 48,667	(7) (8)	48,000 44,700 48,700	(8) (8) (8)	0 0 0		19,145 56,285 11,442

(1)      See page 19 for description of the Executive Performance Award Plan.

(2)      See Other Compensation on page 25.

(3)      See page 25 for description of the Alcan Executive Share Option Plan.

(4)      See page 20 for description of the Executive Deferred Share Unit Plan.

(5)      See page 28 for description of the Alcan Stock Price Appreciation Unit Plan.

(6)      See Compensation of the Chief Executive Officer on page 21.

(7)     Tax equalization, a tax adjustment so that net income after taxes is not less than it would have been in the U.S.: T. Engen $340,312, R. B. Evans $626,632, B. W. Sturgell $254,756, G. E. Merszei $345,044 and C. Carroll $238,030.

(8)      Granted as C Options (see page 25 for description).

(9)      Company matching payments in excess of U.S. savings plan earnings limit: T. Engen $49,500 and B. W. Sturgell $18,000.

(10)    Received 30% of the EPA in cash ($210,704) and 70% in the form of 16,547 Deferred Share Units, based on the Share price ($29.71) at the end of 2002.  Received also 1,520 discretionary Executive Deferred Share Units to replace the retiring allowance amount of $38,700.

(11)    Grant of D Options became effective (see page 26 for description).

(12)    Received 50% of the EPA in cash ($297,500) and 50% in the form of 8,337 Deferred Share Units, based on the Share price ($35.68) at the end of 2001.

(13)    B. W. Sturgell resigned in January 2005 from Alcan following the Novelis Spin-off to become chief executive officer of Novelis.

(14)    Granted as restricted share units in recognition of his contribution in the Pechiney Combination.

(15)    Received Common Shares after completion of 3 years of employment with the Company, see Employment Agreements on page 31.

Proxy Circular 2005 24 Alcan Inc.

Executive Performance Award

The Executive Performance Award Plan and the related Executive Deferred Share Unit Plan are described on pages 19 and 20.

Other Compensation

Compensation benefits made available to senior employees under various plans included those under (a) the Executive Performance Award Plan mentioned above, (b) the Alcan Executive Share Option Plan described below, (c) the Alcan Stock Price Appreciation Unit Plan described below, (d) the TSR Plan described on pages 20 and 28, (e) retirement benefit plans, (f) life insurance plans, (g) savings plans, (h) plans for the use of automobiles, (i) plans for professional financial advice and for club membership fees, and (j) in applicable cases, expatriate benefits, tax equalization payments and housing assistance.

Alcan Executive Share Option Plan

The Option Plan provides for the granting to senior employees of non-transferable options ("Options") to purchase Shares (see also Report on Executive Compensation - Compensation of the Executive Officers on page 19).  The Option Plan is administered by the Human Resources Committee.

A Options

Prior to 22 April 1993, the Option Plan provided for the granting of Options referred to as "A Options". Each A Option was exercisable in whole or in part during a period commencing not less than three months after the effective date of the grant and ending no later than ten years after that date. Alcan made loans to assist in financing the purchase of Shares through the exercise of A Options. The interest rate is currently nil on all outstanding A Option loans. The loans have terms of up to 9¾ years. As at September 2002, all A Options had been exercised or had expired but certain loans under the A Options are outstanding (see Table of Indebtedness of Executive Officer on page 33).

B Options

Beginning on 22 April 1993, the Option Plan provides for Options hereinafter referred to as "B Options".

The exercise price per Share under B Options is set at not less than 100% of the market value of the Share on the effective date of the grant of each B Option.  The effective date is fixed at the time of the grant. 

Each B Option is exercisable (not less than three months after the effective date) in respect of 25%, 50%, 75% or 100% of the grant after a Waiting Period (as defined in the Option Plan) of 12, 24, 36 and 48 months, respectively, following the effective date. 

The Options expire 10 years after the effective date; in the event of retirement or death of the employee, any remainder of this 10-year period in excess of five years is reduced to five years.

C Options

Beginning on 23 September 1998, the Option Plan provides for Options hereinafter referred to as "C Options".

The exercise price per Share under C Options is set at not less than 100% of the market value of the Share on the effective date of the grant of each C Option.  The effective date is fixed at the time of the grant.  Each C Option is exercisable (not less than three months after the effective date) in respect of one-third of the grant when the market value of the Share has increased by 20% over the exercise price, two-thirds of the grant when the market value of the Share has so increased by 40% and the entire amount of the grant when the market value of the Share has so increased by 60%.  The said market values must exceed those thresholds for at least 21 consecutive trading days.  The said thresholds are waived 12 months prior to the expiry date, which is 10 years after the effective date.  In the event of death or retirement, any remainder of this 10-year period in excess of five years is reduced to five years, and the said thresholds are waived.

Proxy Circular 2005 25 Alcan Inc.

D Options

In respect of B and C Options granted to certain senior executives in 1996, 1997 and 1998, Alcan has granted further Options, hereinafter referred to as "D Options". The grant shall become effective upon the exercise of associated B or C Options and upon the executive placing at least one-half of the Shares resulting from the exercise of the B or C Option, as the case may be, in trust with an agency named by Alcan for a minimum period of five years.  The exercise price per Share of each D Option is set at not less than 100% of the market value of the Share on the exercise date of the associated B or C Options.  D Options are exercisable in the same manner as the associated B or C Option.  The option period for the D Option will terminate on the same date as the associated B or C Options.  In the event of death or retirement, any remainder of this option period in excess of five years is reduced to five years.  The vesting provisions of the D Options are identical to those of the associated B or C Option.

E Options

Options granted under the share option plan of Algroup, a Subsidiary of Alcan as a result of the Algroup Combination, were converted into Options for Shares of Alcan. These Options are hereinafter referred to as "E Options". The exercise price per Share was originally set at 110% of market price and the right to purchase one share of Algroup was converted into the right to purchase 21.66 Shares of Alcan.  Each E Option is exercisable in whole or in part during a period commencing not less than three years after the date of grant and ending not later than five years after that date.  In the event of death or disability, the three year waiting period is waived.  As this was a transitional measure related to the Algroup Combination, no further E Options will be granted.

F Options

Certain options granted under the stock option plans of Pechiney, a Subsidiary of Alcan after the Pechiney Combination, are exercisable for Shares or exchangeable into Options for Shares in accordance with liquidity agreements signed with the holders thereof.

There are 11 series of Pechiney options, several without current value. These Options are hereinafter referred to as "F Options". As this was a transitional measure related to the Pechiney Combination, no further F Options will be granted.

Limits on Grants of Options

Alcan may issue in any year Options in respect of a Yearly Allotment, as defined in the Option Plan, in aggregate not exceeding 0.75% of the Shares outstanding as at the end of the previous calendar year.  In addition, the unused portion of any previous Yearly Allotment may be carried forward.  The maximum cumulative number of Shares which can currently be issued under the Option Plan after 11 March 2005 is 12,844,630. Alcan Shareholders are being requested to approve the reservation of an additional 12,000,000 Shares for issuance of Option grants under the Option Plan (see Schedule D).

Securities Authorized for Issuance
Under Equity Compensation Plans

The following table provides information as at 11 March 2005 regarding the Common Shares issuable upon the exercise of Options under the Option Plan, as well as the number of Common Shares remaining available for issuance under the Option Plan.

Equity Compensation Plan Information

Plan category	Number of securities to be issued upon exercise of options (a)		Weighted-average exercise price of outstanding options (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
Equity compensation plans approved by security holders   - Alcan Executive Share   Option Plan (except F   Options) - F Options	10,200,860 3,785,609	(1) (3)	Can. $44.50 € 31.50	2,643,770 0	(2)
Equity compensation plans not approved by security holders	-		-	-
	13,986,469		N/A	2,643,770
Total

(1)    This represents 2.8% of the total outstanding Shares of Alcan.
(2)    This represents 0.7% of the total outstanding Shares of Alcan.
(3)    This represents 1% of the total outstanding Shares of Alcan.

Proxy Circular 2005 26 Alcan Inc.

The following table provides information pertaining to Options granted to the Named Executive Officers during 2004. The date of grant in each case was 22 September 2004; all Options granted are C Options (see above).

Option Grants during 2004

Name	Shares Under Options Granted (#)	Percent of Total Options Granted to Employees in 2004	Exercise Price and Market Value on Date of Grant (Can. $/Share)	Expiration Date
T. Engen	348,000	13.0	58.15	21 September 2014
R. B. Evans	110,700	4.1	58.15	21 September 2014
B. W. Sturgell	221,100	8.3	58.15	21 September 2014
G. E. Merszei	63,600	2.4	58.15	21 September 2014
C. Carroll	48,000	1.8	58.15	21 September 2014

The following table summarizes, for each of the Named Executive Officers, (a) the number of Shares acquired by Options exercised during 2004, (b) the aggregate value realized upon exercise, which is the difference between the market value of the underlying Shares on the exercise date and the exercise price of the Option, (c) the total number of Shares underlying unexercised Options held at 31 December 2004, and (d) the aggregate value of unexercised in-the-money Options at 31 December 2004, which is the difference between the exercise price of the Options and the market value of the Shares on 31 December 2004, which was Can. $58.80 per Share. The aggregate values indicated with respect to unexercised in-the-money Options at financial year-end have not been, and may never be, realized. These Options have not been, and may never be exercised, and actual gains, if any, on exercise will depend on the value of the Shares on the date of exercise. There can be no assurance that these values will be realized.

Aggregated Option Exercises during 2004 and Year-End Option Values

Name	Shares Acquired on Exercise (#)	Aggregate Value Realized (Can. $)		Shares Underlying Unexercised Options at 31 Dec. 2004 (1) (#)		Value of Unexercised In-the-Money Options at 31 Dec. 2004 (1) (Can. $)
T. Engen	0	0	E: U:	193,000 1,399,000	E: U:	0 2,260,320
R. B. Evans	0	0	E: U:	159,934 232,266	E: U:	2,540,884 1,424,073
B. W. Sturgell	167,450	2,734,759	E: U:	0 379,700	E: U:	0 1,945,328
G. E. Merszei	0	0	E: U:	188,467 167,333	E: U:	1,714,041 1,198,951
C. Carroll	0	0	E: U:	87,383 127,833	E: U:	1,448,362 884,409

(1)  E: Exercisable    U: Unexercisable

The information provided in the above tables has been modified following the Novelis Spin-off to reflect adjustment as described in the Report on Executive Compensation on page 21.

Proxy Circular 2005 27 Alcan Inc.

Alcan Stock Price Appreciation Unit Plan

The Alcan Stock Price Appreciation Unit Plan ("SPAU Plan") also provides for the granting to senior employees of non-transferable Stock Price Appreciation Units ("SPAU"). The purpose of the SPAU Plan is to attract and retain employees and to encourage an increased proprietary interest in the Company.  The SPAU Plan is administered by the Human Resources Committee and was approved on 26 September 2001.

A SPAU is a right to receive cash in an amount equal to the excess of the market value of a Share on the date of exercise of a SPAU over the market value of a Share as of the date of grant of such SPAU. SPAUs may be exercised in the same manner as C Options (see page 25).

Grants are made under the SPAU Plan instead of under the Option Plan due to certain local conditions of countries of the employees' residence.

Total Shareholder Return Performance Plan

The TSR Plan, described on page 20, is a cash incentive plan that provides performance awards to eligible employees based on the Company's Share price and cumulative dividend yield performance relative to the performance of the companies included in the S&P Industrial Composite Index over a three-year period.

The following table summarizes target cash performance award incentives under the TSR Plan for each of the Named Executive Officers.

TSR Plan Awards during 2004

Name(1)	Securities, Units or other Rights (#) (2)	Performance Period	Estimated Future Payouts
			Threshold ($)	Target ($)	Maximum ($)
T. Engen	0	1 Oct. 2004 __ 30 Sept. 2007	0	5,000,000	15,000,000
R. B. Evans	0	1 Oct. 2004 __ 30 Sept. 2007	0	1,588,500	4,765,500
G. E. Merszei	0	1 Oct. 2004 __ 30 Sept. 2007	0	911,900	2,735,700
C. Carroll	0	1 Oct. 2004 __ 30 Sept. 2007	0	690,000	2,070,000

(1) B. W. Sturgell was not granted any target cash performance award under the TSR Plan since he was to resign from Alcan following the Novelis Spin-off to become the chief executive officer of Novelis.

(2) The TSR Plan provides for a grant of a target cash award - no securities, units or other rights were awarded.

Proxy Circular 2005 28 Alcan Inc.

Retirement Benefits

U.S. Plan

During 2004, C. Carroll, R.B. Evans and B.W. Sturgell participated in an Alcan-sponsored qualified pension plan in the U.S. which, together with supplemental arrangements for payment directly by Alcan of pensions in excess of statutory limits, is herein referred to as the "U.S. Plan".

The U.S. Plan is available to Alcan salaried employees in U.S. and provides for pensions calculated on service with the Company of up to 35 years and eligible earnings which consist of the average annual salary and EPA up to its guideline amount during the 36 consecutive months when they were the greatest.  Eligible earnings are subject to a maximum, which was set with reference to the position of each Named Executive Officer at 31 December 2001. 

The following table shows estimated retirement benefits, expressed as a percentage of eligible earnings, payable upon normal retirement at age 65 to persons in the indicated earnings and service classifications.

Pension Plan Table

Eligible Earnings	Years of Service
	10	15	20	25	30	35
$500,000	17%	25%	34%	42%	50%	59%
$600,000 __ $1,100,000	17%	25%	34%	42%	51%	59%
$1,200,000 __ $2,000,000	17%	26%	34%	43%	51%	60%

The normal form of payment of pensions is a lifetime annuity with either a guaranteed minimum of 60 monthly payments or a 50% lifetime pension to the surviving spouse.

The 2004 eligible earnings and projected service upon normal retirement age of 65 were as follows: C. Carroll, $595,900 and 33 years; R.B. Evans, $1,023,300 and 16 years; B.W. Sturgell, $929,000 and 26 years.

Pension Plan for Officers

Officers generally participate in the Alcan pension plan available to salaried employees in the country where they join the company and are expected to retire (herein referred to as "home country pension plan").

For Officers who report to the CEO, eligible earnings under these plans are subject to a maximum and the part of their earnings in excess thereof is eligible to the Pension Plan for Officers. This design assures internal equity between Officers who are compensated on the same U.S. salary scale but participate in home country pension plans with different standards and who have been with the Company for different lengths of service prior to becoming an Officer. The Pension Plan for Officers provides benefits only in respect of services rendered as Officer.

The three aforementioned Named Executive Officers also participated in the Alcan Pension Plan for Officers.

Participants in this defined benefit plan are officers who report to the CEO (a total of 9 individuals in 2004), designated by the Human Resources Committee.  This plan provides for pensions calculated based upon service of up to 20 years as an Officer and eligible earnings which consist of the excess of the average annual salary and EPA at its guideline level during the 60 consecutive months when they were the greatest over eligible earnings in their home country pension plan.  The following table shows the percentage of eligible earnings, payable under the Pension Plan for Officers upon normal retirement age after 60 according to years of service as an Officer.

Years as Officer

5	10	15	20
15%	30%	40%	50%

The normal form of payment of pensions is a lifetime annuity.  Pensions are not subject to any deduction for social security or other offset amounts. The Pension Plan for Officers is an unfunded obligation of Alcan and pensions are paid from operating cash flows of the Company.

Proxy Circular 2005 29 Alcan Inc.

The 2004 salary and EPA at its guideline amount and projected service as an Officer upon retirement age of 65 were as follows: C. Carroll, $954,900 and 24 years; R.B. Evans, $1,400,600 and 16 years, B.W. Sturgell, $1,400,600 and 18 years.

Individual Pension Undertakings

G.E. Merszei is a participant of the Alcan Pension Plan (Canada) which provides for pensions up to a statutory limit. At retirement, he will also receive a supplemental pension that will bring his total pension entitlement up to the estimated pension he would have received assuming continuation of service with his previous employer, varying from $291,000 per year at a retirement age of 55 to $525,800 at a retirement age of 62 and above, less the pension from his previous employer for service up to his joining Alcan.

His total pension entitlement shall not be less than the pension that would be payable from the Alcan Pension Plan (Canada) without the statutory limit, equal to $206,900 at retirement age of 65 on the basis of his earnings in 2004.

Mr. Engen does not participate in any of the pension plans sponsored by the Company (see Compensation of the Chief Executive Officer on page 21).

Individual pension undertakings are unfunded obligations of Alcan and pensions are paid from operating cash flows of the company.

Value of the Retirement Benefits

A measure of the value of the U.S. Plan and of the Pension Plan for Officers that can be deemed to be part of the total 2004 compensation of the three aforementioned Named Executive Officers is the service cost of the plans. The service cost is the estimated present value of benefits attributable by the pension benefit formula to services rendered by the plan members during a given period. The valuation of benefits is based on actuarial assumptions in relation to future events that will vary by plan to take into account the general characteristics of its membership. The service cost of the U.S. Plan was 11.2% of its membership's eligible earnings in 2004 (equivalent to $286,000 for the Named Executive Officers). The service cost of the Pension Plan for Officers was $305,000 in 2004 for the Named Executive Officers.

Another measure of the value of pension plans or pension benefits is the projected benefit obligation ("PBO"). The PBO is the actuarial present value of the part of the total pension payable at retirement that is attributable to service rendered up to the date of valuation. 

The following table indicates the total projected annual pension of each Named Executive Officer from either individual undertakings (including in the case of G. Merszei, the pension equivalent of the lump sum settlement of his pension rights from his previous employer) or the plans described above, based on years of credited service up to the normal retirement age of 65 and eligible earnings to the end of 2004. The table also indicates the PBO at 31 December 2004 in relation to each Named Executive Officer.

The service cost and the PBO amounts are only estimates using prevailing interest rates of the discounted value of contractual entitlements. The value of these estimated entitlements may change over time because they are based on long term assumptions, such as the expected distribution of retirement ages, future compensation increases and life expectancy, that may not represent actual developments. Furthermore, the methods used to determine these amounts will not be the same as those used by other companies and therefore will not be directly comparable. The actuarial assumptions applied are the same as those used to determine the service cost and the benefit obligation in the Note on Post‑Retirement Benefits to Alcan's 2004 annual financial statements. There is no contractual undertaking by the Company to pay benefits of equivalent amounts.

Name	Projected Annual pension  payable at age 65 ($)	Projected Benefit Obligation 31 December 2004 ($)
T. Engen	385,900	3,412,500
R.B. Evans	418,300	2,195,600
B.W. Sturgell	612,400	3,818,000
G.E. Merszei	525,800	1,772,700
C. Carroll	500,700	2,082,300

Proxy Circular 2005 30 Alcan Inc.

Employment Agreements

On 31 December 2001, Alcan entered into employment agreements with certain Named Executive Officers including C. Carroll, R. B. Evans and B.W. Sturgell, setting out the terms and conditions of their employment.  Each of these Named Executive Officers is entitled to base salary, annual bonus, Option grants, awards under the TSR Plan, pension plan participation and customary perquisites, as described herein.  The portion of the Named Executive Officers' compensation attributable to services rendered in Canada is adjusted so that their income after taxes is the same as it would have been in the United States.  They are also eligible for a termination payment equal to 24 months of their base salary and EPA at the guideline amount if they are terminated without cause.

Mr. Merszei entered into an employment agreement with Alcan on 13 June 2001.  The terms of his employment agreement are similar to those of the other above Named Executive Officers.  Upon joining Alcan, Mr. Merszei received Options for 80,000 Shares to compensate him for leaving his previous employer and Options for 50,000 Shares as an employment incentive.

These Options vested at the rate of 33.33% per year over a three-year period.  In addition, as part of his employment agreement, he received 15,000 Shares in 2004 on the third anniversary date of his employment with Alcan.

During 2002, the Company renewed change of control agreements with certain Executive Officers, including the Named Executive Officers.  These agreements expire on 30 April 2005.  The terms of change of control agreements are effective upon the occurrence of two events: (1) a change of control of the Company, and (2) the termination of the Executive Officer's employment with the Company either by the Company without cause or by the Executive Officer himself for defined reasons. In such cases, the Executive Officer will be entitled, depending on the individual in question, to an amount equal to either 24 or 36 months of their base salary and EPA at the guideline amount and other applicable incentive plan guideline amounts.

For information relating to Mr. Engen, see Compensation of the Chief Executive Officer on page 21.

Directors' Compensation

Effective on 1 May 2004, the compensation of Non-Executive Directors was increased, to align Directors' compensation levels with prevalent U.S. compensation practices.  Each Non-Executive Director is presently entitled to receive compensation equal to $150,000 per annum, payable quarterly, except that Non-Executive Directors who are members of the Audit Committee are entitled to $155,000 per annum, payable quarterly. The Chairman is entitled to receive total compensation equal to $350,000 per annum, payable quarterly and the chairman of the Audit Committee is entitled to receive $175,000 per annum, payable quarterly. 50% of Directors' compensation is required to be paid in the form of Director's Deferred Share Units ("DDSUs") (see below) and 50% in the form of either cash or additional DDSUs at the election of each Non-Executive Director.

Because at least half of the Non-Executive Directors' compensation is paid in DDSUs, non-executive Directors are not required to own a specific amount of the Company's Shares.  DDSUs are the economic equivalent of Shares.

A Non-Executive Director cannot redeem the accumulated DDSUs until he or she ceases to be a member of the Board.

The Board believes that compensation in the form of DDSUs together with the requirement for Non-Executive Directors to retain all DDSUs until retirement ensures an alignment of the interests of the Non-Executive Directors with those of Shareholders.

The number of DDSUs to be credited each quarter is determined by dividing the quarterly amount payable by the average price of a Share on the Toronto and New York stock exchanges on the last five trading days of the quarter.  Additional DDSUs are credited to each Non-Executive Director corresponding to dividends declared on Shares.  The DDSUs are redeemable only upon termination (retirement, resignation or death). The cash amount to be paid by Alcan upon redemption will be calculated by multiplying the accumulated balance of DDSUs by the average price of a Share on the said exchanges at the time of redemption.

Proxy Circular 2005 31 Alcan Inc.

Non-Executive Directors may invest all or part of the cash portion of their fees (if applicable) in Shares through the Share Investment Plan for Directors.  This plan is similar to the Share Investment Plan available to all Alcan Shareholders.

It allows for purchases of Shares up to a maximum of $15,000 per quarter and for dividends to be invested in additional Shares. The Shares are purchased and held by a custodian.

Non-Executive Directors are not granted Share options. No current non-executive Directors have sold any Shares in the past three years.

Non-Executive Directors are reimbursed for transportation and other expenses incurred in attending Board and Committee meetings.

Non-Executive Directors who are not Canadian residents are entitled to paid tax advice. During 2004, Messrs Ruding and Schulmeyer were reimbursed $3,000 for this purpose.

An employee of Alcan who is a Director is not entitled to receive fees for serving on the Board.

The following table sets out the individual election of each Non-Executive Director in relation to their compensation for 2004.

Name	Portion of fees in Directors' Deferred Share Unit Plan	Portion of fees in Share Investment Plan for Directors	Portion of fees in cash	Amount paid in DDSUs in 2004 (#)
Roland Berger	50%	-	50%	1,595
L. Denis Desautels	50%	12.5%	37.5%	1,754
L. Yves Fortier	100%	-	-	7,211
Jean-Paul Jacamon	50%	-	50%	1,555
William R. Loomis	100%	-	-	3,239
Yves Mansion	100%	-	-	3,183
Christine Morin-Postel	100%	-	-	3,202
H. Onno Ruding	50%	-	50%	390
Guy Saint-Pierre	50%	50%	-	1,676
Gerhard Schulmeyer	50%	$1,250 per quarter	balance	1,674
Paul M. Tellier	100%	-	-	3,309
Milton K. Wong	100%	-	-	3,141

Proxy Circular 2005 32 Alcan Inc.

Indebtedness of Directors, Executive Officers and Employees

Non-Executive Directors and former Non-Executive Directors are not indebted to Alcan.

The following table sets out the aggregate indebtedness of Executive Officers and employees and former Executive Officers and employees of Alcan and its Subsidiaries to the Company in respect of loans given to Executive Officers in connection with the exercise of A Options ("Option Loans") and other loans, excluding "routine indebtedness" as defined under applicable Canadian Securities laws.

Aggregate Indebtedness

Purpose	To Alcan or its Subsidiaries ($)	To Another Entity
Share Purchases (Option Loans)	792,057	-
Other	3,999,130	-

The following table sets out the indebtedness of Executive Officers to Alcan or its Subsidiaries, excluding routine indebtedness. No further Option Loans will be given to officers under the Option Plan.

Table of Indebtedness of Executive Officers

Name and Principal Position	Involvement of Alcan	Largest Amount Outstanding During 2004 ($)	Amount Outstanding as at 2 March 2005 ($)	Financially Assisted Share Purchases During 2004 (1) (#)	Security for Indebtedness	Amount Forgiven During 2004
G. Ouellet Senior Vice President	Lender	45,922	42,642	0	(2)	0

(1)    In respect of A Options only.

(2)  Security for the indebtedness is provided by the deposit of the certificates representing the relevant Shares with CIBC Mellon, as trustee, which holds the certificates registered in its name until full repayment of the particular Option Loan has been made to Alcan.

Directors' and Officers' Liability Insurance

Alcan carries insurance covering liability, including defence costs, of directors and officers of Alcan and its Subsidiaries, incurred as a result of their acting as such, except in the case of failure to act honestly and in good faith. The policy provides coverage against certain risks in situations where Alcan may be prohibited by law from indemnifying the directors or officers.  The policy also reimburses Alcan for certain indemnity payments made by Alcan to such directors or officers, subject to a $10 million deductible in respect of each insured loss.

The premium paid by Alcan for coverage in 2004 was $2,994,500 and the limit of insurance is $225 million per occurrence and in the aggregate per year.

Proxy Circular 2005 33 Alcan Inc.

Additional Information

Additional information relating to Alcan may be found on Alcan's Internet site at www.alcan.com, on SEDAR at www.sedar.com or EDGAR at www.sec.gov. Financial information is provided in Alcan's financial statements and Management Discussion & Analysis reports, which may be obtained, without charge, on request from the Corporate Secretary of Alcan at the registered office of Alcan, 1188 Sherbrooke Street West, Montreal, Quebec, Canada, H3A 3G2, telephone: (514) 848-8000.

Approval of the Board of Directors

The Board of Directors has approved the contents of this Circular and the sending to Shareholders.

Roy Millington
Corporate Secretary

Proxy Circular 2005 34 Alcan Inc.

Schedule A

Resolution - Re-Confirmation of the Shareholder Rights Plan

THAT the Shareholder Rights Plan included in the Shareholder Rights Agreement made as of 14 December 1989, between the Company and CIBC Mellon Trust Company, as amended, (as summarized in Schedule B of the Proxy Circular dated 2 March 2005), be and is hereby re-confirmed in accordance with its terms.

THAT any Officer or Director of the Company be and is hereby authorized for and on behalf of the Company, to do all such things and to execute all such documents or instruments as may be necessary or described to give effect to this resolution.

Proxy Circular 2005 35 Alcan Inc.

Schedule B

Summary of the Shareholder Rights Plan

The following is an explanation and a summary of the Rights Plan as embodied in the Plan Agreement made as of 14 December 1989, between the Company and CIBC Mellon, as amended to date. A copy of the full text of the Plan Agreement is available on Alcan's Internet site at www.alcan.com. Shareholders requiring the full text of the Plan Agreement may obtain a copy from the Corporate Secretary's office, 1188 Sherbrooke Street West, Montreal, Quebec, Canada, H3A 3G2.

The primary objective of the Rights Plan is to provide the Board with sufficient time to explore and develop alternatives for maximizing Shareholder value if a take‑over bid is made for Alcan and to provide every Shareholder with an equal opportunity to participate in such a bid. The Rights Plan encourages a potential acquiror to proceed either by way of a Permitted Bid (as defined in the Plan Agreement), which requires the take‑over bid to satisfy certain minimum standards designed to promote fairness, or with the concurrence of the Board.

The Board of Directors believes that the current legislation in Canada does not provide the Board with adequate time to evaluate and respond to a take‑over bid in the best interests of the Shareholders. The key objective of the Board in a take‑over bid context will be to maximize value for Shareholders. The Rights Plan creates a sufficient opportunity for the Board, in the face of a take‑over bid, to make a proper recommendation to the Shareholders ‑ whether to accept the bid, or to negotiate with the bidder for a higher value or to explore and develop alternatives for maximizing Shareholder value, such as locating other potential bidders or developing a corporate restructuring alternative.

As for the Shareholders themselves, the legislated bid period may not provide sufficient time to consider a take‑over bid and the recommendations of the Board (including alternatives to the bid) and, thus, to make a fully informed decision. The Rights Plan helps address these issues.

A large percentage of Alcan Shares are currently held outside Canada. The Rights Plan is also intended to ensure equal treatment of Shareholders and prevent an acquiror from exploiting differences in securities laws in a way that could be detrimental to some Shareholders.

While the Rights Plan is intended to regulate certain aspects of take‑over bids for Alcan, it is not intended to deter a bona fide attempt to acquire control of Alcan if the offer is made fairly. The Rights Plan does not diminish or otherwise affect Board duties in relation to the due and proper consideration of any offer that is made.

The Rights Plan may be terminated by the Board with Shareholder approval through a redemption process prior to the accumulation of 20% or more of the Shares by any person or group of persons. The Rights Plan will not interfere with any amalgamation or other business reorganization approved by the Board. Nor does the Rights Plan inhibit any Shareholder from utilizing the proxy mechanism of the CBCA to promote a change in the management or direction of Alcan.

If the Rights Plan is re-confirmed as proposed in the resolution in Schedule A, it will continue in effect until 1 May 2008, unless terminated earlier in accordance with its terms.  If the Rights Plan is not re-confirmed, it will terminate at the Meeting.

Summary of the Rights Plan

Capitalized terms used in this summary have the meanings specified in the Rights Plan.

Pursuant to the Plan Agreement, one Right to purchase additional securities, subject to the terms and conditions of the Plan Agreement, has been issued for each Share outstanding and Rights will likewise be issued in respect of Shares issued in the future until the Separation Time (as defined below) or until the termination of the Rights Plan. The Rights are not exercisable until the Separation Time.

Proxy Circular 2005 36 Alcan Inc.

Until the Separation Time (or earlier termination or expiration of the Rights), the Rights are evidenced by the certificates for the Shares to which the Rights attach. The Rights are transferred with, and only with, the associated Shares. Furthermore, until such time, Share certificates issued will contain a notation incorporating the Plan Agreement by reference.

The Rights will separate and trade independently of the Shares after the Separation Time. Promptly following the Separation Time, separate Rights Certificates will be given to holders of record of Shares as of the close of business at the Separation Time and such separate Rights Certificates alone will evidence the Rights.

The Separation Time is the close of business on the tenth business day after either the first date that a person has acquired beneficial ownership of 20% or more of the Shares, thereby becoming an Acquiring Person, or the date of commencement or announcement of a Take‑Over Bid.

A Flip‑In Event occurs when a Person becomes an Acquiring Person. Upon the occurrence of a Flip‑In Event, each Right (except for Rights beneficially owned by an Acquiring Person, its affiliates and associates) shall constitute the right to receive, upon the exercise thereof at the then current Exercise Price of the Right, Shares having an aggregate Market Price on the date of occurrence of such Flip‑In Event equal to twice the Exercise Price. For example, if at the time of the Flip‑In Event, the Exercise Price is $200 and the Shares have a Market Price of $50, the holder of each Right will be entitled to receive $400 in market value of the Shares (8 Shares) for $200, i.e. at a 50% discount.

The Board of Directors may determine to waive the application of the provisions of the Flip‑In Event section of the Plan Agreement to a particular Flip‑In Event or any particular acquisition or other transaction or event that would, but for the waiver, constitute or result in a Flip‑In Event, provided that such waiver shall automatically constitute a waiver of the application of such provisions to all contemporaneous Flip-In Events.

The Rights Plan has a Permitted Bid feature which allows a take‑over bid to proceed in the face of the Rights Plan even if the Board does not support the bid, provided that the bid meets certain minimum specified standards of fairness and disclosure. Specifically, the Permitted Bid procedure allows persons to make a take‑over bid for all or part of the outstanding Shares, provided it is made to all Shareholders, and is held open for 60 days. The Permitted Bid procedure provides Shareholders and the Board with this additional time to assess a bid properly and to permit alternative bids to emerge. If more than 50% of the Shares held by parties other than the bidder, its affiliates and associates are tendered and not withdrawn at the end of the specified period, the bid may proceed and must be held open for an additional 10 business days to allow Shareholders who have not tendered their Shares additional time to do so after having had an opportunity to determine that the bid will otherwise be successful. This two-stage requirement, which separates evaluation of the bid from the tender process, helps remove any element of coercion that might otherwise be present in a one‑stage bid process.

Under the terms of the Plan Agreement, at every third annual meeting following the 1999 annual meeting, including at the 2005 Meeting, the Board of Directors shall submit a resolution to the Shareholders for approval ratifying the continued existence of the Rights Plan. If a majority of the votes cast on such a resolution is against the continued existence of the Rights Plan, then the Plan Agreement, the Rights Plan and any outstanding Rights shall be of no further force or effect.

Amendments now Proposed

The Board considered terms and conditions of current rights plans adopted by other companies as well as comments of the investment industry, and has decided that certain minor amendments to the Plan Agreement would be made.  These amendments are intended to ensure that it is consistent with current rights plans and adequately addresses the concerns of institutional shareholders on a basis that is consistent with the purposes of the Rights Plan. The amendments consist mainly of the following:

Proxy Circular 2005 37 Alcan Inc.

• The definition of "acting jointly and in concert" is being modified to make it clear that only persons actually acting together to acquire Shares should be aggregated for the purpose of the 20% Acquiring Person threshold.

• The definition of "lock‑up agreement" is being modified to incorporate recent views in relation to appropriate thresholds and related issues relating to when the Shares of parties to a lock‑up agreement under a bid should not be counted towards the 20% Acquiring Person threshold.

• Certain technical amendments are also being made so that the Rights Plan would conform to current rights plans and to clarify certain provisions.

All amendments will appear in the full text of the Plan Agreement available as stated above.

Tax Consequences

For Canadian federal income tax purposes, Alcan has not received any income as a result of the issuance of the Rights. Under the Income Tax Act (Canada) ("Act"), the issuance of the Rights may be a taxable benefit which must be included in the income of the recipient. However, no amount must be included in the income of the recipient if the Rights do not have a monetary value at the date of issue. Alcan views the Rights as currently having negligible monetary value. A holder of Rights may have income or be subject to withholding tax under the Act if the Rights become exercisable, are exercised or are otherwise disposed of. This statement does not address the Canadian income tax consequences of other events, e.g., separation of the Rights from Shares, a Flip‑In Event, lapse of Alcan's right to redeem the Rights and redemption of the Rights.

For United States federal income tax purposes, the adoption and approval of the resolution reconfirming the Rights Plan should not be a taxable transaction to the Shareholders. The United States federal income tax consequences of other events in connection with the Rights Plan, e.g., separation of the Rights from the Shares, a Flip‑In Event, lapse of Alcan's right to redeem the Rights, redemption of the Rights and exercise of the Rights, are uncertain. The tax consequences, including the likelihood that an event will be a taxable transaction (which, in certain cases, is probable) or, if taxable, whether it is a distribution or a sale or exchange of a Right, can vary depending on the facts and circumstances at the time of the event.

Shareholders should consult their own tax advisors regarding the consequences of approval of the resolution and of receiving, holding, exercising, exchanging or otherwise disposing of the Rights.

Proxy Circular 2005 38 Alcan Inc.

Schedule C

Resolution - Adoption of Amendments to the Alcan Executive Share Option Plan

THAT the amendments to the Alcan Executive Share Option Plan, including the addition of 12,000,000 Common Shares reserved for issuance under the Alcan Executive Share Option Plan (as described in Schedule D of Proxy Circular dated 2 March 2005), be and are hereby approved.

Proxy Circular 2005 39 Alcan Inc.

Schedule D

Summary of the Alcan Executive Share Option Plan

On 24 July 1987, the Board of Directors and Shareholders adopted the Alcan Executive Share Option ("Option Plan").  A 1995 amendment to the Option Plan established a maximum of 20,500,000 Shares that could be issued after 31 December 1995 without further Shareholder approval. From 1 January 1996 to 11 March 2005, 7,655,370 Common Shares were issued pursuant to Options exercised and 12,844,630 Shares remain in reserve for issuance under the Option Plan. As of 11 March 2005, of the 12,844,630 Common Shares in reserve, 10,200,860 Shares were outstanding under the Option Plan in respect of Options already granted but not exercised and 2,643,770 Shares were available for future grants under the Option Plan.

In order for Alcan to continue its long‑term incentive compensation plan for senior executives and to replenish the number of Shares available for option grants, the Company proposes to implement certain amendments to the Option Plan, in particular to increase the number of Common Shares available for issuance under the Option Plan to 24,844,630 Common Shares, representing an increase of 12,000,000 Common Shares.  If approved by Shareholders at the Meeting, the increase in the total number of Common Shares authorized for issuance pursuant to the exercise of options under the Option Plan would represent approximately 3% of the total number of the then issued and outstanding Common Shares of the Company.  The Board of Directors approved the implementation of the amendments to the Option Plan on 11 March 2005, subject to Shareholder and regulatory approvals.  The total number of Common Shares reserved for issuance under the Option Plan would represent approximately 6.3% of the total number of the then issued and outstanding Common Shares of the Company. At the Company's current rate of Option grants, the 12,000,000 Shares reserved for issuance would be sufficient for a further five years. In addition, a small number of administrative amendments have been made to the Option Plan.

The amendments to the Option Plan have been approved by the Toronto Stock Exchange and New York Stock Exchange, subject to Shareholder approval. A copy of the full text of the Option Plan, as proposed to be amended, is available on Alcan's Internet site at www.alcan.com. Shareholders may also obtain a copy of the full text of the Option Plan, as proposed to be amended, from the Corporate Secretary's office, 1188 Sherbrooke Street West, Montreal, Quebec, Canada, H3A 3G2.

Summary of the Option Plan

Under the Option Plan, Alcan may issue in any year options in respect of a yearly allotment, in aggregate not exceeding 0.75% of the Shares outstanding as at the end of the previous calendar year.  In addition, the unused portion of any previous yearly allotment may be carried forward and, subject to Shareholder approval, the aggregate number of Shares to be issued after 11 March 2005 may not exceed 24,844,630 Shares. 

The exercise price per Share may not be less than 100% of the average of the high and low prices of the Shares on the Toronto Stock Exchange on the effective date of each grant.  Options granted under the Option Plan will not be assignable otherwise than by will or by the laws of descent and distribution.  Options must be exercised during the option period which may not be more than 10 years.  Options may be exercised only for so long as the optionee remains an employee. In the case of death or retirement of the optionee, the option period will not continue for more than five years after the event. No repricing of Options is permitted.

The Human Resources Committee of the Board of Directors of the Company will administer the Option Plan.  The Human Resources Committee may make rules and regulations relating to the administration of the Option Plan including the determination of executives eligible, the number of options granted, the exercise price, the vesting period, the terms of exercise, the option period and any other rules necessary or desirable for the administration of the Option Plan. Options granted under the Option Plan may have connected stock appreciation rights, if so determined by the Human Resources Committee.

Proxy Circular 2005 40 Alcan Inc.

EX-99.3

EXHIBIT 99.3 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (ITEM 7 TO REGISTRANT'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004)

OVERVIEW

The recovery of the global economy that started in the latter stages of 2003 broadened and gained momentum during 2004. Strong stimulus provided by the U.S. economy together with surging growth in China contributed significantly to world economic expansion, fueling increased demand and higher prices for oil and other commodities. Also contributing to the rise in commodity prices denominated in U.S. dollars was a further weakening of the U.S. dollar against most currencies. 

For the first time since 2000, world primary aluminum demand exceeded available supply.  As a consequence, Western World* inventories of aluminum fell by 685 kt during 2004 and ended the year at about nine weeks of supply, a low level by aluminum industry standards.  While the weaker U.S. dollar provided strong impetus for aluminum prices beginning in the second half of 2003, it was mainly the strengthening industry fundamentals that pushed prices higher on the London Metal Exchange (LME) during 2004.  For the year, primary aluminum prices averaged $1,721 per tonne, 21% higher than the average for the previous year.  Prices also rose when viewed in terms of other currencies, a situation that was markedly different than in 2003. 

Reflecting the robust external environment, the underlying performance of Alcan's businesses was solid in 2004.  While the Company benefited from higher prices for aluminum and increased demand for its products, results were dampened by the impact of the weaker U.S. dollar and higher costs for oil, freight and other raw materials.  Synergies arising from the acquisition of Pechiney yielded $101 million of pre-tax benefits in 2004, well above the Company's target for the year.  Net income was reduced by a non-cash pre-tax charge of $154 million for the impairment of goodwill related to the acquisition.

The year was especially noteworthy in terms of strategic developments. Following on the heels of the Pechiney acquisition at the end of 2003, Alcan took another major step towards unlocking greater value for shareholders. In May 2004, the Company announced its intention to spin-off substantially all of its rolled products businesses into a new, independent company, later named Novelis Inc.  The successful completion of the transaction in January 2005 resulted in the creation of two strong industry leaders in their respective businesses.  Going forward, Alcan will focus on leveraging its favourable positions in bauxite and alumina, smelting, engineered products and packaging.  With increased financial strength following the spin-off, Alcan is well positioned to take advantage of profitable growth opportunities across its portfolio.

The tables presented in Management's Discussion and Analysis include Pechiney's results as of January 1, 2004.  Pechiney's balance sheet is included beginning on December 31, 2003.

MARKET REVIEW

World Primary Aluminum Balance

Supply and Demand
World primary aluminum demand grew by close to 10% in 2004 to about 30.5 Mt.  The strong growth reflected the impact of customer inventory restocking ahead of rising end-market demand and the growing influence of China.  During the year, China's scrap aluminum imports rose 84%, which reduced scrap availability in the Western World, pushing up prices for secondary alloys and spurring the substitution of recycled aluminum with primary aluminum in certain end markets.

World primary aluminum production increased by about 7% to 29.8 Mt in 2004.  Once again, the largest increase came from China, which was up 20% to 6.6 Mt.  China now produces almost a quarter of the world's primary aluminum.  Output in the C.I.S. was up 4% to about 4.1 Mt.  Primary production grew only 3% in the Western World as producers idled or closed an additional half a million tonnes of capacity in North America.  Since there were few smelter expansion projects that came on stream during 2004 in the Western World, increased production came mainly from the full-year operation of the many expansions completed during 2003.

*Defined as the world excluding the Commonwealth of Independent States (C.I.S.), Eastern Europe and China.

