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 Exchange Act of 1934 For the fiscal year ended 31 December 2005 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 if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  X   No ___.
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ___  No  X .
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 a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of "accelerated filer" and "large accelerated filer" in Rule 12b-2 of the Exchange Act:
Large accelerated filer X                                                                              Accelerated filer ___                                                              Non-accelerated filer ___
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ___  No  X .
The aggregate market value of the voting stock held by non-affiliates:	USD 11,107 million, as at 30 June 2005.
Common Stock of Registrant outstanding:	373,693,379 Common Shares, as at 27 February 2006.
Documents incorporated by reference:	Portions of the Proxy Circular for the Annual Meeting to be held on 27 April 2006 are incorporated by reference in Part III of this Form 10-K and portions of the Financial Statements and Management's Discussion and Analysis are incorporated by reference in Parts I and II of this Form 10-K.

INDEX TO ALCAN INC.

2005 ANNUAL REPORT ON FORM 10-K

Page

PART I

Item 1	Business	6
	Overview of Operating Segments	6
	History / Recent Developments	6
	Alcan Business Groups	8
	Bauxite and Alumina	8
	Primary Metal	12
	Engineered Products	16
	Packaging	19
	Information by Geographic Areas	21
	Research and Development	21
	Environment, Health and Safety / Alcan Integrated Management System	22
	Employees	22
	Patents, Licenses and Trademarks	23
	Competition and Government Regulations	23
Item 1A	Risk Factors	24
Item 1B	Unresolved Staff Comments	27
Item 2	Properties	27
Item 3	Legal Proceedings	28
	Environmental Matters	28
Item 4	Submission of Matters to a Vote of Security Holders	30
PART II
Item 5	Market for the Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	31
Item 6	Selected Financial Data	32
Item 7	Management's Discussion and Analysis of Financial Condition and Results of Operations	33
Item 7A	Quantitative and Qualitative Disclosures about Market Risk	33
Item 8	Financial Statements and Supplementary Data	38
Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	38
Item 9A	Controls and Procedures	38
Item 9B	Other Information	39
PART III
Item 10	Directors and Executive Officers of the Registrant	40
Item 11	Executive Compensation	45
Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	45
Item 13	Certain Relationships and Related Transactions	47
Item 14	Principal Accountant Fees and Services	47
PART IV
Item 15	Exhibits and Financial Statement Schedules	48
Signatures		52

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,

"Annual Report" means Alcan's annual report to Shareholders for the year ended 31 December 2005,

"Business Group" refers to each of Alcan's business groups: Bauxite and Alumina, Primary Metal, Engineered Products and Packaging,

"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,

"Financial Statements" means Alcan's consolidated financial statements for the year ended 31 December 2005, filed herewith under exhibit 99.3,

"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,

"Management's Discussion and Analysis" means Alcan's management's discussion and analysis of financial condition and results of operations for the year ended 31 December 2005, filed herewith under exhibit 99.2,

"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 27 April 2006, and any adjournment thereof, filed herewith under exhibit 99.1,

"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

"U.S. GAAP" means U.S. generally accepted accounting principles.

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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 Financial Statements, to the Management's Discussion and Analysis 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 Financial Statements", ''See Management's Discussion and Analysis'' 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 in reports 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 securities legislation, in particular 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. All statements that address the Company's expectations or projections about the future including statements about the Company's growth, cost reduction goals, expenditures and financial results are 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 material 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 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 or disposition of businesses;

• 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 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

• other factors affecting Alcan's operations, including without limitation, litigation, labour relations and negotiations and changes in 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 Item 1A of this report and the heading "Risks and Uncertainties" in Management's Discussion and Analysis. The text under the named heading of Management's Discussion and Analysis 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 100 F Street, N. E., 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, and amendments thereto, filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are also available, as soon as reasonably practicable, after Alcan has electronically filed such materials, through its 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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PART I

ITEM 1 BUSINESS

Alcan is the parent company of an international group involved in many aspects of the aluminum, engineered products 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, engineered products, flexible and specialty packaging, as well as related research and development.

On 31 December 2005, Alcan employed approximately 65,000 people in 58 countries.

A.          OVERVIEW OF OPERATING SEGMENTS 

The Company operates through four Business Groups, each responsible for the different business units of which they are comprised. 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. The operating segments of the Company are:

1.1       Bauxite and Alumina, headquartered in Montreal, Canada, this Business Group comprises Alcan's worldwide activities related to bauxite mining and refining into smelter-grade and specialty aluminas, owning, operating or having interests in six bauxite mines and deposits in five countries, five smelter-grade alumina plants in four countries and six specialty alumina plants in three countries and providing engineering and technology services;

1.2       Primary Metal, also headquartered in Montreal, this Business Group comprises smelting operations, power generation, production of primary value-added ingot, manufacturing of smelter anodes and aluminum fluoride, smelter technology and equipment sales, engineering services and trading operations for aluminum, operating or having interests in 22 smelters in 11 countries, power facilities in four countries and 11 technology and equipment sales centres and engineering operations in nine countries;

1.3       Engineered Products, headquartered in Paris, France, this Business Group produces engineered and fabricated aluminum products including rolled, extruded and cast aluminum products, engineered shaped products and structures, including cable, wire, rod, as well as composite materials such as aluminum-plastic, fibre reinforced plastic and foam-plastic in 52 plants located in 11 countries. Also part of this Business Group are 33 service centres in 11 countries and 33 sales offices in 29 countries; and

1.4        Packaging, also headquartered in Paris, this Business Group consists of Alcan's worldwide food, pharmaceutical and medical, beauty and personal care, and tobacco packaging businesses operating 150 plants in 30 countries. This Business Group produces packaging from a number of different materials, including plastics, aluminum, paper, paperboard, glass and steel.

B.         HISTORY / RECENT DEVELOPMENTS

Alcan is a limited liability Canadian company, incorporated on 3 June 1902, with its headquarters and registered office in Montreal, Canada, to establish a smelter and hydroelectric power facility in Shawinigan, Quebec. In 1928, Alcan became an independently-traded company. 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. Alcan continued its international expansion with the acquisitions of Alusuisse Group Ltd. in 2000 and Pechiney in 2003, both of which significantly increased the Company's presence in the packaging industry.

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1.                   Alcan's Recent Developments

In the past year, Alcan reported the major events related to its business and corporate governance described below.

On 6 January 2005, pursuant to a plan of arrangement under the Canada Business Corporations Act, the Company 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-related businesses in Brazil and four former Pechiney rolling facilities in Europe, and distributed the shares of Novelis, which became a publicly-traded company, to Alcan Shareholders. Detailed information on the Novelis Spin-off can be found on pages 10 through 13 of Alcan's Annual Report on Form 10-K for the year ended 31 December 2004.

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 ("EVP") of the Company.

On 15 March 2005, the Company announced that it had completed the sale of its controlling interest in Aluminium de Grèce SAIC to Mytilineos Holdings SA and certain affiliated companies. An agreement on the sale was announced in December 2004, and its completion followed the approval by the Greek Competition Commission and the Greek Ministry of Development.

On 28 April 2005, the Company announced the appointment of Ms. Jacynthe Côté as Senior Vice President ("SVP") of Alcan, and President and Chief Executive Officer of Alcan's Bauxite and Alumina Business Group.

On 2 May 2005, the Company announced that, following the approval of Polish and German anti-trust authorities, it had completed the acquisition of assets of Parkside International's flexible food packaging plant in Zlotow (Poland) pursuant to an agreement originally reached in March 2005.

On 26 May 2005, the Company announced its intention to issue $500 million of 5.00% notes due in 2015 and $300 million of 5.75% notes due in 2035. Alcan used the net proceeds of these offerings, which closed on 31 May 2005, to repay outstanding commercial paper debt.

On 1 June 2005, the Company announced that it had completed the sale of its ferroalloys division, Pechiney Électrométallurgie, to Ferroatlántica, S.L., a leading European ferroalloys manufacturer and independent electrical power producer based in Spain.

On 8 July 2005, the Company announced the acquisition of PreWired Systems LLC of Pacoima (California, U.S.), a business specialized in manufactured wiring systems for the electrical industry.

On 21 July 2005, the Company announced an investment of $42.6 million in the construction of a new packaging facility in Reidsville Industrial Park (North Carolina, U.S.).  The new plant will produce printed packaging, including folding cartons and labels, for key customers in Alcan Packaging's global tobacco business. The announcement followed the Company's May 2005 signing of an exclusive supply agreement with R.J. Reynolds Tobacco Company for selected printed tobacco packaging, including folding cartons and labels.

On 20 September 2005, the Company announced that Aluminerie Alouette Inc. ("Alouette"), in which the Company holds a 40% stake, had completed the Alouette smelter's CAN$1.45 billion expansion project on budget and ahead of schedule. The expansion more than doubled Alouette's annual current production from 245 kilotonnes to 550 kilotonnes, confirming its status as the Americas' largest aluminum smelter.

On 28 September 2005, the Company announced that it planned to invest $35 million in a new aluminum extrusion plant in Slovakia to produce profiles mostly for the building and construction sectors in Eastern Europe. The new facility is to have two aluminum extrusion press lines, and will be part of Alcan Extruded Products, a unit of the Company's Engineered Products Business Group.

On 29 September 2005, the Company announced updated long-term targets for Alcan as a whole and for each of its four Business Groups. The corporate targets included: (i) 15% annual growth in operating earnings per share; (ii) $2 billion minimum annual cash from operations in 2006 and onward; (iii) return on capital employed sufficient to cover its cost of capital by 2008; and (iv) debt-to-total capital ratio of approximately 35%. Specific targets for 2009 and action plans to achieve such targets were also identified for each of the Company's four Business Groups. For the upstream businesses, these included achieving first quartile status on the global cost curve for 50% of the Bauxite and Alumina Business Group's production and for 55% of the Primary Metal Business Group's production. For the downstream businesses, the targets included improving business group profit margins on revenues to 10% for the Engineered Products Business Group and 15% for the Packaging Business Group. The targets reflected Alcan's then-current business plans, economic outlook, and forward rates for aluminum and currencies at that time.

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On 13 October 2005, the Company announced that it had begun discussions with local stakeholders over the progressive closure of the Company's aluminum smelter in Lannemezan (France). The closure process is expected to begin by June 2006 and be completed in 2008.

On 19 October 2005, the Company announced that its Board of Directors had chosen Mr. Richard B. Evans, EVP, to succeed Mr. Travis Engen as the Company's President and Chief Executive Officer ("CEO"). Mr. Engen had informed the Board of his intention to retire when his contract ends in March 2006. To facilitate the transition, Mr. Evans was appointed Chief Operating Officer ("COO") and was elected to the Board as a Director. In addition, Mr. Michael Hanley, EVP and interim Chief Financial Officer ("CFO"), was appointed Alcan's CFO following previous-CFO Geoffery Merszei's departure in mid-May 2005.

On 19 October 2005, Alcan Corporation, a wholly-owned Subsidiary, established a $2 billion U.S. commercial paper program. Alcan acted as guarantor to Alcan Corporation.

On 26 October 2005, the Company announced that it had signed a letter of intent with the Government of Cameroon for the potential upgrade and expansion of their Joint Venture Alucam primary aluminum smelter to an approximate 260-kilotonne per year capacity, and for the construction of a new hydroelectric power station at a total estimated cost of $900 million. The Government of Cameroon and Alcan each own 46.7% of Alucam. Alcan plans to complete all the necessary technical studies to assess the scope of the project and is expected to make a decision on whether to proceed during the course of 2006.

On 22 November 2005, the Company announced that it and Alcoa World Alumina LLC signed a basic agreement with the Government of Guinea that sets forth the framework for development of a 1.5-million tonne per year alumina refinery in Guinea, with further expansion potential. Following the completion of feasibility studies, the parties are to decide whether to proceed with the investment.

On 12 December 2005, the Company announced that, together with Oman Oil Company SAOC and the Abu Dhabi Water and Electricity Authority, it would proceed with the construction of a $1.7 billion primary aluminum smelter in Sohar (Oman). Alcan will hold a 20% stake in the 350-kilotonne per year smelter, which is expected to begin production in the second quarter of 2008.

On 21 December 2005, the Company announced that it would proceed with an investment of approximately $129 million for its participation in the 2.1-million tonne per year expansion of the Alumar consortium alumina refinery in São Luís (Brazil). The expanded refinery, in which Alcan will continue to hold a 10% stake, would have a total capacity of approximately 3.5-million tonnes per year once completed.

On 3 January 2006, the Company announced that Alcan Packaging Mexico, S.A. de C.V., a wholly-owned Subsidiary, had acquired the packaging assets and business of Recubrimientos y Laminaciones de Papel, S.A. de C.V. of Monterrey (Mexico). The asset purchase includes a plant in Monterrey (Nuevo Leòn).

On 4 January 2006, the Company announced that it had signed an agreement in principle for the sale of its Froges (France) rolling mill to Industrie Laminazione Alluminio S.p.A., an Italian company that provides aluminum solutions for the packaging and building markets. The transaction is expected to be completed in the first quarter of 2006.

On 12 January 2006, the Company announced that it would begin the closure process of its 44-kilotonne per year aluminum smelter in Steg (Switzerland).

On 18 January 2006, the Company announced the appointment of Mr. Gwyn Morgan to its Board of Directors.

On 27 February 2006, the Company announced that it had reached an agreement to sell selected assets of its North American Packaging Plastic Bottle business to Ball Corporation for $180 million. The sale, which is subject to compliance with U.S. antitrust law, is to include operations in Batavia (Illinois), Bellevue (Ohio) and Newark (California, U.S.) and Brampton (Ontario, Canada).

C.         ALCAN BUSINESS GROUPS

Alcan has four Business Groups: Bauxite and Alumina, Primary Metal, Engineered Products and Packaging.

1.         Bauxite and Alumina

A recognized leader and supplier of alumina refinery technology, the Bauxite and Alumina Business Group comprises all Alcan bauxite mines and deposits, smelter‑grade alumina refineries and specialty aluminas plants.

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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 naturally 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 re-used. 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 such as fire retardant products, refractory bricks, zeolite, alum, solid surface products, absorbents and ceramics.

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

In 2005, Alcan used 11.8 million tonnes of bauxite to produce 5 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 700 kilotonnes of specialty aluminas to third parties. 

In 2005, the Bauxite and Alumina Business Group had third party sales and operating revenues of approximately $1.5 billion, representing approximately 7% of Alcan's 2005 sales and revenues.  

For further information concerning the Bauxite and Alumina Business Group's sales to third parties, business group profit, working capital, total assets and the percentage of Alcan's total revenue contributed by the Bauxite and Alumina Business Group, see Note 35 to the Financial Statements, prepared in accordance with U.S. GAAP, as well as Management's Discussion and Analysis-Bauxite and Alumina.

1.2        Production / Facilities 

1.2.1     Canada: Alcan owns the Vaudreuil alumina facility at Jonquière, Quebec. Bauxite required 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.

1.2.2    Australia: Alcan owns the Gove bauxite refinery and mine in Australia's Northern Territory. In 2005, the amount of bauxite mined at Gove was 5.8 million tonnes and the refinery produced 1.9 million tonnes of smelter-grade alumina, which was used at the Kitimat (British Columbia, Canada), ISAL (Iceland), Sebree (Kentucky, U.S.) and Quebec smelters and was sold to third parties. In 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 a 4.0-million tonne 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 agreement. Alcan's share of production from QAL (1.6-million tonnes) 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.

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1.2.3    Brazil: Alcan purchased approximately 2.1 million tonnes of bauxite in 2005 from Mineração Rio do Norte S.A. ("MRN"), a company in which Alcan holds a 12.5% interest. MRN's Porto Trombetas mine in the Amazon region has an operating capacity of approximately 16.7 million tonnes per year. Bauxite purchased from MRN is processed at the Vaudreuil (Quebec, Canada) plant (see above) and at the Alumar alumina refinery in São Luis (Brazil) which has an annual capacity of about 1.4 million tonnes; Alcan owns a 10% interest in Consorcio de Alumínio do Maranhão, the legal entity operating the Alumar alumina refinery. On 21 December 2005, Alcan announced that it would proceed with an investment of approximately $129 million for its participation in the 2.1-million tonne per year expansion of the Alumar refinery.

1.2.4    France: Alcan owns a 100% interest in three plants: Gardanne, Beyrède and La Bâthie. The total production of these plants was approximately 700 kilotonnes for 2005 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 Maurienne smelter facility in France and specialty products are sold to third parties.

1.2.5    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 26,000 tonnes.

1.2.6    Ghana: Alcan purchased about 600 kilotonnes of bauxite in 2005 from Ghana Bauxite Co. Ltd., in which it holds an 80% interest. Its bauxite mine is located in Awaso.

1.2.7    Guinea: Alcan and Alcoa World Alumina LLC each hold a 45% interest in Halco (Mining) Inc. ("Halco"), which in turn owns a 51% interest in 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% interest in 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 LLC, Alcan and other Halco shareholders acquire CBG bauxite for processing in their individual refineries.

Alcan purchased about 6.4 million tonnes of bauxite in 2005, under contracts in effect through 2011 from CBG. The 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 6.4 million tonnes are reserved for Alcan needs.

On 22 November 2005, Alcan announced that it and Alcoa World Alumina LLC, a joint venture between Alcoa, Inc. and Alumina Ltd., signed a basic agreement with the Government of Guinea that sets forth the framework for the development of a 1.5-million tonne per year alumina refinery in Guinea with further expansion potential. Following the completion of feasibility studies, Alcan and Alcoa will decide whether to proceed with the investment.

1.2.8     India: Alcan holds a 45% interest in the proposed Utkal bauxite and alumina project in Orissa (India). The planned project would include a 1.0 to 1.5-million tonne per year integrated alumina plant and associated bauxite mine, with potential to further expand production capacity.

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Alumina Plants

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

Smelter-Grade Alumina Refineries
Locations			% of Ownership by Alcan	Annual Capacity (thousands of tonnes)
Australia.....................		Gladstone (QAL)	41.4	1,640	*
		Gove, Northern Territory	100	2,100
Brazil..........................		São Luis (Alumar)	10	140	*
Canada.......................		Jonquière, Quebec	100	1,220
France........................		Gardanne	100	200
Total Smelter-Grade Alumina				5,300
*	Represents Alcan's share.

Specialty Alumina Plants
Locations		% of Ownership by Alcan	Annual Capacity (thousands of tonnes)
Canada.......................	Brockville, Ontario	100	20
	Jonquière, Quebec	100	180
France........................	Gardanne	100	435
	Beyrède	100	28
	La Bâthie	100	31
Germany.....................	Teutschenthal	100	28
Total Specialty Alumina			722

1.3        Source Materials 

1.3.1     Bauxite: Alcan obtains its bauxite from mining Subsidiaries, Joint Ventures, consortium companies and third party suppliers. In 2005, the Company consumed 13.3 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 (MRN)	12.5	2,100	*
Ghana.........................		Awaso	80	700	*
Guinea........................		Conakry	22.9	6,200	*
India............................		Orissa	45	0	**
Total Bauxite				15,000
*	Represents Alcan's share.
**	Bauxite extraction not yet in operation.

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1.3.2    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

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. The Company is the second largest aluminum producer in the world, as well as a recognized leader and supplier of smelting technology. Approximately 50% of its primary metal is produced using company-owned power.

2.1        Products and Services / Business Units 

2.1.1     Power Operations: The smelting of one tonne of aluminum requires between 13.5 and 18.5 megawatthours of electric energy to separate the aluminum from the oxygen in alumina. Alcan produces electricity at its own generating plants in Canada, 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 22 smelters in 11 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, building and construction as well as other industrial applications. Approximately 10% of the primary aluminum produced in Alcan's smelters was sold at market prices to Alcan's fabricating facilities, primarily in the form of sheet ingot, extrusion billet and molten metal. Approximately 26% of the primary aluminum produced in 2005 was sold to Novelis. The remainder was sold to third party customers in North America, Europe, Africa and Asia, in the form of value-added ingot, primarily extrusion billet, sheet ingot, rod, foundry ingot or remelt ingot.

Average ingot product realizations were $2,036 per tonne in 2005, compared to $1,876 per tonne in 2004, and $1,607 per tonne in 2003.

On 12 December 2005, the Company announced that together with its partners, Oman Oil Company SAOC and the Abu Dhabi Water and Electricity Authority, it would proceed with the construction of a $1.7 billion primary aluminum smelter in Sohar, Oman. Alcan is to take a 20% equity interest in the 350-kilotonne per year smelter, which is expected to begin production in the second quarter of 2008. The smelter is expected to be in the lowest quartile of the industry cash cost curve and add approximately 2% to Alcan's global smelting base. Alcan is to provide assistance and support in the construction and operation of the smelter. Under a technology transfer agreement, the Company will provide the operator of the smelter, Sohar Aluminium Company LLC, with a license and related technical services necessary to implement Alcan's AP35 technology. Alcan has the option of acquiring up to a 60% interest in a second potline of similar capacity.

2.1.3    Trading: Alcan trading operations are conducted by wholly-owned Subsidiaries, which trade on behalf of other 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.

2.1.4     Technology Sales, Equipment Sales and Engineering Services: This unit provides 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 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 potroom equipment for the aluminum industry. In addition, it provides cranes for baking furnaces and rodding shop equipment. ECL operations are located in France, Canada, South Africa, Australia, Bahrain, the Netherlands, Mozambique and China; and

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-    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 activity include raw materials technologies, materials handling technologies and process automation.

2.1.5     Other Production facilities: The Primary Metal Business Group carries on other related activities including the production of calcined coke, anodes, cathode blocks and fluoride, which are used in the production and recycling of aluminum, as well as the refining of high-purity aluminum.

In 2005, the Primary Metal Business Group recorded intersegment sales and operating revenues of approximately $1.9 billion and third-party sales and operating revenues of approximately $6.9 billion, the latter representing 34% of Alcan's 2005 sales and operating revenues.

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 35 to the Financial Statements, prepared in accordance with U.S. GAAP, as well as Management's Discussion and Analysis-Primary Metal .

2.2        Production Facilities and Sales Centres 

2.2.1     Smelter Operations: As at 31 December 2005, Alcan operated and had interests in 22 primary aluminum smelters with a nominal rated annual capacity of 3.5 million tonnes (where ownership is shared, this number represents Alcan's share only). Nine of these smelters, having a total nominal rated capacity of 1.7 million tonnes, are located in Canada; the other smelters are located in Australia, Cameroon, China, France, Iceland, the Netherlands, Norway, Switzerland, the U.K. and the U.S. During 2005, Alcan's smelters produced 3.4 million tonnes of primary aluminum: 1,662,200 tonnes in Canada, 193,700 tonnes in the U.S., 220,300 tonnes in the U.K., 179,500 tonnes in Iceland, 81,600 tonnes in Norway, 44,800 tonnes in Switzerland, 439,900 tonnes in France, 219,200 tonnes in the Netherlands, 260,200 tonnes in Australia, 41,600 tonnes in Cameroon and 76,000 tonnes in China.

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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	265	*
Cameroon...................		Edea (Alucam)**	47	47	*
Canada.......................		Alma, Quebec	100	408
		Sept-Iles (Alouette), Quebec	40	220	*
		Beauharnois, Quebec	100	52
		Bécancour, Quebec	25	101	*
		Kitimat, British Columbia	100	277
		Grande-Baie, Quebec	100	203
		Laterrière, Quebec	100	226
		Shawinigan, Quebec	100	97
		Arvida, Quebec	100	164
China..........................		Qingtongxia	50	77	*
France........................		Dunkerque	100	258
		Lannemezan***	100	50
		Saint-Jean-de-Maurienne	100	135
Iceland........................		Reykjavik (ISAL)	100	179
Netherlands.........		Vlissingen	85	181	*
Norway......................		Husnes (SORAL)	50	82	*
Switzerland................		Steg***	100	44
United Kingdom...........		Lynemouth	100	178
		Lochaber	100	43
United States..............		Sebree, Kentucky	100	196
Total Smelting Operations				3,483
*	Represents Alcan's share.
**	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.
***	To be closed.

2.2.2     Technology and Equipment Sales Centres and Engineering Services 

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

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2.2.3     Other Production Facilities:

Other Production Facilities
Locations		Output/Type of Facility	% of Ownership by Alcan
Canada.......................	Dubuc, Quebec	Engineered cast products	100
	Strathcona, Alberta	Calcined coke	61
	Arvida, Quebec	Calcined coke and cathode blocks	100
	Vaudreuil, Quebec	Fluoride plant	100
France........................	Compiegne	Recycling	100
Netherlands.........	Rotterdam	Anode facility	58.5
Norway......................	Vigelands	High purity metal refinery	50
Sweden......................	Helsingborg	Fluoride plant	50

2.2.4     Other Aluminum Sources: Other sources of aluminum include the following: purchases of primary aluminum under contracts and spot purchases, purchases of 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.

2.3        Source Materials

2.3.1     Electrical Power: In Canada, Alcan's plants have an aggregate installed generating capacity of 3,583 megawatts, of which about 2,801 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 which are leased. 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 Quebec, royalties are also payable to the Quebec provincial government based on total energy generation, escalating at the same rate as the Consumer Price Index in Canada. 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.  Any electricity that is surplus to Alcan's needs under the agreements is sold to neighbouring utilities or customers under both long-term and short-term arrangements.

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

In addition to electricity generated at its own plants, as described above, Alcan is a party to a long-term agreement with Hydro-Quebec (a provincially-owned electric utility) for the annual supply of between one and three billion kilowatthours of electrical energy beginning in 2001. The Alouette smelter, which is 40% owned by Alcan, purchases its electricity needs from Hydro-Quebec pursuant to two long-term supply contracts. The Aluminerie de Bécancour smelter, which is 25% owned by Alcan since the Pechiney Combination, also purchases its electricity needs from Hydro-Quebec .   

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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 (50% owned by Alcan) obtains its power from the Vigelands hydroelectric power stations owned by Alcan. The smelter in the U.S. purchases electricity under a long-term contract through 2011 as well as through short-term contracts. The smelter in Iceland is supplied with hydroelectric power from Iceland's national power company under a long-term contract. The smelter in Switzerland is supplied with power under a short-term contract that expires in 2006. The two larger smelters in France are supplied power under long-term contracts, whereas the Lannemezan smelter has a contract that expires in 2006. The smelter in the Netherlands, which is 85% owned by Alcan, has a number of short-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 with hydroelectric power under a long-term contract. The smelter in China, which is 50% owned by Alcan, is supplied by a coal-fired power plant that is 43.9% owned by the Qingtongxia Joint Venture in which Alcan has a 50% participation.

Power Generation
Locations			% of Ownership by Alcan	Installed Capacity (MW)
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
Total Power Generation				4,370
*	Represents Alcan's share, through its Joint Venture interest.

2.3.2     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, Aluminium & Chemie Rotterdam B.V., located in the Netherlands ("Aluchemie"). Alcan directly holds 53% of Aluchemie while Sor-Norge Aluminium A.S. ("SORAL"), a Joint Venture in which Alcan has a 50% participation, owns a further 11%. The remainder of the shares are held by Hydro Aluminium A.S. Each of the shareholders in 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.

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

3.         Engineered Products

3.1        Products / Business Units 

Alcan's Engineered Products Business Group manufactures engineered or fabricated aluminum products, including rolled, extruded and cast aluminum products, wire and cable as well as composites materials for a broad range of applications for customers in the automotive, mass transportation, aerospace, marine and beverage container markets. It also supplies the architectural, electrical and building markets as well as the markets for electrical industrial and electromechanical applications and the display, leisure and wind-power industries. In addition, the Business Group manufactures aluminum cable, rod and strip products, and produces a wide range of soft and hard aluminum alloy extrusions, as well as aluminum rolled products such as sheet, foil and plate. Also part of this group are 33 service centres in 11 countries that supply customers with products as well as advanced fabrication tailored to their requirements, and 33 sales offices in 29 countries selling and sourcing specialty products and materials for industrial applications.

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

3.1.1     Aerospace, Transport & Industry ("ATI"): ATI supplies high-value added sheet, plate and extruded products for customers in aerospace, marine, road and rail transportation markets and other engineering industries with plate, sheet, hard alloy extrusions and castings. It offers a comprehensive range of products and services, including technical assistance, design and delivery of cast, rolled, extruded, rolled pre-cut or shaped parts, and the recycling of customers' machining scrap metal.

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3.1.2   Composites: This business unit manufactures and sells lightweight multi-material composites that are made using a combination of technologies and materials, including aluminum, plastic, foam board and balsa wood. An example is a panel comprising two aluminum sheets surrounding a plastic core. Principal applications for composites include building facades, transportation, display, signage and wind power installations, for which composites have a number of advantages over more traditional materials because of their low weight to rigidity ratio, ease of application and design variety.

3.1.3    Cable: This business unit produces cable, whereby aluminum is cast and rolled into rod and then drawn into wire and stranded into cable. Its cable products are used for applications in the utility, commercial, institutional, industrial and residential construction markets. Its rod products are also used for mechanical applications such as screen, wire and other fine wire drawing applications. Its strip products are predominantly used for armouring electrical cables. Since the acquisition of PreWired Systems LLC in July 2005, the Cable business unit also provides its customers with a complete wiring system from feeder to outlet in the commercial construction market.

3.1.4    Extruded Products: This business unit produces aluminum sections by the extrusion process, which involves forcing a hot cylindrical billet of aluminum alloy through a shaped die to create profiles. It supplies a variety of hard and soft alloy extrusions, including technically advanced products, to the automotive, electrical and building industries, and to manufacturers of mass transport vehicles and shipbuilders.