1

World Primary Aluminum Supply and Demand
Mt/y

	Q1	Q2	Q3	Q4
Supply
2000	24.0	24.1	24.3	24.7
2001	25.5	25.4	25.2	25.7
2002	25.2	25.7	26.2	26.9
2003	27.2	27.5	28.1	29.0
2004	29.1	29.6	29.7	30.3
Demand (seasonally adjusted)
2000	24.5	25.0	24.8	24.9
2001	23.7	23.8	24.1	24.3
2002	24.7	24.7	26.4	26.6
2003	27.3	27.4	27.8	28.6
2004	31.0	29.9	31.1	30.0

Balance
With demand increasing more quickly than supply in 2004, the primary aluminum market was in deficit by about 685 kt as compared to a surplus position of about 157 kt in 2003.  By the end of 2004, inventories held by the LME, the New York Mercantile Commodities Exchange (COMEX) and aluminum producers had fallen to 3.9 Mt, or the equivalent of about nine weeks of supply, from over 4.5 Mt at the end of 2003.  Driven by both the declining inventories and the weakening U.S. dollar, the average 3-month LME aluminum price rose about 21% in 2004 to $1,721/t, up from $1,428/t in 2003.

Total Aluminum Inventories and Ingot Prices

	Q1	Q2	Q3	Q4
LME 3-month aluminum price (US$/t)
2000	1,652	1,502	1,587	1,527
2001	1,562	1,511	1,404	1,337
2002	1,395	1,377	1,329	1,358
2003	1,392	1,379	1,420	1,521
2004	1,666	1,686	1,716	1,814
Total inventories (IAI*, LME and COMEX) (kt)
2000	3,919	3,612	3,552	3,488
2001	3,743	3,799	3,887	3,910
2002	4,084	4,226	4,250	4,312
2003	4,401	4,290	4,438	4,535
2004	4,242	3,975	3,711	3,896
*  International Aluminium Institute

Outlook
Given that apparent demand levels in 2004 were inflated by the impact of customer inventory restocking, a smaller increase in primary aluminum demand is expected for 2005 versus 2004.  Shipments are expected to rise about 1% in the Western World and about 4% globally, boosted by another year of double-digit growth in China. If 2004 shipments are adjusted to remove the impact of restocking, the underlying demand growth in 2005 would be 5% to 6% globally.  On the supply side, there are three major smelter expansion projects starting operation in 2005, namely in Bahrain, Canada and India, which collectively will represent about 871 kt/y of capacity.  Capacity restarts totaling over half a million tonnes have also begun or been announced for Canada, the United States and Ghana.  In China, major changes in export taxes and rebates will likely cut exports and slow production growth to around 12%.  Primary production is expected to rise about 4% in the Western World and about 6% globally.  Based on forecasted primary shipments and production, Alcan expects total inventories to decline by about 200 kt in 2005.

Western World Total Aluminum Consumption

Western World total aluminum consumption grew by an estimated 5.6% in 2004 to about 30.6 Mt. This represented a new record, exceeding the previous high of 29.4 Mt reached in 2000.  Of the aluminum consumed in 2004, about 22.8 Mt was sourced from primary aluminum. The balance of 7.8 Mt was sourced from secondary/recycled metal. 

2

In 2004, aluminum consumption was up in all major regions of the world.  Strong growth in almost all forms and end uses led to an estimated 7% increase in North America, 7% in Asia (excluding China) and 8% in Latin America.  For North America, this was a rebound from the low level of growth seen in 2003. For Asia and Latin America, the increases represented the third straight year of strong, above-average growth.  While Western Europe continued to lag other regions, its 3% growth in 2004 was the highest in five years. China continued to experience rapid growth in 2004 with aluminum consumption up 16% as compared to 26% in 2003.

For the first time in five years, aluminum consumption increased in every end-use market.  Aluminum usage in the transportation market grew by 7% in 2004, making it the fastest growing as well as the largest market for the metal. The strong growth reflected increased light vehicle production worldwide, which was up between 4% and 5%, increased medium and heavy truck production and greater aluminum usage in cars, particularly in Europe.  Aluminum consumption in the containers and packaging market grew 3% to 4.9 Mt, its highest annual increase in six years. Can stock demand was up 2% in 2004 and other packaging, principally foil, rose by 5% to 1.4 Mt. Consumption in the building and construction sector rose 5% to 5.5 Mt, led mainly by strong construction growth in the Western Hemisphere.  U.S. housing starts rose a further 5% last year, while Japanese housing starts were up 3%.  The weakest major region in the world was Western Europe, where consumption growth was only 2% in 2004. The electrical market had its first significant gain in four years, rising 4% to 2.5 Mt, though this was still slightly below the peak of over 2.6 Mt reached in 2000.  Again the weakest region was Western Europe. Consumption in all other markets increased by 6% to 8.2 Mt in 2004.  This segment includes 2.5 Mt from the machinery and equipment market and 2.0 Mt from the consumer durables market. 

Western World Consumption by End-Use Market - 2004

Containers and Packaging	16%
Building and Construction	18%
Electrical	8%
Transportation	31%
Consumer Durables	6%
Machinery and Equipment	8%
Other	12%
Total	100%

Western World Consumption by Geographic Market - 2004

North America	37%
Europe	30%
Asia	27%
South America	3%
Africa and Oceania	3%
Total	100%

Alcan's Revenues by Geographic Market - 2004

North America	35%
Europe	45%
Asia/Pacific/Africa	16%
South America	4%
Total	100%

 

3

RESULTS OF OPERATIONS

Presentation of Financial Information
Alcan has historically prepared and filed its consolidated financial statements in accordance with Canadian generally accepted accounting principles (GAAP) with a reconciliation to United States (U.S.) GAAP.  Beginning January 1, 2004, the Company adopted U.S. GAAP as its primary reporting standard for presentation of its consolidated financial statements. The Company has adopted U.S. GAAP to improve comparability of financial information with its competitors and peer group, as well as to promote a common financial language within Alcan. The financial information contained in this Management's Discussion and Analysis (MD&A) is based on Alcan's financial statements prepared in accordance with U.S. GAAP.

The operating results, any gain (loss) on disposal and any impairment gain (loss) for assets held for sale are disclosed separately as discontinued operations.  Prior years' financial information has been reclassified to present these businesses as discontinued operations on the consolidated statement of income, as assets held for sale and liabilities of operations held for sale on the consolidated balance sheet and as cash flows from (used for) discontinued operations on the consolidated statement of cash flows.  The financial information contained in the MD&A has been revised from the information presented in prior annual reports to reflect the reclassifications.

The results of discontinued operations in 2004 include the copper and ores and concentrates trading businesses, the Pechiney Électrométallurgie (PEM) ferroalloy business, the Company's interest in Aluminium de Grèce S.A. (AdG) as well as certain non-core engineered products and packaging operations, including the packaging operations of the Boxal Group and Suner Cartons.  Certain assets of the ores and concentrates trading business, including zinc and lead, and all of the discontinued packaging operations have been sold in 2004. The aluminum rolling mill in Ravenswood, West Virginia, previously included in discontinued operations, has been reclassified into continuing operations as the Company is no longer required to divest the facility. For further details on discontinued operations, refer to note 5, Discontinued Operations and Assets Held for Sale, of the consolidated financial statements.

At the end of 2003, Alcan acquired Pechiney, an international producer of aluminum and packaging products.  Pechiney is included in Alcan's consolidated balance sheet as at December 31, 2003. Pechiney's results of operations and cash flows are included in Alcan's consolidated financial statements beginning January 1, 2004.

Novelis Spin-Off
On January 6, 2005, Alcan completed the spin-off of substantially all of the aluminum rolled products businesses it operated prior to the 2003 acquisition of Pechiney, together with some of its alumina and primary metal businesses in Brazil and four former Pechiney rolling facilities in Europe.  The spin-off created a company that was named Novelis Inc.

Since the Novelis spin-off was effective on January 6, 2005, the information contained in the MD&A and consolidated financial statements include the businesses transferred to Novelis Inc. for all periods presented.  Alcan's consolidated financial statements for all periods subsequent to January 1, 2005, will not include the balance sheets, statements of income and cash flows of the businesses transferred to Novelis Inc. 

Subsequent to the spin-off, Alcan will continue to have significant cash flows from Novelis related to the supply of metal and alumina, the provision of transitional and technical services, the licensing of certain of Alcan's patents, trademarks and other intellectual property, and the use of certain buildings, machinery and equipment, technology and employees.  As a result of the significant continuing involvement and the significant cash flows from Novelis, the spin-off did not meet the criteria for classification as a discontinued operation.

Results of Operations

Income from Continuing Operations

	2004	2003	2002
Income from continuing operations (US$M)	252	262	421
Foreign currency balance sheet translation
and Other Specified Items (US$M)	(548)	(283)	(150)
LME 3-month aluminum price (US$/t)	1,721	1,428	1,365
Income from continuing operations for 2004 was little changed from the prior year despite significant impairment charges.

In 2004, income from continuing operations was $252 million, $10 million lower than in 2003. Results for 2004 were affected by a negative year-over-year change in Other Specified Items (OSIs) of $438 million, offset in part by a positive impact of $173 million resulting from lower foreign currency balance sheet translation losses.  OSIs and translation effects are discussed below.  During 2004, the Company benefited from significantly higher price realizations, increased volumes, an improved product mix, cost-reduction initiatives and synergies associated with the Pechiney and VAW Flexible Packaging (FlexPac) acquisitions. LME aluminum prices were up on average 21% compared to 2003, mainly reflecting improved aluminum industry fundamentals. Results were somewhat dampened by a number of external factors including increased costs for raw materials, mainly oil-based, and the impact of the weaker U.S. dollar on operating costs. 

4

In 2003, income from continuing operations was $262 million, a decrease of $159 million from 2002. The decline largely reflected the negative effects of foreign currency balance sheet translation and an unfavourable year-over-year change in mark-to-market adjustments on the revaluation of certain derivative instruments, partially offset by a positive net year-over-year change in OSIs. The Company estimates that the weakening of the U.S. dollar and higher external cost pressures reduced earnings by approximately $180 million in 2003.

After including the results of discontinued operations and the cumulative effect of accounting changes, the Company's reported net income was $258 million in 2004 as compared to $64 million in 2003 and a loss of $348 million in 2002.  After-tax income from discontinued operations was $6 million in 2004 compared to losses of $159 million and $21 million in 2003 and 2002, respectively.  Net income in 2003 was reduced by a charge of $39 million for the cumulative effect of an accounting change related primarily to costs for spent potlining disposal. The loss in 2002 included a charge of $748 million for the cumulative effect of an accounting change relating to goodwill impairment.  Goodwill is further discussed under Costs and Expenses.

Net Income (in millions of US$)	2004	2003	2002
Included in income from continuing operations are:
Foreign currency balance sheet translation	(153)	(326)	(41)
Other Specified Items:
Synergy costs	(44)	(14)	-
Restructuring charges	(41)	(26)	(36)
Asset impairments	(66)	(4)	(16)
Goodwill impairments	(154)	(28)	-
Gains from non-routine sales of assets, businesses and investments, net	54	39	19
Tax adjustments	13	72	(3)
Novelis costs	(31)	-	-
Legal and environmental provisions	(7)	(17)	(76)
Pechiney financing-related gains (losses)	(2)	65	-
Purchase accounting and related adjustments	(112)	(32)	-
Other	(5)	(12)	3
Total Other Specified Items	(395)	43	(109)
Income from continuing operations	252	262	421
Income (Loss) from discontinued operations	6	(159)	(21)
Cumulative effect of accounting changes	-	(39)	(748)
Net Income (Loss)	258	64	(348)

Included in income from continuing operations for 2004 were foreign currency balance sheet translation losses of $153 million compared to $326 million in 2003 and $41 million in 2002. Foreign currency balance sheet translation effects arise from translating monetary items (principally deferred income taxes, operating working capital and long-term liabilities) denominated in Canadian and Australian dollars into U.S. dollars for reporting purposes. The translation losses in 2004 largely reflected the further weakening of the U.S. dollar against the Canadian and Australian dollars.  At the end of 2004, the U.S. dollar was 7% lower against the Canadian dollar and 4% lower against the Australian dollar as compared to its value at the end of 2003.  At the end of 2003, the U.S. dollar was 18% lower against the Canadian dollar and 25% lower against the Australian dollar as compared to its value at the end of 2002.  Although balance sheet translation effects are primarily non-cash in nature, they can have a significant impact on the Company's net income.

Income from continuing operations for 2004 included a net after-tax loss of $395 million for OSIs.  The most significant items included: a goodwill impairment charge of $154 million mainly related to European fabricating assets in the Engineered Products group, acquired as part of Pechiney; purchase accounting and other adjustments, primarily on inventory, of $112 million related to Pechiney; an asset impairment charge of $66 million related to two rolling mills in Italy; restructuring charges of $41 million mainly related to the closures of two rolled products facilities in the United Kingdom and Belgium; synergy costs of $44 million related to the Pechiney and FlexPac acquisitions; a gain of $46 million resulting from a dilution in the Company's interest in an anode-producing operation in the Netherlands; and expenses of $31 million related to the spin-off of Novelis.

5

Income from continuing operations for 2003 included a net after-tax gain of $43 million for OSIs.  The most significant items included: favourable tax adjustments of $72 million primarily resulting from a change in tax legislation in Australia; a currency-related gain, net of financing costs, of $65 million on the funding of the Pechiney acquisition; and gains of $39 million mainly from the sale of assets in Japan, the United Kingdom, Malaysia and Italy.  These were partially offset by: a $32-million write-off of in-process research and development undertaken by Pechiney prior to the acquisition; a goodwill impairment charge of $28 million related to Engineered Products businesses; restructuring charges of $26 million related to closure costs for flexible packaging operations in Europe and certain cable operations in the United States; environmental and legal provisions of $17 million mainly due to an environmental reserve for a site in the United States; and synergy costs of $14 million related to the FlexPac acquisition.

Income from continuing operations for 2002 included a net after-tax charge of $109 million for OSIs. The largest of these items included: a provision of $68 million for a ruling on a contract dispute with Powerex, an affiliate of B.C. Hydro; $13 million for the impairment of certain businesses in Italy; charges of $21 million for the closures of the Burntisland specialty alumina plant and the Banbury R&D facility, both in the United Kingdom; $17 million relating to other integration and restructuring costs; and $15 million in other miscellaneous charges.  These items were partially offset by an after-tax gain of $24 million on the sale of more than half of the Company's remaining portfolio investment in Nippon Light Metal Company, Ltd. (NLM).

Sales and Operating Revenues

Revenues and Aluminum Volumes

	2004	2003	2002
Third-party sales and operating revenues (US$M)	24,885	13,850	12,483
Total aluminum volume* (kt)	6,443	4,508	4,424
*Includes ingot and rolled product shipments, conversion of customer-owned metal (tolling) as well as aluminum used in engineered products and packaging.
Higher revenues in 2004 mainly reflect the acquisition of Pechiney and higher prices for aluminum.

Sales Price Realizations

(US$/t)	2004	2003	2002
Ingot product realizations	1,884	1,605	1,528
LME 3-month aluminum price	1,721	1,428	1,365
Realizations for ingot increased in line with higher LME prices.

Sales and operating revenues were $24.9 billion in 2004, an increase of $11.0 billion, or 80%, compared to 2003.   Approximately $9 billion of the increase reflected the additional revenues from former Pechiney businesses acquired in December 2003, with the balance largely explained by higher LME prices, which were up on average 21% compared to 2003.  Also contributing to the increase in sales in 2004 were higher alumina prices and the impact of the stronger euro.  The value of the U.S. dollar declined by approximately 9% against the euro year-over-year.    

In 2003, sales and operating revenues were $13.9 billion, an increase of $1.4 billion, or 11%, compared to 2002. The increase reflected the additional revenues from the packaging and composites businesses acquired during the year, higher aluminum and alumina prices, increased ingot shipments and the impact of the stronger euro.

Revenues by Market - 2004

Packaging	37%
Aluminum Ingot	17%
Beverage Cans	10%
Building and Construction	6%
Electrical	3%
Transportation	8%
Other	19%
Total	100%

 6

Costs and Expenses

(in millions of US$, except where indicated)	2004	% of sales	2003	% of sales	2002	% of sales
Cost of sales and operating   expenses	20,203	81.2	11,171	80.7	10,032	80.4
Depreciation and amortization	1,337	5.4	862	6.2	772	6.2
Selling, administrative and   general expenses..................	1,612	6.5	758	5.5	580	4.6
Research and development    expenses............................	239	1.0	190	1.4	115	0.9
Other expenses......................	406	1.6	131	0.9	119	1.0

Over the last three years, Alcan has experienced significant cost pressure arising mainly from the weakening U.S. dollar, rising fuel prices and increased costs for freight and key raw materials such as coke, pitch, plastics and resins. The sharp decline in the U.S. dollar has had a significant unfavourable impact on costs incurred in other currencies, which are translated into U.S. dollars for reporting purposes. The economic impact was pronounced in countries such as Canada, Australia and the United Kingdom, where the Company's bauxite, alumina and aluminum operations have a local currency cost base but U.S. dollar revenues.  This results in escalating local costs without any offsetting increase in revenues, inflating overall costs as a percentage of sales.  Through cost reductions, increased productivity, more efficient use of raw materials and higher selling prices for both metal and end products, Alcan has largely been able to offset the cost penalty.

In 2003, Alcan formalized its Continuous Improvement (CI) efforts under a common system aimed at maximizing improvement opportunities and enhancing the Company's competitive position and operating efficiency.  The new system combines the complementary approaches of Lean Manufacturing and Six Sigma to provide a full range of improvement tools to the Company's businesses. The acquisition of Pechiney has allowed Alcan to further strengthen its CI process by leveraging the combined knowledge and expertise of both companies.  Each of Alcan's business groups have improvement targets that are integrated into the operating plans and budgets for the year.

With the acquisition of Pechiney, Alcan expects to realize synergies of $360 million in annual pre-tax cost savings largely through streamlined corporate and head office services, logistical and purchasing efficiencies, the optimization of production facilities and a focused approach to research and development (R&D). The actions required to secure these recurring annual synergies are expected to be fully implemented by the end of 2005. In order to achieve the synergies, Alcan estimates that it will need to incur approximately $260 million in costs and make capital expenditures of $90 million.  As at December 31, 2004, Alcan has achieved an annual run rate of approximately $160 million, well ahead of its target for the year.  Realized savings for 2004 were $101 million as compared to a target of $41 million, which reflects faster execution of synergy plans.  The Company incurred $170 million in costs in 2004, of which $107 million were treated as purchase accounting adjustments and $29 million were capital expenditures.

Value of U.S. Dollar - Average Annual Percentage Change (%)	2004	2003	2002
Canadian dollar	(7)	(11)	1
Australian dollar	(11)	(17)	(5)
Euro	(9)	(16)	(5)

In 2004, cost of sales and operating expenses were 81.2% of sales and operating revenues compared to 80.7% in 2003. Higher realized prices for aluminum, alumina and products sold through downstream businesses, together with increased volumes, were more than offset by the adverse impact of the weaker U.S. dollar on operating costs and increased costs for fuel and raw materials.  In 2003, cost of sales and operating expenses were 80.7% of sales and operating revenues compared to 80.4% in 2002.  Benefits from cost and productivity improvements, higher realized prices for aluminum and alumina and volume increases were more than offset by adverse currency impacts and higher costs for recycled metal, fuel, raw materials and employee benefits.

Total Aluminum Volume and Purchases

(kt)	2004	2003	2002
Total aluminum volume *	6,443	4,508	4,424
Total purchases	2,172	1,843	1,855
* Includes ingot and rolled product shipments, conversion of customer-owned metal (tolling) as well as aluminum used in engineered products and packaging.

Depreciation and amortization expense was $1,337 million in 2004, an increase of $475 million from 2003.  Approximately 89% of the increase in 2004 was due to the addition of Pechiney, acquired at the end of 2003, while the balance reflected higher capital expenditures and the weaker U.S. dollar against the euro.  In 2003, depreciation and amortization expense was $862 million, an increase of $90 million over 2002.  The increase mainly reflected the impact of the weaker U.S. dollar and the acquisition of packaging and composites businesses during the year.   

7

Selling, administrative and general (SA&G) expenses were $1,612 million in 2004, $854 million higher than in 2003.  Close to 80% of the increase was due to the addition of Pechiney, while the balance mainly reflected costs associated with the Novelis spin-off, various compliance and governance initiatives, higher incentive compensation expenses and the decline in the value of the U.S. dollar against the various currencies in which Alcan incurs costs.  SA&G expenses were $758 million in 2003, an increase of $178 million as compared to 2002.  In 2003, excluding the impact of business acquisitions, expenses increased by approximately $150 million largely due to higher pension expenses and the impact of the weaker U.S. dollar.  Over the last three years, SA&G expenses have increased as a percentage of sales and operating revenues, which in large part reflects the changing composition of Alcan's portfolio and the greater relative weight of the packaging business.  The percentage for 2004 was 6.5% of sales, but after adjusting for the Novelis spin-off and Pechiney integration costs, the percentage was 6.1%.

Alcan's R&D activities continue to be closely aligned with the needs of its core businesses. The Company is focused on improving process technology and developing new product applications for a diverse range of markets and customers.  R&D spending at central research laboratories, technology centres and technical departments was $239 million in 2004, an increase of $49 million, or 26%, compared to 2003.  The increase in 2004 was due to the addition of Pechiney.  R&D expenses were $190 million in 2003, an increase of $75 million over 2002.  The increase mainly reflected the immediate expensing of $50 million of Pechiney's in-process R&D, as required under U.S. GAAP, as well as the impact of the weaker U.S. dollar.

Interest

	2004	2003	2002
Interest expense (US$M)	346	212	198
Capitalized interest (US$M)	11	5	-
Effective average interest rate (%)	3.7	5.2	5.1
Increased interest expense in 2004 reflects higher debt levels following the acquisition of Pechiney.

Interest expense was $346 million in 2004 compared to $212 million in 2003 and $198 million in 2002.  The increase in 2004 as compared to 2003 was due to the higher level of debt outstanding throughout the year as a result of the debt raised to finance the Pechiney acquisition in December 2003 and debt assumed on acquisition.  The impact of increased leverage more than offset the benefit of a lower average cost of debt.  In 2003, total interest cost, including capitalized interest, increased by $19 million as compared to 2002, primarily as a result of the $3.5 billion of financing raised in December 2003 to fund the acquisition of Pechiney.   

Alcan's effective average interest rate on debt was 3.7% in 2004 as compared to 5.2% in 2003.  The lower effective rate in 2004 reflects the much larger proportion of floating and short-term debt carried throughout 2004 in anticipation of the financing settlement associated with the Novelis spin-off.  The effective average interest rate is derived by dividing the total interest cost on debt for the year (refer to the Liquidity and Capital Resources section for a calculation of debt) by the average quarter-end debt for the year, including the prior year-end debt balance.  In order to calculate the effective rate for 2003, the year-end debt balance is adjusted on a pro-rata basis for the debt raised to finance Pechiney. This provides a more representative debt level on which interest was incurred.  Pechiney debt assumed is excluded from the calculation because the interest cost for the year excludes Pechiney and the debt raised to finance the acquisition is pro-rated because it was only outstanding for a portion of the fourth quarter of 2003.

In 2004, other expenses (net of other income) of $406 million included: restructuring charges of $105 million mainly related to the closure of certain packaging operations in the United States and Europe, the Arvida capacity shutdown and the closure of a rolled products facility in the United Kingdom; asset impairment charges of $99 million mainly related to two rolling mills in Italy and a rolled products facility in the United Kingdom; foreign exchange losses of $61 million mainly related to balance sheet translation; a gain of $46 million resulting from a dilution in the Company's interest in an anode-producing operation in the Netherlands; Pechiney integration costs of $38 million; and losses of $36 million related to the marking-to-market of derivatives. In 2003, other expenses (net of other income) of $131 million included: foreign exchange losses of $116 million mainly related to balance sheet translation; a $59-million currency-related gain on the financing of the Pechiney acquisition; a gain of $34 million on the sale of the Company's remaining portfolio investment in NLM; impairment charges of $14 million related to operations in Canada; an environmental provision of $25 million for a site in the United States; a $30-million mark-to-market gain on the revaluation of derivative instruments; and restructuring charges of $10 million for a cable plant in the United States. Other expenses (net of other income) of $119 million in 2002 included a $100-million provision for a ruling on a contract dispute with Powerex, an affiliate of B.C. Hydro; a mark-to-market gain of $60 million on the revaluation of derivatives; foreign exchanges losses of $51 million mainly arising from balance sheet translation; and a gain of $37 million on the sale of part of the Company's portfolio investment in NLM.  

8

Income Taxes

Income tax expense of $375 million for 2004 represented an effective tax rate of 64%, compared to 52% in 2003 and 43% in 2002.  This compares to a composite of the applicable statutory corporate income tax rate of 32% (39% in 2003 and 2002).  In 2004, the difference between the effective and composite tax rates was principally due to the non-tax deductible charges of $154 million for the impairment of goodwill and $66 million for asset impairments, as well as non-deductible foreign currency balance sheet translation losses.  In 2003, the difference in the rates was primarily due to foreign currency balance sheet translation losses, partially offset by one-time tax benefits in Australia, investment and other allowances and lower tax rates in foreign jurisdictions.  The tax benefits in Australia relate to the implementation of a tax consolidation regime together with the conversion to the U.S. dollar as the tax reporting currency, which the Company adopted at the earliest opportunity to reduce foreign currency volatility.  As a result of these changes in legislation, the Company was able to reset the tax value of certain assets in Australia and record a deferred tax benefit of $74 million in 2003.  After certain uncertainties in the application of the legislation were resolved, additional tax benefits of $23 million were recorded in 2004.  In 2002, the difference in the rates was primarily due to currency related items and the impact of potential future tax benefits that were not recognized since their realization was not likely, partially offset by lower tax rates in foreign jurisdictions and investment and other allowances. 

A full reconciliation between the Canadian composite statutory tax rate and the effective tax rate is presented in note 11, Income Taxes, of the consolidated financial statements.

Goodwill

At the end of 2004, Alcan had $5,496 million of goodwill on its balance sheet, compared to $4,686 million at the end of 2003 and $2,136 million at the end of 2002.  The increase in 2003 mainly reflected the year-end acquisition of Pechiney, which was accounted for using the purchase method.  The balance sheet of Pechiney was included in Alcan's consolidated financial statements as of December 31, 2003, based on a preliminary valuation and purchase price allocation. In the fourth quarter of 2004, Alcan finalized the purchase accounting related to the acquisition, which resulted in a further increase in goodwill.  

In 2002, the Company adopted new accounting standards on goodwill. As a result of this change, goodwill is no longer amortized but carried at the lower of carrying value and fair value. Goodwill is tested for impairment on an annual basis.  In 2004, the Company's review of goodwill resulted in an impairment charge of $154 million mainly related to European fabricating assets acquired as part of Pechiney. At the time of acquisition, Pechiney's value was based on prevailing exchange rates and metal prices combined with Pechiney's internal planning assumptions. Since that time, the strong appreciation of the euro and aluminum prices, together with a reassessment of plan assumptions, have adversely affected the value of several fabricating facilities in the Engineered Products group, mainly in Europe.  In 2003, the review of goodwill resulted in an impairment charge of $28 million related to extrusions operations in Europe.  In 2002, an impairment charge of $748 million was recorded as a cumulative effect of an accounting change as of January 1, 2002.  This non-cash adjustment reflected the deterioration in end-market conditions in the period from the algroup integration in October 2000 to January 1, 2002, and did not reflect a change in the growth prospects of the Company.

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities

Cash Flow from Operating Activities and Free Cash Flow from Continuing Operations

(in millions of US$)	2004	2003	2002
Cash flow from operating activities in continuing operations	1,762	1,801	1,519
Free cash flow from continuing operations	233	752	689
Cash flow from operating activities continued at close to record levels in 2004.

Free Cash Flow from Continuing Operations  (in millions of US$)	2004	2003	2002
Cash flow from operating activities in continuing operations	1,762	1,801	1,519
Dividends
Alcan shareholders (including preference)	(227)	(200)	(197)
Minority interests	(13)	(11)	(6)
Capital expenditures in continuing operations	(1,289)	(838)	(627)
Free Cash Flow from Continuing Operations	233	752	689

Cash flow from operating activities in continuing operations was $1,762 million in 2004, only slightly lower than the record cash flow achieved in 2003.  On a cash basis, operating working capital increased by $178 million in 2004 mainly reflecting an increase in receivables of $435 million, partially offset by an increase in payables of $233 million.  The higher level of receivables and operating working capital at the end of 2004 mainly reflected the impact of rising metal prices, which were up on average 21% from the prior year.   In 2003, a focused attention on costs, stringent management of working capital and a disciplined approach to capital spending yielded record cash flow from operating activities in continuing operations of $1,801 million, an increase of 19% over 2002.  Management action resulted in operating working capital, most notably receivables, being drawn down by $469 million in 2003, following a reduction of $47 million in 2002.

9

Free cash flow from continuing operations consists of cash from operating activities in continuing operations less capital expenditures and dividends. Management considers this relevant information for investors as it provides a measure of the cash generated internally that is available for investment opportunities and debt service. GAAP does not prescribe a methodology for computing free cash flow from continuing operations and, accordingly, information may not be comparable to similar measures published by other companies.  Free cash flow from continuing operations was $233 million in 2004, a decrease of $519 million, or 69%, compared to 2003.  The decrease in 2004 is mainly attributable to a higher level of capital spending compared to 2003.  Capital expenditures are further discussed under Investment Activities. Free cash flow from continuing operations was a record $752 million in 2003, an increase of $63 million, or 9%, compared to 2002, resulting from the record level of cash flow from operating activities and disciplined capital spending. 

Cash and time deposits in continuing operations totaled $184 million at the end of 2004, down from $686 million at the end of 2003 and up from $97 million at the end of 2002. The decrease in 2004 resulted from a focus on tight cash management.  The increase in 2003 includes $243 million of cash assumed on the acquisition of Pechiney, as well as funds held for the purchase of the remaining shares of Pechiney subsequent to year-end.

Financing Activities

Total Borrowings and Equity

	2004	2003	2002
Borrowings * (US$M)	9,405	9,543	3,751
Equity ** (US$M)	10,962	10,680	8,442
Debt as a percentage of invested capital (%)	46	47	31
* Includes borrowings of operations held for sale.
** Includes minority interests and preference shares.
With the spin-off of Novelis, borrowings were reduced by $2.5 billion in the first quarter of 2005.

Cash used for financing activities in continuing operations was $541 million in 2004, which mainly reflected the repayment of some short-term borrowings.  In 2003, the Company generated $3,453 million of funds from financing activities in continuing operations as a result of the issuance of new debt in connection with the acquisition of Pechiney.  In 2002, cash used for financing activities in continuing operations was $673 million, which reflected the net repayment of long and short-term debt.   

Over the last three years, Alcan has paid a quarterly dividend of 15 cents per common share.  Total dividends paid were  $240 million in 2004 compared to $211 million in 2003 and $203 million in 2002.

In April 2004, the Company obtained a $3-billion, multi-currency, five-year, committed global credit facility with a syndicate of international banks.  The facility is available for general corporate purposes. In July 2004, the Company entered into a $500-million, 18-month term loan with a group of international banks.  Proceeds from the loan were used to refinance      $500-million, callable two-year floating rate notes, issued in December 2003 by a wholly-owned subsidiary, Alcan Aluminum Corporation.  In December 2004, the Company entered into an additional $500-million, short-term loan with a group of international banks that was used to refinance one-year floating rate notes which were also issued by Alcan Aluminum Corporation in 2003.  Both term loans have since been repaid in 2005.  In December 2004, a wholly-owned subsidiary, Pechiney Pacific (Pty) Ltd., obtained a $125-million, short-term committed credit facility from a group of international banks.

In May 2003, the Company issued $500 million of 4.5% global notes, due May 15, 2013.  The proceeds were partially used to fund the FlexPac acquisition, with the remainder used to refinance maturing long-term debt.  In December 2003, the Company completed a $2.25-billion, four-tranche debt offering in the United States to partially fund the cash portion of the Pechiney acquisition.  The debt offering consisted of two global notes issues, one for $500 million with a coupon of 5.2%, due January 15, 2014, and the other for $750 million with a coupon of 6.125%, due December 15, 2033, as well as the issuance of two tranches of floating rate notes:  $500-million, one-year notes and $500-million, two-year callable notes.  The floating rate notes, fully and unconditionally guaranteed by the Company, were issued by its wholly-owned subsidiary, Alcan Aluminum Corporation. The remaining funding requirements for the acquisition were obtained through a combination of commercial paper, available cash and a short-term bank loan. In addition to the issuance of new debt, the Company has also assumed the debt of companies acquired, which amounted to approximately $2.1 billion in 2003. 

In January 2002, the Company redeemed all of its $150-million, 8.875% debentures originally due on January 15, 2022, for 104.15% of their face value. A loss of $6 million was recognized in the first quarter of 2002. In September 2002, the Company issued $500 million of 4.875% global notes, due September 15, 2012. Net proceeds were used to repay existing long-term debt and commercial paper borrowings.

10

Alcan has access to $3.1 billion of committed credit facilities, which are used primarily to support Alcan's commercial paper programs.  As of the date of this report, Alcan has $1.6 billion of commercial paper outstanding.  The Company believes that the cash from continuing operations together with available credit facilities will be more than sufficient to meet the cash requirements of operations, planned capital expenditures, dividends and any short-term debt refinancing requirements. In addition, the Company believes that its ability to access global capital markets, considering its investment grade credit rating, provides any additional liquidity that may be required to meet unforeseen events. During 2004, Standard & Poor's Rating Services maintained its rating on Alcan's long-term debt at A- and its rating on short-term debt at A2.  Comparable ratings from Moody's Investors Services were Baa1 and P2, respectively. 

Debt as a percentage of invested capital does not have a uniform definition. Because other issuers may calculate debt as a percentage of invested capital differently, Alcan's calculation may not be comparable to other companies' calculations. The reconciliation below explains the calculation. The figure is calculated by dividing borrowings by total invested capital. Total invested capital is equal to the sum of borrowings and equity, including minority interests. The Company believes that debt as a percentage of invested capital can be a useful measure of its financial leverage as it indicates the extent to which it is financed by debtholders. The measure is widely used by the investment community and credit rating agencies to assess the relative amounts of capital put at risk by debtholders and equity investors.

Debt as a percentage of invested capital was 46% at the end of 2004, down slightly from the rate at the end of 2003 and up from 31% at the end of 2002. The significant increase in the ratio in 2003 was mainly due to the impact of new debt issuances and debt assumed on the Pechiney acquisition. In line with its objective to maintain a solid investment grade credit rating, Alcan has a target debt to capitalization ratio of 35%. The spin-off transaction on January 6, 2005 will help accelerate the achievement of this target.

Debt as a Percentage of Invested Capital As at December 31 (in millions of US$)	2004	2003	2002
Debt
Short-term borrowings	2,486	1,764	378
Debt maturing within one year	569	341	249
Debt not maturing within one year	6,345	7,437	3,120
Debt of operations held for sale	5	1	4
Total debt	9,405	9,543	3,751
Equity
Minority interests	236	403	150
Shareholders' equity
Redeemable non-retractable preference shares	160	160	160
Common shareholders' equity	10,566	10,117	8,132
Total equity (including minority interests)	10,962	10,680	8,442
Invested capital	20,367	20,223	12,193
Debt as a Percentage of Invested Capital (%)	46	47	31

Investment Activities

Cash used for investment activities in continuing operations was $1,728 million in 2004 compared to $4,594 million in 2003 and $860 million in 2002.  The higher level of investment activity in 2003 principally reflected the acquisition of a 92.2% stake in Pechiney.  In February 2004, Alcan completed the acquisition of the company with the purchase of the remaining outstanding shares, such that it is now a wholly owned subsidiary.  For further details, refer to the section Business Acquisitions below. 

Capital Expenditures and Depreciation in Continuing Operations (in millions of US$)	2004	2003	2002
Capital expenditures for continuing operations	1,289	838	627
Depreciation and amortization expense	1,337	862	772
For the last three years, the Company has maintained capital expenditures below the level of depreciation.

Capital Expenditures
Capital expenditures for 2004 were $1,289 million, up from $838 million in 2003 and $627 million in 2002.  The increase in 2004 mainly reflects the inclusion of capital expenditures by former Pechiney business units as well as spending on the Gove alumina refinery expansion, which began in the fall of 2004.  Nevertheless, capital spending remained below the level of depreciation and amortization expense for a third consecutive year, a reflection of the Company's emphasis on financial discipline.  Spending in 2003 increased over 2002 largely due to the 307-kt expansion of the Alouette smelter in Quebec, in which Alcan has a 40% stake. By the end of 2004, the expansion was virtually complete at a total cost to Alcan of approximately $400 million of which about $207 million was spent in 2004.  In the third quarter of 2004, Alcan announced that it would proceed with the 1.7-Mt expansion of its 2.1-Mt Gove alumina refinery in Australia. The expansion, which is expected to cost $1.3 billion, should commence operations by early 2007. 

11

In 2005, Alcan's capital spending is expected to be approximately $1.9 billion, reflecting additional spending on the Gove expansion. Excluding Gove, the remaining capital expenditures are expected to be in line with depreciation.  Of the remaining capital expenditures, about 75% are considered to be sustaining expenditures required to maintain the quality of the asset base or meet environmental regulations, with the balance mainly targeting smaller, profitable growth initiatives.

Business Acquisitions
Alcan has taken several important strategic steps to significantly transform its portfolio towards higher growth and higher value added businesses.  Most notable among these steps were the acquisition of Pechiney at the end of 2003 and the spin-off of the rolled products businesses, which was completed in early 2005.  Cash used for acquisitions was $466 million in 2004 compared to $3,819 million in 2003 and $346 million in 2002.  The higher level in 2003 mainly reflected the acquisition of Pechiney, but also a number of smaller investments.

As discussed earlier, in February 2004, Alcan acquired the remaining outstanding shares of Pechiney for cash. In March 2004, the Company finalized the joint venture agreement with Qingtongxia Aluminium Group Company Limited and Ningxia Electric Power Development and Investment Co. Ltd. Under the agreement, Alcan has invested $110 million as at December 31, 2004, for a 50% participation in a 150-kt modern pre-bake smelter located in the Ningxia autonomous region of China. 

On December 15, 2003, Alcan acquired 92.2% of Pechiney, a French société anonyme with international operations in three core businesses: primary aluminum, aluminum conversion and packaging. The total consideration for this ownership interest was $5.5 billion, which consisted of $3.7 billion in cash (including net transaction costs of $79 million and net of cash and time deposits acquired of $243 million), $1.7 billion in Alcan common shares (42 million shares at $39.63 per share) and $80 million for Pechiney stock options held by the employees.  In addition, the Company assumed from Pechiney total debt of $2.1 billion. In early February 2004, Alcan took a number of steps to acquire the remaining shares of Pechiney for cash.  Also in 2003, the Company executed several value-creating transactions including the acquisition of a packaging business, VAW Flexible Packaging (FlexPac), at a cost of $330 million and two composite product businesses, Baltek Corporation (Baltek) and Uniwood/Fome-Cor (Gator-Cor), at a cost of $38 million and $95 million, respectively. These acquisitions built upon Alcan's already strong market positions by extending product range and geographic reach.

During 2002, the Company acquired a 40% joint venture interest in the Aluminerie Alouette consortium in two transactions. The first tranche of 20% was purchased from the Société générale de financement du Québec (SGF) and the second tranche of 20% from the Corus Group plc at costs of $172 million and $171 million, respectively.

In February 2005, Alcan signed a Shareholders' Agreement with Oman Oil Company S.A.O.C. (OOC) and Abu Dhabi Water and Electricity Authority (ADWEA) for the development of a proposed 325-kt/y aluminum smelter in Sohar, Oman. Under the agreement, Alcan will have a 20% equity interest in the smelter with each of the other two partners holding a 40% share. 

Business Divestments
Proceeds from the disposal of businesses, investments and other assets totaled $35 million in 2004 compared to $63 million in 2003 and $113 million in 2002.  Assets and businesses disposed of in 2004 included the packaging operations of the Boxal Group and Suner Cartons, certain assets of the ores and concentrates trading operations, including the lead and zinc trading business.  Proceeds on the sale of these businesses are included in cash from (used for) investment activities in discontinued operations.  In December 2004, the Company announced that it had reached agreements for the sale of its controlling interest in Aluminium de Grèce S.A. (AdG) and Pechiney Électrométallurgie (PEM).  On March 15, 2005, Alcan completed the sale of AdG.

In 2003, asset disposals included the Borgofranco power station in Italy, the Banbury laboratory and assets associated with the Burntisland specialty alumina plant, both located in the United Kingdom, as well as the Company's remaining investment in NLM.  In addition, the Company sold businesses that were classified as discontinued operations in its consolidated financial statements. These included the Fibrenyle packaging plants in the United Kingdom and the Pieve extrusions operation in Italy. Proceeds on the sale of these businesses are included in cash from (used for) investment activities in discontinued operations. Disposals in 2002 mainly comprised moulded glass operations in the United States and China, rolled product circles operations in Italy, three Company-owned cargo ships and more than half of the Company's investment in NLM.

Novelis Spin-Off
On January 6, 2005, Alcan completed the spin-off of Novelis to its shareholders. Novelis consists of substantially all of the aluminum rolled products businesses held by Alcan prior to its 2003 acquisition of Pechiney, together with some of Alcan's alumina and primary metal-related businesses in Brazil, which are fully integrated with the rolled products operations there, as well as four former Pechiney rolling facilities in Europe.  The spin-off allows Alcan to focus on its higher growth, higher margin businesses and satisfies certain regulatory requirements associated with the acquisition of Pechiney, including the requirement to divest either of Neuf-Brisach or the AluNorf/Göttingen/Nachterstedt rolling facilities in Europe and the Ravenswood facility in the United States. 

12

The spin-off transaction resulted in a payment to Alcan by Novelis of approximately $2.6 billion shortly following the effective date of the spin-off to settle the accounts between the two parties. These proceeds were used to reduce two term loans and Alcan's commercial paper balance included in short-term borrowings and debt not maturing within one year in Alcan's pro forma consolidated financial statements as at December 31, 2004. As a result of this payment, together with the impact of the transfer of $300 million of other debt to Novelis and the termination of the receivables securitization program, Alcan's debt has been reduced by $2.5 billion in its pro forma condensed consolidated balance sheet as at December 31, 2004. The final cash settlement between Alcan and Novelis related to the spin-off will happen by the end of the first quarter of 2005 and is expected to result in a cash outflow of approximately $100 million from Alcan to Novelis. 

For further details, refer to note 8, Acquisition of Pechiney, note 7, Spin-Off of Rolled Products Businesses and note 28, Commitments and Contingencies, of the consolidated financial statements.