3.1.5   Automotive Structures: This business unit serves major automotive manufacturers with advanced technology and produces engineered shaped products including aluminum cockpit carriers, bumpers, extrusion-based safety systems and other structural automotive components.

3.1.6    Alcan Service Centres: The service centres comprise a specialist added-value service and distribution network. They supply customers in the aerospace, building and facade, road transport and shipbuilding industries with products as well as advanced fabrication tailored to customer requirements. The service centres network offers various forms of fabricated aluminum including plates, extrusions and composite panels, and performs value-added services such as cutting, shaping, machining and assembling. The network currently has 33 service centres in 11 countries.

3.1.7   Alcan International Network ("AIN"): This sales organization comprises 33 offices in 29 countries selling and sourcing specialty products and materials for industrial applications in 65 countries. It provides marketing and sourcing services for both Alcan and its customers. AIN's product portfolio includes primary aluminum for the aluminum and steel industries, semi-fabricated products for the construction, transportation, general engineering, packaging and other industrial sectors, minerals for the glass, ceramics and refractories industries, and specialty chemicals for industrial and healthcare applications.

3.1.8    Ventures: The Ventures business unit comprises a number of different, generally smaller operations, offering aluminum and composite products for electronics, home appliances and transportation.

3.1.9  Specialty Sheet: This business unit provides coils and sheet to customers in the can stock, bright sheet, closures, automotive, foil stock, distribution, building and engineering products sectors.

In 2005, the Engineered Products Business Group had third party sales and operating revenues of approximately $6 billion, representing approximately 30% of Alcan's sales and operating revenues for the year.  

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 35 to the Financial Statements, prepared in accordance with U.S. GAAP, as well as Management's Discussion and Analysis-Engineered Products.

3.2        Production and Services Facilities

Alcan's Engineered Products Business Group consists of 52 production facilities, 33 service centres and 33 AIN commercial offices around the world.

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Engineered Products Facilities
Locations			Products / Business Units
Brazil............................		Camaçari	Composites
Canada.......................		Concord, Ontario	Cable
		Mississauga, Ontario	Cable
		Lapointe, Quebec	Cable
		Shawinigan, Quebec	Cable
		Saguenay, Quebec	Automotive Structures
China..........................		Shanghai	Composites
Czech Republic...........		Decin	Extruded Products
		Strojmetal	Partnership/Joint Venture
Ecuador......................		Guayaquil (Balmanta, Maseca, Plantabal, Plantations, Prodpac)	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 Structures
		Gottmadingen	Automotive Structures
		Markt Schwaben***	Automotive Structures
		Osnabrück	Composites
		Singen*	Composites, Extruded Products, Specialty Sheet
		Burg	Extruded Products
		Crailsheim	Extruded Products
		Landau	Extruded Products
Slovakia......................		New facility****	Extruded Products
Slovenia.....................		Koper	Partnership/Joint Venture
Switzerland.................		Altenrhein	Ventures
		Sierre**	Extruded Products, Aerospace, Transportation & Industry
		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 Structures
		Pacoima, California	Cable
		Vernon, California*****	Aerospace, Transportation & Industry
		Ravenswood, West Virginia	Aerospace, Transportation & Industry
*	Shared site with the Packaging Business Group.
**	Shared site with Novelis.
***	Classified as discontinued operations.
****	Facility not yet in operation.
*****	Facility to be closed.
Service centres and AIN locations are listed in subsections 3.2.6 and 3.2.7.

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

3.2.2     Composites: Composites has the following plants: Camaçari (Brazil), Shanghai (China), Guayaquil-Balmanta, Maseca, Plantabal, Plantations and Prodpac (Ecuador), Osnabrück and Singen (Germany), Sins (Switzerland), Chelmsford (U.K.) and Benton, Glasgow and Statesville (U.S.). Composites also has four sales and administration offices: São Paulo (Brazil), Guayaquil (Ecuador), Singapore (Singapore) and Saint-Louis (U.S.). The Singen site, also part of the Specialty Sheet and the Extruded Products business units, is shared with the Packaging Business Group.

3.2.3     Cable: Alcan's main wire, rod, strip and cable businesses are located in Canada and the U.S.: Concord and Mississauga (Ontario), Lapointe and Shawinigan (Quebec), Pacoima (California), Roseburg (Oregon), Sedalia (Missouri) and Williamsport (Pennsylvania).

3.2.4    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).

3.2.5     Automotive Structures: Facilities are located in Saguenay (Quebec, Canada), Dahenfeld and Gottmadingen (Germany) and Novi (Michigan, U.S.).

3.2.6     Service Centres: The service centres network operates across most of Europe. Alcan service centres are established in St. Johann im Pongau, Hallein and Vienna (Austria), Brussels (Belgium), Chassieu, Nantes and Ozoir-la-Ferri è re (France), Nurnberg, Waiblingen Hohenacker, Hamburg, Bad Salzungen, Düsseldorf, Fellbach, Hanover, Remshalden Hebsack, Gera, Mannheim, Munich Unterschleissheim, Frankfurt, Immendingen and Cologne (Germany), Budapest (Hungary), Bologna, Florence, Padova, and Treviglio (Italy), Breda (Netherlands), Bihor (Romania), Ljubljana (Slovenia), Madrid and Barcelona (Spain), Niederglatt and Dagmersellen (Switzerland).

3.2.7     Alcan International Network: Commercial offices are located in Melbourne (Victoria, Australia), Vienna (Austria), Brussels (Belgium), São Paulo (Brazil), Mississauga (Ontario, Canada), Beijing, Hong Kong and Shanghai (China), Prague (Czech Republic), Copenhagen (Denmark), Cairo (Egypt), Paris (France), D üsseldorf (Germany), Athens (Greece), Budapest (Hungary), Milan (Italy), Tokyo (Japan), Mexico City and Monterrey (Mexico), Amsterdam (Netherlands), Lisbon (Portugal), Bucharest (Romania), Moscow (Russia), Singapore (Singapore), Sandton (South Africa), Seoul (South Korea), Madrid and Barcelona (Spain), Taipei (Taiwan), Bangkok (Thailand), Dubai (United Arab Emirates), Slough (U.K.) and Stamford, (Connecticut, U.S.) .

3.2.8    Ventures: The ventures operations are located in Chambery, Goncelin, Mercus-Gabarret and Froges (France) and Altenrhein (Switzerland). Ventures also has an office based in Zurich (Switzerland).

3.2.9     Specialty Sheet: The specialty sheet operations are located in Neuf-Brisach (France) and Singen (Germany).

3.3        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.

4.         Packaging

4.1        Products / Business Sectors

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

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The Packaging Business Group is divided into six sectors:

4.1.1     Food Packaging Europe, Americas and Asia: In these three sectors, 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, the Americas 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 for products such as 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, rolling and lamination of plastic film, aluminum foil, containers and paper to manufacture 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, as well as single and multi-layer injection and extrusion plastic bottles.

4.1.2    Global Pharmaceuticals and Medical Packaging: Alcan Packaging is a leading supplier of packaging to the pharmaceutical industry, with production sites and research and development 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.

4.1.3    Global Beauty and Personal Care Packaging: This sector 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 and lipstick packaging, beauty promotional items, and aluminum cans and bottles.

4.1.4    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 and flexible packaging.

Packaging sales to third parties were approximately $6 billion in 2005. The Packaging Business Group's sales and operating revenues represented approximately 29% of Alcan's 2005 sales and operating revenues. 

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 35 to the Financial Statements, prepared in accordance with U.S. GAAP, as well as Management's Discussion and Analysis- Packaging.

4.2        Production Facilities

Alcan has 150 packaging plants in 30 countries.

4.2.1     Food Packaging Europe: Alcan produces an extensive range of products at its manufacturing facilities in Australia (1 plant), Canada (1 plant), Chile (1 plant), Czech Republic (1 plant), France (10 plants), Germany (4 plants), Ireland (1 plant), Italy (3 plants), Morocco (1 plant), Netherlands (1 plant), Poland (1 plant), Portugal (1 plant), Spain (2 plants), Switzerland (2 plants), Turkey (1 plant), the U.K. (2 plants) and the U.S. (1 plant).

4.2.2     Food Packaging Americas: Manufacturing facilities are located in Argentina (1 plant), Brazil (1 plant), Canada (2 plants), France (1 plant), Mexico (2 plants) and the U.S. (20 plants).

4.2.3     Food Packaging Asia: The food markets are served from China (6 plants), Indonesia (1 plant), New Zealand (1 plant) and Thailand (2 plants).

4.2.4     Global Pharmaceutical and Medical Packaging: Alcan's pharmaceutical and medical products are manufactured and shipped from Belgium (1 plant), Brazil (1 plant), Canada (2 plants), China (1 plant), France (7 plants), Germany (1 plant), Italy (1 plant), Puerto Rico (1 plant), Spain (1 plant), Switzerland (1 plant), the U.K. (1 plant) and the U.S. (18 plants).

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4.2.5     Global Beauty and Personal Care Packaging: Alcan produces its beauty and personal care packaging in Brazil (3 plants), Canada (1 plant), China (2 plants), Czech Republic (1 plant), France (11 plants), Germany (1 plant), Indonesia (1 plant), Italy (2 plants), Mexico (3 plants), Poland (1 plant), Spain (2 plants), the U.K. (1 plant) and the U.S. (6 plants).

4.2.6     Global Tobacco Packaging: Production facilities are located in Canada (1 plant), Germany (1 plant), Kazakhstan (1 plant), Malaysia (1 plant), Netherlands (2 plants), Philippines (1 plant), Russia (1 plant), Turkey (1 plant), the U.K. (1 plant) and the U.S. (3 plants).

Five plants are shared between the Global Pharmaceutical and Medical Packaging and the Food Packaging Europe business sectors: one in each of France, Germany, Italy, Spain and Switzerland. One plant in China is shared between the Global Pharmaceutical and Medical Packaging and the Food Packaging Asia sectors.

4.3       Source Materials

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

D.                  INFORMATION BY GEOGRAPHIC AREAS 

See Note 34 to the Financial Statements for financial information by geographic area.

E.                  RESEARCH AND DEVELOPMENT

Alcan's research and development ("R&D") comprises a system of research laboratories, applied engineering centres and plant technical departments covering all major markets and regions. Alcan invested $227 million, $239 million and $190 million in R&D in 2005, 2004 and 2003, respectively. During 2003, Pechiney invested 93 million Euros in R&D.

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. The Company also funds research activities at several universities.

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 Saguenay (Quebec, Canada), Voreppe and Saint-Jean-de-Maurienne (France).

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

1.4       Research laboratories relating to the Packaging Business Group are located in Neenah (Wisconsin, U.S.), Gennevilliers (France) and Neuhausen (Switzerland).

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

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F.                  ENVIRONMENT, HEALTH AND SAFETY  / ALCAN INTEGRATED MANAGEMENT SYSTEM

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 laws and regulations, 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.

In 2003, Alcan implemented the Alcan Integrated Management System built on three key components, namely Value-Based Management, Continuous Improvement and EHS FIRST, intended to ensure that the same focus on value, improvement and environment, health and safety is found in each of the Company's operations. 

EHS FIRST represents a focus on environment, health and safety throughout the Company and requires certification according to ISO 14001, a globally accepted environmental standard, and OHSAS 18001, an international occupational health and safety certification. By the end of 2005, 88% of the sites were ISO 14001 certified and 86% were OHSAS 18001 certified. Newly acquired facilities are required to be fully compliant with all corporate and Business Group standards within two years of their acquisition. EHS capital expenditures in 2005 were $91 million and are projected to be $207 million and $212 million in 2006 and 2007, respectively. Expenditures charged against income for environmental protection were $138 million in 2005, and are expected to be $203 million and $186 million in 2006 and 2007, 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, and is applied in many EHS FIRST projects throughout the Company.

G.                  EMPLOYEES

Alcan has approximately 20,700 employees in North America, 31,500 in Europe, 4,900 in South America, and 7,800 in Asia/Pacific and other areas. A majority of the shop-floor employees are represented by labour unions. 

There are 26 collective labour agreements in effect in Canada. The majority of the labour agreements for unionized employees working at Alcan facilities in Quebec will expire at the end of 2006. The labour agreement governing the Shawinigan facility was renewed in April 2005 and is now set to expire at the end of 2011. In British Columbia, the collective labour agreement at Kitimat was renewed in 2005 and is now set to expire in 2008.

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Following the Pechiney Combination, Alcan has a large number of employees in France. 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 some individuals result from their specific contracts.

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

H.                  PATENTS, LICENSES AND TRADEMARKS

Alcan owns, directly or through Subsidiaries, a large number of patents in the U.S., the European Union, Canada and Australia 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 date 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.

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 while other trademarks will be at the beginning of 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, engineered products 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 primary metal technology and 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 restrictions. Imports of ingot and other aluminum products into certain markets may be subject to import duties and regulations.  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 1A RISK FACTORS

The following factors, among others, could cause actual results or outcomes to differ from the results expressed or implied by forward-looking statements and could adversely affect the Company's financial performance and, consequently, the value of the Shares:

Alcan is exposed to volatility in the aluminum industry and in aluminum end-use markets, which may adversely affect its financial results because such volatility may significantly reduce revenues without resulting in corresponding cost savings.

Alcan is a leading global producer of aluminum and aluminum fabricated products. The aluminum industry is highly cyclical, with prices subject to worldwide market forces of supply and demand and other influences. Prices have been historically volatile and Alcan expects such volatility to continue. Although Alcan may use contractual arrangements with customers, employ certain measures to manage its exposure to the volatility of LME-based prices, and is product and segment diversified to a significant extent, Alcan's results of operations could be materially adversely affected by material adverse changes in economic or aluminum industry conditions generally.

Fluctuations in currency exchange rates may negatively affect Alcan's financial results and cost structure.

Economic factors, including foreign currency exchange rates, could affect Alcan's revenues, expenses and results of operations. A substantial portion of Alcan's revenue is determined in U.S. dollars while a significant portion of Alcan's costs related to those revenues are incurred in Canadian and Australian dollars and in Euros. Fluctuations in exchange rates between the U.S. dollar and these currencies give rise to currency exposure.

Alcan conducts operations and owns assets worldwide and transacts business in a variety of currencies. Adverse changes in the relative values of currencies can impact Alcan's ability to sell its products or increase the cost of imports, and can reduce the value of Alcan's assets in relative terms.

Alcan's operations are energy-intensive and, as a result, its profitability may be adversely affected by rising energy costs or by energy supply interruptions.

Alcan consumes substantial amounts of energy in its operations. Although Alcan generally expects to meet the energy requirements for its aluminum smelters and alumina refineries from internal sources or from long-term contracts, the following factors could materially adversely affect Alcan's energy position:

• the unavailability of hydroelectric power due to droughts;

• significant increases in the costs of supplied electricity or other energy;

• interruptions in energy supply due to equipment failure or other causes; or

• the inability to extend contracts for the supply of energy on economical terms upon expiration.

Alcan obtains significant amounts of electricity and other energy under contracts that Alcan may not be able to renew or replace on comparable terms following their expiry.

Alcan's profitability could be adversely affected by increases in the costs of and disruptions in the availability of raw materials.

The raw materials that Alcan uses in manufacturing its products include alumina, aluminum, caustic soda, plastics, calcinated petroleum coke and resin. The prices of many of the raw materials Alcan uses depend on supply and demand relationships at a worldwide level, and are therefore subject to continuous volatility.

Prices for the raw materials that Alcan requires may increase from time to time and, if they do, Alcan may not be able to pass on the entire cost of the increases to its customers or offset fully the effects of higher raw material costs through productivity improvements, which may cause Alcan's profitability to decline. In addition, there is a potential time lag between changes in prices under Alcan's purchase contracts and the point when Alcan can implement a corresponding change under its sales contracts with its customers. As a result, Alcan may be exposed to fluctuations in raw material prices since, during the time lag period, Alcan may have to temporarily bear the additional cost of the change under its purchase contracts, which could have a negative impact on its profitability.

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Alcan participates in highly competitive markets.

Alcan is a participant in the market for packaging materials. The Pechiney Combination increased the importance of the packaging business to Alcan's overall results. The packaging market is highly competitive, with competition based on cost and innovation. Alcan's operating results could be adversely affected if Alcan cannot compete effectively in this market or if the market experiences weakness.

Alcan is subject to risks caused by changes in interest rates.

Increases in benchmark interest rates will likely increase the interest cost associated with Alcan's variable interest debt in a rising rate environment and will increase the cost of future borrowings, which could harm Alcan's financial condition and results of operations.

Alcan could be required to make large contributions to its defined benefit pension plans as a result of adverse changes in interest rates and the equity markets.

Alcan sponsors defined benefit pension plans for its employees in Canada, the United States, the United Kingdom, Switzerland and certain other countries. Alcan's pension plan assets consist primarily of listed stocks and bonds. Alcan's estimates of liabilities and expenses for pensions and other post-retirement benefits incorporate significant assumptions, including expected long-term rates of return on plan assets and interest rates used to discount future benefits. Alcan's results of operations, liquidity or shareholders' equity in a particular period could be materially adversely affected by equity market returns that are less than their expected long-term rate of return or a decline of the rate used to discount future benefits.

If the assets of Alcan's pension plans do not achieve expected investment returns for any fiscal year, such deficiency would result in one or more charges against earnings. In addition, changing economic conditions, poor pension investment returns or other factors may require Alcan to make substantial cash contributions to the pension plans in the future, preventing the use of such cash for other purposes.

Alcan has a unionized workforce, and union disputes and other employee relations issues could harm its financial results.

The majority of Alcan's shop-floor employees are represented by labour unions under a large number of collective labour agreements in various countries, including France, Canada and the United States. Alcan may not be able to satisfactorily renegotiate its collective labour agreements when they expire. In addition, existing labour agreements may not prevent a strike or work stoppage at its facilities in the future, and any such work stoppage could have a material adverse effect on Alcan's financial condition and results of operations.

Alcan's operations are affected by conditions and events beyond its control in countries where Alcan has operations or sells products.

Economic and other factors in the many countries in which Alcan operates, including inflation, fluctuations in currency and interest rates, competitive factors, and civil unrest and labour problems, could affect its revenues, expenses and results of operations. Alcan's operations could also be adversely affected by government actions such as controls on imports, exports and prices, new forms of taxation, and increased government regulation in the countries in which Alcan operates or services customers.

Alcan is exposed to market and credit risks from its derivatives portfolio and trading activities.

Where judged appropriate, Alcan uses derivatives to hedge, among other things, exposure to changes in exchange rates, interest rates and metal prices. Alcan is engaged in trading activities in respect of alumina and metals. The Company uses derivatives as one way to protect against losses related to price fluctuations in trading activities. Alcan's use of derivatives makes it subject to certain market and credit risks. These risks could result in credit or derivative-related charges and losses independent of the relative strength of Alcan's core businesses. Alcan is therefore exposed to risks associated with trading activities and with the derivatives themselves, including counterparty credit risks and the risk of significant losses if prices move contrary to expectations or if Alcan's risk management procedures prove to be inadequate. The risks from its trading businesses may result in material losses which could adversely affect its results of operations, liquidity and financial position.

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Alcan may be exposed to significant legal proceedings or investigations.

Alcan's results of operations or liquidity in a particular period could be affected by significant adverse legal proceedings or investigations, including environmental, product liability, health and safety and other claims, as well as commercial or contractual disputes with suppliers or customers.

Alcan is subject to a broad range of environmental laws and regulations in the jurisdictions in which it operates, and Alcan may be exposed to substantial environmental costs and liabilities.

Alcan is subject to a broad range of and increasingly stringent environmental laws and regulations in each of the jurisdictions in which it has operations. The costs of complying with these laws and regulations, including participation in assessments and remediation of sites and installation of pollution control facilities, could be significant. In addition, these standards can create the risk of substantial environmental liabilities, including liabilities associated with divested assets and past activities. Alcan is involved in a number of compliance efforts, remediation activities and legal proceedings concerning environmental matters.

Alcan may be subject to liability related to the use of hazardous substances in production.

Alcan uses a variety of hazardous materials and chemicals in its manufacturing processes, as well as in connection with Alcan's manufacturing facilities, including the maintenance thereof. In the event that any of these substances or related residues proves to be toxic, Alcan may be liable for certain costs, including, among others, costs for health-related claims or removal or retreatment of such substances.

Alcan is, and may be in the future, subject to suits regarding product liability, commercial disputes and claims by individuals, corporations and governmental entities related to its past and current activities and the activities of companies that Alcan has acquired and may acquire in the future.

Alcan is involved in the manufacture of numerous products, including complex component and finished products. The production of such products, used in a variety of end-uses and integrated into separately manufactured end products, entails an inherent risk of suit and liability relating to product operation and performance. Companies that Alcan has acquired and that Alcan may acquire in the future may be subject to similar risk of suit and to pending litigation. Alcan maintains product liability and other insurance to cover liability contingencies. Alcan's policies, however, are subject to deductibles and recovery limitations, as well as limitations on contingencies covered. Suits against Alcan could be resolved in a manner that materially and adversely affects its financial condition, and Alcan could be subject to future material product liability, tort or contractual suits, and to proceedings imposed by governmental entities.

Alcan may not be able to successfully implement productivity and cost-reduction initiatives.

Alcan has undertaken and may continue to undertake productivity and cost-reduction initiatives to improve performance. There can be no assurance that these initiatives will be completed or beneficial to Alcan or that any estimated cost savings from such activities will be realized.

Alcan has made significant capital expenditure commitments to expand and modernize production capacity.

Alcan commonly undertakes significant capital projects. Alcan's involvement in large capital investments subjects it to certain risks, including risks of unanticipated delays, complications and increased costs related to project execution. Alcan may be required to commit to capital spending for particular projects over the course of several years during which market conditions may change, which could reduce the attractiveness of the project relative to other potential investments.

Alcan is subject to risks related to the Novelis Spin-off.

Alcan derives significant cash flows under supply agreements and other arrangements with Novelis, that encompasses most of Alcan's former rolled products business, that Alcan spun off to its shareholders in January 2005 and is now an independent company and an important customer. In the event that Novelis' business is subject to downturns or disruptions, Alcan's cash flows could be negatively affected. Alcan does not control Novelis and cannot provide any assurance regarding its operations. Novelis may make strategic decisions that are disadvantageous to Alcan's commercial relationship with it. Alcan must compete with other market participants for continued business from Novelis, and Novelis could become a competitor to Alcan over the long-term. In connection with the Novelis Spin-off, Alcan entered into agreements with Novelis to license and supply intellectual property, sell assets, lease properties, supply materials, assist with transitional activities, provide personnel and other resources, as well as take part in other exchanges and transactions. No assurance can be given that the terms of such arrangements are not inferior to the terms that Alcan may have been able to achieve with respect to such matters in the market from a third party.

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Alcan could be adversely affected by changes in the business or financial condition of significant customers.

A significant downturn in the business or financial condition of its significant customers could materially adversely affect Alcan's results of operations. In addition, if Alcan's existing relationships with significant customers materially deteriorate or are terminated in the future, and Alcan is not successful in replacing business lost to such customers, Alcan's results of operations may be harmed.

The markets for Alcan's products are highly competitive and the willingness of customers to accept substitutions for Alcan's products is high.

The markets for aluminum and packaging products are highly competitive. In addition, aluminum competes with other materials, such as steel, plastics and glass, among others, for various applications in Alcan's key customer sectors. The willingness of customers to accept substitutions for Alcan's products, the ability of large customers to apply buyer power in the marketplace to affect the pricing for fabricated aluminum or packaging products, or other developments could adversely affect Alcan's results of operations.

Future acquisitions or divestitures may adversely affect Alcan's financial condition.

Alcan has grown partly through the acquisition of other businesses including Pechiney. There are numerous risks commonly encountered in business combinations, including the risk that Alcan may not be able to effectively integrate businesses acquired or generate the cost savings and synergies anticipated. Failure to do so could have a material adverse effect on its costs, earnings and cash flows.

As part of its strategy for growth, Alcan may continue to make acquisitions, divestitures or strategic alliances, which may not be completed or may not be ultimately beneficial to Alcan.

Alcan may not be able to successfully develop and implement new technology required to achieve continued profitability.

Alcan has invested in and is involved with a number of technology and process initiatives. Several technical aspects of these initiatives are still unproven and the eventual commercial outcomes cannot be assessed with any certainty.

Unexpected events may increase Alcan's cost of doing business or disrupt Alcan's operations.

Unexpected events, including, but not limited to, supply disruptions, labour disputes, failure of equipment or processes to meet specifications, war or terrorist activities may increase the cost of doing business or otherwise impact Alcan's financial performance.

The above list of important factors is not all-inclusive or necessarily in order of importance.

ITEM 1B UNRESOLVED STAFF COMMENTS

The Company has nothing to report under this Item.

ITEM 2 PROPERTIES 

Alcan believes that its properties, most of which are owned, are suitable for its operations. For additional information concerning specific properties, as broken down by Alcan Business Group, see Item 1 sub-headings C.1.2 (Bauxite and Alumina), C.2.2 (Primary Metal), C.3.2 (Engineered Products) and C.4.2 (Packaging).

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ITEM 3 LEGAL PROCEEDINGS

The Company is involved in various legal proceedings in either a defendant or plaintiff capacity. In certain circumstances, the amounts at stake in the proceedings, whether such proceedings are pending or potential, are not quantifiable for various reasons. Nothing set out below should, unless expressly stated to the contrary, be interpreted as a confirmation or admission of liability on the part of either the Company or any Subsidiary. The outcome of any legal proceeding, whether pending or potential, will not, in management's opinion, have a material adverse effect on the financial position of the Company.

A.                  ENVIRONMENTAL MATTERS

1.                   Cases

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 U.S. Environmental Protection Agency ("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, U.S.). 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. In addition, Howmet Corporation is also named as a potentially responsible party at this site (see "Howmet Sites" on page 29). There were no developments in 2005.

Millville, New Jersey Plant. In 1997, Wheaton USA Inc., now Alcan Global Pharmaceutical Packaging Inc. ("AGPP"), a wholly-owned Subsidiary, began building new furnaces at its Millville (New Jersey, U.S.) 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. AGPP made modifications to the two furnaces. AGPP is awaiting a review and approval from the NJDEP. There were no further developments in 2005.

Shulton, Mays Landing Landfill. Shulton, an adjacent manufacturing neighbour to AGPP coated products operation in Mays Landing (New Jersey, U.S.), alleged that in the 1970s AGPP had disposed of hazardous waste in a landfill area thereby causing leaching in other sites. After an investigation by the NJDEP, AGPP was required to perform remediation and monitoring at the site. The soil remediation has been completed. An investigation of ground water is continuing and could result in long-term monitoring of the site.

Clifton, New Jersey Facility. Lawson Mardon USA plc, now Alcan Packaging Food & Tobacco Inc. ("APF&T"), a wholly-owned Subsidiary, is undertaking a site investigation and clean-up of the land at its Clifton (New Jersey, U.S.) plant, in compliance with a NJDEP permit. No court action was brought. According to studies, off-site contamination was not a result of APF&T's operations. APF&T has reached an agreement with the NJDEP for alleged on-site contamination whereby APF&T would isolate the area and would monitor the ground water for two years. APF&T completed the remediation and ground water monitoring in 2004 and concluded an agreement with the NJDEP. In 2005, APF&T submitted a ground water remediation work plan to the NJDEP. Once the plan is approved, APF&T will have certain ground water treatment and monitoring to complete.

LM Trentesaux Site. In 1999, an investigation was carried out at a site owned by a Subsidiary, Lawson Mardon Trentesaux SA ("LM Trentesaux"), in 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. There were no developments in 2005. 

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 an additional recovery well was installed in 2005. 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 was required. The remediation plan, which included the installation of recovery wells, was fully put in place by September 2005.

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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 that exceeded a reserve of $6 million on the pro-forma 1995 balance sheet of Pechiney. Alcoa Inc., 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 ("Howmet Sites"). In addition to the Dover and Combe Fill South, New Jersey sites (see below), the Howmet Sites include the LaPorte Casting facility in Indiana, the Pellestar Superfund site in Michigan, as well as other sites in Connecticut, Texas and Wisconsin. Current Company provisions in respect of the Howmet Sites amount to $2.8 million.

Dover, New Jersey Site. In 1997, Howmet notified Pechiney of high PCB readings at Dover (New Jersey, U.S.). 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 for alleged impact on the site ground water. The State of New Jersey is thus asking for money damages for the impact on the ground water separate and above the remediation costs.

Combe Fill South Landfill. In 1998, the U.S. Government and the NJDEP sued Howmet and other parties for damages and response costs in relation to the environmental conditions at the Combe Fill South Landfill in New Jersey. The governments claim both past and future costs for remediation. 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; allocations are not yet final.

Holden Mine Site. In a 1993 settlement agreement, Pechiney had agreed to indemnify Alumax for certain claims, including in connection 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 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 natural resource damages may exceed $30 million. Alcan submitted its final draft feasibility study in February 2004 and meetings took place at several times up to September 2005 without an agreement on remedy. A new proposal was submitted in November 2005.

Blackbird Mine. In 1994 and 1995, Pechiney signed a consent decree with the U.S. Forest Service, National Oceanic and Atmosphere Administration, the EPA and the State of Idaho, as well as 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. Government 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. Government 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 includeD 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 to the consent decree to extend the time for achieving water quality standards. Negotiations with the various agencies concerning the ROD and the consent decree were held during 2003. The EPA also issued a unilateral administrative order which became effective on 10 August 2003. The EPA estimated the ROD remedy cost at $15.4 million in addition to what had already been paid. The parties have complied with a request by the EPA to supply $25 million in financial assurance. The Company is vigorously opposing certain elements of the additional work. In 2005, the EPA decided that treatment for cobalt was not required.