Contractual Obligations
The Company has future obligations under various contracts relating to debt payments, capital and operating leases, long-term purchase arrangements, pensions and other post-employment benefits, and guarantees.  The table below provides a summary of these contractual obligations (based on undiscounted future cash flows) as at December 31, 2004.  There are no material off-balance sheet arrangements.

Contractual Obligations  As at December 31, 2004 (in millions of US$)	Payments due by period
	Total	2005	2006-2007	2008-2009	2010 and thereafter
Long-term debt (1)	6,914	569	1,559	525	4,261
Capital leases (2)	34	8	12	7	7
Operating leases (2)	345	83	115	62	85
Purchase obligations (2)	6,324	885	1,176	1,163	3,100
Unfunded pension plans (3)	2,845	76	157	163	2,449
Other post-employment benefits (3)	2,795	72	148	161	2,414
Funded pension plans (3) (4)	(4)	206	421	434	(4)
Guarantees (2)	28	15	-	-	13
Total		1,914	3,588	2,515

⁽¹⁾   Refer to note 23, Debt Not Maturing Within One Year, of the accompanying consolidated financial statements.

⁽²⁾   Refer to note 28, Commitments and Contingencies, of the accompanying consolidated financial statements.

⁽³⁾   Refer to note 32, Post-Retirement Benefits, of the accompanying consolidated financial statements.

⁽⁴⁾  Pension funding generally includes the contribution required to finance the annual service cost, except where the plan is largely overfunded, and amortization of unfunded liabilities over periods of 15 years, with larger payments made over the initial period where required by pension legislation.  Contributions depend on actual returns on pension assets and on deviations from other economic and demographic actuarial assumptions.  Based on management's long-term expected return on assets, annual contributions for years after 2009 are projected to be in the same range as in prior years and to grow in relation with payroll.

ENVIRONMENT, HEALTH AND SAFETY (EHS)

EHS FIRST, a core component of Alcan's Integrated Management System (AIMS), ensures that environment, health and safety performance is a top priority across all of Alcan's businesses and all levels of the organization, from corporate offices to the shop floor.  With this company-wide commitment, Alcan strives to be a recognized industry leader in EHS excellence.  EHS FIRST is more than just a system; it represents an attitude, a mindset and an acceptance by all employees of their responsibility and accountability towards implementing EHS best practices around the globe.

EHS FIRST requires all sites to be certified under ISO 14001, an international environmental management standard, and OHSAS 18001, an international occupational health and safety management standard. In addition, Alcan imposes stringent requirements on its businesses. For instance, newly acquired facilities must be fully compliant with all requirements within two years of their acquisition. By the end of 2004, 60% of the Company's facilities were ISO 14001 certified and 53% of the facilities were OHSAS 18001 certified. All wholly-owned facilities of Alcan prior to the acquisition of Pechiney are certified. 

Since the 1990s, Alcan has been actively engaged in the reduction of greenhouse gases (GHG) and in 2000 introduced TARGET, a program for setting voluntary reduction objectives, managing risks and reporting performance. In 2004, Alcan introduced an EHS FIRST performance data management system to standardize data gathering and reporting at all levels of the organization. A comprehensive overview of EHS FIRST performance, including GHG data, can be found in the 2004 Sustainability Report available on the Company's Web site.

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The precautionary principle inherent in EHS FIRST is designed to efficiently minimize the risks of new EHS-related liabilities emerging from Alcan's present or future activities. For liabilities originating from past Alcan activities as well as its acquired industrial activities, an Alcan-wide program has been standardized in EHS FIRST to systematically manage liabilities in voluntary programs and in co-operation with local authorities.

Alcan's capital expenditures to protect the environment and improve working conditions were $79 million in 2004 and are projected to be $131 million in 2005 and $157 million in 2006. In addition, expenditures charged against income for environmental protection were $175 million in 2004, and are expected to be $218 million in 2005 and $193 million in 2006.

For the fourth consecutive year, Alcan was selected as a member of the Dow Jones Sustainability World Index. The Index recognizes Alcan as leading the aluminum industry in criteria ranging from code of conduct, risk and crisis management, environmental policy and management, human capital development and standards for suppliers. In addition, the Company's high ranking in the Index is a testament to how well Alcan has set industry standards in managing climate change issues, such as the development of its carbon dioxide (CO₂) inventory and GHG strategy.

OPERATING SEGMENT REVIEW

Throughout 2004, the Company had six business groups or operating segments: Bauxite and Alumina; Primary Metal; Rolled Products Americas and Asia; Rolled Products Europe; Engineered Products; and Packaging. This structure included the fully integrated former businesses of Pechiney.

The Company's measure of the profitability of its operating segments is referred to as business group profit (BGP).  BGP comprises earnings before interest, income taxes, minority interests, depreciation and amortization and excludes certain items, such as corporate costs, restructuring costs (relating to major corporate-wide acquisitions or initiatives), impairment and other special charges, and pension actuarial gains, losses and other adjustments, that are not under the control of the business groups or are otherwise excluded from the measurement of their profitability.  These items are generally managed by the Company's corporate head office, which focuses on strategy development and oversees governance, policy, legal, compliance, human resources and finance matters.

Financial information for individual business groups presented in this section includes the results of certain joint ventures on a proportionately consolidated basis, which is consistent with past practice under Canadian GAAP and reflects the way the business groups are managed. However, with the adoption of U.S. GAAP, the BGP of these joint ventures is now removed under the caption "Equity-accounted joint venture eliminations" and their net after-tax results are reported as equity income.

The change in the fair market value of derivatives has been removed from individual business group results and is shown on a separate line in reconciling to income from continuing operations.  This presentation provides a more accurate portrayal of underlying business group results and is in line with the Company's portfolio approach to risk management. 

The BGPs for prior periods have been restated to reflect the reclassification of the foil-rolling operations from the Packaging group to the Rolled Products Europe group.

Additional operating segment information is presented in note 34, Information by Operating Segments, of the consolidated financial statements.  The information that follows is reported by operating segment on a stand-alone basis. Transactions between groups are conducted at arm's length and reflect market prices. Accordingly, earnings from Bauxite and Alumina as well as from Primary Metal operations include profit on alumina or metal produced by the Company, whether sold to third parties or used in the Company's fabricating and packaging operations. Earnings from the downstream operations represent only the value-added portion of the profit from rolled products, engineered products and packaging products.

On January 6, 2005, Alcan completed the spin-off of its rolled products businesses into a new, independent company named Novelis Inc. The new company comprises substantially all of the aluminum rolled products businesses held by Alcan prior to its 2003 acquisition of Pechiney, together with some of Alcan's alumina and primary metal-related businesses in Brazil, which are fully integrated with the rolled products operations there, as well as four former Pechiney rolling facilities in Europe, whose end-use markets and customers are similar to those of Novelis. Also included within Novelis are the assets, liabilities and operations relating to portions of the Sierre facility, located in Switzerland.

Following the spin-off, Alcan will continue to have five aluminum rolled products facilities in four countries. The rolled products facilities retained by Alcan are Neuf-Brisach and Issoire, both in France, which are part of Engineered Products; Sierre in Switzerland, which is included in Engineered Products; Singen in Germany, which is a shared facility between Engineered Products and Packaging; and Ravenswood in the United States, which is included in Engineered Products.

Financial and operating information for businesses transferred to Novelis in January 2005 are included in Alcan's consolidated financial statements and MD&A for 2004 and prior periods presented. 

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Effective in 2005, Alcan's operating management structure comprises four business groups or operating segments:  Bauxite and Alumina; Primary Metal; Engineered Products and Packaging. 

Third-Party Revenues by Business Group - 2004

Bauxite and Alumina	6%
Primary Metal	17%
Engineered Products	21%
Packaging	25%
Rolled Products Americas and Asia	18%
Rolled Products Europe	13%
Total	100%

Bauxite and Alumina
The Bauxite and Alumina (B&A) group owns or is a joint-venture partner in seven bauxite mines and deposits and ten alumina or specialty alumina refineries, excluding discontinued operations. It also purchases bauxite and alumina from third parties, and is a recognized leader and supplier of alumina refinery technology. Approximately 60% of the alumina produced and purchased is used to meet Alcan's own smelting requirements and the balance is sold to third parties. With the acquisition of Pechiney at the end of 2003, the group's alumina hydrate production capacity increased from 4.3 Mt/y to approximately 5.8 Mt/y.  Over the last several years, the group has substantially improved its competitive position by successfully repositioning its production base around low-cost bauxite and alumina assets in Australia.  The recently started expansion of the Gove refinery in Australia, discussed below, will further enhance the group's alumina cost position, firmly placing a majority of production in the lowest quartile of the industry cost curve.

In November 2004, Alcan signed a protocol of negotiation with Alcoa World Alumina LLC and the Government of the Republic of Guinea for the development of a 1.5-Mt/y alumina refinery.  A final decision on this project is expected within the next       12 months, following completion of a detailed feasibility study.

As a result of a value-based review of its portfolio of assets, Alcan announced in December 2004 that it had entered into a binding agreement for the sale of its controlling interest in Aluminium de Grèce S.A. (AdG).  As a consequence, AdG has been reclassified as a discontinued operation and is therefore excluded from the operating and financial data for the group.  On March 15, 2005, Alcan completed the sale of AdG.

Sales and Production - B&A

	2004	2003	2002
Third-party sales and operating revenues (US$M)	1,501	539	440
Intersegment sales and operating revenues (US$M)	1,596	873	758
Alumina hydrate production (kt)	5,775	4,299	4,271
Higher production in 2004 mainly reflected the addition of former Pechiney operations.

In 2004, all of the group's alumina refineries achieved record production levels. In 2003, record production levels at the Gove refinery together with higher production levels at the Queensland Alumina joint venture in Australia were partially offset by production lost due to the 2002 closure of the Burntisland specialty alumina plant in the United Kingdom.  

In September 2004, Alcan approved a $1.3-billion investment to expand its Gove smelter-grade alumina refinery in Australia from about 2.1 Mt/y to approximately 3.8 Mt/y.  With significant efficiency and environmental enhancements integrated into the project, the Gove mining and alumina operations will be well positioned for superior economic, environmental and social performance.  The expansion of the refinery is under way and is slated to be fully operational by 2007.

BGP - B&A

	2004	2003	2002
BGP (US$M)	464	191	248
The addition of former Pechiney operations together with higher alumina prices contributed to higher BGP in 2004, despite increased energy costs and negative foreign currency impacts.

BGP in 2004 increased by $273 million, largely due to the addition of the former Pechiney businesses, which contributed $148 million to BGP, and higher alumina prices. These positive factors were partly offset by the unfavourable impact of higher energy and maritime freight costs, as well as the effect of the weaker U.S. dollar on operating costs.  While alumina prices were higher in 2003 compared to 2002, BGP in 2003 declined due to higher energy costs and the negative impact of foreign currency movements on balance sheet translation and operating costs. 

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In 2004, strong demand from China caused the alumina market to be in short supply, resulting in a sharp rise in spot prices.  In addition, long-term contract prices moved up in response to rising prices for aluminum on the LME.  Average realized prices also increased in 2003 compared to 2002 in line with higher LME prices and a tight alumina market.

Average production costs per tonne were 14% higher in 2004 due to the addition of higher-cost Pechiney facilities, higher maritime freight costs and the impact of foreign currency movements. Together, these negative factors more than offset ongoing cost reduction efforts.  Average production costs per tonne were 7% higher in 2003 compared to 2002, due to higher energy prices and the weakening U.S. dollar.

Seven alumina refineries produce specialty aluminas for a wide array of applications, including solid surface products, refractory bricks, ceramics, catalysts, absorbents and public water treatment programs.  In 2004, operating results for the specialty alumina business were 72% lower than in 2003, mainly due to the impact of former Pechiney plants.  In 2003, operating results were 85% higher than in 2002, largely as a result of the closure of the Burntisland plant in the United Kingdom.

Primary Metal
Alcan is the second largest primary aluminum producer in the world, as well as the recognized leader and supplier of smelting technology.  With the acquisition of Pechiney, the Primary Metal group operates or has interests in 24 smelters with a total capacity of 3.4 Mt/y, excluding discontinued operations.  Approximately 50% of its capacity is supplied by Company-owned power, which is a major competitive advantage when compared to the industry average of only 20%.  With a sharp focus on cost reduction, productivity improvement and technology development, Alcan seeks to continuously reinforce its low-cost primary metal position. Approximately 50% of the Company's smelter capacity is in the first quartile of the industry cash cost curve, while 75% of the production is at costs which are lower than the world average.  In addition to LME-grade ingot, the Primary Metal group produces value-added aluminum in the form of sheet ingot, extrusion billet, rod and foundry ingot for other Alcan plants or third-party customers serving the transportation, building and construction, consumer goods and machinery markets.

As a result of a value-based review of its portfolio of assets, Alcan announced in December 2004 that it had entered into a binding agreement for the sale of its controlling interest in Aluminium de Grèce S.A. (AdG).  As a consequence, AdG has been reclassified as a discontinued operation and is therefore excluded from the operating and financial data for the group. Likewise, the Company announced in December its intention to sell the Pechiney Électrométallurgie ferroalloy business.  It has also been reclassified as a discontinued operation. On March 15, 2005, Alcan completed the sale of AdG.

Sales and Production - Primary Metal

	2004	2003	2002
Third-party sales and operating revenues (US$M)	4,275	2,647	2,473
Intersegment sales and operating revenues (US$M)	4,263	2,306	2,204
Aluminum production (kt)	3,382	2,354	2,238
Increased sales in 2004 reflects the addition of former Pechiney smelters together with higher prices for aluminum.

In 2004, Alcan's production of primary aluminum was approximately one million tonnes higher than in the prior year, reflecting the addition of former Pechiney facilities, the acquisition of a 50%-interest in a smelter in China and incremental production improvements at smelters in the United Kingdom, Iceland, Norway and Canada. During the year, some production was lost due to the closure of Söderberg capacity at the Arvida smelter and a strike at the 25%-owned Aluminerie Bécancour smelter, both situated in Quebec.

Fourteen of the group's smelters set new annual production records in 2004.  Most of Alcan's smelter production is in the form of value-added ingot. Record sales levels were achieved for each of the three major product lines; sheet ingot, extrusion billet and rod, as well as for remelt ingot. Power generation by the Company's hydroelectric facilities in Quebec also achieved a new record.

BGP - Primary Metal

	2004	2003	2002
BGP (US$M)	1,518	814	857
Average realized price (US$/t)	1,884	1,605	1,528
LME 3-month aluminum price (US$/t)	1,721	1,428	1,365
Increased BGP reflects the addition of former Pechiney operations and higher prices, offset in part by adverse currency effects and higher costs for raw materials.

In 2004, BGP from continuing operations improved by $704 million, reflecting contributions from former Pechiney sites, acquisition synergy benefits, higher metal price realizations, an improved product mix and lower foreign currency balance sheet translation losses. These favourable factors were partially offset by the adverse impact of the weaker U.S. dollar on operating costs, increased costs for alumina, energy, freight and fuel-related raw materials and costs related to the Arvida closure.  For the year, BGP included balance sheet translation losses of $31 million.

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In 2003, additional sales volumes, higher metal realizations, a favourable adjustment of $40 million from asset retirement obligations and benefits from profit improvement initiatives were more than offset by the negative impact of the weaker U.S. dollar, higher alumina and fuel-related raw material costs, as well as higher pension expenses. For the year, BGP included balance sheet translation losses of $82 million.

In April 2004, in line with Alcan's commitment to economic and environmental sustainability, the 90 kt/y of Söderberg capacity at the 60-year-old Arvida smelter in Quebec, was permanently closed. The shutdown was completed on schedule and on budget.

In June 2004, the Candonga hydro power plant in Brazil, with an installed capacity of 140Mw, commenced operation. Alcan participates equally in the facility with CVRD (Companhia Vale do Rio Doce).

Following a five-month strike at the 25%-owned Bécancour smelter in Quebec, a new collective labour agreement was signed in November 2004.  Two of the three potlines that had been shut down were restarted in December 2004.  The smelter is expected to return to full operation by April 2005.

Work on the expansion of the Alouette smelter in Quebec, in which Alcan has a 40% interest, is virtually complete. The first pots were operational in December 2004 and full production is expected by the fall of 2005. The expansion, of which Alcan's share of the total cost is approximately $400 million, will increase the capacity of the smelter from 243 kt/y to 550 kt/y. The project is ahead of schedule and on budget.

Detailed engineering studies and project cost evaluations are underway for an 80-kt/y spent potlining treatment facility, which is expected to be built in the Saguenay- Lac-Saint-Jean region in Quebec using Alcan technology.  Spent potlining, which is designated a hazardous waste, is the used refractory lining of smelter pots that is removed at the end of the potlining's service life.

At the 51.55%-owned Tomago smelter in Australia, which previously had a total capacity of 460 kt/y, work is essentially complete on a project to increase smelter capacity by 65 kt/y through amperage increase and process improvements. The project is ahead of schedule and on budget.

In June 2004, Alcan announced the signing of a Memorandum of Understanding with the Oman Oil Company S.A.O.C. (OOC) and the Abu Dhabi Water and Electricity Authority (ADWEA) for a 20% equity interest in a proposed smelter in Sohar, Oman.  In February 2005, a Shareholders' Agreement was signed with OOC and ADWEA, each owning a 40% share, for the development of the proposed 325-kt/y aluminum smelter project. Under a technology transfer agreement, Alcan will provide Sohar Aluminium Company L.L.C. with a license and related technical services necessary to implement Alcan's AP35 Technology. ADWEA will be providing technical services and management support for the power plant. Alcan would also have the right to acquire up to 60% of a planned second potline of similar capacity.  Final decisions on financing and construction are expected in the second half of 2005. Construction would begin shortly thereafter with full production expected by 2008.

A feasibility study for the construction of a new aluminum smelter with the South African government and their Industrial Development Corporation was launched. The focus of this new study will be the use of the highly efficient and advanced AP30 or AP35 smelting technologies.

In 2003, Alcan signed a joint venture agreement with the Qingtongxia Aluminium Group Company Limited and the Ningxia Electric Power Development and Investment Co. Ltd. Under the agreement, Alcan acquired 50% participation and a secure power supply in an existing 150-kt/y modern pre-bake smelter situated in the Ningxia autonomous region of China. Following Chinese government approval, the joint venture became effective June 2004. Alcan has the right to acquire up to an 80% interest in a 250-kt/y potline that is currently under construction.

Engineered Products

The Engineered Products (EP) group comprises a portfolio of businesses that provide innovative, high value-added product solutions for customers in a wide range of markets including aerospace, automotive, mass transportation, architectural and display materials.  The group manufactures aluminum products such as soft and hard alloy extrusions, sheet, plate, castings, cable, rod and strip, as well as composite materials such as balsa-core, aluminum-plastic, fibre-reinforced plastic and foam-plastic for a broad range of applications. 

In 2004, the Company's annual testing of goodwill resulted in an impairment charge of $154 million related to several fabricating facilities in the EP group, mainly in Europe, acquired as part of Pechiney. At the time of acquisition, the value of these assets was based on prevailing exchange rates and metal prices combined with Pechiney's internal planning assumptions. Since that time, the strong appreciation of the euro and aluminum prices together with a reassessment of plan assumptions have adversely affected these values.  Nonetheless, the business fundamentals and growth prospects for the affected assets remain sound.  This non-cash impairment charge is not reflected in BGP for the group.

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Sales and BGP - Engineered Products

	2004	2003	2002
Third-party sales and operating revenues (US$M)	5,162	1,760	1,601
BGP (US$M)	324	103	100
Increased sales in 2004 reflects the addition of former Pechiney businesses, most notably aerospace.

In 2004, sales and operating revenues were $5.2 billion, up $3.4 billion from the prior year due in large part to the addition of former Pechiney businesses. Excluding the $3-billion impact of Pechiney, revenues increased 21% as the group benefited from price increases, higher volumes and favourable foreign currency exchange effects. BGP was up $221 million over 2003, of which $203 million was due to Pechiney.  Excluding the impact of Pechiney, BGP rose 17% despite higher raw material, integration and restructuring costs.

In 2003, sales and BGP were 10% and 3% higher, respectively. Despite difficult conditions for extrusions and distribution markets in Europe and for the cable market in North America, cost reductions across all businesses helped to mitigate the impact of the weak economic environment and higher costs for raw materials.  The group's performance also benefited from the acquisitions of Baltek Corporation (Baltek) and Uniwood/Fome-Cor, since renamed Alcan Gator-Cor (Gator-Cor).

Engineered Products Revenues by Market - 2004

Aerospace, Transportation and Industry (ATI)	22%
Automotive Structures	3%
Cable	11%
Composites	11%
Extruded Products	15%
Alcan International Network (AIN)	12%
Alcan Service Centres (ASC)	8%
Specialty Sheet	15%
Ventures	3%
Total	100%

Engineered Products Business Units
The Aerospace, Transportation and Industry (ATI) business unit, which accounted for 22% of the group's sales and operating revenues in 2004, is a new addition following the acquisition of Pechiney. ATI is a key supplier of high value-added sheet, plate and extruded products for the aerospace market, as well as products for marine, transport and industrial applications.  Third-party sales and operating revenues were $1,154 million in 2004 led by strong aerospace volumes and higher demand for plate and coil used in transportation.  The aerospace market is expected to be a significant source of future volume growth as Alcan is well positioned as the lead supplier of aluminum plate for Airbus' new super jumbo aircraft, the A380. 

The Automotive Structures business unit had third-party sales and operating revenues of $164 million in 2004.  This unit was reorganized in 2004 to focus on automotive structures and safety systems.  Two new plants for the manufacture of safety components are under construction in North America, one beginning production at the end of 2004 and the other in early 2005. These plants will complement the unit's already strong European market position in safety systems for new model cars.

The Cable unit is a fully integrated manufacturer of aluminum cable, rod and strip products in North America and supplies many sectors of the electrical industry including utilities, distributors and original equipment manufacturers. The unit had third-party sales and operating revenues of $557 million in 2004, an increase of more than 20% compared to 2003, reflecting generally improving market conditions, strong demand for utility cable, an improved product mix and increased production due to higher plant utilization rates.

The Composites unit supplies a wide range of products for customers in the display and graphic arts, architecture, transportation and industrial markets.  Sales and operating revenues were $553 million in 2004, up 43% from 2003, reflecting increased demand for foam and balsa products and full year revenues from Gator-Cor and Baltek.  In 2003, Alcan acquired Baltek, the world's leading supplier of balsa-based structural core materials, and Gator-Cor, one of the largest manufacturers of foam-based display boards in the U.S. 

The Extruded Products unit, a leading supplier of extruded products for rail, bus, marine, automotive and engineering applications, had third-party sales and operating revenues of $748 million in 2004. Through the acquisition of Pechiney, the unit has increased its capacity to produce soft alloy extrusions mainly for the transportation and general engineering markets in Europe.  Strong demand for these products helped to offset slower demand for large profile extrusions for rail applications. During 2004, large profile extrusion operations in Switzerland and Germany were restructured in order to improve their competitive position.

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Alcan International Network (AIN), formerly a part of Pechiney's trading activities, was moved under the management of EP in 2004. AIN is engaged in marketing and commercial agency services for both EP and non-EP entities.  In 2004, AIN had operating revenues of $603 million. The unit's profitability is driven by its sales efficiency and market expertise in metals and specialty aluminas.

Alcan Service Centres (ASC) supply mainly small and mid-sized industrial companies with specialist services and fabricated products such as sheet, plate, composite materials and extrusions. ASC had third-party sales and operating revenues of  $432 million in 2004, 63% higher than in 2003. The increase mainly reflected growth in the German distribution market. While demand from the transport, building and moulding markets has improved, demand from the industrial and semi-conductor markets has weakened.

In 2004, the Specialty Sheet business unit, comprised of the Neuf-Brisach rolling mill in France, had third-party sales and operating revenues of $790 million. Sales benefited from strong demand for can stock and heat exchangers, as well as from favourable exchange rate movements. Effective January 2005, the unit also includes the Singen rolling mill in Germany.

The Ventures business unit is a new entity in EP and is made up of generally smaller businesses offering products like capacitor foil, refrigerator panels, rail and bus engineering, and composite structures for transportation. The Ventures unit had third-party sales and operating revenues of $166 million in 2004. 

Packaging
Through the acquisition and successful integration of algroup, VAW Flexible Packaging (FlexPac) and Pechiney, Alcan has become a global leader in specialty packaging for the food, pharmaceutical and medical, beauty and personal care, and tobacco markets throughout the Americas, Europe and Asia. The Packaging group offers customers a broad range of packaging solutions using a multi-material offering that includes plastics, engineered films, aluminum, paper and paperboard, as well as other materials.   Acquisitions have enabled the group to realize significant synergy benefits, including capitalizing on profitable growth opportunities created by enhanced product ranges, new geographic markets and new customer relationships.

Sales and BGP - Packaging

	2004	2003	2002
Third-party sales and operating revenues (US$M)	6,119	2,864	2,250
BGP (US$M)	657	354	288
BGP rose sharply in 2004 with the addition of former Pechiney businesses.

Third-party sales and operating revenues were $6.1 billion in 2004, more than double the previous year's level, mainly reflecting the addition of the Pechiney packaging business.  BGP for 2004 was $303 million higher than in 2003 in large part due to the contribution of former Pechiney businesses as well as operational improvements, synergies and favourable foreign currency impacts.  The increases in BGP and sales and operating revenues in 2003, as compared to 2002, mainly reflected the impact of the FlexPac acquisition in April 2003. 

Strong volume growth was achieved in 2004 across most markets while simultaneously integrating the newly-acquired businesses. Substantial operating cost reductions, resulting both from ongoing productivity programs and from the carry-over impact of prior year restructuring activities, more than offset massive increases in resin prices in the second half of the year. The full pass-through of these costs into the marketplace was not possible due to normal repricing time lags.  The pressure on margins from rising raw material costs is expected to continue through much of 2005.

Synergy programs increased 2004 results by $70 million as compared to 2003, arising from both the FlexPac and the Pechiney acquisitions. As of year-end 2004, the FlexPac synergy run-rate was nearly $50 million, well in excess of the original target of $40 million. Pechiney synergies are also exceeding expectations, particularly in purchasing.

Capital spending in 2004 was focused on synergy and growth projects identified during the merger integration process in the first half of the year. Major projects launched in 2004 included facilities for tobacco cartons and beverage labels and new pharmaceutical specialty foil capacity.  In January 2005, the Company announced it would invest in two new plants for food and tobacco packaging in Russia. Cash outlays for these projects will mainly occur in 2005. Other capital projects were directly in support of the industrial optimization and consolidation projects that were part of the synergy programs.

During the year, an operating working capital initiative was launched in order to implement best practice benchmarking across the group. This resulted in a significant reduction in the number of days of sales in operating working capital, a significant contributor to the group's cash from operations.

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Packaging Revenues by Market - 2004

Food	61%
Pharmaceutical	13%
Beauty	18%
Tobacco	8%
Total	100%

Packaging Revenues by Region - 2004

Europe	57%
North America	37%
South America	2%
Asia	4%
Total	100%

Packaging Revenues by Type of Input - 2004

Plastic	59%
Aluminum	26%
Paperboard	7%
Paper	4%
Glass	3%
Steel	1%
Total	100%

Packaging Business Sectors
The Packaging group is composed of six business sectors: Food Europe, Food Americas, Food Asia, Global Pharmaceuticals, Global Beauty and Global Tobacco.

The Food Europe flexible packaging market was soft in 2004.  Intense competition, exacerbated by ongoing consolidation of the customer base, increased tender activity and price pressure on food manufacturers from the major retail chains. Raw material prices were sharply higher during the year and proved difficult to fully pass through to the marketplace despite significant efforts. Food Europe launched several major restructuring and consolidation projects in order to accelerate synergy benefits and optimize production. Despite lower sales as compared to 2003, results improved in 2004 due to realized synergies and improved cost productivity.

Food Americas posted strong gains in 2004. Market conditions were positive across most products and several major operating initiatives were successfully realized, including the commercialization of a revolutionary puncture-resistant clear film for wrapping meat. Integration programs to focus food plants and optimize beverage label production have progressed rapidly. Key account positions and technology leadership have been strengthened by the Pechiney acquisition. Pass-through of raw material price increases is facilitated by existing contractual agreements.

Food Asia's sales grew by 13%, driven mainly by growing demand from China and a welcome recovery in Indonesia. Profit performance was, however, heavily squeezed by steep raw material price increases.  The pass through of higher raw material costs is difficult due to price competition resulting from overcapacity in most Asian markets.

Global Pharmaceutical's performance was driven primarily by strong volume and productivity improvements in global flexibles. Profit growth in the other businesses, particularly in North America, has been restrained by significantly increased raw material and healthcare costs. The plastics business was restructured in 2004 with the closure of one manufacturing site in order to better focus the businesses on its most profitable specialty pharmaceutical products and markets.

Global Beauty represents a significant new segment for Alcan. The business commands a premier worldwide supply position with the major cosmetics manufacturers across Europe and North America and includes low-cost manufacturing sites in Indonesia, China, Brazil and Mexico.  In 2004, the business benefited from important restructuring undertaken in the previous year. Significant positions have been developed in the make-up, skincare and fragrance markets.

Global Tobacco's sales grew by 7.5% in Europe and 9% in North America in 2004, despite an essentially flat worldwide market and a strong consumption decline in the developed world. Carton growth continues to be driven by substitution of soft packs and development of multinational customers. Construction of a new tobacco carton production facility in St. Petersburg, Russia, will commence early in 2005.

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Rolled Products
As discussed in the introduction to the Operating Segment Review of the MD&A, on January 6, 2005, Alcan completed the spin-off of substantially all of its rolled products businesses into a new, independent company named Novelis Inc.  During 2004, the rolled products businesses were managed under two separate operating segments within Alcan, Rolled Products Americas and Asia and Rolled Products Europe.

Following the spin-off, Alcan will continue to own five rolled product facilities, which will be under the management of the Engineered Products group.  Effective for 2005, Alcan will no longer separately report results for its remaining rolled products operations. 

Rolled Products Americas and Asia (RPAA)

Sales and Operating Revenues - RPAA

	2004	2003	2002
Third-party sales and operating revenues (US$M)	4,388	3,528	3,396

Sales and operating revenues were up 24% in 2004 compared to 2003. Approximately one half of the increase was the result of higher LME aluminum prices being passed on to customers. LME 3-month aluminum prices were up on average 21% compared to a year ago, reflecting improved aluminum industry fundamentals. The balance of the increase in sales and operating revenues largely reflected record shipments, which were up 10% compared to the prior year.  The sales increase in 2003 was driven mainly by higher LME prices being passed on to customers.

BGP and Shipments - RPAA

	2004	2003	2002
BGP (US$M)	398	344	365
Shipments * (kt)	1,774	1,612	1,613
* Includes shipments of rolled products and conversion of customer-owned metal.

RPAA posted record BGP in 2004, a 16% improvement over 2003, driven by record shipments in response to strengthening market conditions in Asia and North America and market share improvements in South America.  The recovery in market price spreads between recycled metal and primary aluminum also added to earnings, but these benefits were partially offset by the adverse impact of metal price lags, negative exchange effects due to a weakening U.S dollar as well as higher costs.

BGP for RPAA in 2003 declined by 6% compared to the 2002 performance. While shipments were at all-time highs in Asia and South America, the positive impact was offset by reduced volume in North America.  Benefits from aggressive cost reduction efforts in all regions helped counterbalance higher recycled metal and energy costs, a less favourable product mix and metal price lags, as well as the adverse impact of the strengthening Canadian dollar.  BGP in Asia and South America increased by 86% and 23%, respectively, compared to 2002.

In North America, shipments for 2004 were 7% better than the prior year due to higher volumes in all major end-use markets.  Can stock volumes were up 5% in 2004 compared to a year ago in an essentially flat market. Automotive sheet sales were a record in 2004 as sales of light trucks in the North American market remained strong, despite a 3% decline in overall automobile sales.  Industrial sheet product revenues improved both in terms of shipments and pricing mainly due to the stronger economy. Foil volumes also increased from 2003 levels with industrial and transportation foil achieving record annual shipments.

South American economies strengthened somewhat in 2004.  As the only local can sheet producer, RPAA was well positioned to grow can sheet sales by 18%, exceeding the improvement in the overall can market. Overall, shipments reached record levels and were 14% higher than in 2003.

Taking full advantage of can sheet qualifications achieved in 2002 and continued improvements in operating performance in 2004, the Company's rolled products joint venture in Korea capitalized on strong demand, most notably in China, which led to record production and sales volumes.  Total shipments for the year were 15% higher than the prior year.

Rolled Products Europe (RPE)

Sales and Operating Revenues - RPE

	2004	2003	2002
Third-party sales and operating revenues (US$M)	3,217	2,458	2,238

In 2004, RPE had sales and operating revenues of $3.2 billion, representing an increase of 31% compared to the prior year, and shipments of 982 kt, an improvement of 21% over 2003.  The impact of higher LME prices passed on to customers accounted for most of the improvement in sales and operating revenues, while higher shipments from the acquisition of four Pechiney rolling plants and foreign currency translation effects accounted for the remaining improvement.

21

In 2003, higher realized prices, as a result of the stronger euro and a change in business mix, more than offset the decline in RPE's shipments, leading to higher revenues as compared to 2002.

BGP and Shipments - RPE

	2004	2003	2002
BGP (US$M)	250	224	168
Shipments * (kt)	982	813	836
* Includes shipments of rolled products and conversion of customer-owned metal.

During 2004, market conditions were generally difficult in Europe. The euro continued to strengthen versus the U.S. dollar, slowing down overseas exports. Unemployment remained at high levels, having a negative impact on domestic spending. This was particularly felt in the building and construction, foil and packaging markets, which showed little, if any, growth.

The impact of the weak economic environment was less pronounced in the automotive sheet market as it mainly caters to the higher-end car segments.  Demand growth for aluminum automotive sheet, albeit lower than in previous years, remained a solid 10% in 2004.

The market for beverage can grew by 6% driven by line conversions in Western Europe, with a switch from steel to aluminum, and the strong growth for these products in the Eastern European countries, in particular in Russia. The market for lithographic sheet continued its strong growth observed in previous years, especially in Asia, growing by 7% in 2004.

RISKS AND UNCERTAINTIES

For further details, refer to note 28, Commitments and Contingencies, note 29, Currency Gains and Losses and note 30, Financial Instruments and Commodity Contracts, of the consolidated financial statements.

Risk Management
As a multinational company, which is to a large degree engaged in a commodity-related business, Alcan's financial performance is heavily influenced by fluctuations in the price of aluminum and exchange rates. In order to reduce a portion of the associated risks, the Company uses a variety of financial instruments and commodity contracts. Clearly defined policies and management controls govern all risk management activities. Transactions in financial instruments for which there is no underlying exposure to the Company are prohibited, except for a small metal trading portfolio not exceeding 24,000 tonnes, which is marked to market. 

The decision whether and when to commence a hedge, along with the duration of the hedge, can vary from period to period depending on market conditions and the relative costs of various hedging instruments. The duration of a hedge is always linked to the timing of the underlying exposure, with the connection between the two being constantly monitored to ensure effectiveness.

Sensitivities

The following table provides the estimated annualized after-tax impact of currency and LME price movements on net income from continuing operations. Sensitivities are post the Novelis spin-off.

	Increase in rate / price	US$M	US$ per share
Economic impact of changes in period-average exchange rates
Canadian dollar	+ US$0.10	$ (110)	$ (0.30)
European currencies	+ US$0.10	$   (56)	$ (0.15)
Australian dollar	+ US$0.10	$   (40)	$ (0.11)
Balance sheet translation impact of changes in period-end exchange rates
Canadian dollar	+ US$0.10	$ (170)	$ (0.46)
Australian dollar	+ US$0.10	$   (20)	$ (0.05)
Economic impact of changes in period-average LME prices*
Aluminum	+ US$100/t	$  170	$ 0.46
*Realized prices generally lag LME price changes by one month. Changes in local and regional premium may also impact aluminum price realizations.  Sensitivities are updated as required to reflect changes in the Company's commercial arrangements and portfolio of operations.  Not included are sensitivities to energy and raw material prices, which may have significant impacts.

22

Foreign Currency Exchange
Exchange rate movements, particularly between the Canadian dollar and the U.S. dollar, have an impact on Alcan's costs and therefore its net results. Because the Company has significant operating costs denominated in Canadian dollars while its functional currency is the U.S. dollar for most Canadian operations, it benefits from a weakening in the Canadian dollar but, conversely, is disadvantaged if it strengthens.

The Company's deferred income tax liabilities and net monetary liabilities for operations in Canada and Australia are translated into U.S. dollars at current rates. The resultant exchange gains or losses are included in income and fluctuate from quarter to quarter depending on the changes in exchange rates. A decrease in the Canadian and Australian dollars results in a favourable effect, whereas an increase results in an unfavourable impact. 

Aluminum Prices
Depending on market conditions and logistical considerations, Alcan may sell primary aluminum to third parties and may purchase primary aluminum and secondary aluminum, including scrap, on the open market to meet the requirements of its fabricating businesses. In addition, depending on pricing arrangements with fabricated products customers, Alcan may hedge some of its purchased metal supply in support of those sales.  Through the use of forward purchase and sale contracts and options, Alcan seeks to limit the impact of lower metal prices.

Critical Accounting Policies and Estimates
The Company's significant accounting policies are presented in note 3, Summary of Significant Accounting Policies, of the consolidated financial statements.  The critical accounting policies and estimates described below are those that are both most important to the portrayal of the Company's financial condition and results and require management's most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.  They have been reviewed and approved by our Audit Committee, in consultation with management, as part of their review and approval of our significant accounting policies and estimates.  We believe that our estimates for determining the valuation of our assets and liabilities are appropriate.  However, given the uncertainties involved, it is possible that they will be significantly revised in the future, which could have material adverse effects on the Company's reported earnings.

Post-Retirement Benefits
Net periodic cost of post-retirement benefits includes the actuarially computed cost of benefits earned during the current service period, the interest cost on accrued obligations, the expected return on plan assets based on fair market value and the straight-line amortization of net actuarial gains and losses and adjustments due to plan amendments.  All net actuarial gains and losses are amortized over the expected average remaining service life of the employees.  The costs and obligations of pension and other post-retirement benefits are calculated based on assumptions determined by management, with the assistance of independent actuarial firms and consultants.  These assumptions include the long-term rate of return on pension assets, discount rates for pension and other post-retirement benefits obligations, expected service period, salary increases, retirement ages of employees and healthcare cost trend rates.  These assumptions bear the risk of change as they require significant judgment and they have inherent uncertainties that management may not be able to control. The two most significant assumptions used to calculate the obligations in respect of the net employee benefit plans are the discount rates for pension and other post-retirement benefits, and the expected return on assets.  The discount rate for pension and other post-retirement benefits is the interest rate used to determine the present value of benefits.  It is based on the yield on long-term high-quality corporate fixed income investments at the end of each fiscal year.  The weighted-average discount rate was 5.3% as at December 31, 2004, compared to 5.6% for 2003 and 5.8% for 2002. An increase in the discount rate of 0.5%, assuming inflation remains unchanged, will result in a decrease of $650 million in the pension and other post-retirement obligations and in a decrease of $56 million in the net periodic benefit cost.  A decrease in the discount rate by 0.5%, assuming inflation remains unchanged, will result in an increase of $ 698 million in the pension and other post-retirement obligations and in an increase of $ 51 million in the net periodic benefit cost. The calculation of the estimate of the expected return on assets is described in note 32, Post-Retirement Benefits, of the consolidated financial statements.  The weighted-average expected return on assets was 7.0% for 2004, 7.1% for 2003 and 7.1% for 2002.  The expected return on assets is a long-term assumption whose accuracy can only be measured over a long period based on past experience.  Over the 15-year period ended December 31, 2004, the average actual return on assets exceeded the expected return by 0.9% per year. A variation in the expected return on assets by 0.5% will result in a variation of approximately $41 million in the net periodic benefit cost.

Environmental Liabilities
Environmental expenses that are not legal asset retirement obligations are accrued on an undiscounted basis when it is probable that a liability for past events exists. In determining whether a liability exists, the Company is required to make judgments as to the probability of a future event occurring.  The Company's judgments regarding the probability are subject to the risk of change, as it must make assumptions about events that may or may not occur in the distant future.  Changes could occur due to such factors as the extent of contamination, a technical change and changes in remedial requirements or nature.  If the Company's judgments differ from those of legal or regulatory authorities, the provisions for environmental expense could increase or decrease significantly in future periods. The Company consults with its external legal counsel on all material environmental matters.  In order to estimate the likelihood of a future event occurring, the Company and its legal counsel exercise their professional judgment based on case facts and experience.

23

Property, Plant and Equipment
Due to changing economic and other circumstances, the Company regularly reviews the carrying amount of its property, plant and equipment (PP&E) for impairment.  Accounting standards require that an impairment loss be recognized when the carrying amount of a long-lived asset held for use is not recoverable and exceeds its fair value.  The fair value of an asset is the amount at which that asset can be bought or sold in a current transaction between willing parties, that is, other than a forced or liquidated sale.  Where market prices are not readily available, the estimate of fair value is based on the best information available, including prices for similar assets and the results of using other valuation techniques.  For the most part, the Company uses an expected present value technique to measure the fair value of long term assets. In estimating future cash flows, the Company uses its internal plans, which incorporates management's judgments as to the remaining service potential of long-lived assets.  These internal plans reflect management's best estimates; however they are subject to the risk of change as they have inherent uncertainties that management may not be able to control.  The amount of impairment to be recognized is calculated by subtracting the fair value of the asset from the carrying amount of the asset. As discussed in the notes to the consolidated financial statements, the Company reviewed specific PP&E for impairment in 2004 due to situations where circumstances indicated that the carrying value of specific assets could not be recovered.  The Company made assumptions about the undiscounted sum of the expected future cash flows from these assets and determined that they were less than their carrying amount, resulting in the recognition of an impairment in accordance with GAAP. Actual results could differ significantly from those estimates. The Company cannot predict whether an event that triggers an impairment of PP&E will occur or when it will occur, nor can it estimate what effect it will have on the carrying values of these assets.  However, the effect could be material.

Goodwill
As reported in note 4, Accounting Changes, of the consolidated financial statements, effective January 2002, goodwill is no longer amortized but is tested annually for impairment at the reporting unit level.  Impairment is determined by comparing the fair value of the reporting unit to its carrying value.  The estimate of fair value of a reporting unit and the assets and liabilities within a reporting unit are based on a net present value approach, which includes making assumptions and estimates in a number of areas, including future cash flows, cash flow periods, terminal values and discount rates. In estimating future cash flows, the Company uses its internal plans.  These plans reflect management's best estimates; however, they are subject to change as they have inherent uncertainties that management may not be able to control. In estimating the fair value of a reporting unit, different ranges are used for future cash flow periods as well as for terminal growth rates, depending on the business group. The Bauxite and Alumina business group, for the most part, bases future cash flow periods on the total operating life of the business unit, and assumes no terminal value, while the remaining business groups use, for the most part, a range of 5 to 15 years for future cash flow periods and base terminal values on growth rates ranging from -2% to +2%.  A discount rate of 7.4%, which is the Company's estimated weighted-average cost of capital, is used.  A variance in the estimated weighted-average cost of capital could have a significant impact on the amount of the goodwill impairment charge recorded, and actual results could differ significantly from those estimates.  Upon adoption of this standard, an impairment of $748 million (including $8 million related to assets held for sale) was identified in the goodwill balance as at January 1, 2002, and was charged as a cumulative effect of an accounting change in the consolidated statement of income in 2002. In 2004 an impairment charge of $154 million was identified (2003: $28 million).