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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 the monitoring, testing, analyzing and reporting on the Tungsten Mine Site, in Vance County (North Carolina, U.S.). 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 potentially responsible parties took place in October 2001. In October 2004, the State of North Carolina met with the potentially responsible parties and presented a proposed remedial plan to which they must respond. In 2005, Pechiney submitted its own remedial plan.

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, U.S.) facility as it sought to identify possible contributors of a specific contaminant - trichloroethylene - 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. Pursuant to a remedial investigation and ground water report, the EPA published a proposed plan calling for remedies that would cost $12.4 million. PPPI is working on alternative remedies that it believes would be more effective cost substantially less.

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, U.S.). Negotiations continue between the parties and the NJDEP with respect to the PPPI's share of remediation costs. Since 2001, the NJDEP has reduced PPPI's required funding share on three separate occasions.

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.

ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

The Company has not submitted any matter to a vote of security holders, through solicitations of proxies or otherwise, during the fourth quarter of the year ended 31 December 2005.

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PART II

ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

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, Regina, Calgary and Vancouver, and Mellon Investors Services LLC in New York. 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 27 February 2006 was approximately 16,959.

While the Company currently intends to pursue a policy of paying quarterly dividends, the payment and 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$)
2005 Quarter		High	Low	Close	Avg. Daily Volume	High	Low	Close	Avg. Daily Volume
First	0.150	47.50	35.75	37.92	1,269,532	58.27	43.35	46.00	1,268,361
Second	0.150	39.13	28.75	30.00	1,207,673	47.89	36.56	36.78	1,468,538
Third	0.150	36.78	30.21	31.37	1,231,066	44.18	35.38	36.85	1,492,671
Fourth	0.150	41.92	29.49	40.95	1,233,368	48.60	34.86	47.76	1,678,781
Year	0.600
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

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 the section entitled ''Securities Authorized for Issuance Under Equity Compensation Plans'' on page 25.

31

Sales of Unregistered Securities

In 2005, the Company issued 106,228 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 U.S. Securities Act of 1933, as amended ("Securities Act") in reliance on Regulation S.  The dates of sale and amounts of Common Shares are set forth below:

2005 Exercises - Dates

Dates	Number of Shares	Dates	Number of Shares	Dates	Number of Shares
5 January 2005	377	4 November 2005	1,042	7 December 2005	10,219
3 February 2005	8	14 November 2005	271	9 December 2005	3,593
8 February 2005	819	24 November 2005	840	12 December 2005	19,388
14 March 2005	23	1 December 2005	468	15 December 2005	1,592
22 March 2005	1,993	2 December 2005	3,273	29 December 2005	2,393
31 March 2005	48	5 December 2005	4,907
11 April 2005	819	6 December 2005	54,155

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	2005	2004	2003	2002	2001
Sales and operating revenues	20,320	24,948	13,850	12,483	12,545
Income (Loss) from continuing operations	155	243	262	421	(60)
Income (Loss) from discontinued operations	(26)	15	(159)	(21)	(6)
Cumulative effect of accounting changes	-	-	(39)	(748)	(12)
Net income (Loss)	129	258	64	(348)	(78)
Earnings (Loss) per share:
Basic and diluted:
Income (Loss) from continuing operations	0.40	0.64	0.79	1.29	(0.21)
Loss from discontinued operations	(0.07)	0.05	(0.49)	(0.07)	(0.02)
Cumulative effect of accounting changes	-	-	(0.12)	(2.32)	(0.04)
Net income (Loss) per share	0.33	0.69	0.18	(1.10)	(0.27)
Cash dividends per share	0.60	0.60	0.60	0.60	0.60
Total assets	26,638	33,341	31,948	17,761	17,551
Long-term debt (including current portion)	6,067	6,914	7,778	3,369	3,411

Prior to 2004, Alcan prepared and filed its financial statements in accordance with Canadian generally accepted accounting principles ("Canadian 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 financial statements.   Historical financial statements were restated in accordance with U.S. GAAP. Note 36 of the Financial Statements, prepared in accordance with U.S. GAAP provides an explanation and reconciliation of differences between U.S. GAAP and Canadian GAAP .

32

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 Financial Statements, prepared in accordance with U.S. GAAP.

On 6 January 2005, the Company completed the Novelis Spin-off. Unaudited pro-forma condensed consolidated financial information giving effect to the Novelis Spin-off as at 1 January 2004 for the income statement and as at 31 December 2004 for the balance sheet is presented in Note 7 to the Financial Statements, prepared in accordance with U.S. GAAP.

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 22 of the 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.

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.  Unless hedge criteria are met, 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 2003 to 2005 are described in Note 4 of the 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.

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

Management's Discussion and Analysis is filed herewith as exhibit 99.2 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 2005 and 31 December 2004 net of its invested surplus cash and time deposits at 31 December 2005 and 31 December 2004 would be to reduce net income by $4 million and $7 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 Financial Statements, prepared in accordance with U.S. GAAP.

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 2005.

33

(in US$ millions, except for average contract rate)			2006	2007	2008	2009	2010	2011 thereafter	Total Nominal Amount	Fair Value
FORWARD CONTRACTS
To buy USD against the foreign currency
CHF	Nominal amount		26	-	-	-	-	-	26	1
	Average contract rate		1.233	-	-	-	-	-
GBP	Nominal amount		8	-	-	-	-	-	8	-
	Average contract rate		0.576	-	-	-	-	-
JPY	Nominal amount		7	-	-	-	-	-	7	-
	Average contract rate		111.8	-	-	-	-	-
NZD	Nominal amount		3	-	-	-	-	-	3	-
	Average contract rate		1.464	-	-	-	-	-
To sell USD against the foreign currency
AUD		Nominal amount	172	-	-	-	-	-	172	(4)
		Average contract rate	1.336	-	-	-	-	-
GBP		Nominal amount	32	-	-	-	-	-	32	(1)
		Average contract rate	0.572	-	-	-	-	-
BRL		Nominal amount	23	42	-	-	-	-	65	2
		Average contract rate	2.507	2.669	-	-	-	-
ISK		Nominal amount	7	-	-	-	-	-	7	-
		Average contract rate	63.86	-	-	-	-	-
CHF		Nominal amount	10	-	-	-	-	-	10	-
		Average contract rate	1.316	-	-	-	-	-
Other		Nominal amount	3	-	-	-	-	-	3	-
To sell EUR against the foreign currency
USD		Nominal amount	607	24	11	1	1	2	646	2
		Average contract rate	1.207	1.223	1.113	1.333	1.349	1.374
CHF		Nominal amount	44	5	4	-	-	-	53	(1)
		Average contract rate	1.524	1.522	1.506	-	-	-
GBP		Nominal amount	8	-	-	-	-	-	8	-
		Average contract rate	0.679	-	-	-	-	-
Other		Nominal amount	3	-	-	-	-	-	3	-

34

(in US$ millions, except for average contract rate)		2006	2007	2008	2009	2010	2011 thereafter		Total Nominal Amount	Fair Value
FORWARD CONTRACTS (cont'd)
To buy EUR against the foreign currency
USD	Nominal amount	657	20	-	-	-	-		677	7
	Average contract rate	1.187	1.201	-	-	-	-
GBP	Nominal amount	34	1	-	-	-	-		35	-
	Average contract rate	0.692	0.694	-	-	-	-
JPY	Nominal amount	6	-	-	-	-	-		6	-
	Average contract rate	137.8	-	-	-	-	-
CAD	Nominal amount	4	2	-	-	-	-		6	(1)
	Average contract rate	1.490	1.525	-	-	-	-
Other	Nominal amount	3	-	-	-	-	-		3	-
To buy CHF against the foreign currency
GBP	Nominal amount	6	-	-	-	-		-	6	-
	Average contract rate	0.442	-	-	-	-		-
JPY	Nominal amount	3	-	-	-	-		-	3	-
	Average contract rate	88.59	-	-	-	-		-
Other	Nominal amount	1	-	-	-	-		-	1	-
To sell CHF against the foreign currency
CZK	Nominal amount	3	-	-	-	-		-	3	-
	Average contract rate	18.62	-	-	-	-		-
OPTIONS
To sell EUR against the foreign currency
USD	Nominal amount	119	20	-	-	-		-	139	-
	Average contract rate	1.328	1.320	-	-	-		-

35

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.

(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	-	-	-	-	-	1
	Average contract rate	4.38	-	-	-	-	-
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	-	-	-	-	-
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	-	-	-
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	-	1.198	-	-	-	-
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	-	-	-	-

 *   As disclosed in Note 30 - Financial Instruments and Commodity Contracts of the financial statements for the year ended 31 December 2004, prepared in accordance with U.S. GAAP.

36

(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	-	-	-	-		-

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, except for a small trading portfolio not exceeding $50 million. For accounting policies relating to currency contracts, see Note 3 of the Financial Statements, prepared in accordance with U.S. GAAP.

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 2005 would be to increase net income over the period ending December 2007 by approximately $106 million ($64 million in 2006 and $42 million in 2007). As of 31 December 2004, such sensitivity was $70 million ($59 million in 2005 and $11 million in 2006). The results as of 31 December 2005 reflect a 10% reduction from the 31 December 2005, three-month LME aluminum closing price of $2,277 per tonne and assume an equal 10% drop has occurred throughout the aluminum forward price curve existing as at 31 December 2005. The Company's aluminum forward contract positions, producing the above results, are entered into to hedge anticipated future sales of metal. 

37

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 being hedged.  The effect of a reduction of 10% in aluminum prices on the Company's anticipated sales and purchases of aluminum is excluded from the sensitivity analysis above.

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 25,000 tonnes. In addition, see page 24 of the Management's Discussion and Analysis.

ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

The information required is filed herewith as exhibit 99.3 and is incorporated by reference and includes the Financial Statements and Notes thereto and the "Auditors' Report", as well as 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 2005, 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 (respectively, the Company's principal executive and financial officers), 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 U.S. Securities Exchange Act of 1934). Based upon that evaluation, Alcan's Chief Executive Officer and Chief Financial Officer concluded that these disclosure controls and procedures were effective as of 31 December 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 (as defined in Rule 15a-15(d) under the U.S. Securities Exchange Act of 1934). Alcan's internal control over financial reporting is a process designed under the supervision of Alcan's Chief Executive Officer and Chief Financial Officer 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 2005, 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). Based on this assessment, management concluded that the Company's internal control over financial reporting as of 31 December 2005 was effective.

Management's assessment of the effectiveness of the Company's internal control over financial reporting as of 31 December 2005 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing in exhibit 99.3 to this report.

38

Management's report on Financial Statements:

Management has concluded that the Financial Statements present fairly, in all material respects, the financial position of the Company as at 31 December 2005, 2004 and 2003 and the results of its operations and its cash flows for each of the years in the three year period ended 31 December 2005 in accordance with U.S. GAAP.  The Financial Statements have been audited by PricewaterhouseCoopers LLP.

ITEM 9B OTHER INFORMATION

The Company has nothing to report under this Item.

39

PART III

Information in this part is based on information contained in the Company's Proxy Circular dated 27 February 2006, except as otherwise provided.

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 Chief Financial Officer and the Controller, which is available on the Company's website at www.alcan.com.

Supplemental information required by this item, including information relating to the Audit Committee, is incorporated by reference to the Proxy Circular on pages 10 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 close of the next succeeding annual meeting or until he or she ceases to hold office as such.

There are no family relationships among any Directors, nominees or Executive Officers of Alcan.

The following are nominees for election as Directors:

ROLAND BERGER, 68, 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.

CGC, HRC, EHSC

L. DENIS DESAUTELS, O.C., F.C.A., 62, 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. (a leading manufacturer of aircraft and transportation equipment) and vice chair of the Accounting Standards Oversight Council of the Canadian Institute of Chartered Accountants.

CGC, AC (C)

RICHARD B. EVANS, 58, Director since 19 October 2005; Montreal, Quebec.

See Item 10 (B) ("Identification of Executive Officers") below.

L. YVES FORTIER ⁺, C.C., Q.C., 70, 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 (the largest Canadian department store retailer) and a director of NOVA Chemicals Corporation. Mr. Fortier is a trustee of the International Accounting Standards Committee.

CGC (C), EHSC

JEAN-PAUL JACAMON, 58, Director since 2004; Mareil-Marly, France.

Mr. Jacamon is non-executive chairman of Cameron France Holding (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), ASTEEL (a leader in computer software for business-to-business on the web) and AMEC plc (an international engineering services company).

CGC, HRC, EHSC

40

YVES MANSION, 55, Director since 2004; Paris, France.

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 (a leading global credit insurance group).

CGC, AC, NC

GWYN MORGAN, 60, Director since 18 January 2006; Calgary, Alberta.

Mr. Morgan is executive vice chairman of EnCana Corporation (a leading oil and gas producer in North America), where he was founding president and chief executive officer until December 2005. From 1994 to 2002, he was president and chief executive officer of Alberta Energy Company which merged with PanCanadian Energy Corporation to create EnCana Corporation. He is the lead director of HSBC Bank Canada, a director of SNC‑Lavalin Group Inc. (a leading engineering and construction firm) and a member of the energy advisory board of Accenture Ltd. (a global management consulting and technology services company).

CGC, HRC

CHRISTINE MORIN-POSTEL, 59, Director since 2003; Neuilly sur Seine, France.

Mrs. Morin-Postel was, until 2003, executive vice president in charge of human resources at Suez Group (an international industrial and services 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), Royal Dutch Shell plc and Pilkington plc (a world leader in manufacturing of glass and glazing products).

CGC, HRC

H. ONNO RUDING, 66, 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 and director of Citicorp and Citibank, N.A. Dr. Ruding is a director of Corning Inc. (a diversified technology company), Holcim AG (a world leading supplier of cement, concrete and construction-related services) and RTL Group (a leading European commercial broadcaster). 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 Citigroup and the Federal Reserve Bank of New York.

CGC, AC

GUY SAINT-PIERRE, C.C, 71, 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. from 1989 to 1996 and chairman from 1996 to 2002. He was previously a director of BCE Inc. (Canada's largest communications company), Bell Canada, Telesat Canada and General Motors of Canada.

CGC, HRC, NC

GERHARD SCHULMEYER, 67, Director since 1996; Greenwich, Connecticut.

Mr. Schulmeyer is professor of practice at MIT Sloan School of Management. 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. (a wholesale provider of technology products and supply chain services) and Korn/Ferry International (a leader in executive recruitment).

CGC, HRC (C)

PAUL M. TELLIER, P.C., C.C., Q.C., 66, 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. From 1985 to 1992, he was Clerk of the Privy Council Office and Secretary to the Cabinet of the Government of Canada. He is a director of McCain Foods, Bell Canada, BCE Inc. and the advisory board of General Motors Canada. He is also a strategic advisor to Société Générale (Canada). In 2005, Mr. Tellier was an advisor to the Government of Canada in the softwood lumber negotiations with the United States.

CGC, AC, EHSC (C)

41

MILTON K. WONG, C.M., 67, Director since 2003; Vancouver, British Columbia.

Mr. Wong is non-executive chairman of HSBC Asset Management (Canada) Ltd. He was founder and chairman of M.K. Wong and Associates until it was sold in 1996 to HSBC. Mr. Wong is Chancellor Emeritus of Simon Fraser University of Burnaby, British Columbia. 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 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.

CGC, AC, HRC

Committee Memberships

CGC:	Corporate Governance Committee
AC:	Audit Committee
HRC:	Human Resources Committee
EHSC:	Environment, Health and Safety Committee
NC:	Nominating Committee
(C):	Committee Chairman

⁺    Mr. Fortier is a former 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 issued on 17 May 2004 as a result of Nortel's failure to file financial statements in a timely manner. The cease trade order was lifted on 21 June 2005.

42

B.                  IDENTIFICATION OF EXECUTIVE OFFICERS

Each Executive Officer is appointed by the Board of Directors to hold office until his or her successor is appointed.

The following is information regarding Alcan's Executive Officers:

TRAVIS ENGEN, 61, President and Chief Executive Officer and Director, Alcan Inc.

Mr. Engen has been President and CEO of Alcan since March 2001 and a Director since 1996. He will be retiring on 11 March 2006 and is not standing for re-election as a Director. 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 chairman of the World Business Council for Sustainable Development, the International Aluminium Institute and The Prince of Wales International Business Leaders Forum.

RICHARD B. EVANS, 58, Executive Vice President, Chief Operating Officer, Alcan Inc.

Mr. Evans has held this position since October 2005 and was appointed President and Chief Executive Officer effective 12 March 2006. He was previously Executive Vice President, Office of the President, overseeing two of Alcan's Business Groups (January 2002). 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 Alusuisse Group Ltd. (now a Subsidiary of Alcan as a result of its acquisition in 2000). He has held several positions within the Company, including President, Aluminum Fabrication, Europe (March 1999) and 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, 40, Executive Vice President and Chief Financial Officer, Alcan Inc.

Mr. Hanley has held this position since October 2005. He was previously Executive Vice President, Office of the President, overseeing two Business Groups while being interim Chief Financial Officer (May 2005). He was previously President and Chief Executive Officer, Alcan Bauxite and Alumina from 2002 to 2005. 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. (a distributor of natural gas in Quebec and Vermont).

DAVID L. McAUSLAND, 52, 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. Mr. McAusland is a director of Cogeco Inc. (a diversified communications company), Cogeco Cable Inc. and Cascades Inc. (a leader in the paper industry) and chairman of the National Circus School Foundation.

DANIEL GAGNIER, 59, Senior Vice President, Corporate and External Affairs, Alcan Inc.

Mr. Gagnier's responsibilities include corporate communications, international relations, government affairs, corporate security, environment, health and safety and sustainability. 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.

JEAN-CHRISTOPHE DESLARZES, 42, Senior Vice President, Human Resources, Alcan Inc.

Mr. Deslarzes was appointed to this position effective 1 March 2006. He was previously Vice President, Human Resources and Environment, Health and Safety, Alcan Packaging since April 2003. He has held several positions with the Company including Vice President, Human Resources and Environment, Health and Safety, Rolled Products Europe (January 2002) and Vice President, Human Resources and Environment, Health and Safety, Aluminum Fabrication Europe (April 2001).

43

GASTON OUELLET, 63, Senior Vice President, Alcan Inc.

Mr. Ouellet has held this position since October 2000. Effective 1 March 2006, he will concentrate his activities on human resources matters in France. He was previously Senior Vice President, Human Resources, Alcan Inc. from 2000 to 2006. He was appointed Vice President, Human Resources in April 1993. Mr. Ouellet joined the Company in 1967.

JACYNTHE CÔTÉ, 47, Senior Vice President, Alcan Inc., President and Chief Executive Officer, Alcan Bauxite and Alumina.

Mrs. Côté has held this position since June 2005. Prior to her current position, she was Vice President, Human Resources, Environment, Health and Safety, Alcan Primary Metal since January 2003. She has held several positions with the Company including Vice President, Business Planning and Development, Alcan Primary Metal (December 2000) and Works Director of the Lynemouth smelter (1999).

CYNTHIA CARROLL, 49, Senior Vice President, Alcan Inc., President and Chief Executive Officer, Alcan Primary Metal.

Mrs. Carroll has held this position since January 2002 and her responsibilities include Alcan primary metal facilities and power generation installations. She has held several positions with the Company: 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, 54, Senior Vice President, Alcan Inc., President and Chief Executive Officer, Alcan Engineered Products.

Mr. Jacques has held this position since October 2003. Prior to the Pechiney Combination, Mr. Jacques was Vice President, Strategic Management Support, a position he held since January 2002 and assisted 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 (1996).

CHRISTEL BORIES, 41, Senior Vice President, Alcan Inc., President and Chief Executive Officer, Alcan Packaging.

Mrs. Bories has held this position since 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, 42, Vice President and Treasurer, Alcan Inc.

Mr. Harries joined the Company in August 2004. He is responsible for Alcan's global treasury activities, including financing, cash management, risk management, pension investments, insurance and corporate real estate. 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.

CESIDIO RICCI, 41, Vice President and Controller, Alcan Inc.

Mr. Ricci became Vice President and Controller in December 2005. Previously, he was Vice President, Business Finance Director, Engineered Products since February 2003. He has held several positions with the Company including Financial Director, Engineered Products and Composites (September 2002) and Financial Director, Bauxite, Alumina and Specialty Chemicals (July 1999).

PIERRE CHENARD, 45, Vice President and General Counsel, Operations, Alcan Inc.

Mr. Chenard has held this position since July 2005. He is responsible for providing legal services and support to all Business Groups and serves as the coordinator of the global legal group. He joined the Company in July 2000 as Director of Legal Services, Primary Metal. From 1988 to 2000, he was vice president, corporate development and general counsel of Cambior Inc. (a large Canadian gold producer).

ROY MILLINGTON, 46, 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 Alusuisse Group Ltd. He has been a member of Alcan's legal department since 1989 and served with British Alcan Aluminium plc from 1995 to 1997.

44

ITEM 11 EXECUTIVE COMPENSATION

The information required is incorporated by reference to the Proxy Circular, on pages 23 to 31, 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 whose officers in turn served on either the Board or the Human Resources Committee.

ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Information relating to equity compensation plans is incorporated by reference in the Proxy Circular under the section entitled "Securities Authorized for Issuance Under Equity Compensation Plans" on page 25.

Share Ownership of Certain Beneficial Owners

The following shareholder reported to the SEC on Schedule 13G that it owned more than 5% 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 5% or more of Alcan's Common Shares.

Name and Address of Beneficial Owner	Amount and Nature of Beneficial Ownership	% of Outstanding Common Shares Owned
Capital Group International, Inc. 11,100 Santa Monica Boulevard Los Angeles, California  90025	31,988,700(1)	8.6

⁽¹⁾   Capital Group International, Inc. ("CGII") is the parent holding company of a group of investment management companies. It reported that it had sole power to vote 27,029,100 Shares, sole power to dispose of 31,988,700 Shares and shared power to vote or dispose of none of the Shares in a filing with the SEC on Form 13G/A on 9 February 2006. Capital Guardian Trust Company, an affiliate of CGII, also reported that it is the beneficial owner of 21,106,800 or 5.7% of the outstanding Common Shares which are included in the above-mentioned 31,988,700 Shares.

Share Ownership of Directors and Executive Officers

As of 1 March 2006, Directors and Executive Officers as a group beneficially own 403,475 Common Shares (including shares over which control or direction is exercised). This represents 0.1% of Common Shares issued and outstanding. In addition, Executive Officers as a group have Options (as defined in the Proxy Circular) to purchase 4,267,064 Shares. 

The following table lists ownership of Alcan's Common Shares by each Director, by each Named Executive Officer (as defined in the Proxy Circular) in the summary compensation table on page 23 of the Proxy Circular, and by all Directors and Executive Officers as a group as of 1 March 2006.

45

Name	Current Beneficial Holdings	Shares Subject to Options1	Stock Price Appreciation Units2	Number of Deferred Share Units		Number of Restricted Share Units3	Total
Roland Berger (D)	-	N/A	N/A	7,472	4	-	7,472
L. Denis Desautels (D)	960	N/A	N/A	5,971	4	-	6,931
L. Yves Fortier (D)	1,000	N/A	N/A	27,178	4	-	28,178
Jean-Paul Jacamon (D)	136	N/A	N/A	4,024	4	-	4,160
William R. Loomis (D)	10,000	N/A	N/A	13,093	4	-	23,093
Yves Mansion (D)	-	N/A	N/A	8,282	4	-	8,282
Gwyn Morgan (D)	15,000	N/A	N/A	-		-	15,000
Christine Morin-Postel (D)	-	N/A	N/A	9,790	4	-	9,790
H. Onno Ruding (D)	112	N/A	N/A	2,712	4	-	2,824
Guy Saint-Pierre (D)	17,734	N/A	N/A	11,345	4	-	29,079
Gerhard Schulmeyer (D)	2,421	N/A	N/A	11,158	4	-	13,579
Paul M. Tellier (D)	1,969	N/A	N/A	19,123	4	-	21,092
Milton K. Wong (D)	40,000	N/A	N/A	10,890	4	-	50,890
Travis Engen (D, O)	275,500	2,265,617	N/A	2,230	4	-	2,543,347
Richard B. Evans (D, O)	30,702	588,764	85,530	35,698	5	-	740,694
Michael Hanley (O)	1,790	198,868	N/A	-		-	200,658
Cynthia Carroll (O)	-	308,333	N/A	-		-	308,333
Michel Jacques (O)	-	31,704	130,282	2,238	6	-	164,224
All Directors and Officers as a group (28 individuals)	403,475	4,267,064	188,554	179,037		21,158	5,059,288
D - Director
O - Officer

1  Represents Shares that may be acquired through the exercise of B, C, D, and F options as described in the Proxy Circular on pages 24 and 25.

2  Indicates number of units awarded under the Alcan Stock Price Appreciation Unit Plan. The Plan is described on page 26 of the Proxy Circular. The units are payable in cash.

3  Certain Executive Officers hold restricted share units that were awarded in recognition of their contribution to the Pechiney Combination. The units are payable in Shares.

4  Indicates number of deferred share units awarded under the Non-Executive Deferred Share Unit Plan. The Plan is described on page 31 of the Proxy Circular. The units are payable in cash.

5  Mr. Evans holds 32,057 deferred shares units under the Executive Deferred Share Unit Plan, and 3,641 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.

6  Mr. Jacques holds 2,238 deferred share units under the Executive Deferred Share Unit Plan. The units are payable in cash.

46

ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

Indebtedness of Directors and Executive Officers

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

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, on pages 16 and 17, in the sections entitled "Report of the Audit Committee" and "Auditors".

 47

PART IV

ITEM 15 EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

A.   1.   FINANCIAL STATEMENTS

            The information required is filed as exhibit 99.3 and is incorporated by reference herein.

            List of Financial Statements included under Item 8 of this report:

            -  Independent Auditors' Report

            -  Consolidated Statement of Income

            -  Consolidated Balance Sheet

            -  Consolidated Statement of Cash Flows

            -  Notes to Financial Statements

            -  Quarterly Financial Data (unaudited)

            -  Eleven-Year Summary

2.   FINANCIAL STATEMENTS SCHEDULES

      The required information is shown in the 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).) 

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.)

48

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 and amended on 28 April 2005 between Alcan Inc. and CIBC Mellon Trust Company as Rights Agent, which Agreement includes the form of Rights Certificates. (Incorporated by reference to exhibit 99 to the Company's Current Report on Form 8-K filed on 29 April 2005.)

(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 Richard B. Evans. (Filed herewith.)

10.3      Employment Agreement dated 10 March 2005 with Michael Hanley. (Filed herewith.)

10.4      Employment Agreement dated 31 December 2001 with Cynthia Carroll. (Filed herewith.)

10.5      Employment Agreement dated 10 July 2003 with Michel Jacques. (Filed herewith.)

10.6      Change of Control Agreement dated 1 May 2005 with Travis Engen. (Incorporated by reference to exhibit 10.1 to the Company's Current Report on Form 8-K filed on 29 July 2005.)

10.7      Change of Control Agreement dated 1 May 2005 with Richard B. Evans. (Incorporated by reference to exhibit 10.2 to the Company's Current Report on Form 8-K filed on 29 July 2005.)

10.8      Change of Control Agreement dated 1 May 2005 with Michael Hanley. (Filed herewith.)

49

10.9      Change of Control Agreement dated 1 May 2005 with Cynthia Carroll. (Incorporated by reference to exhibit 10.3 to the Company's Current Report on Form 8-K filed on 29 July 2005.)

10.10    Change of Control Agreement dated 1 May 2005 with Michel Jacques. (Filed herewith.)

10.11    Alcan Executive Share Option Plan, dated 30 April 1990, as amended. (Filed herewith.)

10.12    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.)

10.13    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.)

10.14    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.)

10.15    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.)

10.16    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.)

10.17    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.)

10.18    Alcan Inc. Stock Price Appreciation Unit Plan, dated 27 September 2001, as amended. (Filed herewith.)

10.19    Alcan Inc. Deferred Share Unit Plan for Non-Executive Directors, dated 1 April 2001, as amended. (Filed herewith.)

10.20   Total Shareholder Return Performance Plan, dated 1 January 2002, as amended. (Filed herewith.)

10.21    Separation Agreement dated 31 December 2004 between Alcan Inc. and Novelis Inc. (Incorporated by reference to exhibit 10.16 to the Annual Report on Form 10-K of the Company for 2004.)

10.22    Alcan Executive Deferred Share Unit Plan, dated 1 January 2003, as amended. (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)     The list of Subsidiaries and Related Companies of the Company. (Filed herewith.)

(23)     Consent of Independent Auditors. (Filed herewith.)

50

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

(24.1)     Power of Attorney of L. D. Desautels

(24.2)     Power of Attorney of R. B. Evans

(24.3)     Power of Attorney of L. Y. Fortier

(24.4)     Power of Attorney of J.-P. Jacamon

(24.5)     Power of Attorney of W. R. Loomis, Jr.

(24.6)     Power of Attorney of Y. Mansion

(24.7)     Power of Attorney of G. Morgan

(24.8)     Power of Attorney of C. Morin-Postel

(24.9)     Power of Attorney of H. O. Ruding

(24.10)   Power of Attorney of G. Saint-Pierre

(24.11)   Power of Attorney of G. Schulmeyer

(24.12)   Power of Attorney of P. M. Tellier

(31.1)  Section 302 Certification signed by Travis Engen on 8 March 2006. (Filed herewith.)

(31.2)  Section 302 Certification signed by Michael Hanley on 8 March 2006. (Filed herewith.)

(32.1)  Section 906 Certification signed by Travis Engen on 8 March 2006. (Filed herewith.)