Income Taxes
The provision for income taxes is calculated based on the expected tax treatment of transactions recorded in the Company's consolidated financial statements. In determining a provision for income taxes, the Company interprets tax legislation in a variety of jurisdictions and makes assumptions about the expected timing of the reversal of future tax assets and liabilities.   Income tax assets and liabilities, both current and deferred, are measured according to enacted income tax legislation that is expected to apply when the asset is realized or the liability settled.  The Company regularly reviews the recognized and unrecognized deferred income tax assets to determine whether a valuation allowance is required or needs to be adjusted. In forming a conclusion about whether it is appropriate to recognize a tax asset, the Company must use judgment in assessing the potential for future recoverability, while at the same time considering past experience.  The Company's conclusion of whether it is more likely than not that deferred assets will be realized includes making assessments of expectations of future taxable income. All available evidence is considered in determining the amount of a valuation allowance.  If the Company's interpretations differ from those of tax authorities or judgments with respect to tax losses change, the income tax provision could increase or decrease, potentially significantly, in future periods.

Business Combinations
The Company accounts for business acquisitions using the purchase method.  Under this method, the cost of a purchase is allocated to the estimated fair values of the net assets acquired.   When the Company completes an acquisition towards the end of its fiscal year or the acquired enterprise is very large, the Company makes tentative estimates of the fair values of the net assets acquired as it is still in the process of gathering all the relevant data.  Accordingly, the final fair values of the net assets acquired could differ materially from the tentative amounts. Changes from the tentative amounts could have a significant impact on the Company's net income, including depreciation and amortization, and income taxes.  In the case of the Pechiney acquisition completed on December 15, 2003, the significant elements for which the fair values differed from the tentative amounts included property, plant and equipment, goodwill, and deferred charges and other assets.  The Company completed the final valuation of Pechiney's net assets in the fourth quarter of 2004.

24

Reconciliation of Canadian to U.S. GAAP

A reconciliation of Alcan's Consolidated Statement of Income and Consolidated Balance Sheet between U.S. GAAP and Canadian GAAP is contained in note 35 of the financial statements.  The impact of material differences is discussed below.

GAAP	2004		2003		2002
(US$ per common share)	Cdn	U.S.	Cdn	U.S.	Cdn	U.S.
Income from continuing operations per share — basic	0.66	0.67	0.95	0.79	1.14	1.29
Net income (Loss) per share — basic	0.68	0.69	0.46	0.18	1.07	(1.10)

In 2004, net income per common share under Canadian GAAP was $0.68 compared to $0.69 under U.S. GAAP.  In 2003, net income per common share under Canadian GAAP was $0.46 compared to $0.18 under U.S. GAAP.  The principal reasons for the difference were the cumulative effect of an accounting change for asset retirement obligations, acquired in-process research and development and derivatives.  In 2002, net income (loss) per common share under Canadian GAAP was $1.07 compared to ($1.10) under U.S. GAAP.  The principal reasons for the difference were derivatives and the cumulative effect of an accounting change for impairment of goodwill. The differences in net income had no material impact on the discussion of results of operations for the periods presented.

Joint Ventures
The major ongoing difference between U.S. GAAP and Canadian GAAP deals with the accounting for joint ventures.  Under U.S. GAAP, joint ventures, other than those over which Alcan has an undivided interest in the assets, are accounted for using the equity method while under Canadian GAAP, joint ventures are accounted for using the proportionate consolidation method.  This different accounting treatment affects only the display and classification of financial statement items and has no impact on net income or shareholders' equity.  This difference had no material impact on the discussion of the results of operations.  The major impact of the difference in accounting treatment on the balance sheet was to increase (decrease) operating working capital in continuing operations at December 31, 2004, by $30 million compared to $7 million at December 31, 2003, and ($93) million at December 31, 2002, under Canadian GAAP compared to U.S. GAAP.  Under Canadian GAAP, net property, plant and equipment at December 31, 2004, was $1,179 million higher than under U.S. GAAP compared to  $831 million at December 31, 2003, and $687 million at December 31, 2002. Under Canadian GAAP, goodwill was higher by $837 million at December 31, 2004, compared to $174 million at December 31, 2003, and $168 million at December 31, 2002.  Under Canadian GAAP, deferred charges and other assets (which include investments accounted for under the equity method) were $1,618 million lower at December 31, 2004, compared to $664 million at December 31, 2003, and $504 million at December 31, 2002, as compared to U.S. GAAP.

Debt as a percentage of invested capital as at December 31, 2004, December 31, 2003, and December 31, 2002, was essentially the same under Canadian and U.S. GAAP.  For 2004, interest expense under Canadian GAAP was higher than under U.S. GAAP by $11 million compared to $6 million for 2003 and $3 million for 2002. 

Accounting for Derivatives
Beginning in 2004, Canadian GAAP is aligned with U.S. GAAP with respect to the criteria to be met for hedge accounting.  For certain derivatives as at December 31, 2003, that do not qualify for hedge accounting in 2004 under Canadian GAAP but qualified for hedge accounting prior to 2004 under Canadian GAAP but not under U.S. GAAP, there will be an impact on the Company's Canadian GAAP income for a transitional period ending with the maturities of the derivatives.  Under U.S. GAAP, these derivatives had been marked-to-market prior to December 31, 2003.

In addition, Canadian GAAP does not permit the recognition of embedded derivatives. 

The impact of the different accounting treatments for derivatives was to increase (decrease) net income under Canadian GAAP by $1 million, $21 million and ($40) million for the years ended December 2004, 2003 and 2002, respectively.  This difference had no material impact on the discussion of results for the periods presented.

In addition, because Canadian GAAP does not have the concept of Other Comprehensive Income, certain amounts related to cash flow hedges classified in shareholders' equity on the balance sheet under U.S. GAAP were reclassified to various asset and liability accounts under Canadian GAAP.

Minimum Pension Liability
Canadian GAAP does not require the recognition of a minimum pension liability if the accumulated benefit obligation exceeds the market value of plan assets.   This difference had no impact on net income but did result in shareholders' equity under Canadian GAAP being higher by $548 million at December 31, 2004, compared to $350 million at December 31, 2003, and $319 million at December 31, 2002.  At December 31, 2004, total assets were lower by $253 million compared to $224 million at December 31, 2003, and $143 million at December 31, 2002. As at December 31, 2004, total pension liabilities were lower by $1,036 million compared to $730 million at December 31, 2003, and $610 million at December 31, 2002, under Canadian GAAP.

25

Acquired In-Process Research and Development
In-process research and development acquired from Pechiney amounted to $50 million.  Under Canadian GAAP, the amount is amortized over 15 years.  Under U.S. GAAP, it was expensed in 2003.

Asset Retirement Obligations
U.S. GAAP net income for 2003, included an after-tax charge of $39 million for the cumulative effect of an accounting change which, under Canadian GAAP was treated as an adjustment to retained earnings.

Impairment of Goodwill
U.S. GAAP net income for 2002, included a charge of $748 million for the cumulative effect of an accounting change which, under Canadian GAAP was treated as an adjustment to retained earnings.

Cautionary Statement

Statements made in this report which describe the Company's or management's objectives, projections, estimates, expectations or predictions of the future may be forward-looking statements within the meaning of securities laws, which can be identified by the use of forward-looking terminology such as believes, expects, may, will, should, estimates, anticipates or the negative thereof or other variations thereon.  The Company cautions that, by their nature, forward-looking statements involve risk and uncertainty and that the Company's actual actions or results could differ materially from those expressed or implied in such forward-looking statements or could affect the extent to which a particular projection is realized.  Important factors which could cause such differences include global supply and demand conditions for aluminum and other products, aluminum ingot prices and changes in raw materials' costs and availability, changes in the relative value of various currencies, cyclical demand and pricing within the principal markets for the Company's products, changes in government regulations, particularly those affecting environmental, health or safety compliance, economic developments, relationships with and financial and operating conditions of customers and suppliers, the effects of integrating acquired businesses and the ability to attain expected benefits, the Company's ability to dispose of assets at the anticipated prices and other factors within the countries in which the Company operates or sells its products and other factors relating to the Company's ongoing operations including, but not limited to, litigation, labour negotiations and fiscal regimes.  The aluminum market overview contained in this report is based on research that includes information from sources believed to be reliable, but Alcan does not make any representation that it is accurate in every detail. The aluminum market overview represents the Company's views as of March 16, 2005.

EX-99.4

Responsibility for the Annual Report
Alcan's management is responsible for the preparation, integrity and fair presentation of the financial statements and other information in the Annual Report. The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and include, where appropriate, estimates based on the best judgment of management. A reconciliation with Canadian generally accepted accounting principles is also presented. Financial and operating data elsewhere in the Annual Report are consistent with that contained in the accompanying financial statements.

Alcan's policy is to maintain systems of internal accounting, administrative and disclosure controls of high quality consistent with reasonable cost. Such systems are designed to provide reasonable assurance that the financial information is accurate and reliable and that Company assets are adequately accounted for and safeguarded. The Board of Directors oversees the Company's systems of internal accounting, administrative and disclosure controls through its Audit Committee, which is comprised of directors who are not employees. The Audit Committee meets regularly with representatives of the shareholders' independent auditors and management, including internal audit staff, to satisfy themselves that Alcan's policy is being followed. In addition, a Disclosure Committee of management has been established to manage disclosure of corporate information and oversee the functioning of the Company's disclosure controls and procedures.

The Audit Committee has recommended the appointment of PricewaterhouseCoopers LLP as the independent auditors, subject to approval by the shareholders.

The financial statements have been reviewed by the Audit Committee and, together with the other required information in this Annual Report, approved by the Board of Directors. In addition, the financial statements have been audited by PricewaterhouseCoopers LLP, whose report is provided below.

((Signature))
Travis Engen, President and Chief Executive Officer

((Signature))
Geoffery E. Merszei, Executive Vice-President and Chief Financial Officer
March 16, 2005

Management's Report on Internal Control over Financial Reporting

Management of Alcan is responsible for establishing and maintaining adequate internal control over financial reporting. Alcan's internal control over financial reporting is a process designed under the supervision of Alcan's principal executive and principal financial officers to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the Company's financial statements for external reporting purposes in accordance with accounting principles generally accepted in the United States of America.

As of December 31, 2004, management conducted an assessment of the effectiveness of the Company's internal control over financial reporting based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). This assessment identified one control deficiency in the Company's internal control over financial reporting that constitutes a material weakness, as defined by the Public Company Accounting Oversight Board's Auditing Standard No. 2, that existed as of December 31, 2004.  The deficiency in question was that the Company's methodology for allocating goodwill resulted in an excess allocation of goodwill to one reporting unit consisting of certain fabricating businesses acquired in the Pechiney Combination and for which the Company properly determined goodwill to be impaired in the fourth quarter of 2004.  The excess allocation of goodwill to the reporting unit resulted in an overstatement of the fourth quarter 2004 goodwill impairment charge of which $109 million related to this material weakness.  The appropriate corrections were made prior to the completion of the financial statements and resulted in an increase to the Company's net income for the year and for the fourth quarter of 2004, but did not have any effect on previously filed financial statements.  Because of the existence of the deficiency in question at year-end, management has concluded that the Company's internal control over financial reporting was ineffective as of December 31, 2004.

Management's assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2004 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing below, which expresses an unqualified opinion on management's assessment and, due to the control deficiency described above, an adverse opinion with respect to the effectiveness of the Company's internal control over financial reporting as of December 31, 2004.

Remediation of the Deficiency

The deficiency in question was corrected by making appropriate changes to the Company's documented accounting policies and procedures for allocating goodwill to reporting units acquired in a business combination.

OECD Guidelines

The Organization for Economic Cooperation and Development (OECD), which consists of 30 industrialized countries including Canada, has established guidelines setting out an acceptable framework of reciprocal rights and responsibilities between multinational enterprises and host governments. Alcan supports and complies with the OECD guidelines and has a Worldwide Code of Employee and Business Conduct, which is consistent with them.

1

Independent Auditors' Report

To the Shareholders of Alcan Inc.

We have audited the accompanying consolidated balance sheets of Alcan Inc. (the "Company") as at December 31, 2004, 2003 and 2002 and the related consolidated statements of income, shareholders' equity and cash flows for each of the years in the three-year period ended December 31, 2004. We have also audited the effectiveness of the Company's internal control over financial reporting as at December 31, 2004, based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") and management's assessment thereof, included in the accompanying Management's Report on Internal Control over Financial Reporting.  The Company's management is responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express an opinion on these financial statements, an opinion on management's assessment and an opinion on the effectiveness of the Company's internal control over financial reporting based on our audits.

A company's internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

We conducted our audits of the Company's financial statements 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 plan and perform an audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. A financial statement audit also includes assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We conducted our audit of the effectiveness of the Company's internal control over financial reporting and management's assessment thereof in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, evaluating management's assessment, testing and evaluating the design and operating effectiveness of internal control and performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

A material weakness is a control deficiency, or combination of control deficiencies, that results in more than a remote likelihood that a material misstatement of the annual or interim financial statements will not be prevented or detected. The following material weakness has been identified and included in management's assessment. The deficiency in question was that the Company's methodology for allocating goodwill resulted in an excess allocation of goodwill to one reporting unit consisting of certain fabricating businesses acquired in the Pechiney Combination and for which the Company properly determined goodwill to be impaired in the fourth quarter of 2004.  The excess allocation of goodwill to the reporting unit resulted in an overstatement of the fourth quarter 2004 goodwill impairment charge.  The appropriate corrections were made prior to the completion of the financial statements and resulted in an increase to the Company's net income for the year and for the fourth quarter of 2004, but did not have any effect on previously filed financial statements.  Such a control deficiency, if not remediated, could result in a material misstatement to the financial statements that would not be prevented or detected.  This material weakness was considered in determining the nature, timing, and extent of audit tests applied in our audit of the 2004 consolidated financial statements, and our opinion regarding the effectiveness of the Company's internal control over financial reporting does not affect our opinion on those consolidated financial statements.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as at December 31, 2004, 2003 and 2002 and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 2004 in accordance with accounting principles generally accepted in the United States of America. Also, in our opinion, management's assessment that the Company did not maintain effective internal control over financial reporting as of December 31, 2004, is fairly stated, in all material respects, based on criteria established in Internal Control - Integrated Framework issued by the COSO. Also, in our opinion, because of the effect of the material weakness described above on the achievement of the objectives of the control criteria, the Company has not maintained effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control - Integrated Framework issued by the COSO.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

((Signature))

PricewaterhouseCoopers LLP
Chartered Accountants
Montreal, Quebec

March 16, 2005

2

Independent Auditors' Report (cont'd)

Comments by Auditor on Canada-U.S. Reporting Differences

In the United States, reporting standards for auditors require the addition of an explanatory paragraph (following the opinion paragraph) when there is a change in accounting principles that has a material effect on the comparability of the company's financial statements, such as the changes described in Note 4 to the financial statements. Although we conducted our audit in accordance with both Canadian generally accepted auditing standards and standards of the Public Company Accounting Oversight Board (United States), our report to the Shareholders of Alcan Inc. dated March 16, 2005, with respect to the financial statements, is expressed in accordance with Canadian reporting standards which do not permit a reference to such a change in accounting principles in the auditors' report when the change is properly accounted for and adequately disclosed in the financial statements.

((Signature))

PricewaterhouseCoopers LLP
Montreal, Quebec
March 16, 2005

3

Alcan Inc.

CONSOLIDATED STATEMENT OF INCOME
Year ended December 31
(in millions of US$, except per share amounts)

	2004	2003	2002
Sales and operating revenues	24,885	13,850	12,483
Costs and expenses
Cost of sales and operating expenses, excluding depreciation and
amortization noted below	20,203	11,171	10,032
Depreciation and amortization (NOTE 9)	1,337	862	772
Selling, administrative and general expenses	1,612	758	580
Research and development expenses	239	190	115
Interest	346	212	198
Goodwill impairment (NOTE 9)	154	28	-
Other expenses (income) - net (NOTE 16)	406	131	119
	24,297	13,352	11,816
Income from continuing operations before income taxes and
other items	588	498	667
Income taxes (NOTE 11)	375	258	287
Income from continuing operations before other items	213	240	380
Equity income (NOTE 12)	54	38	44
Minority interests	(15)	(16)	(3)
Income from continuing operations	252	262	421
Income (Loss) from discontinued operations (NOTE 5)	6	(159)	(21)
Income before cumulative effect of accounting changes	258	103	400
Cumulative effect of accounting changes, net of income
taxes of nil ($17 in 2003 and nil in 2002) (NOTES 4 AND 9)	-	(39)	(748)
Net income (Loss)	258	64	(348)
Dividends on preference shares	6	7	5
Net income (Loss) attributable to common shareholders	252	57	(353)
Earnings (Loss) per share (NOTE 6)
Basic and Diluted
Income from continuing operations	0.67	0.79	1.29
Income (Loss) from discontinued operations	0.02	(0.49)	(0.07)
Cumulative effect of accounting changes	-	(0.12)	(2.32)
Net income (Loss) per common share - basic and diluted	0.69	0.18	(1.10)
Dividends per common share	0.60	0.60	0.60

The accompanying notes are an integral part of the financial statements.

4

 Alcan Inc.

CONSOLIDATED BALANCE SHEET

As at December 31
(in millions of US$, except where indicated)

	2004	2003	2002
ASSETS
Current assets
Cash and time deposits	184	686	97
Trade receivables (net of allowances of $99 in 2004, $92 in 2003,
and $56 in 2002) (NOTES  14 AND 15)	3,232	2,937	1,390
Other receivables	936	686	676
Deferred income taxes (NOTE 11)	214	49	-
Inventories (NOTE 17)	4,029	3,663	1,862
Current assets held for sale (NOTE 5)	817	1,093	116
Total current assets	9,412	9,114	4,141
Deferred charges and other assets (NOTE 18)	2,877	1,563	1,178
Deferred income taxes (NOTE 11)	870	892	189
Property, plant and equipment (NOTE 19)
Cost (excluding construction work in progress)	21,922	22,030	16,238
Construction work in progress	816	637	516
Accumulated depreciation	(9,445)	(8,509)	(7,319)
	13,293	14,158	9,435
Intangible assets, net of accumulated amortization of  $172 in 2004,
$86 in 2003, and $52 in 2002 (NOTE 9)	1,230	1,160	452
Goodwill (NOTE 9)	5,496	4,686	2,136
Long-term assets held for sale (NOTE 5)	163	375	230
Total assets	33,341	31,948	17,761

5

Alcan Inc.

CONSOLIDATED BALANCE SHEET (cont'd)

As at December 31
(in millions of US$, except where indicated)

	2004	2003	2002
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Payables and accrued liabilities	5,464	4,846	2,483
Short-term borrowings	2,486	1,764	378
Debt maturing within one year (NOTE 23)	569	341	249
Deferred income taxes (NOTE 11)	23	81	-
Current liabilities of operations held for sale (NOTE 5)	714	559	69
Total current liabilities	9,256	7,591	3,179
Debt not maturing within one year (NOTES 23 AND 29)	6,345	7,437	3,120
Deferred credits and other liabilities (NOTE 22)	4,975	4,306	1,996
Deferred income taxes (NOTE 11)	1,543	1,696	1,010
Long-term liabilities of operations held for sale (NOTE 5)	260	238	14
Minority interests	236	403	150
Shareholders' equity
Redeemable non-retractable preference shares (NOTE 24):
Series C: stated value $106, issuable in series, unlimited; number of
shares authorized and outstanding 5,700,000	106	106	106
Series E: stated value $54, issuable in series, unlimited; number of
shares authorized and outstanding 3,000,000	54	54	54
Common shareholders' equity
Common shares, unlimited number of shares authorized, outstanding
(in thousands): 369,930 in 2004; 365,181 in 2003; 321,470 in 2002 (NOTE 25)	6,670	6,461	4,731
Additional paid-in capital  (NOTES 8 AND 26)	112	128	42
Retained earnings (NOTE 27)	3,362	3,331	3,467
Common shares held by a subsidiary (NOTE 25)	(35)	(56)	-
Accumulated other comprehensive income (loss)	457	253	(108)
	10,566	10,117	8,132
	10,726	10,277	8,292
Commitments and contingencies (NOTE 28)
Total liabilities and shareholders' equity	33,341	31,948	17,761

The accompanying notes are an integral part of the financial statements.

Approved by the Board:

((Signature))
Travis Engen, Director
((Signature))
L. Denis Desautels, Director

6

Alcan Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS

Year ended December 31
(in millions of US$)

	2004	2003	2002
OPERATING ACTIVITIES
Net income (Loss)	258	64	(348)
Loss (Income) from discontinued operations	(6)	159	21
Income (Loss) from continuing operations	252	223	(327)
Adjustments to determine cash from operating activities:
Cumulative effect of accounting changes	-	39	748
Depreciation and amortization	1,337	862	772
Deferred income taxes	45	(2)	91
Equity income, net of dividends	(16)	(11)	(18)
Asset impairment provisions	98	36	33
Goodwill impairment	154	28	-
Stock option compensation	11	13	11
Write-off of acquired in-process research and development	-	50	-
Loss (Gain) on sales of businesses and investment - net	(47)	(44)	9
Change in operating working capital
Change in  receivables	(435)	339	73
Change in inventories	24	69	86
Change in payables and accrued liabilities	233	61	(112)
Change in deferred charges, other assets, deferred credits
and other liabilities - net	27	101	171
Other - net	79	37	(18)
Cash from operating activities in continuing operations	1,762	1,801	1,519
Cash from operating activities in discontinued operations	110	11	15
Cash from operating activities	1,872	1,812	1,534
FINANCING ACTIVITIES
Proceeds from issuance of new debt	1,768	3,638	816
Debt repayments	(1,615)	(593)	(1,093)
Short-term borrowings - net	(543)	577	(209)
Common shares issued *	100	42	16
Dividends
- Alcan shareholders (including preference)	(227)	(200)	(197)
- Minority interests	(13)	(11)	(6)
Other	(11)	-	-
Cash from (used for) financing activities in continuing operations	(541)	3,453	(673)
Cash from (used for) financing activities in discontinued operations	(35)	(29)	2
Cash from (used for)  financing activities	(576)	3,424	(671)

* Excludes the non-cash impact of common shares issued in exchange for Pechiney securities.  See note 8 - Acquisition of Pechiney.

The accompanying notes are an integral part of the financial statements.

7

Alcan Inc.

CONSOLIDATED STATEMENT OF CASH FLOWS (cont'd)

Year ended December 31
(in millions of US$)

	2004	2003	2002
INVESTMENT ACTIVITIES
Purchase of property, plant and equipment	(1,289)	(838)	(627)
Business acquisitions, net of cash and time deposits acquired (NOTES 8 AND 20)	(466)	(3,819)	(346)
Net proceeds from disposal of businesses, investments and other assets	35	63	113
Other	(8)	-	-
Cash used for investment activities in continuing operations	(1,728)	(4,594)	(860)
Cash from (used for) investment activities in discontinued operations	(22)	17	(19)
Cash used for investment activities	(1,750)	(4,577)	(879)
Effect of exchange rate changes on cash and time deposits	16	21	10
Increase (Decrease) in cash and time deposits	(438)	680	(6)
Cash and time deposits ─ beginning of year	778	98	104
Cash and time deposits ─  end of year in continuing operations	184	686	97
Cash and time deposits ─  end of year in current assets held for sale (NOTE 5)	156	92	1
Cash and time deposits ─  end of year	340	778	98

The accompanying notes are an integral part of the financial statements.

8

Alcan Inc.

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY

Year ended December 31
(in millions of US$)

	Comprehen-sive Income	Preference Shares - Series C and E	Common Shares	Additional Paid-In Capital	Retained Earnings	Common Shares Held by a Subsidiary	Accumulated Other Comprehensive Income (Loss)	Total Shareholders' Equity
Balance at end of 2001		160	4,713	33	4,012	-	(348)	8,570
Loss - 2002	(348)				(348)			(348)
Other comprehensive income:
Net change in deferred translation
adjustments	413
Net change in excess of market value
over book value of  "available-for-
sale" securities	8
Reclassification to net income	(10)
Net change in minimum pension liability
- net of taxes of $81	(171)						240	240
Comprehensive loss	(108)
Dividends:
Preference					(5)			(5)
Common					(192)			(192)
Stock option expense				11				11
Exercise of stock options			2	(2)				-
Common shares issued for cash:
Executive share option plan			7					7
Dividend reinvestment and share
purchase plans			9					9
Balance at end of 2002		160	4,731	42	3,467	-	(108) a	8,292
Net income  - 2003	64				64			64
Other comprehensive income:
Net change in deferred translation
adjustments	404
Net change in excess of market value
over book value of  "available-for-
sale" securities	8
Reclassification to net income	(8)
Net change in minimum pension liability  -
net of taxes of $8	(31)
Net change in unrealized gains and
losses on derivatives, net of taxes
of $5:
Net change from periodic
revaluations	(12)						361	361
Comprehensive income	425
Dividends:
Preference					(7)			(7)
Common					(193)			(193)
Stock option expense				13				13
Exercise of stock options			7	(7)				-
Cost of Pechiney options				80				80
Common shares held by a subsidiary						(56)		(56)
Common shares issued for cash:
Executive share option plan			22					22
Dividend reinvestment and share
purchase plans			20					20
Common shares issued in exchange
for tendered Pechiney securities			1,681					1,681
Balance at end of 2003		160	6,461	128	3,331	(56)	253 b	10,277

9

Alcan Inc.

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (cont'd)

Year ended December 31
(in millions of US$)

	Comprehen- sive Income	Preference Shares - Series C and E	Common Shares	Additional Paid-In Capital	Retained Earnings	Common Shares Held by a Subsidiary	Accumulated Other Comprehensive Income (Loss)	Total Shareholders' Equity
Net income  - 2004	258				258			258
Other comprehensive income:
Net change in deferred translation
adjustments	454
Net change in excess of market value
over book value of  "available-for-
sale" securities	2
Reclassification to net income	-
Net change in minimum pension liability  -
net of taxes of $82	(200)
Net change in unrealized gains and
losses on derivatives, net of taxes
of $24:
Net change from periodic
revaluations	(65)
Net amount reclassified to income	13						204	204
Comprehensive income	462
Dividends:
Preference					(6)			(6)
Common					(221)			(221)
Stock option expense				11				11
Exercise of stock options			27	(27)				-
Common shares held by a subsidiary						21		21
Common shares issued for cash:
Executive share option plan			60					60
Dividend reinvestment and share
purchase plans			28					28
Liquidity Agreement			12					12
Common shares issued in exchange
for tendered Pechiney securities			82					82
Balance at end of 2004		160	6,670	112	3,362	(35)	457 c	10,726

a.     Comprised of deferred translation adjustments of $205, unrealized gain on "available-for-sale" securities of $6, and minimum pension liability of  ($319).

b.    Comprised of deferred translation adjustments of $609, unrealized gain on "available-for-sale" securities of $6, minimum pension liability of ($350) and unrealized loss on derivatives of ($12).

c.     Comprised of deferred translation adjustments of $1,063, unrealized gain on "available-for-sale" securities of $8, minimum pension liability of ($550) and unrealized loss on derivatives of ($64).

The accompanying notes are an integral part of the financial statements.

10

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

1.         NATURE OF OPERATIONS

Alcan is engaged, together with its subsidiaries, joint ventures and related companies, in a variety of aspects of the aluminum and packaging businesses on an international scale. Its operations include the mining and processing of bauxite, the basic aluminum ore; the refining of bauxite into smelter-grade and specialty alumina; the generation of electric power for use in smelting aluminum; the smelting of aluminum from alumina; the recycling of used and scrap aluminum; the fabrication of aluminum, aluminum alloys and non-aluminum materials into semi-fabricated and finished products; the producing and converting of specialty packaging and packaging products for many industries including the food, pharmaceutical, cosmetic and health sectors; the distribution and marketing of aluminum, non-aluminum and packaging products; and, in connection with its aluminum operations, the licensing of alumina and aluminum production technology and related equipment.

As at December 31, 2004, Alcan, together with its subsidiaries, joint ventures and related companies, had bauxite holdings in six countries, produced alumina in six countries, smelted primary aluminum in 13 countries, operated rolled products plants in 12 countries, had engineered products plants in 11 countries, had packaging facilities in 27 countries and had sales outlets and maintained warehouse inventories in the larger markets of the world. Alcan also operated a global transportation network that included the operation of bulk cargo vessels, port facilities and freight trains.

Pechiney - Basis of Presentation
As described in note 8 - Acquisition of Pechiney, Alcan acquired Pechiney on December 15, 2003. Pechiney refers to Pechiney, a French société anonyme, and, where applicable, its consolidated subsidiaries. The balance sheet of Pechiney is included in the consolidated financial statements commencing on December 31, 2003, and the statements of income and cash flows of Pechiney have been included in the consolidated financial statements beginning January 1, 2004.

Spin-off of Rolled Products Businesses - Basis of Presentation
On January 6, 2005, Alcan completed the spin-off of Novelis Inc. (Novelis), as described in note 7 - Spin-off of Rolled Products Businesses.  Prior to the spin-off, these businesses were owned by Alcan.  Subsequent to the spin-off, Alcan's rolled products operations will comprise five facilities in four countries.  Four of these facilities will be part of the Engineered Products operating segment, and one of these facilities will be a shared facility between the Engineered Products and the Packaging operating segments.

The balance sheets, statements of income and cash flows of the businesses transferred to Novelis are included in Alcan's consolidated financial statements for all periods presented.  Alcan's consolidated financial statements for all periods subsequent to December 31, 2004 will not include the balance sheets, statements of income and cash flows of the businesses transferred to Novelis.  See note 7 - Spin-off of Rolled Products Businesses for Alcan's unaudited pro forma condensed consolidated financial information, giving effect to the spin-off of Novelis. 

2.         CHANGE IN REPORTING GENERALLY ACCEPTED ACCOUNTING PRINCIPLES

Alcan has historically prepared and filed its financial statements in accordance with Canadian generally accepted accounting principles (GAAP) with a reconciliation to United States (U.S.) GAAP.  On January 1, 2004, the Company adopted U.S. GAAP as its primary reporting standard for presentation of its consolidated financial statements. Historical consolidated financial statements were restated in accordance with the guidance provided under U.S. GAAP. Note 35 - Differences between United States and Canadian Generally Accepted Accounting Principles (GAAP) provides an explanation and reconciliation of differences between U.S. and Canadian GAAP. 

The Company adopted U.S. GAAP to enhance its communication with its shareholders, improve comparability of financial information with its competitors and peer group, and promote a common financial language within Alcan.

11

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

3.          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions.  These may affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements.  They may also affect the reported amounts of revenues and expenses during the reporting period.  Actual results could differ from those estimates.

Business Combinations

All business combinations are accounted for using the purchase method.  Under the purchase method, assets and liabilities of the acquired entity are recorded at fair value.  The excess of the purchase price over the fair value of the assets and liabilities acquired is recorded as goodwill.

Principles of Consolidation

The consolidated financial statements include the accounts of subsidiaries that are controlled by Alcan, all of which are majority owned, as well as a variable interest entity, in which the Company is the primary beneficiary.  Investments in entities over which Alcan has significant influence are accounted for using the equity method.  Under the equity method, Alcan's investment is increased or decreased by Alcan's share of the undistributed net income or loss and deferred translation adjustments since acquisition.  Investments in joint ventures over which Alcan has an undivided interest in the assets and liabilities are consolidated to the extent of Alcan's ownership or participation in the assets and liabilities.  All other investments in joint ventures are accounted for using the equity method.  Investments for which there is an active market available are accounted for as available-for-sale.  Other investments are accounted for using the cost method.  Under the cost method, dividends received are recorded as income.

Intercompany balances and transactions, including profits in inventories, are eliminated in the consolidated financial statements.

Foreign Currency

The assets and liabilities of foreign operations, whose functional currency is other than the U.S. dollar (located principally in Europe and Asia), are translated into U.S. dollars at the year-end exchange rates.  Revenues and expenses are translated at average exchange rates for the year.  Differences arising from exchange rate changes are included in the Deferred translation adjustments (DTA) component of Accumulated other comprehensive income. If there is a reduction in the Company's ownership in a foreign operation, the relevant portion of DTA is recognized in Other expenses (income) - net. All other operations, including most of those in Canada, have the U.S. dollar as the functional currency.  For these operations, monetary items denominated in currencies other than the U.S. dollar are translated at year-end exchange rates and translation gains and losses are included in income.  Non-monetary items are translated at historical rates.

The Company has entered into foreign currency contracts and options to hedge certain future, identifiable foreign currency revenue and operating cost exposures.  All such contracts are reported at fair value on the Consolidated Balance Sheet.  For contracts qualifying and designated as cash flow hedges, the effective portion of the changes in fair value is recorded in Other comprehensive income and reclassified to Sales and operating revenues, Cost of sales and operating expenses, or Depreciation and amortization, as applicable, concurrently with the recognition of the item being hedged.  The portion of the change in the contract's fair value that is not effective at offsetting the hedged exposure is recorded in Other expenses (income) - net.  For contracts qualifying as fair value hedges, changes in fair value are recorded in the statement of income together with the changes in the fair value of the hedged item.  For contracts not qualifying as hedges, changes in fair value are recorded in Other expenses (income) - net.

Foreign currency forward contracts and swaps are also used to hedge certain foreign currency denominated debt and intercompany foreign currency denominated loans.  Changes in the fair value of these contracts are recorded in Other expenses (income) - net concurrently with the changes in the fair value of the foreign currency denominated debt and intercompany foreign currency denominated loans being hedged. 

The Company has entered into forward exchange contracts to hedge certain foreign currency denominated net equity investments.  All such contracts are reported at fair value on the Consolidated Balance Sheet.  Changes in fair value are reported in the DTA component of Accumulated other comprehensive income concurrently with translation exchange gains and losses related to the equity being hedged.  If there is a reduction in the Company's ownership in a foreign operation, the relevant portion of DTA is recognized in Other expenses (income) - net.

12

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

3.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

Revenue Recognition

Revenue from product sales, net of trade discounts and allowances, is recognized once delivery has occurred provided that persuasive evidence of an arrangement exists, the price is fixed or determinable, and collectibility is reasonably assured.  Delivery is considered to have occurred when title and risk of loss have transferred to the customer.  Revenue from services is recognized as services are rendered and accepted by the customer.

The Company reports trading revenues and costs for aluminum contracts on a net basis in Sales and operating revenues rather than on a gross basis.  This applies only to those third-party metal sales contracts sourced from third parties.  This accounting treatment reduced Sales and operating revenues by $1,193, Cost of sales and operating expenses by $1,182, and Other expenses (income) ─ net by $11, for the year ended December 31, 2004.

Shipping and Handling Costs

Amounts charged to customers related to shipping and handling are included in Sales and operating revenues, and related shipping and handling costs are recorded in Cost of sales and operating expenses.

Commodity Contracts and Options

Generally, all of the forward metal contracts and options serve to hedge certain future identifiable aluminum price exposures.  For these contracts, the fair values of the derivatives are recorded on the Consolidated Balance Sheet.  For contracts qualifying as cash flow hedges, the effective portions of the changes in fair value are recorded in Other comprehensive income and are reclassified, together with related hedging costs, to Sales and operating revenues or Cost of sales and operating expenses, concurrently with the recognition of the underlying item being hedged or in the period that the derivatives no longer qualify as cash flow hedges.

All oil, natural gas and electricity futures contracts, swaps and options are recorded at fair value on the balance sheet.  For contracts qualifying as cash flow hedges, the effective portions of the changes in the fair value are recorded in Other comprehensive income and are reclassified to the statement of income concurrently with the recognition of the underlying item being hedged or in the period that the derivatives no longer qualify as cash flow hedges.  For contracts not qualifying for hedge accounting, changes in fair value are recorded in Other expenses (income) - net.  

Physical aluminum purchase and sales contracts with third parties and related aluminum forward contracts are considered to be derivatives held for trading purposes and are recorded at fair value on the balance sheet.  Changes in fair value are recorded on a net basis in Sales and operating revenues.

In circumstances where the Company's  purchase or sales contracts for a commodity contain derivative characteristics, these contracts, excluding those considered to be derivatives held for trading purposes, are generally not recorded at fair value as they involve quantities that are expected to be used or sold in the normal course of business over a reasonable period of time.

Interest Rate Swaps

The Company enters into interest rate swap agreements to manage its exposure  to fluctuations in interest rates on its long-term debt.  These swaps are marked-to-market in the financial statements and all changes in fair value are recorded in Other expenses (income) - net.

Inventories

Inventories are stated at cost (determined for the most part on the monthly average cost method) or net realizable value, whichever is lower.  Cost includes material, labour and manufacturing overhead costs.

Capitalization of Interest Costs

The Company capitalizes interest costs associated with the financing of major capital expenditures up to the time the asset is ready for its intended use.  

13

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

3.        SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

Sale of Receivables

When the Company sells certain receivables, it retains servicing rights and provides limited recourse, which constitute retained interests in the sold receivables.  No servicing asset or liability is recognized in the financial statements as the fees received by the Company reflect the fair value of the cost of servicing these receivables.  The related purchase discount is included in Other expenses (income) - net.

Property, Plant and Equipment

Property, plant and equipment is recorded at cost. Additions, improvements and major renewals are capitalized; normal maintenance and repair costs are expensed.   Depreciation is calculated on the straight-line method using rates based on the estimated useful lives of the respective assets.  The principal rates range from 2% to 10% for buildings and structures, 1% to 4% for power assets and 3% to 20% for chemical, smelter and fabricating assets. Gains or losses from the sale of assets are included in Other expenses (income) - net. 

Impairment or Disposal of Long-Lived Assets

The Company reviews its long-lived assets and amortizable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of a long-lived asset may not be recoverable.  An impairment loss is recognized when the carrying amount of the assets exceeds the future undiscounted cash flows expected from the asset.  Any impairment loss is measured as the amount by which the carrying amount exceeds the fair value.  Such evaluations for impairment are significantly impacted by estimates of future prices for the Company's product, capital needs, economic trends in the market and other factors.  Quoted market values are used whenever available to estimate fair value.  When quoted market values are unavailable, the fair value of the long-lived asset is generally based on estimates of discounted expected net cash flows.  Assets to be disposed of by sale are reflected at the lower of their carrying amount or fair value less cost to sell and are not depreciated while classified as held for sale.

Goodwill

Goodwill is tested for impairment on an annual basis at the reporting unit level and is also tested for impairment when events occur or circumstances change that would more likely than not reduce the fair value of a reporting unit below the carrying value.  Fair value is determined using discounted cash flows.

Intangible Assets

Intangible assets are primarily trademarks and patented and non-patented technology, purchase contracts and customer contracts all of which have finite lives.  Intangible assets are recorded at cost less accumulated amortization and are amortized over their useful life, which is generally 15 years, using the straight-line method of amortization.

Legal Claims

Accruals for legal claims are made when it is probable that liabilities will be incurred and where such liabilities can be reasonably estimated.

Environmental Costs and Liabilities

Environmental costs for legal obligations associated with the retirement of a tangible long-lived asset that result from its acquisition, construction, development or normal operation are recognized at their fair values when incurred and a corresponding asset retirement cost is added to the carrying amount of the related asset.  In subsequent periods, the carrying amount of the liability is adjusted to reflect the passage of time and any changes in the timing or amount of the underlying future cash flows.  The asset retirement cost is amortized to expense over the asset's useful life.

Environmental costs that are not legal asset retirement obligations are expensed or capitalized, as appropriate.  Environmental expenditures of a capital nature that extend the life, increase the capacity or improve the safety of an asset or that mitigate or prevent environmental contamination that has yet to occur are included in Property, plant and equipment and are depreciated generally over the remaining useful life of the underlying asset.  Expenditures relating to existing conditions caused by past operations, and which do not contribute to future revenues, are expensed when probable and estimable and are normally included in Cost of sales and operating expenses except for large, unusual amounts, which are included in Other expenses (income) - net.  Recoveries relating to environmental liabilities are recorded when received.

14

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

3.         SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

Pensions and Post-Retirement Benefits

Using appropriate actuarial methods and assumptions, the Company's defined benefit pension plans are accounted for in accordance with the Financial Accounting Standards Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 87, Employers' Accounting for Pensions.  Other post-retirement benefits are accounted for in accordance with SFAS No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions.  Pension and post-retirement benefit obligations are actuarially calculated using management's best estimates and based on expected service period, salary increases and retirement ages of employees.  Pension and post-retirement benefit expense includes the actuarially computed cost of benefits earned during the current service period, the interest cost on accrued obligations, the expected return on plan assets based on fair market value and the straight-line amortization of net actuarial gains and losses and adjustments due to plan amendments.  All net actuarial gains and losses are amortized over the expected average remaining service life of the employees.

Stock Options and Other Stock-Based Compensation

The Company accounts for its stock options granted under the share option plan using the fair value provisions of SFAS No. 123, Accounting for Stock-Based Compensation.  Under the fair value method, stock-based compensation expense is recognized in the statement of income over the applicable vesting period.  When stock options are exercised, the consideration paid by employees, together with the applicable amount in additional paid-in capital, is credited to common shares.  Other stock-based compensation arrangements, that can be settled in cash and are based on the change in the common share price during the period, are recognized in income over the vesting period of awards.  Stock-based compensation expense is recorded in Selling, administrative and general expenses in the statement of income.

Income Taxes

Income taxes are accounted for under the liability method. Under the liability method, deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases.

This method also requires the recognition of future tax benefits such as net operating loss carryforwards, to the extent that realization of such benefits is more likely than not.  Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled.  The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Cash and Time Deposits

All time deposits have original maturities of 90 days or less and qualify as cash equivalents.

Allowance For Doubtful Accounts

The allowance for doubtful accounts reflects management's best estimate of probable losses inherent in the trade receivables balance.  Management determines the allowance based on known doubtful accounts, historical experience, and other currently available evidence.

Guarantees

The Company follows the recognition and measurement provisions of the FASB Interpretation No. (FIN) 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.  The provisions are applied on a prospective basis to guarantees issued or modified after December 31, 2002.  Under FIN 45, guarantees issued after December 31, 2002, are recorded as a liability equal to the fair value of the obligation at the inception of the guarantee. See note 28 - Commitments and Contingencies.