(32.2)  Section 906 Certification signed by Michael Hanley on 8 March 2006. (Filed herewith.)

(99.1)  Proxy Circular. (Filed herewith.)

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

(99.3)  Financial Statements. (Filed herewith.)

Amendments and modifications to other exhibits previously filed have been omitted when in the opinion of the Company such exhibits as amended or modified are no longer material or, in certain instances, are no longer required to be filed as exhibits.

No other instruments defining the rights of holders of long-term debt of the Company have been filed as exhibits because no such instruments met the threshold materiality requirements under Regulation S-K. The Company agrees, however, to furnish a copy of any such instruments to the SEC upon request.

 51

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.
8 March 2006	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 8 March 2006.

/s/ Travis Engen

Travis Engen, Director, President and

Chief Executive Officer

(Principal Executive Officer)

Roland Berger, Director

*

L. Denis Desautels, Director

*

Richard B. Evans, Director, Executive Vice President and Chief Operating Officer

*

L. Yves Fortier, Chairman of the Board

*

Jean-Paul Jacamon, Director

*

William R. Loomis, Jr., Director

*

Yves Mansion, Director

*

Gwyn Morgan, Director

*

Christine Morin-Postel, Director

*

H. Onno Ruding, Director

*

Guy Saint-Pierre, Director

52

*

Gerhard Schulmeyer, Director

*

Paul M. Tellier, Director

Milton K. Wong, Director

/s/ Michael Hanley

Michael Hanley, Executive Vice President and

Chief Financial Officer

(Principal Financial Officer)

/s/ Cesidio Ricci

Cesidio Ricci, Vice President and Controller

(Principal Accounting Officer)

* By: Roy Millington as Attorney-in-fact

53

EX-10

Exhibit 10.2

                                                                                                31 December 2001

PERSONAL & CONFIDENTIAL

Mr. Richard B. Evans

Dear Dick:

I wish to confirm my discussion with you pertaining to the position of Executive Vice President of Alcan Inc. and a member of the Office of the President, effective on 1 January 2002.  You will report to me and you will be located in Montreal.  This offer letter contains two sections.  The first deals with the on-going annual compensation package while the second section deals with transfer and relocation issues.

Section 1

Salary

Your base salary will be US$575,000 per annum, effective 1 January 2002.  Your salary will be reviewed annually on the basis of competitive US compensation data.  Your job grade will be administered at 55 under Alcan's structure.

Annual Bonus

You will participate in Alcan's Executive Performance Award Plan (EPA) with a guideline bonus of 75% of the mid-point salary (US $588,000).  Under the modified EPA program, award payment will be related to the global performance of Alcan Inc. as well as your own personal performance.

Long Term Incentive (Stock Option and Relative TSR Program)

At this point in time, we cannot provide you with all the specific details of the new Long Term Incentive Program.  These should be available to you over the next few months.

On the other hand we can confirm that the combined target compensation value of the two Plans (Stock Option and TSR Performance Plan) will be equal to approximately

US $1,750,000 for 2002 with half this value provided in stock options and the other half provided under the new TSR Performance Plan.  The compensation value of

US $1,750,000 will be revised annually on the basis of competitive US compensation data.  The Awards under both Plans are subject to approval by the Personnel Committee of the Board.

1

Pension Plan

We are currently reviewing the pension coverage of senior executives and may propose some modifications pertaining to the different top hat programs in existence.  Changes, if any, will be effective from 1 January 2002, but are not likely to be known before the end of the 1^st Quarter 2002.

Thus, on an interim basis, from 1 January 2002, you will continue to participate in your current pension plan, at the pensionable earnings level in existence on 31 December 2001.  As soon as we complete the design of the executive top hat plan and its valuation, we will communicate the proposed changes.  We intend to have this work completed by the end of the 1^st Quarter 2002.

Tax Equalization

While working in Canada, we will provide you with a tax equalization payment to compensate for the tax differential between Canada and Cleveland (federal, state and local income taxes).  The tax equalization will be applied to Base Salary, the EPA bonus payment and payments under the TSR Performance Plan.  Recognizing that there are potentially different tax treatments on TSR's and stock options in the US and Canada, the intent is that the net affect be tax neutral to you compared to the US.  In order to achieve this result you will be tax equalized on any excess taxes due from exercising TSR's in Canada offset by the savings, if any, of exercising stock options during the same tax year.

With regards to the eventual income tax payable on the 75,000 SPAUs granted to you in September 2001, we will provide you with a tax equalization payment to compensate for the tax differential between Canada and Cleveland (Ohio), in the event that you have a larger Canadian tax liability than you would have had in the USA.  However, Alcan may through mutual agreement replace those SPAUs with stock options or other more tax effective compensation of equal gross value.  In such an event the tax equalization on the  SPAUs may not be required.

It is recognized that there is a potentially material adverse tax impact on your investment income (interest, dividends, capital gains, rental income, etc.) while a resident in Canada.  Alcan will not tax equalize the differential taxes between Canada and the US on investment income, but will provide you with an annual compensatory payment of US$25,000 per year and a lump sum payment of US$10,000 to cover administrative costs.

Pay Disbursement and Benefits

You will transfer to the Canadian payroll as a non-resident on 1 January 2002, until you become a resident on or about 1 April 2002.  Alcan Inc. (Montreal) will disburse all payments and you will participate in all Employee Benefits and Flexperk Programs available to Canada-based employees, except that we will maintain your participation in the Alcancorp Pension Plan (ACPP) and US Social Security Programs.  The employee costs of these programs, if any, will be for your account.  Should you be required to contribute to the Quebec Pension Plan (Social Security) Alcan will reimburse you the annual contributions to this plan.

2

Even though you will be covered by Quebec's Medicare Program and Alcan's Medical Plan, Alcan will provide additional coverage under the Alcan Medical Plan for Expatriate employees to be used as payer of last resort in the event you or your wife wish to receive medical treatment in the United States.

Other than the Deferred Share Unit Program related to the annual bonus (EPA), there is no other deferral program available in Canada.

SECTION II

Immigration Requirements

You will be required to obtain the proper work permit from the Canadian authorities.  Ms. Claire Mallette will work with you to achieve this.

Relocation to Montreal

Your relocation to Montreal will be administered under Alcan Inc's Relocation Policy.

You will receive a relocation allowance of US $30,000, net of taxes to cover incidental expenses related to your move (refer to relocation policy).  The present arrangement on your Montreal house will be maintained to the end of March 2002 .  Furthermore Alcan will be responsible for the costs associated with the termination of your lease in Zurich.

Language Training Program

You and your wife are encouraged to undertake language lessons after you arrive in Montreal.  Reasonable expenses associated with these lessons will be for Alcan's account.

Termination

Should your employment be terminated without cause, Alcan will pay you a termination allowance equal to 24 months base salary and EPA guideline, calculated at the date of termination, tax-equalized to Cleveland, Ohio if need be.  The amount will be paid as a lump sum or as salary continuance at your choice.  In the event you elect salary continuance, you will continue to participate in the benefit programs for the period of salary continuance except that the long-term disability plan and the accrual of vacation cease on termination date.  No option grants are made during the salary continuance period.

Furthermore, the Company will repatriate you and your wife to the United States.  The regular relocation policy will be applied.

Change in Organizational Structure

In the event that the Board makes a change in the current Office of the President structure, which impacts on your future role in the organization, you will have the right to resign from Alcan if there is no mutually acceptable position for you in the new organization structure.  You will have up to 3 months from the date of the organizational change to make the decision to resign.  In this eventuality you shall be entitled to the termination provisions outlined above.

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Professional assistance for the preparation of income tax returns

It is strongly recommended that you obtain professional tax advice, both in Canada and in the USA, prior to leaving Zurich, and prior to making any major financial decisions arising from the transfer.  Reasonable expenses for tax advice for this purpose will be paid by Alcan.

You will be provided with the services of professional consultants for the preparation of your personal income tax requirements in Canada and the United States.  The fees for this service in the USA will be for Alcan's account.  The Canadian cost is part of your Flexperk program.

Change of Control/Confidentiality/Non-Competition

Your current Change of Control Agreement continues to be in force.  The amounts payable, if any, will be grossed up for the tax differential between your province of residence and Cleveland, Ohio.  Furthermore, you are asked to sign the attached confidentiality and non-competitive agreements.

Acceptance

Please sign and return a copy of this letter indicating your acceptance of the terms and conditions described in it.

This letter is written in English at the express request of the Parties.  Cette lettre est rédigée en anglais à la demande expresse des parties.

The terms and conditions outlined in this letter replace any previous contractual arrangements and constitute the full terms and conditions of employment.

                                                                                    /s/ Travis Engen                               

                                                                                    Travis Engen

                                                                                    Chief Executive Officer

I accept the terms and conditions described above.

                                                                                    /s/ Richard B. Evans                                                                               11 January 2002                

                                                                                    Richard B. Evans                                                                                           date

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EX-10

Exhibit 10.3

                                                                                                10 March 2005

PERSONAL & CONFIDENTIAL

Mr. Michael Hanley

Dear Michael:

This letter is to confirm my discussion with you pertaining to the position of Executive Vice President of Alcan Inc. and a member of the Office of the President, effective 1 February 2005.  In this position you will report to me and you will be located in Montreal. 

Salary

Your base salary will be US$550,000 per annum, effective 1 February 2005.  Your salary will be reviewed annually on the basis of competitive US compensation data.  Your job grade will be administered at a Personal Grade 54 under Alcan's structure.

Annual Bonus

You will continue to participate in Alcan's Executive Performance Award Plan (EPA) with a guideline bonus of 80% of the mid-point salary (US $582,700).  Under the EPA program, award payment will be related to the global EVA performance of Alcan Inc. as well as EHS performance.

Long Term Incentive (Stock Option and Relative TSR Program)

The combined target compensation value of Alcan's long term incentive Plans (Stock Option and TSR Performance Plan) at Salary Grade 54 is US $1,708,000 for 2005 with half this value provided in stock options and the other half provided under the new TSR Performance Plan.  The compensation value is revised annually on the basis of competitive US compensation data.  The Awards under both Plans continue to be subject to approval by the Human Resources Committee of the Board.

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Pension Plan

You will remain a member of and eligible for pension benefits from the Alcan Canadian Pension plan and the Alcan Pension Plan for Officers

Termination

Should your employment be terminated without cause, Alcan will pay you a termination allowance equal to 24 months base salary and EPA guideline, calculated at the date of termination.  The amount will be paid as a lump sum or as salary continuance at your choice.  In the event you elect salary continuance, you will continue to participate in the benefit programs for the period of salary continuance except that the long-term disability plan and the accrual of vacation cease on termination date.  No option or TSR grants are made during the salary continuance period.

Change in Organizational Structure

In the event that the Board makes a change in the current Office of the President structure, which impacts on your future role in the organization, you will have the right to resign from Alcan if there is no mutually acceptable position for you in the new organization structure.  You will have up to 3 months from the date of the organizational change to make the decision to resign.  In this eventuality you shall be entitled to the termination provisions outlined above.

Change of Control/Confidentiality/Non-Competition

Your current Change of Control Agreement continues to be in force but will be revised to reflect your new position. Furthermore, you are asked to sign the attached confidentiality and non-competitive agreements.

Acceptance

Please sign and return a copy of this letter indicating your acceptance of the terms and conditions described in it.

This letter is written in English at the express request of the Parties.  Cette lettre est rédigée en anglais à la demande expresse des parties.

The terms and conditions outlined in this letter replace any previous contractual arrangements and constitute the full terms and conditions of employment.

                                                                                    /s/ Travis Engen                           

                                                                                    Travis Engen

                                                                                    Chief Executive Officer

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I accept the terms and conditions described above.

/s/ Michael Hanley                                    31 March 2005                                               

            Michael Hanley                                                                        date

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EX-10

Exhibit 10.4

                                                                                                31 December 2001

PERSONAL & CONFIDENTIAL

Ms. Cynthia Carroll

Dear Cynthia:

I wish to confirm my discussion with you pertaining to the position of Senior Vice President of Alcan Inc. and President, Alcan Primary Metal Group, effective on 1 January 2002.  You will report to the Office of the President and you will be located in Montreal.

Salary

Your base salary will be US$425,000 per annum, effective 1 January 2002.  Your salary will be reviewed annually on the basis of competitive US compensation data.  Your job grade will be administered at 52 under Alcan's structure.

Annual Bonus

You will participate in Alcan's Executive Performance Award Plan (EPA) with a guideline bonus of 75% of the mid-point salary (US$441,000).  Under the modified EPA program, award payment will be related to the global performance of the Alcan Primary Metal Group as well as your own personal performance.

Long Term Incentive (Stock Option and Relative TSR Program)

At this point in time, we cannot provide you with all the specific details of the new Long Term Incentive Program.  These should be available to you over the next few months.

On the other hand we can confirm that the combined target compensation value of the two Plans (Stock Option and TSR Performance Plan) will be equal to approximately US$1,000,000 for 2002 with half this value provided in stock options and the other half provided under the new TSR Performance Plan.  The compensation value of approximately US$1,000,000 will be revised annually on the basis of competitive US compensation data.  The Awards under both Plans are subject to approval by the Personnel Committee of the Board.

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Pension Plan

We are currently reviewing the pension coverage of senior executives and may propose some modifications pertaining to the different top hat programs in existence.  Changes, if any, will be effective from 1 January 2002, but are not likely to be known before the end of the 1^st Quarter 2002.

Thus, on an interim basis, from 1 January 2002, you will continue to participate in your current pension plan, at the pensionable earnings level in existence on 31 December 2001.  As soon as we complete the design of the executive top hat plan and its valuation, we will communicate the proposed changes.  We intend to have this work completed by the end of the 1^st Quarter 2002.

Pay Disbursement and Benefits

Alcan Inc. will disburse all payments and as such you will participate in all Employee Benefits Programs and the Flexperk Program available to Canadian based employees, except that we will maintain your participation in the Alcancorp Pension Plan (ACPP) and US Social Security Programs.  The employee costs of these programs, if any, will be for your account.

Tax Equalization

While working in Canada, we will provide you with a tax equalization payment to compensate for the tax differential between Canada and Cleveland (federal, state and local income taxes).  The tax equalization will be applied to Base Salary, the EPA bonus payment and payments under the TSR Performance Plan.  Recognizing that there are potentially different tax treatments on TSR's and stock options in the US and Canada, the intent is that the net affect be tax neutral to you compared to the US.  In order to achieve this result you will be tax equalized on any excess taxes due from exercising TSR's in Canada offset by the savings, if any, of exercising stock options during the same tax year.

Termination

Should your employment be terminated without cause, Alcan will pay you a termination allowance equal to 24 months base salary and EPA guideline, calculated at the date of termination.  The amount will be paid as a lump sum or as salary continuance at your choice.  In the event you elect salary continuance, you will continue to participate in the benefit programs for the period of salary continuance except that the long-term disability plan and the accrual of vacation cease on termination date.  No option grants are made during the salary continuance period.