15

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

3.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

Recently Issued Accounting Standards

Share-Based Payment

In December 2004, the FASB issued SFAS No. 123 (Revised 2004), Share-Based Payment (SFAS No. 123(R)), which is a revision to SFAS No. 123, Accounting for Stock-Based Compensation.  SFAS No. 123(R) requires all share-based payments to employees, including grants of employee stock options, to be recognized in the financial statements based on their fair values.  SFAS No. 123(R) is effective July 1, 2005.  The Company adopted the fair-value based method of accounting for share-based payments effective January 1, 2004 using the retroactive restatement method described in SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure.  Currently, the Company uses the Black-Scholes formula to estimate the value of stock options granted to employees and expects to continue to use this acceptable option valuation model.  The Company does not anticipate that the adoption of SFAS No. 123 (R) will have a material impact on its results of operations or its financial position.

Inventory Costs

In November 2004, the FASB issued SFAS No. 151, Inventory Costs - an amendment to ARB No. 43, Chapter 4.  This statement amends the guidance in Accounting Research Bulletin (ARB) No. 43 , Chapter 4, "Inventory Pricing", to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage).  ARB 43 previously stated that these expenses may be so abnormal as to require treatment as current period charges.   SFAS No. 151 requires that those items be recognized as current-period charges regardless of whether they meet the criterion of  "so abnormal".  In addition, SFAS No. 151 requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities.  Prospective application of this statement is required beginning January 1, 2006.  The Company does not expect its financial statements to be significantly impacted by this statement.

Exchanges of Nonmonetary Assets

In December 2004, the FASB issued SFAS No. 153, Exchanges of Nonmonetary Assets - an amendment of APB Opinion No. 29.  This statement amends Opinion 29 to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange.  Prospective application of this statement is required beginning January 1, 2006.  The Company does not expect its financial statements to be significantly impacted by this statement.

16

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

4.             ACCOUNTING CHANGES

Consolidation of Variable Interest Entities

Effective January 1, 2004, the Company adopted the provisions of FIN 46(R), Consolidation of Variable Interest Entities.  In 2004, the Company determined that it is the primary beneficiary of Logan Aluminum Inc. (Logan), a variable interest entity.  As a result, the consolidated balance sheet includes the assets and liabilities of Logan.  Logan manages a tolling arrangement for Alcan and an unrelated party.

At the date of adoption of FIN 46(R), assets of $38 and liabilities of $38 related to Logan that were previously not recorded on the consolidated balance sheet have been recorded by the Company. Prior periods were not restated.  The Company's investment, plus any unfunded pension liability, related to Logan totaled approximately $37, representing the Company's maximum exposure to loss. Creditors of Logan do not have recourse to the general credit of the Company as a result of including it in the Company's financial statements.

Stock Options and Other Stock-Based Compensation

Effective January 1, 2004, the Company adopted the fair value recognition provisions of SFAS No. 123, Accounting for Stock-Based Compensation using the retroactive restatement method as described in SFAS No. 148, Accounting for Stock-Based Compensation - Transition and Disclosure.  Beginning January 1, 1999, all periods have been restated to reflect compensation cost as if the fair value method had been applied for awards issued after January 1, 1995.

The impact of the adoption of the fair value method of accounting for stock-based compensation is an increase in stock-based compensation expense of $11 for the year ended December 31, 2004 (2003: $13; 2002: $11).  The impact on the consolidated balance sheet as at January 1, 2002 was an increase in additional paid-in capital of $33, an increase in common shares of $25, and a decrease in retained earnings of $58.  The earnings per common share impact of the adoption of the fair value method of accounting for stock-based compensation is a reduction of $0.03 per share for the year ended December 31, 2004 (2003: $0.04; 2002: $0.03). 

Asset Retirement Obligations

On January 1, 2003, the Company retroactively adopted SFAS No. 143, Accounting for Asset Retirement Obligations.  Under SFAS No. 143, the Company recognized additional liabilities, at fair value, of approximately $107 as at January 1, 2003, for existing legal asset retirement obligations. Such liabilities are adjusted for accretion costs and revisions in estimated cash flows.  The related asset retirement costs are capitalized as increases to the carrying amount of the associated long-lived assets and accumulated depreciation on these capitalized costs is recognized.  These liabilities consist primarily of environmental remediation costs, resulting from normal operations, associated with certain bauxite residue disposal sites at its alumina refineries and the disposal of certain of its spent potlining associated with smelter facilities.  An after-tax charge of $39 for the cumulative effect of accounting change was recorded as a result of the new standard, relating primarily to costs for spent potlining disposal for pots currently in operation.  As at January 1, 2003, Property, plant and equipment - cost has been increased by $140, Property, plant and equipment - accumulated depreciation has been increased by $90, Deferred credits and other liabilities have been increased by $107, and Deferred income taxes have been reduced by $18.  Net income for the year ended December 31, 2002 would not have been materially different if this standard had been adopted effective January 1, 2002.  For the year ended December 31, 2003, net income was reduced by $1 due to the adoption of the standard.

Goodwill and Other Intangible Assets

On January 1, 2002, the Company adopted SFAS No. 142, Goodwill and Other Intangible Assets. Under this standard, goodwill and other intangible assets with an indefinite life are no longer amortized but are carried at the lower of carrying value and fair value. Goodwill and other intangible assets with an indefinite life are tested for impairment on an annual basis.

Goodwill is tested for impairment using a two-step test. Under the first step, the fair value of a reporting unit, based upon discounted cash flows, is compared to its net carrying amount. If the fair value is greater than the carrying amount, no impairment is deemed to exist. However, if the fair value is less than the carrying amount, a second test must be performed whereby the fair value of the reporting unit's goodwill must be estimated to determine if it is less than its carrying amount. Fair value of goodwill is estimated in the same way as goodwill is determined at the date of acquisition in a business combination, that is, the excess of the fair value of the reporting unit over the fair value of the identifiable net assets of the reporting unit.

An impairment of $748 (including $8 relating to assets held for sale) was identified in the goodwill balance as at January 1, 2002, and was charged to income as a cumulative effect of accounting change in 2002 upon adoption of the new accounting standard. Any further impairment arising subsequent to January 1, 2002, is taken as a charge against income. As a result of the new standard, the Company no longer amortizes goodwill.

17

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

4.           ACCOUNTING CHANGES (cont'd)

Impairment or Disposal of Long-Lived Assets

In 2002, the Company adopted SFAS No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets.  Under this standard, an impairment loss is recognized when the carrying amount of a long-lived asset held for use is not recoverable and exceeds its fair value. No impairment charges were recorded upon adoption of this new standard.  Impairment charges recorded during 2003 are described in note 5 - Discontinued Operations and Assets Held for Sale, note 10 - Restructuring Programs and note 16 - Other Expenses (Income) - Net. 

Under this standard, a long-lived asset to be disposed of by sale is measured at the lower of its carrying amount or fair value less cost to sell, and is not depreciated while classified as held for sale.  Assets and liabilities classified as held for sale are reported as assets held for sale and liabilities of operations held for sale on the balance sheet.  A long-lived asset to be disposed of other than by sale, such as by abandonment, before the end of its previously estimated useful life, is classified as held for use until it is disposed of and depreciation estimates revised to reflect the use of the asset over its shortened useful life.   Also, the standard requires that the results of operations of a component of an enterprise, that has been disposed of either by sale or abandonment or is classified as held for sale, be reported as discontinued operations if the operations and cash flows of the component have been, or will be, eliminated from the ongoing operations as a result of the disposal transaction and the Company will not have any significant continuing involvement in the operations of the component after the disposal transaction.  A component of an enterprise comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the enterprise.  Disposal activities relating to long-lived assets are described in note 5 - Discontinued Operations and Assets Held for Sale.

In December 2004, the Company adopted the provisions of Emerging Issues Task Force (EITF) 03-13, Applying the Conditions in Paragraph 42 of FASB Statement No. 144 in Determining Whether to Report Discontinued Operations, on which the EITF reached a consensus in November 2004.  Based on the provisions of the EITF, the Company determined that it had significant continuing involvement in the operations of Novelis, the rolled products business spun-off on January 6, 2005, as described in note 7 - Spin-off of Rolled Products Businesses, due to the existence of significant contracts between the Company and Novelis.  As a result, Novelis did not meet the criteria for classification as discontinued operations.

Derivatives

On July 1, 2003, the Company adopted SFAS No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities.  This standard amends and clarifies financial accounting and reporting for derivatives and for hedging activities under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities.  This standard has no impact on the Company's financial statements.

Costs Associated with Exit or Disposal Activities

On January 1, 2003, the Company prospectively adopted SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities.  This standard requires that a liability associated with an exit or disposal activity be recognized when the liability is incurred rather than at the date of the Company's commitment to an exit plan.

Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity

On July 1, 2003, the Company adopted SFAS No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity.  This standard requires that certain financial instruments embodying an obligation to transfer assets or to issue equity securities be classified as liabilities. This standard has no impact on the Company's financial statements.

Guarantees

On January 1, 2003, the Company adopted the recognition and measurement provisions of FIN 45, Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others.  The provisions are applied on a prospective basis to guarantees issued or modified after December 31, 2002.

As at December 31, 2002, the Company had guaranteed the repayment of approximately $3 of indebtedness by third parties.  Alcan believes that none of these guarantees is likely to be invoked.  Under FIN 45, guarantees issued after December 31, 2002, are recorded as a liability equal to the fair value of the obligation at the inception of the guarantee. See note 28 - Commitments and Contingencies.

18

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)
 

5.         DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

Bauxite and Alumina and Primary Metal
On December 29, 2004, the Company announced that, following an extensive evaluation of the Company's operations subsequent to the Pechiney acquisition, it had entered into a binding agreement for the sale of its controlling interest in Aluminium de Grèce S.A. (AdG), as well as the transfer of certain related contracts, to Mytilineos Holdings S.A. of Greece.  The Company has classified this business in discontinued operations and assets held for sale during the fourth quarter of 2004. The Company owns approximately 13 million shares in AdG, representing a 60.2% equity interest.  Under the terms of this agreement, Mytilineos Holdings and certain affiliated companies acquire from the Company a 53% equity position in AdG.  The balance of the Company's interest in AdG, some 7.2%, may be sold by the Company to Mytilineos Holdings one year after closing pursuant to a three-month put option at a price equivalent to the selling price of the shares.  Subsequently, Mytilineos Holdings will have a call option for six months to purchase the remaining interest, at a price equivalent to the selling price of the shares.  The transaction was completed on March 15, 2005.

Primary Metal
On December 30, 2004, the Company announced that it had reached agreement on the principal terms of a sale of Pechiney Électrométallurgie (PEM) to Ferroatlántica, S.L., Spain's leading feroalloys and independent electrical power producer.  The Company has classified this business in discontinued operations and assets held for sale during the fourth quarter of 2004.  The Company's decision to sell this business was based on an extensive evaluation of the Company's operations subsequent to the Pechiney acquisition and is consistent with the Company's strategy of divesting non-core activities. The transaction, which will be ultimately subject to relevant regulatory authorities' approvals, is expected to be completed in the second quarter of 2005.

Engineered Products
In December 2003, the Company classified in discontinued operations its extrusions operations in Milan, Italy. These operations had been classified as held and used until their sale in December 2003.

In the first quarter of 2004, the Company committed to a plan to sell certain non-strategic assets that are not part of its core operations.  The assets are used to supply castings and components to the automotive industry.  The Company is actively pursuing potential purchasers.  These assets are classified as held for sale and are included in discontinued operations.

Following a detailed assessment subsequent to the Pechiney acquisition, the Company began restructuring efforts at certain European sites in the fourth quarter of 2004.  As a result of this restructuring, the Company committed to a plan to sell two high purity businesses in France.  The Company is actively pursuing potential purchasers and expects the sales to be completed by the end of 2005.  These businesses have been classified in discontinued operations and assets held for sale during the fourth quarter of 2004.

Also in the fourth quarter of 2004, the Company committed to a plan to sell its service centres in France that are not part of its core operations.  The Company is actively pursuing potential purchasers. These assets are classified as held for sale and included in discontinued operations.

On December 31, 2003, the Company classified the aluminum rolling mill in Ravenswood, West Virginia (Ravenswood), as held for sale. Ravenswood was included in the acquisition of Pechiney.  As described in note 7 - Spin-Off of Rolled Products Businesses, the Company is no longer required to divest Ravenswood.  Accordingly, Ravenswood has been reclassified into continuing operations and assets held and used in December 2004, with reclassification of the balance sheet as at December 31, 2003.  The reclassification did not have a significant impact on Income from continuing operations for the year ended December 31, 2004.

Packaging
In the second quarter of 2003, the Company committed to a plan to sell certain non-strategic operations (Fibrenyle, Boxal Group, and Suner Cartons), as the businesses are not part of its core operations. These businesses were classified as held for sale and were included in discontinued operations. In the fourth quarter of 2003, the Company recorded the sale of Fibrenyle, in the U.K., for proceeds of $29.  In the second quarter of 2004, the Company recorded the sale of the Boxal Group and Suner Cartons, for proceeds of $6 and $19, respectively. The Boxal Group comprises three manufacturing facilities in France, the Netherlands and Switzerland as well as a sales office in Germany.  Suner Cartons comprises a facility in Spain.  As at June 30, 2004, the Company had sold all of the assets of the non-strategic packaging businesses previously classified as held for sale in the second quarter of 2003.

19

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

5.         DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE (cont'd)

Other
In the second quarter of 2004, the Company classified in discontinued operations its copper and ores and concentrates trading businesses.  In the fourth quarter of 2004, the Company sold certain assets of its ores and concentrates trading division to its current management team, and sold the assets of its zinc and lead metal trading business to Trafigura Ltd., an independent commodity trading company.

Fair values for discontinued operations were determined based on either discounted cash flows or expected selling price.  Certain financial information has been reclassified in the prior periods to present these businesses as discontinued operations on the statement of income, as assets held for sale and liabilities of operations held for sale on the balance sheet and as cash flows from (used for) discontinued operations on the statement of cash flows.

An impairment charge of $6 for the year ended December 31, 2004 (2003: $159; 2002: $9), was recorded in discontinued operations to reduce the carrying values of these businesses to estimated fair values less costs to sell.

Selected financial information for the businesses included in discontinued operations is reported below:

Year ended December 31	2004	2003	2002
Sales	1,482	337	320
Income (Loss) from operations	18	(6)	(12)
Gain (Loss) on disposal - net	27	(8)	-
Asset impairment provisions	(6)	(159)	(9)
Pre-tax income (loss)	39	(173)	(21)
Income taxes recovered (expense)	(33)	14	-
Income (Loss) from discontinued operations	6	(159)	(21)

The major classes of Assets held for sale and Liabilities of operations held for sale are as follows:
 

	2004	2003	2002
Current assets held for sale:
Cash and time deposits	156	92	1
Trade receivables	323	384	58
Other receivables	40	155	12
Deferred income taxes	2	4	-
Inventories	296	458	45
	817	1,093	116
Long-term assets held for sale:
Deferred charges and other assets	21	30	4
Deferred income taxes	6	65	-
Property, plant and equipment, net	86	200	159
Intangible assets, net	50	58	14
Goodwill, net	-	22	53
	163	375	230
Current liabilities of operations held for sale:
Payables and accrued liabilities	709	558	65
Short-term borrowings	5	1	4
	714	559	69
Long-term liabilities of operations held for sale:
Deferred credits and other liabilities	121	108	2
Deferred income taxes	4	14	12
Minority interests	135	116	-
	260	238	14

20

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

6.         EARNINGS PER SHARE - BASIC AND DILUTED

Basic and diluted earnings per share are based on the weighted average number of shares outstanding during the year.  The treasury stock method for calculating the dilutive impact of stock options is used.  The following table outlines the calculation of basic and diluted earnings per share on income from continuing operations.

	2004	2003	2002
Numerator:
Income from continuing operations	252	262	421
Less: dividends on preference shares	(6)	(7)	(5)
Income from continuing operations attributable to common shareholders	246	255	416
Denominator (number of common shares in millions):
Weighted average of outstanding shares	368	322	321
Effect of dilutive stock options	2	-	1
Adjusted weighted average of outstanding shares	370	322	322
Earnings per common share - basic and diluted (in US$)	0.67	0.79	1.29

Options to purchase 3,656,500 common shares (2003: 3,443,855; 2002: 1,146,500) at a weighted average grant price of CAN$58.94 per share (2003: CAN$54.32; 2002: CAN$60.16) were outstanding during the year but were not included in the computation of diluted earnings per share because the options' exercise price was greater than the average price of the common shares.

As at December 31, 2004, there are 369,930,252 common shares outstanding (2003: 365,181,101; 2002: 321,470,298).

As described in note 1 - Nature of Operations, the results of operations of Pechiney are not included in the 2003 statement of income. The common shares issued in December 2003 as part of the Pechiney acquisition are excluded from the weighted average of outstanding shares in 2003.

7.       SPIN-OFF OF ROLLED PRODUCTS BUSINESSES

On January 6, 2005, Alcan completed the spin-off of Novelis to its shareholders. Alcan shareholders received one Novelis common share for every five Alcan common shares held.   Novelis consists of substantially all of the aluminum rolled products businesses held by Alcan prior to its 2003 acquisition of Pechiney, together with some of Alcan's alumina and primary metal-related businesses in Brazil, which are fully integrated with the rolled products operations there, as well as four former Pechiney rolling facilities in Europe.  The spin-off, which was approved by both the shareholders and Board of Directors of Alcan, completed the planned strategic spin-off that was initially announced on May 18, 2004.   Additionally, the spin-off of Novelis satisfied certain regulatory requirements associated with the acquisition of Pechiney (see note 8 - Acquisition of Pechiney and note 28 - Commitments and Contingencies), including the requirement to divest either of the Neuf-Brisach rolling facilities or the AluNorf/Göttingen/Nachterstedt rolling facilities and allows Alcan to retain Ravenswood.

Agreements between Alcan and Novelis

Novelis has entered into various agreements with Alcan for the use of transitional and technical services, the supply of Alcan's metal and alumina, the licensing of certain of Alcan's patents, trademarks and other intellectual property rights, and the use of certain buildings, machinery and equipment, technology and employees at certain facilities retained by Alcan, but required in Novelis' business.

Certain of the agreements between Alcan and Novelis described above indicate that Alcan will have significant cash flows with, and significant continuing involvement in, the operations of Novelis subsequent to the spin-off.  As a result of the significant continuing involvement and the significant cash flows with Novelis, the spin-off did not meet the criteria for classification as a discontinued operation, as described in note 4 − Accounting Changes − Impairment or Disposal of Long-Lived Assets.

The following tables set forth the unaudited pro forma condensed consolidated information of the Company as at, and for the year ended, December 31, 2004, giving effect to the spin-off of Novelis as at January 1, 2004 for the statement of income and as at December 31, 2004 for the balance sheet.  The unaudited pro forma condensed consolidated information is for illustrative and informational purposes only and is not intended to represent or be indicative of what Alcan's financial condition or results of operations would have been had the transactions described below occurred on the dates indicated.  The unaudited pro forma condensed consolidated information also is not necessarily indicative of Alcan's future financial condition or results of operations.

21

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

7.       SPIN-OFF OF ROLLED PRODUCTS BUSINESSES (cont'd)

Unaudited Pro Forma Condensed Consolidated Balance Sheet
As at December 31, 2004

	Alcan	Removal of Novelis	Pro Forma  Adjustments		Alcan Pro Forma
ASSETS
Current assets
Cash and time deposits	184	(31)	-		153
Receivables, net	4,168	(1,761)	1,637	(c)	3,795
			(312)	(g)
			58	(j)
			5	(k)
Deferred income taxes	214	-	-		214
Inventories	4,029	(1,226)	143	(a)	2,946
Current assets held for sale	817	-	-		817
Total current assets	9,412	(3,018)	1,531		7,925
Deferred charges, other assets and long-term
receivables from related parties	2,877	(297)	2,599	(c)	2,658
			(2,597)	(g)
			76	(k)
Deferred income taxes	870	-	-		870
Property, plant and equipment, net	13,293	(2,348)	-		10,945
Intangible assets, net	1,230	(35)	-		1,195
Goodwill	5,496	(256)	-		5,240
Long-term assets held for sale	163	-	-		163
Total assets	33,341	(5,954)	1,609		28,996
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Payables and accrued liabilities	5,464	(1,260)	1,247	(c)	4,783
			(426)	(g)
			(242)	(j)
Short-term borrowings	2,486	(541)	392	(c)	614
			(1,723)	(h)
Debt maturing within one year	569	(1)	-		568
Deferred income taxes	23	-	-		23
Current liabilities of operations held for sale	714	-	-		714
Total current liabilities	9,256	(1,802)	(752)		6,702
Debt not maturing within one year	6,345	(2,736)	2,597	(c)	5,746
			(10)	(g)
			(750)	(h)
			300	(j)
Deferred credits and other liabilities	4,975	(472)	17	(k)	4,520
Deferred income taxes	1,543	(249)	49	(a)	1,343
Long-term liabilities of operations held for sale	260	-	-		260
Minority interests	236	(140)	-		96

22

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

7.       SPIN-OFF OF ROLLED PRODUCTS BUSINESSES (cont'd)

Unaudited Pro Forma Condensed Consolidated Balance Sheet
As at December 31, 2004

	Alcan	Removal of Novelis	Pro Forma  Adjustments		Alcan Pro Forma
Shareholders' equity
Redeemable non-retractable preference shares	160	-	-		160
Common shareholders' equity
Common shares	6,670	-	-		6,670
Additional paid-in capital	112	-	-		112
Retained earnings	3,362	(467)	94	(a)	3,053
			(2,473)	(g)
			2,473	(h)
			64	(k)
Common shares held by a subsidiary	(35)	-	-		(35)
Accumulated other comprehensive income	457	(88)	-		369
Total liabilities and shareholders' equity	33,341	(5,954)	1,609		28,996

23

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

7.       SPIN-OFF OF ROLLED PRODUCTS BUSINESSES (cont'd)

Unaudited Pro Forma Condensed Consolidated Statement of Income
For the year ended December 31, 2004

	Alcan	Removal of Novelis	Pro Forma  Adjustments		Alcan Pro Forma
Sales and operating revenues	24,885	(7,755)	2,409	(b)	19,539
Costs and expenses
Cost of sales and operating expenses	20,203	(6,856)	(67)	(a)	15,689
			2,409	(b)
Depreciation and amortization	1,337	(246)	-		1,091
Selling, administrative and general expenses	1,612	(268)	30	(f)	1,374
Research and development expenses	239	(58)	38	(e)	219
Interest	346	(74)	37	(d)	289
			(25)	(h)
			5	(j)
Goodwill impairment	154	-	-		154
Other expenses (income) - net	406	(28)	(26)	(d)	309
			(38)	(e)
			4	(f)
			(2)	(k)
			(7)	(j)
	24,297	(7,530)	2,358		19,125
Income from continuing operations before
income taxes and other items	588	(225)	51		414
Income taxes	375	(166)	17	(l)	226
Income from continuing operations before other items	213	(59)	34		188
Equity income	54	(6)	-		48
Minority interests	(15)	10	-		(5)
Income from continuing operations	252	(55)	34		231
Income from discontinued operations	6	-	-		6
Net income	258	(55)	34		237
Dividends on preference shares	6	-	-		6
Net income attributable to common shareholders	252	(55)	34		231
Earnings per share
Income from continuing operations per common share-
basic and diluted (in US$)	0.67	(0.15)	0.09		0.61
Net income per common share - basic and diluted (in US$)	0.69	(0.15)	0.09		0.63
Average number of shares used in calculating earnings
per share - basic (in millions)					368
Average number of shares used in calculating earnings
per share - diluted (in millions)					370

24

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

7.         SPIN-OFF OF ROLLED PRODUCTS BUSINESSES (cont'd)

The unaudited pro forma condensed consolidated financial statements also include the following pro forma adjustments:

(a)	Adjustments to reflect the release of deferred profits held in inventory and the related tax effects.  These adjustments arise due to the change in relationship between Alcan and Novelis subsequent to the spin-off.  Prior to the spin-off, all profits on sales of inventory between Alcan and Novelis were deferred on the balance sheet until the inventory was sold to a third party.  Subsequent to the spin-off, Alcan and Novelis are not considered affiliated and any sales between Alcan and Novelis are considered third party.
(b)	Adjustments to reflect the sales and cost of sales between Alcan and Novelis.  These adjustments arise due to the change in relationship between Alcan and Novelis subsequent to the spin-off.  Prior to the spin-off, all sales and cost of sales between Alcan and Novelis were eliminated upon consolidation in Alcan's financial statements.  Subsequent to the spin-off, all sales and cost of sales between Alcan and Novelis are considered third party and are not eliminated.
(c)	Adjustments to reflect the receivables, payables, and debt between Alcan and Novelis.  These adjustments arise due to the change in relationship between Alcan and Novelis subsequent to the spin-off. Prior to the spin-off, all receivables and payables between Alcan and Novelis were eliminated upon consolidation in Alcan's financial statements.  Subsequent to the spin-off, receivables and payables between Alcan and Novelis are considered third party and are not eliminated.
(d)	Adjustments to reflect the interest expense and income on loans payable and receivable between Alcan and Novelis. These adjustments arise due to the change in relationship between Alcan and Novelis subsequent to the spin-off. Prior to the spin-off, all interest expense and income on loans payable and receivable between Alcan and Novelis were eliminated upon consolidation in Alcan's financial statements.  Subsequent to the spin-off, interest expense and income are adjusted to reflect the settlement of the intercompany loans receivable and payable between Alcan and Novelis.
(e)	Adjustments to reflect the research and development and other services rendered between Alcan and Novelis. These adjustments arise due to the change in relationship between Alcan and Novelis subsequent to the spin-off. Prior to the spin-off, all revenues and expenses related to these services rendered were eliminated upon consolidation in Alcan's financial statements.  Subsequent to the spin-off, these revenues and expenses are considered third party and are not eliminated.
(f)	Adjustments to record the general corporate expenses allocated to Novelis.  As these expenses will continue to be incurred by Alcan subsequent to the spin-off, they are included in Alcan's pro forma condensed consolidated statements of income.
(g)	Represents the settlement of intercompany loans receivable and payable between Alcan and Novelis.
(h)	Represents the proceeds from Novelis of $2,473, which have been used to reduce Alcan's commercial paper and bank loans included in Short-term borrowings and in Debt not maturing within one year. As a result of this reduction in debt, interest expense has been reduced by $25 in Alcan's pro forma condensed consolidated income statement for the year ended December 31, 2004.
(i)	In October 2003, Alcan entered into a derivative financial instrument that was designated as a hedge of Alcan's net investment in certain foreign subsidiary companies.  With the spin-off of Novelis, the amount of the net investment in those foreign subsidiaries is less than the notional amount of the derivative instrument, until December 15, 2003 when Alcan acquired Pechiney.  The change in fair value of the derivative instrument for 2003 amounted to a $32 loss and is reported in Accumulated other comprehensive income.  No adjustment has been made in this pro forma financial information related to this transaction, as it would not have a recurring impact on Alcan's consolidated results of operations.
(j)	Under an agreement effective December 18, 2001, on an ongoing basis, the Company sold to a third party an undivided interest in certain trade receivables, with limited recourse, for maximum cash proceeds of $300 with the maximum credit exposure to the Company held in reserve by the third party. The Company acted as a service agent and administers the collection of the receivables sold.  As at December 31, 2004, the Company sold trade receivables of $345, of which $242 were allocated to Novelis, with $45 held in reserve by the third party.  Subsequent to the spin-off, this program was discontinued.

25

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

7.           SPIN-OFF OF ROLLED PRODUCTS BUSINESSES (cont'd)

(k)	Adjustment to reflect a lease to Novelis of the Sierre North Building and the machinery and equipment located in the Sierre North Building (including the hot and cold mills) for a term of 15 years, renewable at Novelis' option for an additional five-year period, at an annual base rent of $5.
(l)	Represents the tax effect of pro forma adjustments at the statutory rate of 34%.

8.           ACQUISITION OF PECHINEY

During the initial offer period, which closed on November 24, 2003, 77,950,776 Pechiney shares, 1,598 Pechiney bonus allocation rights and 7,722,915 Pechiney OCEANEs were tendered, representing 92.21% of Pechiney share capital and 93.55% of Pechiney voting rights, on a fully diluted basis. Pechiney shares, Pechiney bonus allocation rights, Pechiney OCEANEs and Pechiney American Depositary Shares (ADS) are collectively hereby referred to as Pechiney securities. On December 15, 2003, the Company acquired the Pechiney securities tendered during the initial offer and as consideration, issued 42,413,105 common shares (including 1,417,910 shares to Pechiney) valued at $39.63 per share and paid $3,544 in cash. Accordingly, Pechiney became a subsidiary of the Company on December 15, 2003. In addition, the Company assumed from Pechiney total debt of $2,130 (short-term borrowings, debt maturing within one year, and debt not maturing within one year). The value of $39.63 per share represents the average closing market price for an Alcan common share for a reasonable period of time before and after November 17, 2003, the date at which the number of Alcan common shares to be issued and the amount of cash consideration for each Pechiney share became fixed. 

The offer was re-opened from December 9 to 23, 2003. During the re-opened offer, 3,826,638 Pechiney shares, 19 Pechiney bonus allocation rights and 149,072 Pechiney OCEANEs were tendered. As more than 95% of the capital and voting rights of Pechiney were tendered (on a fully diluted basis) during the initial and re-opened offers, the Company paid to the holders of Pechiney securities who tendered during the initial offer, additional consideration of $100 on January 19, 2004. This additional consideration was recorded in 2003 as it became payable on December 23, 2003, the date the re-opened offer closed.

On January 15, 2004, the Company acquired the Pechiney securities tendered in the re-opened offer and as consideration, issued 2,082,075 common shares (including 691,669 shares to Pechiney) valued at $39.63 per share and paid $158 in cash including $5 as payment of additional consideration for holders of Pechiney securities who tendered during the re-opened offer. The additional ownership acquired through this re-opened offer was accounted for in the first quarter of 2004 when the Company settled the purchase price and obtained legal title of the Pechiney securities tendered during the re-opened offer. 

The withdrawal offer of Alcan, made in accordance with French securities regulations, as a required step to acquire all remaining Pechiney equity securities, was opened from January 23 to February 5, 2004. It was followed on February 6, 2004, by a compulsory acquisition by which Alcan became the owner of the remaining Pechiney equity securities it did not already own. On January 23, 2004, Alcan paid $109, which was accounted for in the first quarter of 2004, representing the aggregate consideration for the withdrawal offer and compulsory acquisition (without taking into account the Pechiney shares that could have resulted from exercise of Pechiney options between January 23 and February 5, 2004), for distribution in accordance with the provisions of French securities regulations. On February 6, 2004, the Company paid $7, which was accounted for in the first quarter of 2004, in order to complete the acquisition of the Pechiney shares that were issued between January 23 and February 5, 2004, upon the exercise of Pechiney options. On February 6, 2004, Pechiney became a wholly-owned subsidiary of the Company. 

Pechiney's three core businesses were primary aluminum, aluminum conversion and packaging. The transaction enables Alcan to build upon its position as one of the world's leading aluminum and packaging companies and to benefit from the combined entity's enhanced scale, financial strength and technological resources as well as its increased capacity to serve customers worldwide. The combined entity benefits from a larger and more diversified low-cost global position in primary aluminum production with opportunities for profitable growth, an advanced aluminum fabricating business with facilities around the world and a leading position in flexible packaging.

The acquisition was accounted for using the purchase method. The balance sheet of Pechiney is included in the consolidated financial statements commencing on December 31, 2003, and the results of operations and cash flows of Pechiney have been included in the consolidated financial statements beginning January 1, 2004. Given the magnitude of the acquisition of Pechiney and due to the fact that the transaction was completed at the end of 2003, a tentative purchase price allocation was performed at December 31, 2003 and the final valuation was completed in 2004.  The revisions resulted in an increase in goodwill of $881. Goodwill of $642 has been allocated to the equity-accounted entities, which are included in Deferred charges and other assets.

26

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

8.         ACQUISITION OF PECHINEY (cont'd)

The divestitures required for regulatory reasons as a result of the Pechiney acquisition are described in note 28 - Commitments and Contingencies.

	Final Purchase Price Allocation	Tentative Purchase  Price Allocation
Fair value of net assets acquired at date of acquisition
Trade receivables	1,479	1,475
Other receivables	117	110
Deferred income taxes - current	42	49
Inventories	1,597	1,575
Current assets held for sale	956	992
Deferred charges and other assets(1)	1,131	357
Deferred income taxes - non-current	699	677
Property, plant and equipment	2,847	4,139
Intangible assets	730	601
Goodwill (2)	3,164	2,283
Long-term assets held for sale	125	317
Total assets	12,887	12,575
Payables and accrued liabilities	2,190	1,993
Short-term borrowings	849	849
Debt maturing within one year	200	202
Deferred income taxes - current	95	81
Current liabilities of operations held for sale	510	500
Debt not maturing within one year	1,006	1,004
Deferred credits and other liabilities	1,893	1,673
Deferred income taxes - non-current	423	618
Long-term liabilities of operations held for sale	232	229
Minority interests	31	259
Fair value of net assets acquired at date of acquisition - net of cash  and time deposits acquired	5,458	5,167

⁽¹⁾  Includes $642 of goodwill allocated to equity-accounted entities.
⁽²⁾  See note 9 - Goodwill and Intangible Assets

The goodwill is generally not deductible for tax purposes.

The differences between the tentative and final purchase price allocations are principally due to the completion of the final valuation of the property, plant and equipment and intangible assets; the recording of liabilities for costs to exit certain operations of Pechiney and liabilities for employee termination benefits and environmental liabilities; the purchase of the remaining common shares of Pechiney in 2004; and the fair value adjustments relating to equity-accounted entities.

Of the $730 of acquired intangible assets, $50 was assigned to in-process research and development assets that were written off at the date of acquisition.  This write-off was included in Research and development expenses.  The balance of the acquired intangible assets are amortized over 13.5 years.

Acquisition Cost
Issuance of common shares on December 15, 2003 (40,995,195* common
shares without nominal or par value; average market value of $39.63 per
share)	1,625
Issuance of common shares on January 15, 2004 (1,390,406 ** common
shares without nominal or par value; average market value
of $39.63 per share)	55
Cash paid in 2003 of $3,544 net of cash and time deposits acquired of $243	3,301
Additional consideration for initial offer, re-offer and compulsory acquisition
paid in 2004	318
Cost of Pechiney options	80
Transaction costs	79
Total acquisition cost - net of cash and time deposits acquired	5,458

*    Represents the issuance of 42,413,105 common shares net of 1,417,910 shares held by Pechiney.
**  Represents the issuance of 2,082,075 common shares net of 691,669 common shares held by Pechiney.

27

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

8.         ACQUISITION OF PECHINEY (cont'd)

Unaudited supplemental pro forma information (in millions of US$, except per share amounts)

The following unaudited pro forma information for 2003 and 2002 presents a summary of consolidated results of operations of the Company and Pechiney as if the combination had occurred on January 1, 2002. These pro forma results have been prepared for comparative purposes only.

	2003	2002
	(UNAUDITED)	(UNAUDITED)
Sales and operating revenues	20,435	18,224
Net income (Loss)	(35)	183
Net income (Loss) per common share - basic and diluted	(0.10)	0.51

9.       GOODWILL AND INTANGIBLE ASSETS

Goodwill

The changes in the carrying amount of goodwill for the year ended December 31, 2004, are as follows:

	BALANCE AS AT JANUARY 1, 2004	DISPOSALS	ADDITIONS	DEFERRED TRANSLATION ADJUSTMENTS	ADJUSTMENTS*	IMPAIRMENT LOSSES	BALANCE AS AT    DECEMBER 31, 2004
Bauxite and Alumina	558	-	-	-	559	-	1,117
Primary Metal	534	-	4	24	947	-	1,509
Rolled Products Europe	-	-	-	8	331	-	339
Engineered Products	183	-	-	9	369	(154)	407
Packaging	1,301	-	4	59	1,597	-	2,961
Pechiney	2,283	-	-	-	(2,283)	-	-
Goodwill excluding amount
included in Long-term assets
held for sale	4,859	-	8	100	1,520	(154)	6,333
Goodwill included in equity-
accounted entities	173	-	4	19	641	-	837
Goodwill excluding amount
included in equity-accounted
entities and Long-term assets
held for sale	4,686	-	4	81	879	(154)	5,496
Goodwill included in Long-term
assets held for sale	22	(19)	-	(1)	(2)	-	-
	4,708	(19)	4	80	877	(154)	5,496

* In 2004, adjustments are principally changes to the tentative purchase price allocation related to the Pechiney acquisition.

28

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

9.             GOODWILL AND INTANGIBLE ASSETS (cont'd)

The changes in the carrying amount of goodwill for the year ended December 31, 2003, are as follows:

	BALANCE AS AT JANUARY 1, 2003	DISPOSALS	ADDITIONS	DEFERRED TRANSLATION ADJUSTMENTS	ADJUSTMENTS	IMPAIRMENT LOSSES	BALANCE AS AT    DECEMBER 31, 2003
Bauxite and Alumina	546	-	-	-	12	-	558
Primary Metal	511	-	6	18	(1)	-	534
Engineered Products	161	-	33	18	(1)	(28)	183
Packaging	1,085	-	75	126	15	-	1,301
Pechiney	-	-	2,283	-	-	-	2,283
Goodwill excluding amount
included in Long-term assets
held for sale	2,303	-	2,397	162	25	(28)	4,859
Goodwill included in equity-
accounted entities	167	-	-	6	-	-	173
Goodwill excluding amount
included in equity-accounted
entities and Long-term assets
held for sale	2,136	-	2,397	156	25	(28)	4,686
Goodwill included in Long-term
assets held for sale	53	(11)	-	(1)	(19)	-	22
	2,189	(11)	2,397	155	6	(28)	4,708

The changes in the carrying amount of goodwill for the year ended December 31, 2002, are as follows:

	BALANCE AS AT JANUARY 1, 2002	DISPOSALS	ADDITIONS	DEFERRED TRANSLATION ADJUSTMENTS	ADJUSTMENTS	IMPAIRMENT LOSSES	BALANCE AS AT    DECEMBER 31, 2002
Bauxite and Alumina	543	-	-	-	3	-	546
Primary Metal	426	-	33	49	3	-	511
Rolled Products Europe	163	-	-	-	-	(163)	-
Engineered Products	466	-	2	19	(5)	(321)	161
Packaging	1,255	-	-	94	(8)	(256)	1,085
Other	21	-	-	-	(21)	-	-
Goodwill excluding amount
included in Long-term assets
held for sale	2,874	-	35	162	(28)	(740)	2,303
Goodwill included in equity-
accounted entities	128	-	-	39	-	-	167
Goodwill excluding amount
included in equity-accounted
entities and Long-term assets
held for sale	2,746	-	35	123	(28)	(740)	2,136
Goodwill included in Long-term
assets held for sale	51	-	-	9	1	(8)	53
	2,797	-	35	132	(27)	(748)	2,189

In 2004, an increase in goodwill of $1,523 relating to the Pechiney acquisition was recorded in adjustments.  Of this amount, $642 was allocated to equity-accounted entities.  The increase in goodwill of $1,523 relates to a decrease in the fair value of the net assets acquired and results from the final purchase price allocation being completed in December 2004.  See note 8 - Acquisition of Pechiney.  Also included in 2004 in adjustments, a reduction in goodwill of $12 (2003: $7; 2002: $28) was recorded principally relating to a decrease in the valuation allowance related to future income tax assets acquired in the combination with algroup, but which were not recognized at the date of the business combination because, at the time, it was unlikely they would be recovered.

29

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

9.        GOODWILL AND INTANGIBLE ASSETS (cont'd)

As a result of the annual test, conducted as at October 31, 2004, to determine whether, as at that date, there was an impairment in the carrying amount of goodwill, an impairment loss of $154 relating to several fabricating facilities in the Engineered Products group, mainly in Europe, was recognized as a charge to income in 2004.  The impairment loss arose as a result of the strong appreciation of the euro since the date of acquisition in December 2003 and a reassessment of plan assumptions resulting from a change in business conditions from the date of acquisition to October 31, 2004.  The fair value of all reporting units was determined using discounted future cash flows.   For the year ended December 31, 2003, an impairment loss of $28 related to the extrusions business in the Engineered Products group in Europe was recognized as a charge to income.

In accordance with SFAS No. 142, the Company completed an initial review to determine whether, at January 1, 2002, there was impairment in the goodwill balance.  As a result of this review, an impairment loss of $748 (including $8 relating to long-term assets held for sale) was recognized in income in 2002 as a cumulative effect of accounting change.  The adjustment reflected the decline in end-market conditions in the period from the algroup merger in October 2000 to January 1, 2002.  The fair value of all reporting units was determined using discounted future cash flows.  The annual test was also completed in 2002 and no further impairment was identified. 

Intangible Assets with Finite Lives

		GROSS CARRYING AMOUNT	ACCUMULATED AMORTIZATION	NET BOOK VALUE
DECEMBER 31, 2004
Trademarks		218	53	165
Patented and non-patented technology		537	89	448
Purchase contracts		355	21	334
Customer contracts		39	9	30
Prior service costs included in pensions		253	-	253
		1,402	172	1,230
DECEMBER 31, 2003
Trademarks		178	33	145
Patented and non-patented technology		497	51	446
Purchase contracts		233	2	231
Customer contracts		115	-	115
Prior service costs included in pensions		223	-	223
		1,246	86	1,160
	DECEMBER 31, 2002
Trademarks		134	20	114
Patented and non-patented technology		208	31	177
Purchase contracts		20	1	19
Prior service costs included in pensions		142	-	142
		504	52	452

The aggregate amortization expense for the year ended December 31, 2004, was $79 (2003: $26; 2002: $23).  The estimated amortization expense for the five succeeding fiscal years is approximately $87 per year.  In 2004, the Company acquired intangible assets of nil (2003: $721; 2002: $20).  These assets are comprised of trademarks of nil (2003: $27; 2002: nil), patented and non-patented technology of nil (2003: $313; 2002: nil), purchase contracts of nil (2003: $266; 2002: $20), and customer contracts of nil (2003: $115; 2002: nil).  In 2004, the intangible assets were increased by $71 relating to the finalization of the Pechiney purchase price allocation.

30

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

10.      RESTRUCTURING PROGRAMS

2004 Restructuring Activities

In line with the Company's objective of value maximization, the Company undertook various restructuring initiatives in 2004.

Pechiney

In 2004, the Company recorded liabilities of $193 for restructuring costs in connection with the exit of certain operations of Pechiney, and these costs were recorded in the allocation of the purchase price.  See note 8 - Acquisition of Pechiney.  These costs relate principally to severance costs of $121 related to the involuntary termination of Pechiney employees in France (Primary Metal, Engineered Products, Packaging and Other), as well as other severance costs of $54, principally comprising $21 relating to a plant closure in Spain (Packaging), $17 relating to a planned plant closure in Flemalle, Belgium (Rolled Products Europe), $5 relating to a  plant closure in Garbagnate, Italy (Packaging), and $1 relating to the downsizing of a plant in Kolin in the Czech Republic (Packaging). 

Other 2004 restructuring activities

The Company incurred restructuring charges of $19 relating to the consolidation of its U.K. aluminum sheet rolling activities in Rogerstone, Wales, in order to improve competitiveness through better capacity utilization and economies of scale.  Production ceased at the rolling mill in Falkirk, Scotland (Rolled Products Europe) in December 2004 and the facility is expected to close during the first quarter of 2005.  The charges include $6 of severance costs, $8 of asset impairment charges, $2 of pension costs, $2 of decommissioning and environmental costs and $1 of other charges.  No further charges are expected to be incurred in relation to this restructuring activity.

The Company incurred restructuring charges of $7 relating to the closure of two corporate offices in the U.K. and Germany (Other).  The charges include $4 related to severance costs and $3 related to lease exit costs and costs to consolidate facilities. The Company expects to incur $4 of additional charges in 2005 relating principally to additional lease exit costs. 

In November 2004, the Company announced the downsizing of its Alcan Mass Transportation Systems business unit in Zurich, Switzerland (Engineered Products) as a result of changing market conditions and business realities.  In 2004, the Company incurred restructuring charges of $5 consisting of $4 of asset impairment charges, and $1 of other charges.  The Company expects to incur $3 of additional restructuring charges in 2005 relating principally to severance costs.  In addition, the Engineered Products group incurred restructuring charges of $9 relating to both the closure of a composites facility in the U.S., and process reengineering at certain facilities in Switzerland and Germany.  These charges consist of severance costs of $6, asset impairment charges of $2 and other costs of $1.  The Company expects to incur $4 of additional severance charges in 2005.

In 2004, the Company incurred restructuring charges of $21 relating to the closure of certain non-strategic packaging facilities located in the United States and France.  These charges consist of severance costs of $11, asset impairment charges of $8 and other charges of $2.  The Company expects to incur additional charges of $1 in relation to these plant closures.  In addition, the Company recorded $18 of restructuring charges relating to exit activities at certain packaging facilities located primarily in Europe.  These charges comprise $12 of severance costs, $3 of asset impairment charges and $3 of other costs.  No further charges are expected to be incurred in connection with these activities.  

In early 2004, the Company permanently halted production at its Jonquière Söderberg primary aluminum facility in Saguenay, Quebec (Primary Metal).  As a result, the Company recorded charges of $14 in 2004 comprising $5 of severance costs, $5 of asset impairment charges, and $4 of other costs.  The Company expects to incur an additional $12 in 2005 relating to severance and dismantling costs.

Other Pre-2004 Restructuring Activities

Included in the provision balance as at December 31, 2003, are $62 of liabilities related to Pechiney restructuring activities initiated before its acquisition by Alcan, and $24 of severance and other exit costs at certain packaging operations in Europe (Packaging), certain cable operations in the U.S. (Engineered Products), and a corporate office in the U.K. (Other).

2001 Restructuring Program

In 2001, the Company implemented a restructuring program aimed at safeguarding its competitiveness, resulting in a series of plant sales, closures and divestments throughout the organization. In the context of the Company's objective of value maximization, a detailed business portfolio review was undertaken in 2001 to identify high cost operations, excess capacity and non-core products.  Impairment charges arose as a result of negative projected cash flows and recurring losses. These charges related principally to buildings, machinery and equipment and some previously capitalized project costs. This program was essentially completed in 2003. 

31

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

10.      RESTRUCTURING PROGRAMS (cont'd)

In 2004, the Company recorded charges related to the 2001 restructuring program of $7, pre-tax, relating principally to the closure of facilities in the U.K. (Bauxite and Alumina) and the closure of cable operations in Canada and the United States (Engineered Products), and recorded recoveries of $14 relating principally to the sale of assets related to the closure of facilities in Glasgow, U.K. (Rolled Products Europe) and other recoveries related to the closure of facilities in the U.K. (Bauxite and Alumina).

The schedule provided below shows details of the provision balances and related cash payments for the significant restructuring activities:

As at December 31, 2004	SEVERANCE COSTS	ASSET         IMPAIRMENT PROVISIONS*	OTHER	TOTAL
Provision balance as at December 31, 2003	86	-	46	132
2004:
Charges recorded in the statement of
Income, net	44	30	13	87
Charges recorded in the allocation of the
Pechiney purchase price	175	-	18	193
Cash payments	(99)	-	(33)	(132)
Non-cash (charges) recoveries	-	(30)	8	(22)
Provision balance as at December 31, 2004	206	-	52	258

* Fair value of assets was determined using discounted future cash flows.

The schedule provided below shows details of the charges by operating segment:

Charges (recoveries) recorded in the statement of income in Other expenses (income) - net

Year ended December 31, 2004	SEVERANCE COSTS	ASSET         IMPAIRMENT PROVISIONS	OTHER	TOTAL
Bauxite and Alumina	-	-	(3)	(3)
Primary Metal	4	5	5	14
Rolled Products Europe	6	8	(1)	13
Engineered Products	7	6	4	17
Packaging	23	11	5	39
Other	4	-	3	7
Total	44	30	13	87

Charges forming part of the allocation of the Pechiney purchase price
 

Year ended December 31, 2004	SEVERANCE COSTS	OTHER	TOTAL
Primary Metal	50	2	52
Rolled Products Europe	17	2	19
Engineered Products	12	6	18
Packaging	42	5	47
Other	54	3	57
Total	175	18	193

32

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

11.          INCOME TAXES

	2004	2003	2002
Income (Loss) from continuing operations before income taxes and other items
Canada	(144)	(201)	(25)
Other countries	732	699	692
	588	498	667
Current income taxes
Canada	9	18	(8)
Other countries	321	242	204
	330	260	196
Deferred income taxes
Canada	89	120	75
Other countries	(44)	(122)	16
	45	(2)	91
Income tax provision	375	258	287

The composite of the applicable statutory corporate income tax rates in Canada is 32% (2003: 39%; 2002: 39%).

Effective January 1, 2004, the general and manufacturing and processing tax rates in Canada are equivalent.  Prior to 2004, the effect of the reduced tax rate on manufacturing and processing activities in Canada was disclosed as a deduction from the general tax rate.

The following is a reconciliation of income taxes calculated at the above composite statutory rates with the income tax provision:

	2004	2003	2002
Income taxes at the composite statutory rate	189	195	260
Differences attributable to:
Tax benefits from changes in Australian tax legislation	(23)	(74)	-
Exchange translation items	89	96	37
Exchange revaluation of deferred income taxes	44	112	16
Effect of tax rate changes on deferred income taxes	(9)	(1)	-
Unrecorded tax benefits - net	81	1	18
Investment and other allowances	(22)	(35)	(18)
Goodwill impairment	50	11	-
Large corporations tax	10	7	7
Withholding taxes	34	6	5
Reduced rate or tax exempt items	(25)	(11)	(11)
Foreign tax rate differences	(40)	(43)	(30)
Prior years' tax adjustments	(23)	(18)	(7)
Other - net	20	12	10
Income tax provision	375	258	287

33

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

11.          INCOME TAXES (cont'd)

At December 31, the principal items included in Deferred income taxes are:

	2004	2003	2002
Liabilities
Property, plant, equipment and intangibles	1,765	2,118	1,301
Inventory valuation	75	131	66
Other - net	113	122	81
	1,953	2,371	1,448
Assets
Tax benefit carryovers	1,505	1,429	361
Accounting provisions not currently deductible for tax	1,496	1,255	511
	3,001	2,684	872
Valuation allowance (amounts not likely to be recovered)	1,530	1,149	245
	1,471	1,535	627
Net deferred income tax liability	482	836	821

Amounts recognized in the Consolidated Balance Sheet consist of:
Deferred income tax asset - current	(214)	(49)	-
Deferred income tax asset - non-current	(870)	(892)	(189)
Deferred income tax liability - current	23	81	-
Deferred income tax liability - non-current	1,543	1,696	1,010
Net deferred income tax liability	482	836	821

Based on rates of exchange at December 31, 2004, tax benefits of approximately $1,290 relating to prior and current years' operating losses and $60 of benefits related to capital losses and tax credits carried forward will be recognized when it is more likely than not that such benefits will be realized. These amounts are included in the valuation allowance above. Approximately $8 of these potential tax benefits expire in 2005.

The valuation allowance relates principally to loss carryforward benefits and tax credits where realization is not likely.  The majority of the allowance relates to loss carryforwards of French companies with no expiry date, but which are subject to limitations to their use such that it is unlikely that they will be used against taxable income.  In the event that the valuation allowance related to these loss carryforwards was reversed, approximately $1,052 of the allowance would be allocated to reduce goodwill.  In 2004, $13 (2003: $5; 2002: $11) of the valuation allowance was reversed when it became more likely than not that benefits would be realized. Of that amount, $12 (2003: $4; 2002: $5) reduced goodwill since it related to future income tax assets acquired in business combinations, but which were not recognized at the date of the business combinations.

34

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

12.          INVESTMENT IN UNCONSOLIDATED AFFILIATES

At December 31, 2004, investments accounted for using the equity method and the ownership held by Alcan include principally:

Sor-Norge Aluminium AS (50%); Aluminium Norf GmbH (50%); Consortium Strojmetal A.S. Kamenice Alcan Singen GmbH (50%); Rhenaroll S.A. (50%); Halco (Mining) Inc. (45%); Queensland Alumina Limited (41%); Alcan Propack Chengdu Co. Ltd. (26%); Mineração Rio Do Norte S.A. (13%); Petrocoque S.A. - Indústria E Comércio (25%); Pechiney Reynolds Quebec Inc. (50%); Alucam - Compagnie Camerounaise de l'Aluminium (46.67%); Socatral - Société Camerounaise de Transformation de l'Aluminium (29.96%); Airlessystems (50%); Alcan Ningxia Aluminium Company Limited (50%); Euronorca Partners (50%).

The activities of the Company's major equity-accounted investments include the procurement and processing of bauxite in Australia, Brazil and Guinea, smelting operations in Norway, Cameroon, Canada, and China, aluminum rolling operations in Germany and Cameroon, as well as packaging operations in France and China, and engineered products operations in the Czech Republic.

As described in note 4 - Accounting Changes - Consolidation of Variable Interest Entities, beginning in 2004, the Company consolidated, under the provisions of FIN 46, the financial statements of Logan, in which it holds a 40% interest.  Prior to 2004, the Company's investment in Logan was accounted for using the equity method.

A summary of the combined financial information for these equity-accounted companies is set forth below.

Summary of Combined Financial Position

	2004	2003	2002
Current assets	1,091	881	485
Non-current assets	3,628	2,381	2,323
Total assets	4,719	3,262	2,808
Current liabilities	1,122	981	1,068
Non-current liabilities	1,052	791	494
Total liabilities	2,174	1,772	1,562
Net assets	2,545	1,490	1,246
Alcan's equity in net assets	1,737*	724	545

*Includes $642 of goodwill arising from the Pechiney acquisition.  See note 8 - Acquisition of Pechiney.

Summary of Combined Operations

	2004	2003	2002
Revenues	1,954	1,122	1,347
Costs and expenses	1,648	885	1,081
Income taxes	114	59	70
Net income	192	178	196
Alcan's share of net income as reported in equity income	54	38	44

35

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

13.      RELATED PARTY TRANSACTIONS

Alcan has transactions with certain investees accounted for under the equity method, generally with respect to the purchase of inventory in the ordinary course of business.  The activities of the major equity-accounted investees are the procurement and processing of bauxite in Australia, Brazil and Guinea, smelting operations in Norway, Cameroon, Canada and China, aluminum rolling operations in Germany and Cameroon, as well as packaging operations in France and China, and engineered products operations in the Czech Republic.  These transactions are reflected in the consolidated financial statements as follows:

	2004	2003	2002
Year ended December 31:
Sales and operating revenues	95	42	40
Cost of sales and operating expenses	249	39	38
Other expenses (income) - net	(1)	(2)	(8)
As at December 31:
Trade receivables	184	142	152
Deferred charges and other assets	28	-	-
Payables and accrued liabilities	122	56	35
Short-term borrowings	34	-	-

As at December 31, 2003, the Company had entered into exchange contracts with an unconsolidated affiliate with a notional amount of $28.  These contracts matured in 2004.

14.      ALLOWANCE FOR DOUBTFUL ACCOUNTS

The allowance for doubtful accounts reflects management's best estimate of probable losses inherent in the trade receivables balance.  Management determines the allowance based on known uncollectable accounts, historical experience, and other currently available evidence.  Activity in the allowance for doubtful accounts is as follows:

YEAR	BALANCE AT BEGINNING OF YEAR	ADDITIONS CHARGED TO COSTS & EXPENSES	ACQUISITIONS	RECOVERIES	WRITE- OFFS	DIVESTMENTS	EXCHANGE	BALANCE AT END OF YEAR
2004	92	27	-	(7)	(17)	-	4	99
2003	56	12	31	-	(7)	-	-	92
2002	50	20	-	-	(9)	(4)	(1)	56

36

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

15.                SALES OF RECEIVABLES

Under an agreement effective December 18, 2001, on an ongoing basis, the Company sells to a third party an undivided interest in certain trade receivables, with limited recourse, for maximum cash proceeds of $300 with the maximum credit exposure to the Company held in reserve by the third party. This amount is recorded in Other receivables (2003 and 2002: Deferred charges and other assets). Net proceeds were used in 2001 to repay commercial paper borrowings. The Company acts as a service agent and administers the collection of the receivables sold.  As at December 31, 2004, the Company sold trade receivables of $345 (2003: $336; 2002: $341), with $45 (2003: $43; 2002: $44) held in reserve by the third party.  In January 2005, as a result of the spin-off of Novelis, this program was discontinued.

The Company has also entered into other programs with certain financial institutions to sell third party receivables.  Under one program, the Company entered into agreements to sell up to $129 (€ 95 million) (2003: $211 (€ 168 million)) of selected receivables without recourse.  As at December 31, 2004, the Company sold trade receivables of $129 (€ 95 million) (2003: $143 (€ 114 million)) under this program. Under another program, the Company entered into an agreement to sell third party receivables of $61 (2003: $61).  As at December 31, 2004, the Company sold trade receivables under this program of $59 (2003: nil) with $6 (2003: nil) held in reserve by a third party.

16.                OTHER EXPENSES (INCOME) - NET

Other expenses (income) - net comprise the following elements:

	2004	2003	2002
Restructuring and other costs (recoveries), net	105	(2)	65
Asset impairment provisions	99	36	4
Gain on disposal of businesses and investment - net (NOTE 20)	(49)	(14)	(36)
Provisions for legal claims (NOTE 28)	8	1	113
Environmental provisions	20	29	2
Interest revenue	-	(19)	(17)
Pechiney integration	38	-	-
Exchange losses	61	116	51
Derivatives (gains) losses	36	(30)	(60)
Other	88	14	(3)
	406	131	119

The 2004 restructuring costs of $105 consist principally of $71 of charges included in note 10 - Restructuring Programs.  The balance relates principally to severance costs.

The 2004 asset impairment provisions consist principally of $30 of charges included in note 10 - Restructuring Programs and $65 related to the impairment of certain rolling assets in Italy (Rolled Products Europe) and arose as a result of negative projected cash flows.  Fair values were determined based on either discounted cash flows or selling price.

The 2003 restructuring costs (recoveries) of ($2) consist principally of $36 of employee severance costs and other exit costs at flexible packaging operations in Europe (Packaging) and closure costs for certain cable operations in the U.S. (Engineered Products) offset by recoveries of $38 related to the 2001 restructuring program.  The recoveries are primarily due to the reversal of an excess severance provision and gains on the sales of assets.  

The 2003 asset impairment provisions of $36 consist principally of $14 for the closure of the Söderberg primary aluminum facility in Jonquière, Quebec (Primary Metal), $7 for flexible packaging operations in Europe and $7 for a converting facility in Charlotte, North Carolina (Packaging). The impairment charges arose as a result of negative projected cash flows and related principally to buildings, machinery and equipment. Fair values were determined based on either discounted cash flows or selling price.

37

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

17.          INVENTORIES

	2004	2003	2002
Aluminum operating segments
Aluminum	1,873	1,887	905
Raw materials	731	486	359
Other supplies	575	467	309
	3,179	2,840	1,573
Packaging operating segment
Raw materials and other supplies	347	317	97
Work in progress	147	143	41
Finished goods	356	363	151
	850	823	289
	4,029	3,663	1,862

18.          DEFERRED CHARGES AND OTHER ASSETS

Deferred charges and other assets comprise the following elements:

	2004	2003	2002
Prepaid pension costs (NOTE 32)	197	210	314
Income taxes recoverable	-	31	-
Marketable securities	52	51	37
Prepaid mining expenses	49	51	53
Debt financing costs	43	47	21
Investments *	1,794	808	579
Reserve for receivables sold (NOTE 15)	-	43	30
Amount receivable on currency swap of debt	62	16	-
Long-term notes and other receivables	595	164	104
Other	85	142	40
	2,877	1,563	1,178
* Investments
Companies accounted for under the equity method (NOTE 12)	1,737	724	545
Available-for-sale securities	57	84	34
	1,794	808	579

19.          PROPERTY, PLANT AND EQUIPMENT

	2004	2003	2002
Cost (excluding Construction work in progress)
Land and property rights	686	506	346
Buildings	3,904	3,836	2,998
Machinery and equipment	17,332	17,688	12,894
	21,922	22,030	16,238

Accumulated depreciation relates primarily to Buildings and Machinery and equipment. 

38

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

20.          SALES AND ACQUISITIONS OF BUSINESSES AND INVESTMENTS

2004
Asia and Other Pacific
On March 10, 2004, the Company announced that it had secured the necessary regulatory and government approvals to move forward with its previously announced definitive joint venture agreement, signed in October 2003, with the Qingtongxia Aluminium Group Company Limited and the Ningxia Electric Power Development and Investment Co. Ltd.  Under the agreement, Alcan invested $110 as at December 31, 2004 for a 50% participation and for a secure power supply in an existing 150-kilotonne (kt) modern pre-bake smelter located in the Ningxia autonomous region in the People's Republic of China.  The agreement provides for the joint venture to obtain long-term access to dedicated power on competitive terms sufficient to meet the energy requirements of the smelter.  The joint venture also gives Alcan a substantial operating role and the option to acquire, through additional investment, up to 80% of a new 250-kt potline, already under construction.  The investment is accounted for using the equity method.

Other Europe
In 2004, the Company recorded in Other expenses (income) - net a gain of $46 due to the dilution of its ownership interest in Aluminium & Chemie Rotterdam B.V. (Primary Metal). 

All other
On June 29, 2004, the Company announced that Alcan officials and a South African delegation are continuing to examine the best value-creating alternatives offered by the aluminum smelter project originally proposed by Pechiney in Coega, South Africa.  On November 18, 2004, the Company announced that it will conduct a new feasibility study for the construction of a new aluminum smelter with the South African Government and Industrial Development Corporation. 

On November 24, 2004, the Company announced that it had signed a protocol of negotiation with Alcoa World Alumina LLC (Alcoa) and the Government of the Republic of Guinea (the Government) for the development of a 1.5-million tonne per year  (Mt/y) alumina refinery in the West African nation.  This protocol sets out the items and framework for the alumina refinery project, which will be negotiated with the Government during the upcoming months as part of the Memorandum of Understanding between the parties, announced in May, 2004.

Subsequent to a Memorandum of Understanding in June 2004, on February 23, 2005, the Company announced the signing of a Shareholders' Agreement with Oman Oil Company S.A.O.C. (OOC) and the Abu Dhabi Water and Electricity Authority (ADWEA) for a 20% equity interest in the development of a proposed 325-kt per year (kt/y) aluminum smelter project in Sohar, Oman.  The Company has the option of acquiring up to 60% of a planned second potline for an additional 330 kt/y of aluminum.  The agreement provides that the Company would license its AP35 smelter technology and take a leading role in the construction and operation of the smelter.  Subject to successful completion of the project agreements and financing arrangements, construction is expected to commence in the second half of 2005 and result in the first metal production by 2008.

2003
Asia and Other Pacific
In the second quarter of 2003, the Company sold its remaining investment in Nippon Light Metal Company, Ltd. (NLM) for sales proceeds of $22, resulting in a gain of $34 including the realization of deferred translation gains of $15. In the third quarter of 2003, the Company increased its ownership position in Aluminium Company of Malaysia, a manufacturer of light gauge aluminum products, from 36% to 59% by acquiring additional shares, with a value of $30, from NLM in exchange for its ownership in Alcan Nikkei Siam Limited in Rangsit, Thailand, with a value of $24, and a cash payment of $6. The sale of Alcan Nikkei Siam Limited resulted in the realization of deferred translation losses of $11. The gain on the sale of NLM and the loss on the sale of Alcan Nikkei Siam Limited were recorded in Other expenses (income) - net.

In December 2003, the Company sold the extrusions operations of Aluminium Company of Malaysia, for net proceeds of $2. A pre-tax amount of $6, which is included in Other expenses (income) - net, consists of a favourable adjustment to a previously recorded impairment provision.

France, Germany, Other Europe and Asia and Other Pacific
In April 2003, the Company completed the acquisition of VAW Flexible Packaging (FlexPac) from Norsk Hydro for a cost of $302, net of cash and time deposits acquired. FlexPac includes 14 plants in 8 countries and has 5,400 employees. FlexPac comprises a set of custom manufacturing businesses producing high quality flexible packaging products for a wide variety of end use customers and manufacturers of consumer goods, including those in the food, dairy and pharmaceutical industries. The business combination is accounted for using the purchase method and the results of operations are included in the consolidated financial statements since acquisition.

39

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

20.          SALES AND ACQUISITIONS OF BUSINESSES AND INVESTMENTS (cont'd)

As part of the acquisition of FlexPac in the second quarter of 2003, the Company acquired, directly and indirectly, 63% of the total issued share capital of Strongpack Plc in Thailand. Strongpack is engaged in packaging businesses, providing production and processing services on all types of flexible packaging materials. In June 2003, the Company acquired an additional 12% of Strongpack for a cost of $4.

Also, as part of the acquisition of FlexPac, the Company acquired 70% of the total issued share capital of Rotopak in Turkey. Rotopak is engaged in the food flexible packaging business. In August 2003, the Company acquired the remaining 30% of Rotopak for a cost of $24.

The total purchase cost of $330 for FlexPac was allocated based on the assigned fair values of the assets acquired and liabilities assumed as follows:

	2003
Current assets	285
Deferred charges and other assets	2
Property, plant and equipment	215
Intangible assets	10
Deferred tax asset	19
Goodwill(1)	75
	606
Current liabilities	188
Debt not maturing within one year	11
Deferred credits and other liabilities	60
Minority interests	17
Fair value of net assets acquired at date of acquisition (net of cash and time deposits
acquired of $31)	330

⁽¹⁾ See note 9 - Goodwill and Intangible Assets.

United States and Ecuador
In July 2003, the Company completed the acquisition of Baltek Corporation (Baltek) for a cost of $38. Baltek is the world's leading supplier of balsa based structural core materials and has production and sales facilities around the world, including in Ecuador. Baltek's balsa core materials fit well into the existing composites business, as structural foam and balsa are complementary products that go to market through the same distribution channels. Ecuador is included in the geographic area All other. The business combination is accounted for using the purchase method and the results of operations are included in the consolidated financial statements since acquisition. The purchase price was allocated based on the assigned fair values of the assets acquired and liabilities assumed as follows:

	2003
Current assets	29
Deferred charges and other assets	1
Property, plant and equipment	23
Intangible assets	4
Goodwill(1)	9
	66
Current liabilities	23
Debt not maturing within one year	1
Deferred credits and other liabilities	4
Fair value of net assets acquired at date of acquisition	38

⁽¹⁾ See note 9 - Goodwill and Intangible Assets.

In October 2003, the Company acquired the Uniwood/Fome-Cor Division of Nevamar for a cost of $95. Uniwood/Fome-Cor is one of the largest U.S. manufacturers of foam-based display board, with its head office and production facilities in Statesville, North Carolina, and another production site in Glasgow, Kentucky.

40

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

20.          SALES AND ACQUISITIONS OF BUSINESSES AND INVESTMENTS (cont'd)

The business combination is accounted for using the purchase method and the results of operations are included in the consolidated financial statements since acquisition. The purchase price was allocated based on the assigned fair values of the assets acquired and liabilities assumed as follows:

	2003
Current assets	14
Property, plant and equipment	17
Intangible assets	54
Goodwill(1)	25
	110
Current liabilities	4
Deferred income taxes	11
Fair value of net assets acquired at date of acquisition	95

⁽¹⁾ See note 9 - Goodwill and Intangible Assets.

Other
In 2003, the Company sold its Borgofranco power facilities in Italy (Rolled Products Europe) and recorded a gain of $18 in Other expenses (income) − net. 

See reference to the sale of the extrusions operations in Milan, Italy, and the sale of Fibrenyle in the U.K. in note 5 - Discontinued Operations and Assets Held for Sale.

See reference to the acquisition of Pechiney in note 8 - Acquisition of Pechiney.

2002

Canada

In April 2002, the Company acquired the Société générale de financement (SGF) 20% joint venture interest in the Aluminerie Alouette consortium at a cost of $172 and, in September 2002, the Company acquired the Corus Group plc's 20% joint venture interest at a cost of $171 giving the Company a 40% ownership in Alouette.  These business combinations are accounted for using the purchase method and the results of operations are included in the consolidated financial statements since acquisition.

The total purchase price was allocated based on the assigned fair values of the assets acquired and liabilities assumed as follows:

	2002
Current assets	31
Deferred charges and other assets	3
Property, plant and equipment	300
Intangible assets	20
Goodwill(1)	39
	393
Current liabilities	9
Deferred credits and other liabilities	15
Deferred income taxes	26
Fair value of net assets acquired at date of acquisition	343

⁽¹⁾ See note 9 - Goodwill and Intangible Assets.

In September 2002, the five co-venturers of the Aluminerie Alouette consortium announced their final approval of the plant expansion in Sept-Îles, Quebec.  Alcan's share of the cost will be approximately $400. Construction began in the spring of 2003 and is approximately 96% complete.  The first pots were put into operation in December 2004.  Production start-up is expected to be completed in the fall of 2005.

41

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

20.          SALES AND ACQUISITIONS OF BUSINESSES AND INVESTMENTS (cont'd)

Japan

In 2002, the Company sold a portion of its investment in Nippon Light Metal Company, Ltd (NLM), included in the geographic area Asia and Other Pacific, for net cash proceeds of $22, reducing its holdings to an effective ownership of 2.2%.  Included in Other expenses (income) - net is a gain of $37.  The after-tax gain included a previously deferred gain of $8 related to the sale in 1996 of Toyo Aluminium K.K. to NLM.

21.          ASSET RETIREMENT OBLIGATIONS

As described in note 4 - Accounting Changes, Asset Retirement Obligations, on January 1, 2003, the Company retroactively adopted SFAS No. 143, Accounting for Asset Retirement Obligations.  These liabilities consist primarily of environmental remediation costs, resulting from normal operations, associated with certain bauxite residue disposal sites at its alumina refineries and the disposal of certain of its spent potlining associated with smelter facilities.  The following is a reconciliation of the aggregate carrying amount of liabilities for asset retirement obligations and the unaudited pro forma impact for the year ended December 31, 2002, as if the standard had been adopted effective January 1, 2002.

			Pro forma
			2002
	2004	2003	(Unaudited)
Balance ─ beginning of year	563	389	363
Acquisition of Pechiney	8	101	-
Liabilities incurred	20	35	12
Liabilities settled	(36)	(25)	(12)
Accretion expense	26	25	17
Exchange	40	91	9
Revisions in estimated cash flows	3	(53)	-
Balance-end of year	624	563	389

22.          DEFERRED CREDITS AND OTHER LIABILITIES

Deferred credits and other liabilities comprise the following elements:

	2004	2003	2002
Post-retirement and post-employment benefits (NOTE 32)	3,465	2,920	1,216
Asset retirement obligations	582	499	-
Environmental liabilities	231	156	327
Restructuring liabilities	13	40	24
Claims	155	240	206
Fair value of derivatives	235	75	35
Long-term payables	-	140	77
Other	294	236	111
	4,975	4,306	1,996

42

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

23.          DEBT NOT MATURING WITHIN ONE YEAR

	2004	2003	2002
Alcan Inc.
Commercial paper - CAN$844 million(A)	703	1,346	390
Commercial paper - US$(A)	116	304	246
Bank loans, due 2005 (€ 21 million)(B)	29	68	91
Bank loan, due 2006 (B) (F)	500	-	-
5.375% Swiss franc bonds (C)	-	-	129
5.5% Euro note, due 2006 (€ 600 million)	813	753	629
6.25% Debentures, due 2008	200	200	200
6.45% Debentures, due 2011	400	400	400
4.875% Global notes, due 2012	500	500	500
4.50% Global notes, due 2013	500	500	-
5.20% Global notes, due 2014	500	500	-
7.25% Debentures, due 2028	100	100	100
7.25% Debentures, due 2031	400	400	400
6.125% Global notes, due 2033	750	750	-
Other debt, due 2017 and 2033 (CAN$13 million)	11	10	3
Alcan Aluminum Corporation
Floating Rate Notes (B) (F)	-	500	-
Alcan Finance Jersey Limited
Euro Medium Term Note Program (EMTN)
EMTN, due 2008 (€ 13 million) (B) (D)	18	17	14
EMTN, due 2008 (€ 8 million) (B) (D)	11	10	8
ALA (Nevada) Inc.
Bank loan, due 2005(B)	60	60	60
Alcan Packaging Canada Limited
5.69% Bank loan	-	-	35
6.24% Bank loan	-	30	30
Alcan Taihan Aluminium Limited(K)
4.55% Bank loan, due 2007	70	-	-
4.80% Bank loan, due 2007 (KRW 40 billion)	39	30	30
4.55% Bank loan, due 2007 (KRW 25 billion)	24	20	20
Bank loans due, 2005/2011(KRW 2 billion)	2	2	2
Alcan Holdings France
Bank loans,  due 2005/2009 (€ 13 million)(B)	18	18	15

43

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

23.          DEBT NOT MATURING WITHIN ONE YEAR (cont'd)

	2004	2003	2002
Pechiney S.A. (l)
Commercial paper − Euro (€ 118 million)(A)	160	-	-
5.10% Debentures, due 2005 (€ 229 million)	313	303	-
2.15% Equity link bonds, due 2005 (€ 53 million)	83	73	-
3.25% Convertible bonds (OCEANEs), due 2007 (€ 15 million)(H)	-	20	-
5.14% FOCOMO bond(J)	-	7	-
6.03% FOCOMO bond (J)	-	10	-
6.20% FOCOMO bond(J)	-	12	-
5.69% FOCOMO bond(J)	-	10	-
4.81% FOCOMO bond(J)	-	3	-
Bank loan, due 2008 (€ 138 million) (B)	187	174	-
4.80% Bank loan, due 2008 (€ 45 million)	61	56	-
3.45% Bank loan, due 2006 (€ 40 million)	54	50	-
Other debt, due 2005/2013 (€ 11 million)(B)	15	13	-
Pechiney Pacific (Pty) Ltd
Credit facility (B) (G)	-	78	-
Credit facility (B) (G)	-	105	-
Techpack Asia
Bank loans, due 2005/2010 (B)	26	26	-
Aluminium Pechiney SPV
Bank loan, due 2005/2013 (B)	89	50	-
Aluminium Dunkerque
Bank loan, due 2005 (B)	27	88	-
Credit facility, due 2005 and 2016 (€ 47 million)(B)	63	40	-
Other
Bank loans, due 2005/2013(B)	28	30	30
4% Eurodollar (E)	-	-	14
Other debt, due 2005/2033(B)	44	112	23
	6,914	7,778	3,369
Debt maturing within one year included in current liabilities	(569)	(341)	(249)
	6,345	7,437	3,120

(A)  The Company has a $3,000, multi-currency, five-year, committed global credit facility with a syndicate of international banks. The facility is available for general corporate purposes, including backup for commercial paper. Effective April 2004, this facility replaced two long-term, global, multi-currency facilities each amounting to $1,000, which were in place at December 31, 2003 and 2002, and a € 700 million short-term revolving credit facility, which was in place at December 31, 2003.  In 2003, the Company had a $4,000 bridge credit facility to finance the acquisition of Pechiney.  This facility was terminated in January 2004.

The interest rates on the CAN$ denominated commercial paper range from 2.23% to 2.78% in 2004 (2003: 2.76% to 2.97%; 2002: 2.79% to 3.07%).  The interest rates on the US$ denominated commercial paper range from 1.75% to 2.53% in 2004 (2003: 1.17% to 1.32%; 2002: 1.30% to 1.96%).  The interest rates on the euro denominated commercial paper range from 2.16% to 2.67% in 2004.

As at December 31, 2004, 2003 and 2002, the Company had both the intention and the ability, through its long-term credit facilities, to refinance its commercial paper borrowings on a long-term basis, and has classified them as Debt not maturing within one year, with the exception of the following:

(i)	$1,500 ($1,324 of CAN$ denominated commercial paper (CAN$1,589 million) and $176 of US$ denominated commercial paper) classified as Short-term borrowings as at December 31, 2004, as these borrowings were repaid during the first quarter of 2005.
(ii)	€ 368 million ($463) issued by Pechiney S.A., classified as Short-term borrowings as at December 31, 2003, as they were backed by a short-term credit facility.

44

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

23.  DEBT NOT MATURING WITHIN ONE YEAR (cont'd)

	In 2004, CAN$ denominated commercial paper borrowings of CAN$2,433 million (2003: CAN$1,747 million; 2002: CAN$ 616 million) were swapped through the use of forward exchange contracts for $1,995 (2003: $1,332; 2002: $391).
(B)	Interest rates fluctuate principally with the lender's prime commercial rate, the commercial bank bill rate, or are tied to LIBOR/EURIBOR/SIBOR rates.
(C)	The Swiss franc bonds were issued at CHF 178 million and were swapped for $105 at an effective interest rate of 8.98%. The bonds were repaid in April 2003.
(D)	The Euro Medium Term Note Program (EMTN) notes of principal amounts of € 13 million and € 8 million were swapped for £9 million and £5 million, respectively.
(E)	Debenture holders were entitled to receive at their option 1,772 common shares held by the Company in NLM, a portfolio investment, in exchange for each ten thousand-dollar principal amount of debentures. The Company sold its remaining investment in NLM in the second quarter of 2003, and the debentures were repaid in September 2003.
(F)	In August 2004, Alcan Aluminum Corporation redeemed the Floating Rate Notes (FRNs) that were due in December 2005.  Alcan Inc. refinanced the FRNs with a bank loan due in 2006 that was repaid during the first quarter of 2005.
(G)	As at December 31, 2004, Pechiney Pacific (Pty) Ltd has a new short-term committed credit facility of $125.  As at December 31, 2003, Pechiney Pacific had borrowings of $78 and $105 under two long-term credit facilities that were repaid in 2004.
(H)	The purchase of the Pechiney OCEANEs outstanding at December 31, 2003, was completed on February 6, 2004, for a price of $19.
(I)	Upon acquisition of Pechiney, Pechiney's debt was recorded at fair market value.
(J)	As at December 31, 2004, all of Pechiney's FOCOMO bonds were reclassified as short-term borrowings, as they became callable at the option of the holders.
(K)	In December 2004, Alcan Taihan Aluminium Limited (ATA) entered into a $70 long-term loan, which was subsequently swapped for KRW 73 billion. In 2004, ATA also entered into two new long-term loans of KRW 40 billion and KRW 25 billion, to replace the KRW 30 billion and KRW 20 billion loans that were outstanding in 2003 and 2002, and that matured in 2004. In 2004, interest rates on the other bank loans range from 3.00% to 5.50% (2003: 2.75% to 5.83%; 2002: 4.25% to 6.30%).  ATA is an entity included in the spin-off of Novelis.  Accordingly, these borrowings were transferred to Novelis upon completion of the spin-off on January 6, 2005.

In 2004, the Company has swapped interest rates to 2007 on $63 (2003: $25; 2002: $3) of its floating rate debt to fixed. In 2003, the Company had swapped interest rates on $660 (2002: $9) of its fixed rate debt to floating and on $230 of its floating rate debt to floating with a cap at a certain percentage.

Based on rates of exchange at year-end, debt repayment requirements over the next five years amount to $569 in 2005, $1,399 in 2006, $160 in 2007, $499 in 2008 and $26 in 2009.

24.           PREFERENCE SHARES

Authorized
An unlimited number of preference shares issuable in series. All shares are without nominal or par value.

Authorized and Outstanding
In each of the years 2004, 2003 and 2002, there were authorized and outstanding 5,700,000 series C and 3,000,000 series E  non-retractable preference shares, redeemable at the option of the Company, with stated values of $106 and $54, respectively.

Preference shares, series C and E, are eligible for quarterly dividends based on an amount related to the average of the Canadian prime interest rates quoted by two major Canadian banks for stated periods. The dividends on series C and E preference shares are cumulative.

45

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

24.          PREFERENCE SHARES (cont'd)

Preference shares, series C and E, may be called for redemption at the option of the Company on 30 days' notice at CAN$25.00 per share.

Any partial redemption of preference shares must be made on a pro rata basis or by lot.

25.          COMMON SHARES

The authorized common share capital is an unlimited number of common shares without nominal or par value.  On March 2, 2005, there were 370,037,313 common shares outstanding. Changes in outstanding common shares are summarized below:

	NUMBER (IN THOUSANDS)			STATED VALUE
	2004	2003	2002	2004	2003	2002
Outstanding - beginning of
year	365,181	321,470	320,902	6,461	4,731	4,713
Issued for cash:
Executive share option plan (NOTE 26)	1,760	699	292	60	22	7
Liquidity Agreement (NOTE 26)	276	2	-	12	-	-
Dividend reinvestment and share
purchase plans	631	597	276	28	20	9
Issued in exchange for tendered Pechiney shares*	2,082	42,413	-	82	1,681	-
Transfer of additional paid-in capital upon exercise of stock options	-	-	-	27	7	2
Outstanding - end of year	369,930	365,181	321,470	6,670	6,461	4,731

* As at December 31, 2004, 872 of these shares with a stated value  of $35 are held by a subsidiary (1,418 shares at a stated value of $56 as at December 31, 2003).  In 2004, 692 shares with a stated value of $27 were issued to a subsidiary and subsequently sold by the subsidiary on the open market in January 2004.

Shareholder Rights Plan

In 1990, shareholders approved a plan whereby each common share of the Company carries one right to purchase additional common shares.  The plan, with certain amendments, was reconfirmed at the 1995 Annual Meeting and further amendments were approved at the 1999 Annual Meeting.  The plan was reconfirmed for a three-year period with no amendments at the 2002 Annual Meeting.  The rights under the plan are not currently exercisable but may become so upon the acquisition by a person or group of affiliated or associated persons ("Acquiring Person") of beneficial ownership of 20% or more of the Company's outstanding voting shares or upon the commencement of a takeover bid. Holders of rights, with the exception of an Acquiring Person, in such circumstances will be entitled to purchase from the Company, upon payment of the exercise price (currently $100.00), such number of additional common shares as can be purchased for twice the exercise price based on the market value of the Company's common shares at the time the rights become exercisable.

The plan has a permitted bid feature that allows a takeover bid to proceed without the rights under the plan becoming exercisable, provided that it meets certain minimum specified standards of fairness and disclosure, even if the Board does not support the bid.

The plan expires in 2008, subject to reconfirmation at the Annual Meeting of Shareholders in 2005, but may be redeemed earlier by the Board, with the prior consent of the holders of rights or common shares, for $0.01 per right.  In addition, should a person or group of persons acquire outstanding voting shares pursuant to a permitted bid or a share acquisition in respect of which the Board has waived the application of the plan, the Board shall be deemed to have elected to redeem the rights at $0.01 per right.

46

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

26.          STOCK OPTIONS AND OTHER STOCK-BASED COMPENSATION

Alcan Executive Share Option Plan
Under the executive share option plan, certain key employees may purchase common shares at an exercise price that is based on the market value of the shares on the date of the grant of each option.  The vesting period for options granted beginning in 1998 is linked to Alcan's share price performance, but does not exceed nine years. Options granted before 1998 vest generally over a fixed period of four years from the grant date and expire at various dates during the next 10 years.

Changes in the number of shares under options as well as the average exercise price are summarized below:

	NUMBER OF SHARES UNDER OPTIONS (IN THOUSANDS)			WEIGHTED AVERAGE EXERCISE PRICE (CAN$)
	2004	2003	2002	2004	2003	2002
Outstanding - beginning of year	9,566	8,687	7,108	47.49	46.08	46.34
Granted	2,679	1,609	1,937	58.13	52.58	44.19
Exercised (NOTE 25)	(1,760)	(699)	(292)	43.25	41.85	39.69
Forfeited	(75)	(31)	(66)	45.95	45.29	46.53
Outstanding - end of year	10,410	9,566	8,687	50.96	47.49	46.08
Exercisable - end of year	4,285	5,852	5,007	45.98	44.98	45.47

Shares under Options Outstanding at December 31, 2004

NUMBER OF SHARES UNDER OPTIONS (IN THOUSANDS)	RANGE OF EXERCISE PRICE (CAN$)	WEIGHTED AVERAGE EXERCISE PRICE (CAN$)	WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE (YEARS)
1,221	34.70-40.00	38.41	6.76
603	40.01-46.00	44.20	3.26
3,196	46.01-52.00	46.90	3.34
1,733	52.01-58.00	52.79	8.39
3,657	58.01-64.25	58.94	8.86
10,410	34.70-64.25	50.96

Shares under Options Exercisable at December 31, 2004

NUMBER OF SHARES UNDER OPTIONS (IN THOUSANDS)	RANGE OF EXERCISE PRICE (CAN$)	WEIGHTED AVERAGE EXERCISE PRICE (CAN$)
794	34.70-40.00	38.18
591	40.01-46.00	44.22
2,462	46.01-52.00	47.00
197	52.01-58.00	53.77
241	58.01-64.25	59.21
4,285	34.70-64.25	45.98

At December 31, 2004, the Company had reserved for issue under the executive share option plan 12,949,634 shares.

Stock options are granted at an exercise price equal to the market price on the grant date.  The weighted average fair value of stock options granted in 2004 is $12.87 (2003: $10.00; 2002: $8.69).

To compute compensation expense under SFAS No. 123, Accounting for Stock-Based Compensation, the Black-Scholes valuation model was used to determine the fair value of the options granted. Using the model, the fair value of options averages approximately 26% to 41% of the exercise price.  See note 4 -  Accounting Changes - Stock Options and Other Stock-Based Compensation.

Stock-based compensation expense was $11 in 2004 (2003: $13; 2002: $11).

47

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

26.          STOCK OPTIONS AND OTHER STOCK-BASED COMPENSATION (cont'd)

The fair value of each option grant is estimated on the date of grant with the following weighted average assumptions used for the option grants:

	2004	2003	2002
Dividend yield (%)	1.85	1.88	1.65
Expected volatility (%)	27.87	29.16	35.73
Risk-free interest rate (%)	4.56	3.39	3.50
Expected life (years)	6	6	6

Pechiney Stock Option Plans

Under the stock option plans of Pechiney, now a wholly-owned subsidiary of Alcan, certain officers and employees were granted options to subscribe to or to purchase Pechiney common shares.

Alcan and Pechiney agreed on the terms of a liquidity agreement which has been made available to beneficiaries of Pechiney subscription and purchase options ("Liquidity Agreement"). The Liquidity Agreement allows the holders of Pechiney options to either (a) exchange their Pechiney shares resulting from the exercise of the Pechiney options for Alcan common shares on the basis of a ratio equivalent to the consideration offered under Alcan's public offer for Pechiney or (b) give up their Pechiney options and receive new options to subscribe for Alcan common shares on the basis of a ratio equivalent to the consideration offered under Alcan's public offer for Pechiney. Upon the clearance by the French Conseil des marchés financiers of Alcan's initial public offer for Pechiney securities on July 16, 2003, the Pechiney options became fully vested.

Changes in the number of Alcan shares under Pechiney options as well as the average exercise price are summarized below:

	NUMBER OF SHARES UNDER  PECHINEY OPTIONS (IN THOUSANDS)		WEIGHTED AVERAGE EXERCISE PRICE (€)
	2004	2003	2004	2003
Outstanding - beginning of year	3,889	-	34.71	-
Shares subject to the Liquidity Agreement	-	3,891	-	34.71
Exercised (NOTE 25)	(276)	(2)	27.03	22.62
Exercised for Pechiney shares(1)	(152)	-	24.11	-
Forfeited	(134)	-	32.43	-
Outstanding and exercisable - end of year	3,327	3,889	35.92	34.71

⁽¹⁾   Pechiney options were exercised for 108 Pechiney shares (equivalent to 152 Alcan common shares under Pechiney options) during the period of the withdrawal offer, open from January 23 to February 5, 2004.  On February 6, 2004, these Pechiney shares were purchased by Alcan for $7.  No Alcan common shares were issued as a result of the exercising of these options during this period. 

Shares under Pechiney Options Outstanding and Exercisable at December 31, 2004

NUMBER OF SHARES UNDER  OPTIONS (IN THOUSANDS)	RANGE OF EXERCISE PRICE (€)	WEIGHTED AVERAGE EXERCISE PRICE (€)	WEIGHTED AVERAGE            REMAINING CONTRACTUAL LIFE (YEARS)
346	19.08-22.72	22.44	7.60
159	26.80-29.52	26.96	3.84
1,495	33.15-35.76	33.88	5.66
1,327	42.80-42.96	42.81	7.19
3,327	19.08-42.96	35.92

Under the terms of the Liquidity Agreement, a maximum of 3,890,542 Alcan common shares can be issued.

As part of the cost of the acquisition of Pechiney (see note 8 - Acquisition of Pechiney), an amount of $80 was recognized for the fair value of the Pechiney options and credited to additional paid-in capital. The Black-Scholes valuation model was used to determine the fair value of Pechiney options. The weighted average assumptions used were a dividend yield of 2.19%, an expected volatility of 52.5%, a market risk-free interest rate of 3.99% and an expected life of seven years.

48

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

26.          STOCK OPTIONS AND OTHER STOCK-BASED COMPENSATION (cont'd)

Compensation To Be Settled in Cash
Stock Price Appreciation Unit Plan
A small number of employees are entitled to receive Stock Price Appreciation Units (SPAU) whereby they are entitled to receive cash in an amount equal to the excess of the market value of a common share on the date of exercise of a SPAU over the market value of a common share as of the date of grant of such SPAUs. In 2004, 274,650 units (2003: 254,200 units; 2002: 275,600 units) were granted. At December 31, 2004, 923,789 units (2003: 720,309 units; 2002: 580,305 units) were outstanding, of which 319,780 units (2003: 260,685 units; 2002: 214,635 units) were vested. The vesting period is linked to Alcan's share price performance, but does not exceed nine years.

Executive Deferred Share Unit Plan
Under the Executive Deferred Share Unit Plan, executive officers based in Canada may elect, prior to the beginning of any particular year, to receive Executive Deferred Share Units (EDSUs) with a value between 10% and 100% of their Executive Performance Award in respect of that year, instead of a cash payment. The number of EDSUs is determined by dividing the amount so elected by the average price of a common share on the Toronto and New York stock exchanges at the end of the preceding year. Additional EDSUs are credited to each holder thereof corresponding to dividends declared on common shares. The EDSUs are redeemable only upon termination of employment (retirement, resignation or death). The amount to be paid by the Company upon redemption is calculated by multiplying the accumulated balance of EDSUs by the average price of a common share on the said exchanges at the time of redemption. Under the terms of this plan, discretionary EDSUs may be granted as determined by the Board. In 2004, 31,307 units (2003: 25,038 units; 2002: 9,771 units) were granted and 167,865 units (2003: 24,935 units; 2002: 939 units) were redeemed. At December 31, 2004, 88,414 units (2003: 224,972 units; 2002: 224,869 units) were outstanding.

Total Shareholder Return Performance Plan
A number of employees are entitled to receive cash awards under the Total Shareholder Return Performance Plan, a cash incentive plan which provides performance awards to eligible employees based on the relative performance of the Company's common share price and cumulative dividend yield performance compared to other corporations included in the Standard & Poor's Industrials Index measured over three-year periods commencing on October 1, 2004, 2003 and 2002. If the performance results for the Company's common shares is below the 30th percentile compared to all companies in the Standard & Poor's Industrials Index, the employee will not receive an award. At or above the 75th percentile rank, the employee will earn the maximum award, which is equal to 300% of the target set for the period. The actual amount of the award (if any) will be prorated between the percentile rankings. In 2004, a total target cash award of $17 (2003: $15; 2002: $12) was granted to specific key employees.

As described above, under the Executive Deferred Share Unit Plan, executive officers based in Canada may elect, at least 12 months prior to the period, to receive EDSUs with a value between 10% and 100% of their award earned under the Total Shareholder Return Performance Plan for that period instead of a cash payment.

Non-Executive Directors Deferred Share Unit Plan
Under the Non-Executive Directors Deferred Share Unit Plan, non-executive directors receive 50% of compensation payable in the form of Directors' Deferred Share Units (DDSUs) and 50% in the form of either cash or additional DDSUs at the election of each non-executive director. The number of DDSUs is determined by dividing the quarterly amount payable so elected by the average price of a common share on the Toronto and New York stock exchanges on the last five trading days of each quarter. Additional DDSUs are credited to each holder thereof corresponding to dividends declared on common shares. The DDSUs are redeemable only upon termination (retirement, resignation or death). The amount to be paid by the Company upon redemption is calculated by multiplying the accumulated balance of DDSUs by the average price of a common share on the said exchanges at the time of redemption. In 2004, 35,306 units were granted (2003: 28,011 units; 2002: 25,913 units) and 7,547 units were redeemed (2003: 16,742 units; 2002: 8,876 units).  At December 31, 2004, 87,240 units (2003: 59,481 units; 2002: 48,212 units) were outstanding.

Restricted Stock Units
A small number of employees were granted Restricted Stock Units (RSUs). Additional RSUs are credited to each holder thereof corresponding to dividends declared on common shares and they will be fully vested three years after the grant date. Each RSU carries the right to an amount equal to the average of the closing prices of a common share on the Toronto and New York stock exchanges on the five trading days ending on the vesting date.   In 2004, 627 units were granted (2003: 45,500 units) and 963 units were cancelled.  At December 31, 2004, 45,164 units were outstanding (2003: 45,500 units).

49

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

26.          STOCK OPTIONS AND OTHER STOCK-BASED COMPENSATION (cont'd)

Deferred Share Agreements
Deferred share agreements were also entered into with a small number of executives whereby the executive has the right to receive a certain number of common shares after having completed three years of service. Under these agreements, no deferred shares were granted in 2004 (2003: nil; 2002: 33,500).  In 2004, 15,000 shares were vested (2003: nil; 2002: nil).

Compensation Cost
Stock-based compensation expense for employee compensation awards that are to be settled in cash was $16 in 2004 (2003: $25; 2002: $2).

27.          RETAINED EARNINGS

At December 31, 2004, consolidated retained earnings include $2,929 (2003: $2,591; 2002: $3,137) of undistributed earnings of subsidiaries, some part of which may be subject to certain taxes and other restrictions on distribution to the parent company.  Consolidated retained earnings at December 31, 2004 also include $175 (2003: $155; 2002: $150) of undistributed earnings of investments accounted for using the equity method.  Generally, no provision is made for such taxes as these earnings are considered to be permanently reinvested in the businesses.  The determination of the unrecorded deferred income tax liability for temporary differences related to investments in foreign subsidiaries and foreign corporate joint ventures that are considered to be permanently reinvested is not considered practicable.

28.          COMMITMENTS AND CONTINGENCIES

In 1997, as part of the claim settlement arrangements related to the British Columbia Government's cancellation of the Kemano Completion Project, the Company obtained the right to transfer a portion of a power supply contract with BC Hydro to a third party. The Company sold the right to supply this portion to Enron Power Marketing Inc. (EPMI), a subsidiary of Enron Corporation (Enron). To obtain the consent of BC Hydro, the Company was required to retain a residual obligation for EPMI's performance under the power supply contract in the event that EPMI became unable to perform, to a maximum aggregate amount of $100, with mitigation and subrogation rights. BC Hydro assigned its rights to receive the power to BC Hydro's affiliate, Powerex Corporation (Powerex). On December 2, 2001, EPMI and Enron filed for protection under Chapter 11 of the U.S. Bankruptcy Code and Powerex alleged that Alcan owed it a termination payment of more than $100.  On January 17, 2003, an arbitrator confirmed Powerex's claim for $100.  In 2003 and 2004, there were legal proceedings in Oregon and British Columbia related to the judicial review and enforcement of the January 17, 2003 arbitral award.  On October 7, 2004, Alcan and Powerex agreed to terminate all legal proceedings and, on December 23, 2004, Alcan paid to Powerex $110 in full and final payment of the claim (inclusive of accrued interest). 

The approval of the Pechiney acquisition by the European Commission was obtained on September 29, 2003. The approval is subject to the following conditions:

1)    Alcan must divest its anode baking furnace designs.

2)    The Company must continue to grant licenses to third parties for the alumina refining technologies of either Alcan or Pechiney, and Pechiney's smelter cell technologies on terms and conditions equivalent to those in existence prior to the Pechiney acquisition.

3)    The Company must divest either of the following groups of assets:

(a)   Alcan's 50% interest in the AluNorf rolling mill and its Göttingen and Nachterstedt rolling mills; or

(b)   Pechiney's interest in the rolling mill at Neuf-Brisach, the Rugles foil mill and, at the purchaser's option, the Annecy rolling mill.

As described in note 7 - Spin-Off of Rolled Products Businesses, the Company's spin-off of substantially all of its rolled products businesses, while retaining the Neuf-Brisach rolling mill, has satisfied the requirement for divestiture of the Neuf-Brisach or AluNorf/Göttingen/Nachterstedt rolling facilities.

4)    The Company must also divest either of the following operations:

(a)  Alcan's European activities in relation to aerosol cans and aluminum cartridges; or

(b)  Pechiney's European activities in relation to aerosol cans and aluminum cartridges.

50

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

28.          COMMITMENTS AND CONTINGENCIES (cont'd)

On May 14, 2004, the Company announced the sale of the Boxal Group, which comprises the activities in relation to aerosol cans described in 4(a) above.  The obligation to divest the aluminum cartridges businesses ended with the spin-off of substantially all of the Company's rolled products businesses.

In order to obtain the approval of the Pechiney acquisition by the U.S. Department of Justice (DOJ), the Company entered into a consent decree, on September 29, 2003, with the DOJ pursuant to which the Company undertook to divest Pechiney's rolling mill located in Ravenswood, West Virginia, as described in note 5 - Discontinued Operations and Assets Held for Sale.  However, an alternative remedy to the existing order to divest Ravenswood is described in note 7 - Spin-Off of Rolled Products Businesses, enabling the Company to retain the Ravenswood rolling mill.

The Company has guaranteed the repayment of approximately $28 of indebtedness by third parties.  Alcan believes that none of these guarantees is likely to be invoked. These guarantees relate primarily to customer contracts, employee housing loans and potential environmental remediation at former Alcan sites. Commitments with third parties and certain related companies for supplies of goods and services, including capital expenditures, are estimated at $885 in 2005, $598 in 2006, $578 in 2007, $567 in 2008, $596 in 2009 and $3,100 thereafter. Total payments to these entities, excluding capital expenditures, were $519 in 2004, $171 in 2003 and $50 in 2002.

The Company carries insurance covering liability, including defense costs, of directors and officers of the Company, incurred as a result of their acting as such, except in the case of failure to act honestly and in good faith.  The policy provides coverage against certain risks in situations where the Company may be prohibited by law from indemnifying the directors or officers.  This policy also reimburses the Company for certain indemnity payments made by the Company to such directors or officers, subject to a $10 deductible in respect of each insured loss.

Minimum rental obligations are estimated at $91 in 2005, $69 in 2006, $58 in 2007, $38 in 2008, $31 in 2009 and $92 thereafter. Total rental expenses amounted to $150 in 2004, $91 in 2003 and $82 in 2002.

Alcan, in the course of its operations, is subject to environmental and other claims, lawsuits and contingencies.  The Company is named as a defendant in relation to environmental contingencies at approximately 44 existing and former Alcan sites and third-party sites. Accruals have been made in specific instances where it is probable that liabilities will be incurred and where such liabilities can be reasonably estimated.

Although there is a possibility that liabilities may arise in other instances for which no accruals have been made, the Company does not believe that any losses in excess of accrued amounts would be sufficient to significantly impair its operations, have a material adverse effect on its financial position or liquidity, or materially and adversely affect its results of operations for any particular reporting period, absent unusual circumstances, will occur.

In addition, see reference to agreements between Alcan and Novelis in note 7, income taxes in note 11, asset retirement obligations in note 21, debt repayments in note 23, and financial instruments and commodity contracts in note 30.

51

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

29.          CURRENCY GAINS AND LOSSES

The following are the amounts recognized in the financial statements:

	2004	2003	2002
Currency gains (losses) recorded in income
Losses realized and unrealized on currency derivatives	(66)	(14)	(134)
Realized deferred translation adjustments*	32	10	9
Gains (Losses) on translation of monetary assets and liabilities	(62)	(79)	91
	(96)	(83)	(34)
Deferred translation adjustments** - beginning of year	609	205	(207)
Effect of exchange rate changes	616	425	460
Gains realized*	(32)	(10)	(9)
Losses on forward exchange contracts or translation of debt designated as an equity hedge of foreign subsidiaries	(123)	(28)	(39)
Gains (Losses) on translation of a convertible loan to a subsidiary forming part of the net investment	(7)	17	-
Deferred translation adjustments - end of year	1,063	609	205

* The gain realized in 2004 of $32 relates to the sale of the Boxal Group and Suner Cartons. 

The gain realized in 2003 includes a gain of $15 on the sale of the remaining portion of the Company's investment in NLM, and a gain of $11 on the sale of Fibrenyle in the U.K., that is included in Income (Loss) from discontinued operations. These gains are offset in part by a loss on the sale of Alcan Nikkei Siam Limited of $11, and a loss of $5 on the sale of the Company's extrusions operation in Milan, Italy, that is included in Income (Loss) from discontinued operations.

The gain realized in 2002 related to a gain on the partial sale of the Company's investment in NLM, which was offset in part by a loss on the sale of Alcan Nikkei Thai Limited.

** Deferred translation adjustments are included in Accumulated other comprehensive income (loss).

30.          FINANCIAL INSTRUMENTS AND COMMODITY CONTRACTS

In conducting its business, the Company uses various derivative and non-derivative instruments, including forward contracts, swaps and options, to manage the risks arising from fluctuations in exchange rates, interest rates, aluminum prices and other commodity prices.  Generally, such instruments are used for risk management purposes only.

Derivatives − Currency

The Company enters into forward currency contracts and options that are designated as hedges of certain identifiable foreign currency revenue and operating cost exposures.  Foreign currency forward contracts and swaps are also used to hedge certain foreign currency denominated debt and intercompany foreign currency denominated loans.

52

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

30.          FINANCIAL INSTRUMENTS AND COMMODITY CONTRACTS (cont'd)

OUTSTANDING AT DECEMBER 31		2004	2003	2002
FINANCIAL INSTRUMENT	HEDGE	FAIR VALUE	FAIR VALUE	FAIR VALUE
Forward exchange	Future firm net operating cash	(62)	33	(16)
contracts	flows
Forward exchange contracts	To swap intercompany foreign currency denominated loans to US$, € and CHF	(5)	(6)	(34)
Forward exchange contracts	To hedge € net equity investment (1)	(167)	(44)	-
Forward exchange contracts	Future commitments (2)	5	-	-
Currency options	Future firm operating cost commitments(3)	-	16	6
Currency options	Future US$ sales against € and £	15	51	-
Forward exchange contracts	To swap CAN$ commercial paper borrowings to US$	31	13	-
Cross currency interest swap	To swap 5.375% CHF178 million bonds to US$ (4)	-	-	24
Cross currency interest swap and forward exchange contracts	To swap US$ third party borrowings to KRW	(8)	2	(5)
Cross currency interest swap	To swap € 21 million medium term notes to  £14 million	2	1	(1)
Cross currency	To swap € debt to SEK	-	-	-
interest swap
Embedded derivatives		-	3	(9)

53

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

30.          FINANCIAL INSTRUMENTS AND COMMODITY CONTRACTS (cont'd)

(1)   An exchange loss of nil was recorded in Other expense (income) - net (2003: $14; 2002: nil) and an exchange loss of $123 recorded in Deferred translation adjustments (2003: $30; 2002: nil).

(2)   Mainly Australian dollar, principally for the expansion of the Gove alumina refinery in Australia.

(3)   Currency options used to hedge future firm operating cost commitments matured in 2003.

(4)   The 5.375% Swiss franc bonds of principal amount of CHF178 million were swapped for $105 at an effective interest rate of 8.98%.  The swap matured in 2003.

Derivatives - Interest Rate

The Company sometimes enters into interest rate swaps to manage funding costs as well as the volatility of interest rates.

OUTSTANDING AT DECEMBER 31	2004	2003	2002
	FAIR VALUE	FAIR VALUE	FAIR VALUE
Financial Instrument
Rate swap - fixed to floating
- in € Fixed to EURIBOR	-	8	-
Rate swap - floating to fixed
- in KRW floating to KRW fixed	(1)	-	-
Rate swap - floating to floating capped
- in € floating to € - floating capped	-	6	-

Derivatives and Commodity Contracts - Aluminum
Depending on supply and market conditions, as well as for logistical reasons, the Company may sell primary metal to third parties and may purchase primary and secondary aluminum on the open market to meet its fabricated products requirements. In addition, the Company may hedge certain commitments arising from pricing arrangements with some of its customers and the effects of price fluctuations on inventories.  The Company may also hold for trading purposes physical metal purchase and sales contracts with third parties.

Through the use of forward purchase and sales contracts and options, the Company seeks to limit the negative impact of low metal prices.

OUTSTANDING AT DECEMBER 31	2004	2003	2002
Financial Instrument
Forward contracts (principally forward sales contracts in 2004 and 2003; principally forward purchase contracts in 2002) and physical trading contracts(1)
Maturing principally in years	2005 to 2006	2004 to 2005	2003 to 2004
Fair value	(104)	(18)	15
Call options purchased
Maturing principally in years	2005	2004	2003
Fair value	36	1	-
Call options sold
Maturing principally in years	2005	2004	-
Fair value	(10)	(21)	-
Put options purchased
Maturing principally in years	-	2004	-
Fair value	-	1	-
Embedded derivatives
Maturing principally in years	2005	2005	2005
Fair value	(10)	(49)	4

⁽¹⁾    There was no hedge ineffectiveness in 2004, 2003 and 2002 on forward contracts, for which the Company applies hedge accounting under SFAS No. 133.  The deferred loss that will be recognized in 2005 regarding forward contracts for which the Company applies hedge accounting under SFAS No. 133 is $89 (2004: $10; 2003: nil).

54

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

30.                FINANCIAL INSTRUMENTS AND COMMODITY CONTRACTS (cont'd)

Derivatives and Commodity Contracts - Other Metals

The Company has entered into derivatives to hedge the effects of price fluctuations on sales, purchases and inventories.

OUTSTANDING AT DECEMBER 31	2004	2003	2002
Financial Instrument
Forward contracts (principally forward sales contracts)
Maturing principally in years	2005	2004	-
Fair value	(2)	(53)	-

Derivatives - - Oil

As a hedge of future oil purchases, the Company has outstanding as at December 31:

	2004	2003	2002
Financial Instrument
Futures, swaps and options
Maturing at various times in years	2005 to 2006	2004 to 2006	2003 to 2006
Fair value	-	2	9

Derivatives - - Natural Gas

As a hedge of future natural gas purchases, the Company has outstanding as at December 31:

	2004	2003	2002
Financial Instrument
Swaps, options and fixed price contracts
Maturing at various times throughout	2005	2004	2003
Fair value	(1)	1	2
Embedded derivatives
Maturing at various times throughout	2007	2007	-
Fair value	(4)	(1)	-

Derivatives - - Electricity

As a hedge of future electricity purchases, the Company has outstanding as at December 31:

	2004	2003	2002
Financial Instrument
Fixed price contracts
Maturing at various times in years	2016	2016	-
Fair value	18	1	-

Counterparty risk

As exchange rates, interest rates, and prices for metal, oil, natural gas and electricity fluctuate, the above contracts, excluding embedded derivatives, will generate gains and losses that will be offset by changes in the value of the underlying items being hedged. The Company may be exposed to losses in the future if the counterparties to the above contracts fail to perform. However, the Company is satisfied that the risk of such non-performance is remote, due to its monitoring of credit exposures.

Financial Instruments - Fair Value
On December 31, 2004, the fair value of the Company's long-term debt totaling $6,914 (2003: $7,778; 2002: $3,369) was $7,158 (2003: $7,953; 2002: $3,587), based on market prices for the Company's fixed rate securities and the book value of variable rate debt.

At December 31, 2004, the quoted market value of the Company's marketable portfolio investments having a book value of $52 (2003: $45; 2002: $28) was $60 (2003: $51; 2002: $34).

55

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

30.          FINANCIAL INSTRUMENTS AND COMMODITY CONTRACTS (cont'd)

At December 31, 2004, the fair value of the Company's preference shares having a book value of $160 (2003 and 2002: $160) was $185 (2003: $173; 2002: $131).

The fair values of all other financial assets and liabilities are approximately equal to their carrying values.

31.          SUPPLEMENTARY INFORMATION

	2004	2003	2002
Income statement
Interest on long-term debt	316	187	155
Capitalized interest	(11)	(5)	-
Balance sheet
Payables and accrued liabilities include the following:
Trade payables	2,804	3,008	1,053
Other accrued liabilities	1,701	1,136	918
Income and other taxes	343	377	239
Accrued employment costs	616	325	273
At December 31, 2004, the weighted average interest rate on short-term borrowings for continuing operations was 2.6% (2003: 2.5%; 2002: 4.1%)
Statement of cash flows
Interest paid
─ continuing operations	413	218	191
─ discontinued operations	3	1	3
Income taxes paid
─ continuing operations	546	230	161
─ discontinued operations	6	2	2

32.      POST-RETIREMENT BENEFITS

Alcan and its subsidiaries have established pension plans in the principal countries where they operate. The pension obligation relates to funded defined benefit pension plans mostly in Canada, Switzerland, the United Kingdom and the United States ("Funded Pension Plans") and to unfunded defined benefit pension plans mostly in France and Germany as well as lump sum indemnities payable to employees of French companies upon retirement ("Unfunded Pension Plans"). Pension benefits are generally based on the employee's service and highest average eligible compensation before retirement, and are periodically adjusted for cost of living increases, either by Company practice, collective agreement or statutory requirement.

The Company and some of its subsidiaries also provide health care and life insurance benefits to retired employees in Canada and the United States, mostly unfunded.   

Funded Pension Plans are administered by a Board of Trustees composed of plan members designated by the Company and employees.  Each Board adopts its own investment policy which generally favors diversification and active management of plan assets through selection of specialized managers. Investments are generally limited to publicly traded stocks and high rated debt securities, excluding securities in Alcan, and include only small amounts in other categories, except for the Swiss plan, whose target allocation is evenly distributed between equity, bonds and real estate. Depending on the age distribution of the membership, target allocation, other than for the Swiss plan, varies as indicated below.

56

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

32.      POST-RETIREMENT BENEFITS (cont'd)

The allocation at December 31, 2004 includes all major plans.

CATEGORY OF ASSET	TARGET ALLOCATION	ALLOCATION IN AGGREGATE AT DECEMBER 31
		2004	2003	2002
Equity	40% to 65%	54%	52%	50%
Debt securities	30% to 55%	35%	37%	40%
Real estate		6%	6%	7%

The following table presents the funded status and the amounts recognized in the consolidated balance sheet:

	PENSION BENEFITS			OTHER BENEFITS
	2004	2003	2002	2004	2003	2002
Change in benefit obligation
Benefit obligation at January 1	9,829	7,134	6,464	942	233	210
Service cost	181	137	123	13	6	5
Interest cost	549	442	401	56	16	14
Members' contributions	44	39	27	-	-	-
Benefits paid	(553)	(391)	(387)	(65)	(16)	(14)
Amendments	8	4	111	(3)	-	1
Acquisition of Pechiney	(17)	1,037	-	35	661	-
Other acquisitions	118	174	-	29	2	-
Curtailments/divestitures	(38)	1	(6)	-	-	(2)
Actuarial  (gains) losses	823	822	(41)	42	39	19
Currency losses	440	430	442	1	1	-
Benefit obligation measured at December 31	11,384	9,829	7,134	1,050	942	233
Benefit obligation of funded pension plans	10,117	8,729	6,830	N/A	N/A	N/A
Benefit obligation of unfunded pension plans	1,267	1,100	304	N/A	N/A	N/A
Benefit obligation measured at December 31	11,384	9,829	7,134	1,050	942	233
Change in market value of plan assets
Assets at January 1	7,537	5,760	6,028	2	3	4
Actual return on assets	848	1,298	(347)	-	-	-
Members' contributions	44	39	27	-	-	-
Benefits paid from funded plans	(459)	(360)	(349)	(2)	(1)	(1)
Company contributions	188	124	89	2	-	-
Acquisition of Pechiney	(15)	260	-	-	-	-
Other acquisitions	83	92	-	-	-	-
Curtailments/divestitures	(39)	-	(4)	-	-	-
Currency gains	281	324	316	-	-	-
Assets at December 31	8,468	7,537	5,760	2	2	3
Assets less than benefit obligation of funded
pension plans	(1,649)	(1,192)	(1,070)	N/A	N/A	N/A
Benefit obligation of unfunded pension plans	(1,267)	(1,100)	(304)	N/A	N/A	N/A
Assets less than total benefit obligation	(2,916)	(2,292)	(1,374)	(1,048)	(940)	(230)
Unamortized
─ actuarial losses	1,124	594	645	82	30	(11)
─ prior service cost	560	624	687	(2)	1	2
Minimum pension liability	(1,036)	(722)	(605)	-	-	-
Intangible assets	253	223	142	-	-	-
Net liability in balance sheet	(2,015)	(1,573)	(505)	(968)	(909)	(239)
Net liability in balance sheet for funded pension
plans	(853)	(533)	(228)	N/A	N/A	N/A
Net liability in balance sheet for unfunded pension
plans	(1,162)	(1,040)	(277)	N/A	N/A	N/A
Net liability in balance sheet	(2,015)	(1,573)	(505)	(968)	(909)	(239)
Deferred charges and other assets	197	210	314	-	-	-
Intangible assets	253	223	142	-	-	-
Payables and accrued liabilities	44	5	16	(12)	-	-
Deferred credits and other liabilities	(2,509)	(2,011)	(977)	(956)	(909)	(239)
Net liability in balance sheet	(2,015)	(1,573)	(505)	(968)	(909)	(239)

57

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

32.          POST-RETIREMENT BENEFITS (cont'd)

For certain plans, the projected benefit obligation (PBO) exceeds the market value of the assets. For these plans, including unfunded pensions and lump sum indemnities, the PBO is $10,292 (2003: $6,926; 2002: $6,404), the accumulated benefit obligation (ABO) is $9,623 (2003: $6,510; 2002: $5,837) while the market value of the assets is $7,341 (2003: $4,544; 2002: $5,007).

The total ABO is $10,594 (2003: $9,155; 2002: $6,464). For certain plans, the ABO exceeds the market value of the assets.  For these plans, including unfunded pensions and lump sum indemnities, the PBO is $6,697 (2003: $5,791; 2002: $3,798), the ABO is $6,318 (2003: $5,483; 2002: $3,528) while the market value of the assets is $3,845 (2003: $3,493; 2002: $2,591).

Alcan's pension funding policy is to contribute the amount required to provide for contractual benefits attributed to service to date and to amortize unfunded actuarial liabilities for the most part over periods of 15 years or less. The Company expects to contribute $206 in aggregate to its Funded Pension Plans in 2005. Benefits from Unfunded Pension Plans and health care and life insurance benefits are paid from operating cash flows.

Information about the expected benefit payments are as follows:

	Funded Pension Plans	Unfunded Pension Plans	Other Benefits
2005	477	76	72
2006	489	77	72
2007	503	80	76
2008	518	82	79
2009	536	81	82
2010-2014	2,935	470	449

	PENSION BENEFITS			OTHER BENEFITS
	2004	2003	2002	2004	2003	2002
Components of net periodic benefit cost
Service cost	181	137	123	13	6	5
Interest cost	549	442	401	56	16	14
Expected return on assets	(520)	(434)	(435)	-	-	-
Amortization
─ actuarial (gains) losses	66	81	9	(1)	-	(2)
─ prior service cost	72	69	69	-	-	-
Curtailment/settlement (gains) losses	(13)	8	9	-	-	(2)
Net periodic benefit cost	335	303	176	68	22	15
Weighted average assumptions used to determine benefit obligations at December 31
Discount rate	5.3%	5.6%	5.8%	5.8%	6.2%	6.5%
Average compensation growth	3.4%	3.3%	3.3%	3.7%	3.7%	3.9%
Weighted average assumptions used to determine net periodic benefit cost
Discount rate	5.6%	5.8%	6.1%	6.2%	6.5%	6.9%
Average compensation growth	3.3%	3.3%	3.6%	3.7%	3.9%	4.4%
Expected return on plan assets	7.0%	7.1%	7.1%	8.5%	8.5%	8.5%

In estimating the expected return on assets of a pension plan, consideration is given primarily to its target allocation, the current yield on long-term bonds in the country where the plan is established, and the historical risk premium in each relevant country of equity or real estate over long-term bond yields. The approach is consistent with the principle that assets with higher risk provide a greater return over the long term.

58

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

32.                POST-RETIREMENT BENEFITS (cont'd)

The assumed health care cost trend used for measurement purposes is 9.8% for 2005, decreasing gradually to 4.5% in 2011 and remaining at that level thereafter. A one percentage point change in assumed health care cost trend rates would have the following effects:

	OTHER BENEFITS
	1% INCREASE	1% DECREASE
Sensitivity Analysis
Effect on service and interest costs	6	(5)
Effect on benefit obligation	74	(67)

The Company also sponsors savings plans in Canada and the United States as well as defined contribution pension plans in various countries. The cost of the Company contribution was $26 in 2004 (2003: $21; 2002: $20).

33.      INFORMATION BY GEOGRAPHIC AREAS

	LOCATION	2004	2003	2002
Sales and operating revenues -  third	Canada	1,117	821	719
parties (by destination)	United States	7,620	4,535	4,659
	Brazil	527	414	391
	France	2,197	569	424
	United Kingdom	2,099	1,049	949
	Germany	2,267	1,591	1,375
	Switzerland	235	212	194
	Other Europe	4,453	2,377	1,872
	Australia	429	106	105
	Asia and Other Pacific	3,051	1,788	1,520
	All other	890	388	275
	Total	24,885	13,850	12,483
Sales and operating revenues -	Canada	3,394	2,577	2,354
intercompany (by origin)	United States	945	581	602
	Brazil	76	57	35
	France	2,504	18	15
	United Kingdom	578	445	385
	Germany	546	326	145
	Switzerland	1,250	772	765
	Other Europe	1,045	529	492
	Australia	926	279	232
	Asia and Other Pacific	56	19	13
	All other	415	37	10
	Sub-total	11,735	5,640	5,048
	Consolidation eliminations	(11,735)	(5,640)	(5,048)
	Total	-	-	-

59

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

33.        INFORMATION BY GEOGRAPHIC AREAS (cont'd)

Sales to subsidiary companies are made at fair market prices recognizing volume, continuity of supply and other factors.

	LOCATION	2004	2003	2002
Sales and operating revenues - third	Canada	1,504	1,390	1,018
parties (by origin)	United States	7,648	4,345	4,484
	Brazil	587	440	409
	France	4,405	418	268
	United Kingdom	1,025	814	847
	Germany	3,203	2,395	2,014
	Switzerland	1,831	1,440	1,411
	Other Europe	1,914	1,068	766
	Australia	384	188	186
	Asia and Other Pacific	1,925	1,245	980
	All other	459	107	100
	Total	24,885	13,850	12,483

Income (Loss) from continuing	Canada	(43)	(81)	119
operations (*)(**)	United States	129	66	78
	Brazil	62	13	40
	France	(200)	(34)	12
	United Kingdom	(33)	8	8
	Germany	21	4	37
	Switzerland	67	20	(4)
	Other Europe	59	66	17
	Australia	227	147	84
	Asia and Other Pacific	1	22	1
	All other	21	30	24
	Consolidation eliminations	(59)	1	5
	Total	252	262	421

(*) Other Specified Items included in Income (Loss) from continuing operations is comprised of restructuring charges, asset impairments, gain (loss) from non-routine sales of assets, businesses and investment, tax adjustments, legal and environmental provisions and other. In 2004, Other Specified Items also included purchase accounting adjustments related to inventories and, in 2003, Pechiney financing-related gains and purchase accounting adjustments related to in-process research and development.

In 2004, Income from continuing operations included after-tax charges (income) relating to Other Specified Items of $39 for Canada, $92 for the United States, ($15) for Brazil, $219 for France, $18 for the United Kingdom, $6 for Germany, $8 for Switzerland, $37 for Other Europe, ($23) for Australia and $14 for All other.

In 2003, Income from continuing operations included after-tax charges (income) relating to Other Specified Items of ($60) for Canada, $31 for the United States, $16 for Brazil, $39 for France, ($3) for the United Kingdom, $10 for Germany, $16 for Switzerland, ($4) for Other Europe, ($74) for Australia and ($14) for Asia and Other Pacific.

In 2002, Income from continuing operations included after-tax charges (income) relating to Other Specified Items of $85 for Canada, $20 for the United States, ($2) for Brazil, $3 for France, $12 for the United Kingdom, ($5) for Germany, $2 for Switzerland, $13 for Other Europe, ($14) for Asia and Other Pacific and ($5) for All other.

(**)  In 2002, Income from continuing operations included income (charges) for transfer pricing adjustments of $69 for Canada, ($70) for the United States and $5 for the United Kingdom.

60

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

33.          INFORMATION BY GEOGRAPHIC AREAS (cont'd)

	LOCATION	2004	2003	2002
Property, plant and equipment,	Canada	4,735	4,605	4,444
Intangible assets and Goodwill at	United States	2,796	3,152	1,500
December 31 (***)	Brazil	648	695	681
	France	3,046	3,564	224
	United Kingdom	983	1,002	810
	Germany	1,229	1,170	828
	Switzerland	839	637	630
	Other Europe	2,205	2,118	1,141
	Australia	2,402	1,901	1,130
	Asia and Other Pacific	865	812	627
	All other	271	348	8
	Total	20,019	20,004	12,023
Cash paid for capital expenditures	Canada	377	286	477
and business acquisitions	United States	230	928	94
	Brazil	36	68	60
	France	355	1,610	14
	United Kingdom	65	134	70
	Germany	106	178	70
	Switzerland	51	30	43
	Other Europe	163	650	70
	Australia	210	414	40
	Asia and Other Pacific	112	181	33
	All other	50	178	2
	Total	1,755	4,657	973
Average number of employees	Canada	11	11	12
excluding Pechiney in 2003 and 2002	United States	14	8	9
(in thousands - unaudited)	Brazil	4	3	3
	France	17	2	2
	United Kingdom	4	4	4
	Germany	8	7	7
	Switzerland	3	3	3
	Other Europe	9	5	4
	Australia	2	1	1
	Asia and Other Pacific	7	2	2
	All other	3	1	-
	Total	82	47	47

(***)   In 2004, Property, plant and equipment, Intangible assets, and Goodwill reflect goodwill impairment charges of $36 in the United States, $116 in France, and $2 in the United Kingdom. 

             In 2003, Property, plant and equipment, Intangible assets, and Goodwill reflect goodwill impairment charges of $6 in France, $5 in Germany, $5 in Switzerland and $12 in Other Europe.

In 2002, Property, plant and equipment, Intangible assets and Goodwill  reflect goodwill impairment charges of $9 for Canada, $130 for the United States, $33 for the United Kingdom, $208 for Germany, $171 for Switzerland and $189 for Other Europe.

61

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

34.         INFORMATION BY OPERATING SEGMENTS

The following presents selected information by operating segment, viewed on a stand-alone basis.  The operating management structure is comprised of six operating segments.  The six operating segments are Bauxite and Alumina; Primary Metal; Rolled Products Americas and Asia; Rolled Products Europe; Engineered Products and Packaging.  The Company's measure of the profitability of its operating segments is referred to as business group profit (BGP).  BGP comprises earnings before interest, income taxes, minority interests, depreciation and amortization and excludes certain items, such as corporate costs, restructuring costs (relating to major corporate-wide acquisitions or initiatives), impairment and other special charges, and pension actuarial gains, losses and other adjustments, that are not under the control of the business groups or are not considered in the measurement of their profitability.  These items are generally managed by the Company's corporate head office, which focuses on strategy development and oversees governance, policy, legal, compliance, human resources and finance matters.  The change in fair market value of derivatives is removed from individual BGP and is shown on a separate line in the reconciliation to income from continuing operations.  This presentation provides a more accurate portrayal of underlying business group results and is in line with the Company's portfolio approach to risk management.  Transactions between operating segments are conducted on an arm's-length basis and reflect market prices.  Thus, earnings from the Primary Metal group represent mainly profit on metal produced by the Company, whether sold to third parties or used in the Company's Rolled Products, Engineered Products or Packaging groups. Earnings from the Rolled Products, Engineered Products and Packaging groups represent only the fabricating profit on their respective products.

Subsequent to the spin-off of substantially all of its rolled products businesses, the operating management structure comprises four operating segments.  The four operating segments are Bauxite and Alumina; Primary Metal; Engineered Products and Packaging.  The rolled products facilities retained by Alcan are Neuf-Brisach and Issoire, in France, Sierre in Switzerland, and Ravenswood in West Virginia, which are part of Engineered Products, and Singen in Germany, which is a shared facility between Engineered Products and Packaging.

The accounting principles used to prepare the information by operating segment are the same as those used to prepare the consolidated financial statements of the Company, except for the following two items:

(1)	The operating segments include the Company's proportionate share of joint ventures (including joint ventures accounted for using the equity method) as they are managed within each operating segment, with the adjustments for equity-accounted joint ventures shown on a separate line in the reconciliation to Income from continuing operations; and
(2)	Pension costs for the operating segments are based on the normal current service cost with all actuarial gains, losses and other adjustments being included in Intersegment and other.

The operating segments are described below.

Bauxite and Alumina
Headquartered in Montreal, Canada, this group comprises Alcan's worldwide activities related to bauxite mining and refining into smelter-grade and specialty aluminas, owning and/or operating eight bauxite mines and deposits in six countries, seven smelter-grade alumina plants in five countries and seven specialty alumina plants in four countries.  Two of these facilities are excluded from the operating segment information as they have been reclassified to discontinued operations and assets held for sale.  This group also comprises the sales of technology and technical assistance as well as the alumina trading business previously included in Pechiney World Trade. 

Primary Metal
Also headquartered in Montreal, this group comprises smelting operations, power generation, production of primary value-added ingot, manufacturing of smelter anodes and aluminum fluoride, technology sales, engineering operations and trading operations for aluminum, operating or having interests in 25 smelters in 13 countries.  One of these smelters is excluded from the operating segment information as it has been reclassified to discontinued operations and assets held for sale.  The Company is in the process of relocating the operational headquarters of its European primary aluminum business to Voreppe, France.  

Rolled Products Americas and Asia
Headquartered in Cleveland, U.S.A., this group produces aluminum sheet and light gauge products, operating 15 plants in five countries.

62

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

34.         INFORMATION BY OPERATING SEGMENTS (cont'd)

Rolled Products Europe

Headquartered in Zurich, Switzerland, this group produces aluminum sheet, including automotive, can and lithographic sheet, plate and foil stock production, operating 21 plants in seven countries.  This group includes the Rugles and Annecy rolling mills previously reported as segregated businesses, which have been included in the spin-off to Novelis on January 6, 2005.  See note 7 - Spin-off of Rolled Products Businesses and note 28 - Commitments and Contingencies.

Engineered Products
Headquartered in Paris, France, this group produces extruded, rolled and cast aluminum products, engineered shaped products and structures, including cable, wire and rod, as well as composite materials such as aluminum-plastic, fibre reinforced plastic and foam-plastic in 48 plants located in 11 countries. This group includes the Neuf-Brisach rolling mill previously reported as a segregated business.  See note 7 - Spin-off of Rolled Products Businesses and note 28 - Commitments and Contingencies.  Four of these facilities are excluded from the operating segment information as they have been reclassified to discontinued operations and assets held for sale.  Also included in this operating segment is the Ravenswood facility, which had previously been reported in discontinued operations and assets held for sale.  All operating segment information for 2004, and 2003 operating segment information pertaining only to items included in the consolidated balance sheet include Ravenswood as part of Engineered Products.  See note 5 - Discontinued Operations and Assets Held for Sale and note 7 - Spin-Off of Rolled Products Businesses.  Also included in Engineered Products are 50 service centres in 13 countries offering technical assistance, cutting, shaping, machining and assembling for smaller customers, and nearly 40 offices that sell and source products in 32 countries. 

Packaging
Headquartered in Paris, this group consists of the Company's worldwide food, pharmaceutical and medical, beauty and personal care and tobacco packaging businesses, operating approximately 180 plants in 27 countries.  This group includes the aerosol business previously reported as segregated businesses.  See note 7 - Spin-off of Rolled Products Businesses and note 28 - Commitments and Contingencies.

Intersegment and other
This classification includes the deferral or realization of profits on intersegment sales of aluminum and alumina, corporate office costs as well as other non-operating items.

SALES AND OPERATING REVENUES	INTERSEGMENT			THIRD PARTIES
	2004	2003	2002	2004	2003	2002
Bauxite and Alumina	1,596	873	758	1,501	539	440
Primary Metal	4,263	2,306	2,204	4,275	2,647	2,473
Rolled Products Americas and Asia	85	64	185	4,388	3,528	3,396
Rolled Products Europe	702	602	403	3,217	2,458	2,238
Engineered Products	629	32	22	5,162	1,760	1,601
Packaging	9	4	8	6,119	2,864	2,250
Adjustments for equity-accounted joint ventures	-	-	-	(40)	18	26
Other	(7,284)	(3,881)	(3,580)	263	36	59
	-	-	-	24,885	13,850	12,483

Business Group Profit (BGP)	2004	2003	2002
Bauxite and Alumina	464	191	248
Primary Metal	1,518	814	857
Rolled Products Americas and Asia	398	344	365
Rolled Products Europe	250	224	168
Engineered Products	324	103	100
Packaging	657	354	288
Adjustments for equity-accounted joint ventures	(242)	(147)	(138)
Adjustments for mark-to-market of derivatives	(28)	107	63
Depreciation and amortization	(1,337)	(862)	(772)
Goodwill impairment	(154)	(28)	-
Intersegment, corporate offices and other	(916)	(390)	(314)
Equity income	54	38	44
Interest	(346)	(212)	(198)
Income taxes	(375)	(258)	(287)
Minority interests	(15)	(16)	(3)
Income from continuing operations	252	262	421

63

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

34.         INFORMATION BY OPERATING SEGMENTS (cont'd)

Included in 2004 Intersegment, corporate offices and other are asset impairments of $67, synergy costs of $53, restructuring charges of $18, purchase accounting adjustments related to inventory of $156 and Novelis costs of $40, partially offset by a gain resulting from a dilution in the Company's interest in an anode-producing facility in the Netherlands of $46 and a net gain on sale of fixed assets of $13.

Included in 2003 Intersegment, corporate offices and other are asset impairments of $25, legal and environmental provisions of $36, restructuring charges of $32, purchase accounting adjustments related to in-process research and development of $50, and other of $17, partially offset by a net currency-related gain on the financing of the Pechiney acquisition of $59, 2001 restructuring program recoveries of $38 and net gains of $21 on disposal of businesses.  The 2001 restructuring program recoveries included ($5) for Bauxite and Alumina, ($11) for Primary Metal, ($6) for Rolled Products Americas and Asia, ($22) for Rolled Products Europe, $1 for Engineered Products, $3 for Packaging and $2 for Intersegment and Other.

Included in 2002 BGP for Bauxite and Alumina is a gain of $5 related to the sale of fixed assets. 

Included in 2002 Intersegment, corporate offices and other are net charges of $84 relating principally to a provision of $100 for the ruling on a contract dispute with Powerex (an affiliate of BC Hydro), an increase of $9 to legal provisions, a loss of $6 on redemption of debt and 2001 restructuring program charges of $63, partially offset by a gain of $34 on the sale of a portfolio investment.  The 2001 restructuring program charges included $14 for Bauxite and Alumina, ($6) for Primary Metal, $15 for Rolled Products Americas and Asia, $14 for Rolled Products Europe, $1 for Engineered Products, $8 for Packaging and $17 for Intersegment and Other.

TOTAL ASSETS AT DECEMBER 31			2004			2003		2002
Bauxite and Alumina			3,450			2,399		2,105
Primary Metal			10,459			8,778		6,444
Rolled Products Americas and Asia			2,760			2,424		2,497
Rolled Products Europe			3,091			3,093		2,070
Engineered Products			4,154			2,861		1,311
Packaging			8,096			6,519		2,964
Adjustments for equity-accounted joint ventures			(313)			(334)		(286)
Other			664			4,740		310
Assets held for sale:
Bauxite and Alumina			63			127		-
Primary Metal			823			1,054		-
Engineered Products			90			181		102
Packaging			4			106		244
Total assets held for sale			980			1,468		346
			33,341			31,948		17,761
	DEPRECIATION AND      AMORTIZATION				CASH PAID FOR CAPITAL      EXPENDITURES AND BUSINESS      ACQUISITIONS
	2004	2003		2002	2004		2003		2002
Bauxite and Alumina	138	92		83	202		186		104
Primary Metal	495	323		295	628		1,303		556
Rolled Products Americas and Asia	148	150		146	82		81		73
Rolled Products Europe	142	111		97	165		338		91
Engineered Products	173	78		67	173		523		58
Packaging	336	172		134	424		1,338		160
Adjustments for equity-accounted joint ventures	(119)	(74)		(61)	(36)		(45)		(77)
Other	24	10		11	117		933		8
	1,337	862		772	1,755		4,657		973

64

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

35.          DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)

Significant differences between United States and Canadian GAAP are described below.

(A) Derivatives

Beginning in 2001, the Company was required to adopt, for U.S. GAAP purposes, SFAS Nos. 133 and 138, Accounting for Derivative Instruments and Hedging Activities. These standards require that all derivatives be recorded in the financial statements at fair value.  Beginning in 2001, unrealized gains and losses resulting from the valuation at fair value of derivatives not meeting strict hedge accounting criteria are recognized in net income as the gains and losses arise and not concurrently with the recognition of the transactions being hedged.  Upon initial adoption of the SFAS Nos. 133 and 138 in 2001, the cumulative effect of the accounting change resulted in a decrease in net income of $12.

Beginning January 1, 2004, with the adoption of Canadian Institute of Chartered Accountants (CICA) guideline AcG-13, Hedging Relationships, unrealized gains and losses resulting from the valuation at fair value of derivatives not meeting strict hedge accounting criteria are recognized in net income as the gains and losses arise and not concurrently with the recognition of the transactions being hedged. Upon initial adoption of AcG-13, the effect of the accounting change resulted in an increase in Deferred charges and other assets of $5 and an increase in Deferred credits and other liabilities of $5. Under Canadian GAAP, the recognition of embedded derivatives is not permitted.

AcG-13 establishes certain criteria regarding when hedge accounting may be applied and this guideline is effective for the Company's fiscal year beginning January 1, 2004.  Each hedging relationship is subject to an effectiveness test on a regular basis for reasonable assurance that it is and will continue to be effective.  Under these rules, any derivative instrument that does not qualify for hedge accounting is reported on a mark-to-market basis in earnings. Under U.S. GAAP, hedge ineffectiveness is recognized in the statement of income in the current period whereas under Canadian GAAP such recognition is elective.  In order to minimize differences with U.S. GAAP, the Company has chosen to record ineffectiveness under Canadian GAAP.  Under U.S. GAAP, the change in fair value of derivatives that are treated as cash flow hedges is recorded on the balance sheet in Other comprehensive income whereas under Canadian GAAP it is recorded in Deferred charges and other assets or Deferred credits and other liabilities.

(B) Currency Translation

The difference between Deferred translation adjustments under U.S. GAAP and Canadian GAAP arises from the different treatment of exchange on long-term debt at January 1, 1983, resulting from the adoption of Canadian accounting standards on foreign currency translation on such date.

(C) Investments

Under U.S. GAAP, certain portfolio investments, which are considered to be "available-for-sale" securities, are measured at market value, with the unrealized gains or losses included in Comprehensive income. Under Canadian GAAP, the concept of comprehensive income does not exist and these investments are measured at cost. 

(D) Minimum Pension Liability

Under U.S. GAAP, if the accumulated benefit obligation exceeds the market value of plan assets, a minimum pension liability for the excess is recognized to the extent that the liability recorded in the balance sheet is less than the minimum liability.  Any portion of this additional liability that relates to unrecognized past service cost is recognized as an intangible asset while the remainder is charged to Comprehensive income.  Canadian GAAP has no such requirement to record a minimum liability.

(E) Impairment of Goodwill

Under U.S. GAAP, goodwill impairment identified as at January 1, 2002, was charged to income as the cumulative effect of an accounting change. Under Canadian GAAP, the impairment loss identified as at January 1, 2002, was recognized as a charge to opening retained earnings in 2002.

65

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

35.          DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (cont'd)

(F) Asset Retirement Obligations

Under U.S. GAAP, the Company retroactively adopted on January 1, 2003, SFAS No. 143, Accounting for Asset Retirement Obligations, as described in note 4 - Accounting Changes, and the cumulative effect of the accounting change was charged to income. Under Canadian GAAP, this standard was retroactively adopted on January 1, 2004, however the cumulative effect of the accounting change was recognized as a charge to retained earnings at January 1, 2001. 

(G) Deferred Translation Adjustments

Under U.S. GAAP, deferred translation adjustments are reported as a component of Comprehensive income. Under Canadian GAAP, the concept of comprehensive income does not exist and deferred translation adjustments are reported as a component of shareholders' equity.

(H) Income Taxes

Under U.S. GAAP, deferred income tax assets and liabilities are revalued for all enacted changes in tax rates. Under Canadian GAAP, deferred income tax assets and liabilities are revalued for all enacted or substantially enacted changes in tax rates.

(I) Acquired In-Process Research and Development

Under U.S. GAAP, acquired in-process research and development costs are expensed immediately upon acquisition. Under Canadian GAAP, these costs are recognized as intangible assets upon acquisition if they result from contractual or other legal rights, or the research and development is capable of being separated or divided from the acquired company and sold, transferred, licensed, rented, or exchanged. Under Canadian GAAP, these intangible assets are amortized over their useful lives.

(J) Joint Ventures

Under U.S. GAAP, joint ventures, other than those over which Alcan has an undivided interest in the assets, are accounted for using the equity method while under Canadian GAAP, joint ventures are accounted for using the proportionate consolidation method. A joint venture is an entity owned and operated by a small group of businesses (the "joint venturers") as a separate and specific business or project for the mutual benefit of the members of the group. Venturers are bound by a contractual arrangement, which establishes that the venturers have joint control over the joint venture, regardless of the difference that may exist in their ownership interest. The different accounting treatment affects the display and classification of financial statement items and not net income or shareholders' equity.

(K) Comprehensive Income

U.S. GAAP requires the disclosure of Comprehensive income which, for the Company, comprises Net income, the movement in Deferred translation adjustments, movements in unrealized gains and losses on cash flow hedges, unrealized gains or losses for the period less gains or losses realized during the period on "available-for-sale" securities and the movement in the minimum pension liability. The concept of Comprehensive income does not exist under Canadian GAAP.

Recently Adopted Accounting Standards for Canadian GAAP Presentation

Consolidation of Variable Interest Entities
In 2004, the Company early adopted CICA guideline AcG-15, Consolidation of Variable Interest Entities. The guideline provides guidance as to when to apply consolidation principles to certain entities that are subject to control on a basis other than ownership of voting shares and thus determining when an enterprise includes the assets, liabilities and results of activities of such an entity (a variable interest entity) in its consolidated financial statements.  The adoption of this guideline has the same impact as the adoption of FIN 46 under U.S. GAAP.  See note 4 - Accounting Changes - Consolidation of Variable Interest Entities.

66

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

35.          DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (cont'd)

Stock-Based Compensation and Other Stock-Based Payments
On January 1, 2004, the Company retroactively adopted the provisions of the amendment to Section 3870, Stock-Based Compensation and Other Stock-Based Payments.  The amendment requires the recognition of an expense computed using the fair value method.  The adoption of this amendment has the same impact as the adoption of the fair value method of accounting for stock-based compensation under U.S. GAAP.  See note 4 - Accounting Changes - Stock Options and Other Stock-Based Compensation.

Asset Retirement Obligations
On January 1, 2004, the Company retroactively adopted the new standard of the CICA, Section 3110, Asset Retirement Obligations.  The impact of adopting this standard decreased retained earnings at January 1, 2003 by $39 and increased net income for the year ended December 31, 2003 by $39.

Hedging Relationships
On January 1, 2004, the Company adopted the CICA guideline AcG-13, Hedging Relationships, which establishes certain conditions regarding when hedge accounting may be applied. Each hedging relationship is subject to an effectiveness test on a regular basis for reasonable assurance that it is and will continue to be effective.  The fair value of derivatives is recorded on the balance sheet and any derivative instrument that does not qualify for hedge accounting is reported on a mark-to-market basis in earnings.

Generally Accepted Accounting Principles
On January 1, 2004, the Company adopted the new standard of the CICA, Section 1100, Generally Accepted Accounting Principles.  This standard establishes accounting standards for financial reporting in accordance with Canadian GAAP.  It defines primary sources of Canadian GAAP and requires that the Company apply every relevant primary source. 

General Standards of Financial Statement Presentation
On January 1, 2004, the Company adopted the CICA Section 1400, General Standards of Financial Statement Presentation.  This standard clarifies what constitutes fair presentation in accordance with Canadian GAAP, which involves providing sufficient information in a clear and understandable manner about certain transactions or events of such size, nature and incidence that their disclosure is necessary to understand the Company's financial statements.

Impairment of Long-Lived Assets
On January 1, 2003, the Company early adopted the CICA Section 3063, Impairment of Long-Lived Assets.  Under this standard, an impairment loss is recognized when the carrying amount of a long-lived asset held for use is not recoverable and exceeds its fair value. No impairment charges were recorded upon adoption of this new standard. 

Disposal of Long-Lived Assets and Discontinued Operations
On January 1, 2003, the Company early adopted the CICA Section 3475, Disposal of Long-Lived Assets and Discontinued Operations.  Under this standard, a long-lived asset to be disposed of by sale is measured at the lower of its carrying amount or fair value less cost to sell, and is not depreciated while classified as held for sale.  Assets and liabilities classified as held for sale are reported as assets held for sale and liabilities of operations held for sale on the balance sheet.  A long-lived asset to be disposed of other than by sale, such as by abandonment, before the end of its previously estimated useful life, is classified as held for use until it is disposed of and depreciation estimates revised to reflect the use of the asset over its shortened useful life.   Also, the standard requires that the results of operations of a component of an enterprise, that has been disposed of either by sale or abandonment or is classified as held for sale, be reported as discontinued operations if the operations and cash flows of the component have been, or will be, eliminated from the ongoing operations as a result of the disposal transaction and the Company will not have any significant continuing involvement in the operations of the component after the disposal transaction.  A component of an enterprise comprises operations and cash flows that can be clearly distinguished, operationally and for financial reporting purposes, from the rest of the enterprise. 

Guarantees
On January 1, 2003, the Company adopted the CICA accounting guideline AcG-14, Disclosure of Guarantees, which addresses disclosure requirements for a guarantor that issues a guarantee.

67

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

35.          DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (cont'd)

Severance and Termination Benefits 
On April 1, 2003, the Company adopted the new CICA Emerging Issues Committee abstract No. 134, Accounting for Severance and Termination Benefits.  Under this abstract, contractual termination benefits and severance costs are recognized as an expense when management, having the appropriate level of authority, approves a decision to terminate employees.  Non-contractual termination benefits are recognized as an expense when communicated to employees.  Retention bonuses are recognized as an expense over the required future service period.

Costs Associated with Exit or Disposal Activities
On April 1, 2003, the Company adopted the new CICA Emerging Issues Committee abstract No. 135, Accounting for Costs Associated with Exit or Disposal Activities (including Costs Incurred in a Restructuring).  This abstract requires that a liability associated with an exit or disposal activity be recognized when the liability is incurred rather than at the date of the Company's commitment to an exit plan.

Goodwill and Other Intangible Assets
On January 1, 2002, the Company adopted the new standard of the CICA Section 3062, Goodwill and Other Intangible Assets. Under this standard, goodwill and other intangible assets with an indefinite life are no longer amortized but are carried at the lower of carrying value and fair value. Goodwill and other intangible assets with an indefinite life are tested for impairment on an annual basis.

Goodwill is tested for impairment using a two-step test. Under the first step, the fair value of a reporting unit, based upon discounted cash flows, is compared to its net carrying amount. If the fair value is greater than the carrying amount, no impairment is deemed to exist. However, if the fair value is less than the carrying amount, a second test must be performed whereby the fair value of the reporting unit's goodwill must be estimated to determine if it is less than its carrying amount. Fair value of goodwill is estimated in the same way as goodwill is determined at the date of acquisition in a business combination, that is, the excess of the fair value of the reporting unit over the fair value of the identifiable net assets of the reporting unit.

An impairment of $748 (including $8 relating to assets held for sale) was identified in the goodwill balance as at January 1, 2002, and was charged to opening retained earnings in 2002 upon adoption of the new accounting standard. Any further impairment arising subsequent to January 1, 2002, is taken as a charge against income. As a result of the new standard, the Company no longer amortizes goodwill.

68

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

35.          DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (cont'd)

Reconciliation of U.S. and Canadian GAAP

Year ended December 31	2004				2003				2002
	AS REPORTED	REF.	AMOUNT	CANADIAN GAAP	AS REPORTED	REF.	AMOUNT	CANADIAN GAAP	AS REPORTED	REF.	AMOUNT	CANADIAN GAAP
Income Statement
Sales and operating revenues	24,885	(j)	16	24,901	13,850	(j)	(18)	13,832	12,483	(j)	(26)	12,457
Costs and expenses
Cost of sales and operating	20,203	(a)	(16)	19,985	11,171	(a)	(64)	10,947	10,032	(f)	(19)	9,860
expenses excluding depreciation		(j)	(202)			(j)	(160)			(j)	(153)
and amortization noted below
Depreciation and amortization	1,337	(i)	3	1,459	862	(j)	74	936	772	(f)	13	847
		(j)	119							(j)	62
Selling, administrative and
general expenses	1,612	(j)	6	1,618	758	(j)	1	759	580	(j)	2	582
Research and development
expenses	239	(j)	2	241	190	(i)	(50)	140	115		-	115
Interest	346	(j)	11	357	212	(j)	6	218	198	(j)	3	201
Goodwill impairment	154		-	154	28		-	28	-		-	-
Other expenses (income) - net	406	(a)	21	415	131	(a)	31	158	119	(a)	60	190
		(j)	(12)			(b)	1			(b)	(2)
						(j)	(5)			(f)	20
										(j)	(7)
	24,297		(68)	24,229	13,352		(166)	13,186	11,816		(21)	11,795
Income from continuing
operations before income
taxes and other items	588		84	672	498		148	646	667		(5)	662
Income taxes	375	(a)	(5)	413	258	(a)	12	319	287	(a)	(20)	290
		(i)	(1)			(i)	18			(f)	(3)
		(j)	44			(j)	31			(j)	26
Income from continuing
operations before other items	213		46	259	240		87	327	380		(8)	372

69

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

35.          DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (cont'd)

Reconciliation of U.S. and Canadian GAAP

	2004				2003				2002
	AS REPORTED	REF.	AMOUNT	CANADIAN GAAP	AS REPORTED	REF.	AMOUNT	CANADIAN GAAP	AS REPORTED	REF.	AMOUNT	CANADIAN GAAP
Equity income	54	(a)	2	7	38	(j)	(35)	3	44	(j)	(41)	3
		(j)	(49)
Minority interests	(15)	(a)	(1)	(16)	(16)		-	(16)	(3)		-	(3)
Income from
continuing operations	252		(2)	250	262		52	314	421		(49)	372
Income (Loss) from
discontinued operations	6		-	6	(159)		-	(159)	(21)		-	(21)
Income before
cumulative effect of
accounting changes	258		(2)	256	103		52	155	400		(49)	351
Cumulative effect of accounting
changes	-		-	-	(39)	(f)	39	-	(748)	(e)	748	-
Net income (Loss)	258		(2)	256	64		91	155	(348)		699	351
Dividends on preference shares	6		-	6	7		-	7	5		-	5
Net income (Loss) attributable
to common shareholders	252		(2)	250	57		91	148	(353)		699	346

(a)   Derivatives

(b)   Currency translation

(c)   Investments

(d)   Minimum pension liability

(e)   Impairment of goodwill

(f)    Asset retirement obligations

(g)   Deferred translation adjustments

(h)   Income taxes

(i)    Acquired in-process research and development

(j)    Joint ventures

70

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

35.      DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (cont'd)

Earnings Per Share ─ Canadian GAAP

	2004	2003	2002
Earnings (Loss) per share
Basic and Diluted:
Income from continuing operations	0.66	0.95	1.14
Income (Loss) from discontinued operations	0.02	(0.49)	(0.07)
Net income per common share - basic and diluted	0.68	0.46	1.07

Consolidated Statement of Retained Earnings ─ Canadian GAAP

	2004	2003	2002
Retained earnings - beginning of year	3,350	3,395	3,989
Accounting change
Impairment of goodwill as at January 1, 2002	-	-	(748)
	3,350	3,395	3,241
Net income	256	155	351
Dividends
Common	(221)	(193)	(192)
Preference	(6)	(7)	(5)
Retained earnings - end of year	3,379	3,350	3,395

71

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

35.           DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (cont'd)

Reconciliation of U.S. and Canadian GAAP

December 31	2004				2003				2002
	AS REPORTED	REF.	AMOUNT	CANADIAN GAAP	AS REPORTED	REF.	AMOUNT	CANADIAN GAAP	AS REPORTED	REF.	AMOUNT	CANADIAN GAAP
Balance Sheet
Current assets
Cash and time deposits	184	(j)	53	237	686	(j)	26	712	97	(j)	12	109
Trade receivables	3,232	(j)	(133)	3,099	2,937	(j)	(31)	2,906	1,390	(j)	(147)	1,243
Other receivables	936	(a)	103	1,113	686	(a)	(49)	690	676	(a)	(34)	541
		(j)	74			(j)	53			(j)	(101)
Deferred income taxes	214	(a)	(34)	180	49		-	49	-		-	-
Inventories	4,029	(j)	153	4,182	3,663	(a)	2	3,783	1,862	(a)	4	1,942
						(j)	118			(j)	76
Current assets held for sale	817		-	817	1,093		-	1,093	116		-	116
Total current assets	9,412		216	9,628	9,114		119	9,233	4,141		(190)	3,951
Deferred charges and other	2,877	(a)	21	1,272	1,563	(a)	5	898	1,178	(a)	(1)	667
assets		(c)	(8)			(c)	(6)			(c)	(6)
		(j)	(1,618)			(j)	(664)			(j)	(504)
Deferred income taxes	870	(j)	3	873	892		-	892	189		-	189
Property, plant and equipment
Cost (excluding Construction	21,922	(j)	2,343	24,265	22,030	(j)	1,711	23,741	16,238	(f)	140	17,740
work in progress)										(j)	1,362
Construction work in progress	816	(j)	16	832	637	(j)	26	663	516	(j)	47	563
Accumulated depreciation	(9,445)	(j)	(1,180)	(10,625)	(8,509)	(j)	(906)	(9,415)	(7,319)	(f)	(90)	(8,181)
										(j)	(772)
	13,293		1,179	14,472	14,158		831	14,989	9,435		687	10,122
Intangible assets, net of
accumulated amortization	1,230	(a)	4	1,105	1,160	(d)	(224)	1,000	452	(d)	(143)	317
		(d)	(253)			(i)	50			(j)	8
		(i)	46			(j)	14
		(j)	78
Goodwill	5,496	(j)	837	6,333	4,686	(j)	174	4,860	2,136	(j)	168	2,304
Long-term assets held for sale	163		-	163	375		-	375	230		-	230
Total assets	33,341		505	33,846	31,948		299	32,247	17,761		19	17,780

72

Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

35.         DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (cont'd)

Reconciliation of U.S. and Canadian GAAP

December 31	2004				2003				2002
	AS REPORTED	REF.	AMOUNT	CANADIAN GAAP	AS REPORTED	REF.	AMOUNT	CANADIAN GAAP	AS REPORTED	REF.	AMOUNT	CANADIAN GAAP
Current liabilities
Payables and accrued liabilities	5,464	(a)	(11)	5,517	4,846	(a)	(111)	4,868	2,483	(a)	(51)	2,353
		(j)	64			(j)	133			(j)	(79)
Short-term borrowings	2,486		-	2,486	1,764	(j)	41	1,805	378	(j)	3	381
Debt maturing within one year	569	(j)	81	650	341	(j)	16	357	249	(j)	47	296
Deferred income taxes	23	(a)	(2)	27	81		-	81	-		-	-
		(j)	6
Current liabilities of operations
held for sale	714		-	714	559		-	559	69		-	69
Total current liabilities	9,256		138	9,394	7,591		79	7,670	3,179		(80)	3,099
Debt not maturing within one
year	6,345	(j)	198	6,543	7,437	(j)	168	7,605	3,120	(j)	67	3,187
Deferred credits and other	4,975	(a)	19	4,031	4,306	(a)	17	3,657	1,996	(a)	(10)	1,523
liabilities		(d)	(1,036)			(d)	(730)			(d)	(610)
		(j)	73			(j)	64			(f)	107
										(j)	40
Deferred income taxes	1,543	(a)	9	2,007	1,696	(a)	27	1,996	1,010	(a)	9	1,220
		(d)	235			(d)	156			(d)	148
		(i)	16			(i)	18			(f)	(18)
		(j)	204			(j)	99			(j)	71
Long-term liabilities of
operations held for sale	260		-	260	238		-	238	14		-	14
Minority interests	236		-	236	403		-	403	150		-	150
Shareholders' equity
Redeemable non-retractable
preference shares	160		-	160	160		-	160	160		-	160
Common shareholders' equity
Common shares	6,670		-	6,670	6,461		-	6,461	4,731		-	4,731
Additional paid-in capital	112		-	112	128		-	128	42		-	42
Retained earnings	3,362	(a)	42	3,379	3,331	(a)	42	3,350	3,467	(a)	21	3,395
		(b)	(55)			(b)	(55)			(b)	(54)
		(i)	30			(i)	32			(f)	(39)
Common shares held by a
subsidiary	(35)		-	(35)	(56)		-	(56)	-		-	-
Deferred translation	-	(a)	(29)	1,089	-	(a)	(29)	635	-	(b)	54	259
adjustments		(b)	55			(b)	55			(g)	205
		(g)	1,063			(g)	609
Accumulated other	457	(a)	66	-	253	(a)	12	-	(108)	(c)	(6)	-
comprehensive income		(c)	(8)			(c)	(6)			(d)	319
(loss)		(d)	548			(d)	350			(g)	(205)
		(g)	(1,063)			(g)	(609)
	10,566		649	11,215	10,117		401	10,518	8,132		295	8,427
	10,726		647	11,375	10,277		401	10,678	8,292		295	8,587
Total liabilities and share-
holders' equity	33,341		505	33,846	31,948		299	32,247	17,761		19	17,780

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Alcan Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

36.          PRIOR YEAR AMOUNTS

Certain prior year amounts have been reclassified to conform with the 2004 presentation.

Quarterly Financial Data (unaudited)

(IN MILLIONS OF US$, EXCEPT PER SHARE DATA)	FIRST	SECOND	THIRD	FOURTH	YEAR
2004
Revenues	6,005	6,193	6,169	6,518	24,885
Cost of sales and operating expenses	4,958	4,904	4,983	5,358	20,203
Depreciation and amortization	336	324	322	355	1,337
Income taxes	41	125	134	75	375
Other items	537	555	559	1,067	2,718
Income (Loss) from continuing operations(1)	133	285	171	(337)	252
Income (Loss) from discontinued operations	(27)	46	(4)	(9)	6
Net income (Loss)	106	331	167	(346)	258
Dividends on preference shares	2	1	1	2	6
Net income (Loss) attributable to common
shareholders	104	330	166	(348)	252
Net income (Loss) per share common share - basic
Income (Loss) from continuing operations	0.36	0.77	0.46	(0.92)	0.67
Income (Loss) from discontinued operations	(0.07)	0.12	(0.01)	(0.02)	0.02
Net income (Loss) per common share - basic (2)	0.29	0.89	0.45	(0.94)	0.69
Net Income (Loss) per share common share -
diluted
Income (Loss) from continuing operations	0.35	0.77	0.46	(0.91)	0.67
Income (Loss) from discontinued operations	(0.07)	0.12	(0.01)	(0.02)	0.02
Net income (Loss) per common share -
diluted (2)	0.28	0.89	0.45	(0.93)	0.69
Net income (Loss) under Canadian GAAP(3)	111	333	135	(323)	256
2003
Revenues	3,249	3,505	3,529	3,567	13,850
Cost of sales and operating expenses	2,614	2,838	2,842	2,877	11,171
Depreciation and amortization	208	216	221	217	862
Income taxes	141	144	65	(92)	258
Other items	270	284	293	450	1,297
Income from continuing operations(1)	16	23	108	115	262
Loss from discontinued operations	(4)	(115)	(21)	(19)	(159)
Income (Loss) before cumulative
effect of accounting change	12	(92)	87	96	103
Cumulative effect of accounting change	(39)	-	-	-	(39)
Net income (Loss)	(27)	(92)	87	96	64
Dividends on preference shares	2	1	2	2	7
Net income (Loss) attributable to common
shareholders	(29)	(93)	85	94	57
Net income (Loss) per common share - basic and
diluted
Income from continuing operations	0.04	0.07	0.32	0.36	0.79
Loss from discontinued operations	(0.01)	(0.36)	(0.06)	(0.06)	(0.49)
Cumulative effect of accounting change	(0.12)	-	-	-	(0.12)
Net income (Loss) per common share - basic and
diluted (2)	(0.09)	(0.29)	0.26	0.30	0.18
Net income (Loss) under Canadian GAAP(3)	-	(102)	94	163	155

74

Alcan Inc.

Quarterly Financial Data(unaudited) (cont'd)

(IN MILLIONS OF US$, EXCEPT PER SHARE DATA)	FIRST	SECOND	THIRD	FOURTH	YEAR
2002
Revenues	2,921	3,182	3,215	3,165	12,483
Cost of sales and operating expenses	2,350	2,546	2,578	2,558	10,032
Depreciation and amortization	184	195	191	202	772
Income taxes	104	109	41	33	287
Other items	132	276	239	324	971
Income from continuing operations(1)	151	56	166	48	421
Loss from discontinued operations	(3)	(1)	(7)	(10)	(21)
Income before cumulative
effect of accounting change	148	55	159	38	400
Cumulative effect of accounting change	(748)	-	-	-	(748)
Net income (Loss)	(600)	55	159	38	(348)
Dividends on preference shares	1	1	1	2	5
Net income (Loss) attributable to common shareholders	(601)	54	158	36	(353)
Net income (Loss) per common share - basic and
diluted
Income from continuing operations	0.46	0.18	0.51	0.14	1.29
Loss from discontinued operations	(0.01)	(0.01)	(0.02)	(0.03)	(0.07)
Cumulative effect of accounting change	(2.32)	-	-	-	(2.32)
Net income (Loss) per common share - basic and
diluted (2)	(1.87)	0.17	0.49	0.11	(1.10)
Net income under Canadian GAAP(3)	77	62	196	16	351

(1)   The first quarter of 2004 included one-time purchase accounting adjustments of $56 related to the Pechiney inventory revaluation, synergy costs of $8, restructuring charges of $5 for various operations in North America, a gain of $5 on the sale of assets in the U.K. and favourable tax adjustments of $3 related to a tax settlement in Germany.  The second quarter of 2004 included a deferred tax charge of $46 related to a tax reorganization, a gain of $42 resulting from a dilution of the Company's interest in an anode-producing joint venture in the Netherlands, synergy costs of $8 related to the Pechiney and FlexPac acquisitions, and a $15 gain related to changes in a pension program in Brazil (Other).  The third quarter of 2004 included a deferred tax recovery of $46 relating to further restructuring of Pechiney legal entities, restructuring charges of  $17 related principally to the closure of a rolled products facility in the U.K. and a $11 charge for a purchase accounting adjustment related to inventory.  The fourth quarter of 2004 included a goodwill impairment charge of $154, an asset impairment charge of $65 related to two rolling mills in Italy, purchase accounting and related adjustments of $46, expenses of $31 related to the spin-off of Novelis, synergy costs of $30, and a gain of $4 resulting from a dilution of the Company's interest in an anode-producing joint venture in the Netherlands.

The first quarter of 2003 included $11 of tax adjustments related to prior years.  The second quarter of 2003 included after-tax gains of $41 on the sale of non-core assets, partially offset by $10 of after-tax charges for plant closures in the U.S.  The third quarter of 2003 included a loss of $13 on the sale of a subsidiary in Thailand, financing related gains of $8 on the acquisition of Pechiney and legal and environmental provisions of $7 for sites in the U.S. and Switzerland.  The fourth quarter of 2003 included one-time favourable tax benefits of $85 arising from changes in Australian tax legislation, currency-related gains of $57 on the financing  of the Pechiney acquisition, gains of $11 on sales of assets in the U.K. and an extrusion business in Malaysia.  Partially offsetting these gains were after-tax charges of $32 for purchase accounting adjustments related to in-process research and development, a goodwill impairment charge of $28 related to Engineered Products, synergy costs of $14, restructuring costs of $11 for a packaging operation in Switzerland, and $10 for environmental provisions in the U.S.

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Alcan Inc.

Quarterly Financial Data (unaudited) (cont'd)

	The first quarter of 2002 included net after-tax charges of $7 relating mainly to the restructuring program announced in 2001. The charges included a fixed asset impairment charge of $9 relating to the recycling operations at the Borgofranco plant in Italy and a loss of $5 on the sale of extrusions operations in Thailand. The second quarter of 2002 included net after-tax charges of $8 relating mainly to the restructuring program announced in 2001. The charges included severance and pension costs of $7 relating to the closure of the Bracebridge cable plant in Ontario, Canada. The third quarter of 2002 included net after-tax charges of $6 relating mainly to increases of $9 to legal provisions and net recoveries of $2 relating to the 2001 restructuring program principally arising from severance costs of $4 for the extrusions operations in Malaysia, light gauge operations in Fairmont, West Virginia, and certain cable operations in North America, and income of $8, primarily for the write-back of excess contract loss provisions. The fourth quarter of 2002 included net after-tax charges of $84 relating mainly to a provision of $68 for the ruling on a contract dispute with Powerex (an affiliate of BC Hydro) and charges of $20 for the closures of the specialty chemicals plant at Burntisland, U.K. and the Banbury, U.K. R&D facilities. These charges were partially offset by a gain of $24 on the sale of a portfolio investment.
(2)	Net income per common share calculations are based on the average number of common shares outstanding in each period. See note 6 - Earnings Per Share - Basic and Diluted.
(3)	See note 35 - Differences between United States and Canadian Generally Accepted Accounting Principles (GAAP) for explanation of differences between U.S. and Canadian GAAP.

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Alcan Inc.

ELEVEN-YEAR SUMMARY

	2004	2003		2002	2001	2000	1999	1998	1997	1996	1995	1994
	U.S. GAAP		U.S. GAAP	U.S. GAAP	U.S. GAAP	U.S. GAAP	Canadian GAAP	Canadian GAAP	Canadian GAAP	Canadian GAAP	Canadian GAAP	Canadian GAAP
CONSOLIDATED INCOME STATEMENT ITEMS  (in millions of US$)
Sales and operating revenues	24,885		13,850	12,483	12,545	9,237	7,324	7,789	7,777	7,614	9,287	8,216
Cost of sales and operating expenses	20,203		11,171	10,032	10,108	7,342	5,695	6,076	6,005	5,919	7,247	6,740
Depreciation and amortization	1,337		862	772	809	496	477	462	436	431	447	431
Selling, administrative and general expenses	1,612		758	580	567	426	388	448	444	422	484	528
Research and development expenses	239		190	115	134	80	67	70	72	71	76	72
Interest	346		212	198	242	67	76	92	101	125	204	219
Goodwill impairment	154		28	-	-	-	-	-	-	-	-	-
Other expenses (income) - net	406		131	119	818	32	(40)	(12)	(34)	13	(39)	(14)
Income taxes	375		258	287	(15)	232	211	210	248	212	326	112
Equity income (loss)	54		38	44	44	35	(1)	(48)	(33)	(10)	(3)	(29)
Minority interests	(15)		(16)	(3)	14	1	(14)	4	(4)	(1)	4	(3)
Income (Loss) from continuing operations before amortization of goodwill and extraordinary item	252		262	421	(60)	598	435	399	468	410	543	96
Amortization of goodwill	-		-	-	-	16	-	-	-	-	-	-
Income (loss) from  continuing operations before     extraordinary item	252		262	421	(60)	582	435	399	468	410	543	96
Extraordinary gain (loss)	-		-	-	-	-	-	-	17	-	(280)	-
Income (Loss) from continuing operations	252		262	421	(60)	582	435	399	485	410	263	96
Income (Loss) from discontinued operations	6		(159)	(21)	(6)	-	-	-	-	-	-	-
Income (Loss) before cumulative effect of accounting change	258		103	400	(66)	582	435	399	485	410	263	96
Cumulative effect of accounting change, net of income tax	-		(39)	(748)	(12)	-	-	-	-	-	-	-
Net Income (Loss)	258		64	(348)	(78)	582	435	399	485	410	263	96
Net income (Loss) attributable to common shareholders	252		57	(353)	(86)	572	426	389	475	394	239	75
CONSOLIDATED BALANCE SHEET ITEMS (in millions of US$)
Operating working capital **	2,733		2,440	1,445	1,237	2,354	1,307	1,682	1,483	1,461	1,731	1,675
Capital assets and goodwill - net**	20,019		20,004	12,023	12,054	12,118	6,434	5,897	5,458	5,470	5,672	5,534
Total assets	33,341		31,948	17,761	17,551	17,846	9,839	9,901	9,374	9,228	9,736	10,003
Total debt**	9,400		9,542	3,747	3,990	4,572	1,489	1,789	1,515	1,516	1,985	2,485
Deferred income taxes - net**	482		836	821	751	1,144	781	747	969	996	979	914
Minority interests**	236		403	150	132	244	207	110	43	73	28	28
Preference shares	160		160	160	160	160	160	160	203	203	353	353
Common shareholders' equity	10,566		10,117	8,132	8,410	8,580	5,358	5,359	4,871	4,661	4,482	4,308
PER COMMON SHARE (in US$)
Net income (Loss) before amortization of goodwill and extraordinary item	0.69		0.18	(1.10)	(0.27)	2.37	1.95	1.71	2.02	1.74	2.30	0.34
Net income (Loss) before extraordinary item	0.69		0.18	(1.10)	(0.27)	2.37	1.95	1.71	2.02	1.74	2.30	0.34
Net income (Loss)	0.69		0.18	(1.10)	(0.27)	2.31	1.95	1.71	2.09	1.74	1.06	0.34
Dividends paid	0.60		0.60	0.60	0.60	0.60	0.60	0.60	0.60	0.60	0.45	0.30
Common shareholders' equity	28.56		27.70	25.30	26.21	26.99	24.47	23.71	21.43	20.57	19.84	19.17
Market price - NYSE close	49.04		46.95	29.52	35.93	34.19	41.38	27.06	27.63	33.63	31.13	25.38

77

Alcan Inc.

	2004	2003	2002	2001	2000	1999	1998	1997	1996	1995	1994
	U.S. GAAP	U.S. GAAP	U.S. GAAP	U.S. GAAP	U.S. GAAP	Canadian GAAP	Canadian GAAP	Canadian GAAP	Canadian GAAP	Canadian GAAP	Canadian GAAP
OPERATING DATA (in thousands of tonnes except for LME price)
Consolidated aluminum shipments
Ingot products (includes primary and secondary ingot, trading    and scrap)	2,340	1,552	1,429	1,419	974	859	829	858	810	801	897
Rolled products	2,341	2,022	2,058	1,937	1,855	1,609	1,603	-	-	-	-
Aluminum used in engineered products and packaging	1,347	531	546	536	352	302	220	-	-	-	-
Total fabricated products	3,688	2,553	2,604	2,473	2,207	1,911	1,823	1,694	1,539	1,733	1,763
Conversion of customer-owned metal	415	403	391	344	328	315	289	276	258	225	189
Total aluminum volume	6,443	4,508	4,424	4,236	3,509	3,085	2,941	2,828	2,607	2,759	2,849
Consolidated primary aluminum production	3,382	2,354	2,238	2,042	1,562	1,518	1,481	1,429	1,407	1,278	1,435
Consolidated aluminum purchases	2,172	1,843	1,855	1,865	1,679	1,297	1,227	1,254	1,003	1,365	1,350
Consolidated aluminum inventories (end of year)	831	513	534	528	576	477	469	451	408	449	435
Primary aluminum capacity
Consolidated subsidiaries and joint ventures	3,435	4,076	2,365	2,252	1,899	1,583	1,706	1,558	1,561	1,561	1,561
Total consolidated subsidiaries and related companies	3,435	4,076	2,365	2,252	1,899	1,583	1,706	1,695	1,698	1,712	1,712
Average three-month LME price (US$ per tonne)	1,721	1,428	1,365	1,454	1,567	1,388	1,379	1,620	1,536	1,830	1,500
OTHER STATISTICS
Cash from operating activities from continuing operations    (in millions of US$)	1,762	1,801	1,519	1,614	1,059	1,182	739	719	981	1,044	65
Cash from (used for) financing activities from continuing     operations   (in millions of US$)	(541)	3,453	(673)	(538)	781	(629)	(95)	(46)	(700)	(744)	(191)
Cash from (used for) investment activities from continuing     operations  (in millions of US$)	(1,728)	(4,594)	(860)	(1,182)	(2,074)	(838)	(656)	(587)	178	(273)	71
Cash used for capital expenditures  (in millions of US$)	1,289	838	627	1,017	1,482	1,169	805	641	482	390	264
Cash used for business acquisitions (in millions of US$)	466	3,819	346	404	244	129	72	-	-	51	92
Debt as a percentage of invested capital (%)	46	47	31	46	34	21	24	23	23	29	35
Average number of employees (in thousands)	82	47	47	48	35	38	36	33	34	39	42
Common shareholders - registered (in thousands at end of year)	18	18	18	18	19	20	20	21	22	23	26
Common shares outstanding (in millions at end of year)	370	365	321	321	318	218	226	227	227	226	225
Registered in Canada (%) *	82	82	80	79	76	61	60	61	61	61	55
Registered in the United States (%)	18	18	20	21	24	39	39	39	39	38	44
Registered in other countries (%)	-	-	-	-	-	-	1	-	-	1	1
Return on average common shareholders' equity (%)	2	1	(4)	(1)	8	8	7	10	9	5	2

*         Shares held by former algroup and Pechiney shareholders are registered in Canada.

**       Excludes assets and liabilities of operations held for sale.

            See note 35 - Differences between United States and Canadian Generally Accepted Accounting Principles (GAAP) for Canadian GAAP information.

78