Change of Control/Confidentiality/Non-Competition 

Your Change of Control Agreement continues to be in force.  Furthermore, you are asked to sign the attached confidentiality and non-competitive agreements.

                                                                                 2

Acceptance

Please sign and return a copy of this letter indicating your acceptance of the terms and conditions described in it.

The terms and conditions outlined in this letter replace any previous contractual arrangements and constitute the full terms and conditions of employment.

                                                                                     /s/ Travis Engen                               

                                                                                    Travis Engen

                                                                                    Chief Executive Officer

I accept the terms and conditions described above.

/s/ Cynthia Carroll                                                                      16 January 2002                   

            Cynthia Carroll                                                                        date

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EX-10

Exhibit 10.5

CONFIDENTIAL PERSONAL INFORMATION

10 July 2003

Mr. Michel Jacques

Dear Michel:

I am pleased to offer you the position of Senior Vice President of Alcan Inc. and President, Alcan Engineered Products, effective 1 October 2003.  You will report to the Office of the President and you will be located in Zurich. 

Given that you are required to move to Zurich, effective 1 September 2003, the following conditions will be applied from that date.

1.   STARTING DATE AND DURATION

The effective date of your appointment is 1 October 2003 and is contingent upon successful completion of Swiss immigration requirements.  The anticipated duration of this assignment is approximately 3 to 5 years.

2.   COMPENSATION

Base Salary

Your base salary will be US$300,000 per annum, effective 1 September 2003.  Your salary will be reviewed on 1 January 2004 and then annually on the basis of competitive US compensation data.  Your job grade will be administered at 50 under Alcan's structure.

Executive Performance Award Plan  (EPA) 

You will participate in Alcan's Executive Performance Award Plan (EPA) with a guideline bonus of 70% of the midpoint salary (US$374,500).  Effective 1 September 2003, the award payment will be related to the EVA performance of Alcan Engineered Products as well as their Environment, Health and Safety (EH&S) performance.

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Long Term Incentive (Stock Option/SPAU and Relative TSR Program) 

You will continue to participate in the Alcan Long Term Incentive plans for Executives, Alcan Executive Share Option Plan (AESOP)/ Stock Price Appreciation Units Plan (SPAU) and the Total Shareholder Return (TSR) Plan.  The combined target compensation value of the two Plans will be equal to US$730,000 for 2003 with half of this value delivered in Stock Options/SPAUS and the other half in the TSR Plan.  This compensation value will be revised annually on the basis of competitive US compensation data.  The Awards under both Plans are subject to approval by the Human Resources Committee (HRC) of the Board. 

Expatriate Premium

You will receive an Expatriate Premium of 10% of your base salary (up to a maximum of US$35,000), net after tax per annum.  This premium will be adjusted as and when your base salary is adjusted.

Method of Payment

Your salary will be paid to you in Switzerland in CHF and deposited to your designated bank account in Switzerland, with the exception of a portion to be paid in Montreal to cover contributions to Canadian benefit plans.

Arrangements regarding the conversion of your base salary to Swiss Francs will be as follows.  Effective 1 January 2004, a fixed exchange rate will be used for the whole year.  This rate will be set using the AGHO November month end rate of 2003.  In December 2004, a reconciliation using the rates running from end of November 2003 to end of November 2004 will indicate if an adjustment is required.  Note that a variance of 2% over or under the fixed rate will not trigger an adjustment either way.  This will be reviewed and adjusted every year.  This arrangement does not apply to EPA payments.

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3.   PENSION/LIFE/LONG-TERM DISABILITY PLAN MEMBERSHIP

Canada is designated as your Retirement Base.  Your current membership in Alcan Pension Plan (Canada), Alcan Life Insurance Plan and Alcan Long-term Disability will continue.  The amount required to cover your contributions to these Plans will be deducted from the portion of your salary disbursed in Canada.  Should your assignment exceed 5 years, your participation in the Alcan Pension Plan will be reassessed.

Furthermore, you will participate in the Alcan Pension Plan for Officers ("APPO"), from the date of appointment.  A copy of the Plan will be provided to you.  Should you have any questions pertaining to this Plan, please contact Michel Méthot at (514) 848-8204.

4.   SOCIAL SECURITY

You will continue to contribute to the Quebec Pension Plan (QPP) and be exempt from contributions to the Swiss scheme.  Deductions for your required contributions to this plan will be made from your Canadian salary disbursement.

If you are required to make contributions to Swiss Social Security (AVS), these contributions will be reimbursed to you.  Should you at some future date receive a refund of contributions from AVS, the refund shall be returned to Alcan.

5.   MEDICAL/DENTAL PLANS

For the duration of your assignment, you and your family will be covered under Alcan Inc.'s medical and dental insurance plans for expatriates.  The procedures for making claims under these plans will be forwarded to you when you take up your assignment.

In case Swiss Medical coverage is required by Swiss law, the company will pay thecost for a coverage corresponding to the expatriate scheme.

6.   EMPLOYEE SAVINGS PLAN

As you are being transferred to an affiliated Group Company outside Canada, your active membership in the Alcan Employee Savings Plan will be suspended.  You will be permitted to maintain your RRSP and DPSP accounts but you must withdraw all funds you may have in the EPSP account upon transfer.  You are expected to settle your EPSP account soon after leaving Canada by calling the Sun Life Call Centre to request a "Voluntary Withdrawal" of the entire value of your EPSP account.

You will not be permitted to make contributions nor will any Company contributions be made to your account for the duration of your expatriate assignment.

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7.   AUTOMOBILE

(a)   In Canada

Corporate Fleet Services (CFS) will establish a guaranteed sale price for your personal vehicle.  You will be reimbursed for any shortfall between the resale price and the guaranteed price.  Please contact Keith Grassie at (514) 735-9392 in order to initiate the process.

(b)   In Switzerland

For the duration of your assignment in Switzerland, you will be eligible to participate in the car leasing program under the same terms and conditions that apply to Executives in Switzerland.  Details of the program, including cost to you and limits, will be given to you upon arrival.

8.   HOUSING

In Canada 

You will be entitled to participate in the Home Sale Assistance Program or the Rental Management Program, as provided by Royal Lepage Relocation Services (RLRS). Alcan will pay for the appraisal costs or selling or renting your property.  Information regarding these programs may be obtained from Ms. Anne Levasseur in Montreal (514-848-1400).  A decision as to whether you will sell or rent your property must be made by 31 December 2003. 

Should you elect to rent your property in Montreal, and in recognition that you will be assuming most of your housing costs in Zurich, Alcan will support your renting efforts as follows:

(1)   All of your furniture that is not moved to Zurich should be stored.  The cost of storage will be for Alcan's account.  Any furnishings and/or major appliances that are left in your house in Montreal for tenant's use will be at your sole risk.  Royal Lepage and Alcan shall not be responsible for such furnishings and/or major appliances under any circumstances. 

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(2)   You will use the service of RLRS to manage your property during your absence.  The cost of this rental management service will be for Alcan's account, however, costs resulting from regular maintenance will be for your account.

(3) Consistent with our policy that you should not incur basic housing costs in your home and host location simultaneously, and with our practice to use statistics on housing costs, Alcan guarantees that you will receive the minimum gross rental income resulting from renting your property which is equivalent to the Canadian Housing Cost of C$30,340, grossed up for taxes and adjusted from time to time.  Should at some point during your assignment your property not be rented, Alcan will remit to you the monthly Canadian Housing Cost (C$ 2,530 net of taxes).

(4) Upon taking repossession of your property, Alcan will assume the cost if any, up to a maximum of US$25,000, of necessary expenses (covering repairs and painting) to ensure that your property is returned to you in the same condition as prior to your departure. 

In Switzerland 

If necessary, you will be provided with appropriate temporary accommodation in Switzerland for a reasonable period until such time as you have found suitable permanent accommodation.  The costs of this temporary accommodation will be for the Company's account.

You will be provided with appropriate accommodation in the Zurich area.  You will be responsible for the cost of utilities and rental up to CHF 4,000 per month.  Any rental cost in excess of this amount, and up to CHF 3,000 per month (net of taxes) will be for the Company's account.

9.      RELOCATION

(a)       Related expenses and business class airfares via the most direct route between Montreal and Zurich for you and your spouse will be for the Company's account.

(b)        The cost of storing and/or shipping your household goods and personal effects from Montreal to Switzerland will be for the Company's account.

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(c)       You will be entitled to a relocation allowance of the equivalent of one month's Base salary (US$25,000) net of taxes. This allowance is meant to cover incidental expenses incurred as a result of your move such as, but not limited to, curtains and purchase of replacement household equipment when the electrical current is not compatible with current equipment.  Alcan will provide, on a need basis and if the above allowance is not adequate, financial assistance should you be required to purchase major electrical appliances, such as stove, washing machine and so forth. 

10.   CROSS-CULTURAL TRAINING

Prior to your departure, arrangements will be made for you and your spouse to attend a cross-cultural training program. This program is designed to help you rapidly adapt to your new environment.  Please contact Continuum International (c/o Ms. Barbara Vyncke, tel.: 514-861-0903 extension 227) to learn more about the services available to you.

     11.   ASSISTANCE FOR CHILDREN

Alcan will provide a monthly allowance of US$1,000.00 per month, net of taxes, to provide assistance for your children who remain in Montreal.  This arrangement will run until 31 December 2004.  This amount will be deposited to your designated bank account in Switzerland.    

3.  12.   ASSISTANCE FOR PREPARATION OF INCOME TAX RETURNS

It is very important that you obtain professional tax advice, both in Canada and in Switzerland, prior to making any major financial decisions arising from this transfer.
Canadian financial counseling and tax return preparations related to this assignment will be provided to you by T.E. Financial Consultants Limited (c/o Mr. Michael Giacomodonato, tel.: 514-845-3200 extension 244).  Please contact them prior to your departure.

Similar services in Switzerland will be provided by Mr. Otmar HUBER, Tax Partner AG, Talstrasse 80, 8001 Zurich, Tel.:  0041 1 215 7701.  An entry and exit interview is normally scheduled for all Alcan expatriates going on assignment to Switzerland, therefore, please contact them at your earliest convenience to schedule your meeting.

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The fees associated with the above services will be for Alcan's account.

1.    13.   VACATION

Any untaken vacation or leave entitlements you have accumulated in Canada should be cleared with Alcan Inc. before taking up this appointment.  Your vacation entitlement in Switzerland will be 30 days per annum plus statutory holidays.

       14.   HOME LEAVE

Alcan will reimburse you for the cost of one round trip business class airfare for you and your spouse to travel between Zurich and Montreal per 12-month period during the assignment, via the most direct route.  All incidental expenses incurred during such trips will be for your own account.

In addition to the above, should a member of your immediate family not residing with you suffer life-threatening illness, injury or death, assistance will be provided to allow you to be with the relative or attend to necessary arrangements.

3.   15.   CHANGE OF STATUS

In the event that the anticipated duration of this assignment or the position itself changes significantly from what is set in this letter, then the affected terms and conditions will be rediscussed with you.

If at the end of this assignment, you should accept a permanent position in Switzerland, then the benefits provided to you as an expatriate employee will be discontinued.

If, at the end of this assignment, there should be no mutually satisfactory position or location available at that time within Alcan, you and your spouse will be repatriated to Montreal under normal expatriate terms.  Your employment would be terminated according to Alcan's policies regarding expatriate terminations.

4.   16.   CHANGE OF CONTROL

Enclosed is a Change of Control Agreement that I would ask you to sign and return a copy to Robert Maheu.

5.   17.   CONFIDENTIALITY/NON-COMPETITION

You are asked to sign the attached confidentiality and non-competitive agreements.

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1.    18.   RELOCATION CONTACTS

Your contact in Montreal for assistance with your relocation is Claire Mallette at (514) 848-8178.  Your contact in Zurich is Marianne Manini at +41(0)1-386-2635.

Please sign and return a copy of this letter indicating your acceptance of the terms and conditions described in it.

I accept the terms and conditions described above.

                                                                                                            /s/ Travis Engen                                                   

                                                                                                            Travis Engen

                                                                                                            President and Chief

                                                                                                            Executive Officer

/s/ Michel Jacques                                                          10 July 2003                                               

            Michel Jacques                                                                        date

Attachments

Copies to:         Mr. Richard B. Evans - Alcan Inc.:  Maison Alcan

Mr. Robert Maheu - Alcan Inc.:  Maison Alcan

                        Mrs. Claire Mallette - Alcan Inc.:  Maison Alcan

                        Mr. François Curie - Alcan Holdings Switzerland:  Zurich

                        Ms. Marianne Manini  - Alcan Holdings Switzerland:  Zurich

                        Mr. Jean-Claude Savoie - Alcan Holdings Switzerland:  Zurich

                        Dr. Alan Kimber - British Alcan Aluminium plc:  Uxbridge

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EX-10

Exhibit 10.8 

CHANGE OF CONTROL AGREEMENT

A G R E E M E N T

Agreement made as of the 1^st day of May 2005, by and between Alcan Inc., a corporation incorporated under the laws of Canada with its registered office at 1188 Sherbrooke Street West, Montreal, Quebec, Canada H3A 3G2 (the "Corporation") and Michael Hanley (the "Executive").

WITNESSETH:

                        WHEREAS, the Executive is the Executive Vice President of Alcan Inc.

                        WHEREAS, the Corporation believes that the establishment and maintenance of a sound and vital senior management team is essential to the protection and enhancement of the interests of the Corporation and its shareholders; and

                        WHEREAS, the Corporation also recognizes that the possibility of a Change of Control of the Corporation (as defined in Section 1 hereof), with the attendant uncertainties and risks, might result in the departure or distraction of key employees of the Corporation to the detriment of the Corporation and its shareholders;

                        WHEREAS, the Corporation has determined that it is appropriate to take steps to induce key employees to remain with the Corporation, and to reinforce and encourage their continued attention and dedication, when faced with the possibility of a Change of Control of the Corporation;

WHEREAS, the Corporation and the Executive have entered into a Change of Control agreement dated 1 August 2001 which expired on 30 April 2005; and

WHEREAS, the Corporation and the Executive now wish to enter into a new Change of Control agreement.

                        NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto hereby agree as follows:

1.         Change of Control shall mean any of the following:

1.1       the acquisition of direct or indirect beneficial ownership (as determined under Rule 13d-3 promulgated under the United States Securities Exchange Act of 1934), in the aggregate, of securities of the Corporation representing twenty percent (20%) or more of the combined voting power of the Corporation's then issued and outstanding voting securities by any person or entity or group of associated persons or entities (within the meaning of Section 13(d)(3) or 14(d)(2) of the United States Securities Exchange Act of 1934) acting jointly or in concert (other than its subsidiaries or any employee benefit plan of either) (a "Person"), provided that, if a buyback of shares by the Corporation causes the Person to attain such limit, such limit shall be deemed not to have been attained without such Person having acquired further voting securities of the Corporation;

1.2       any amalgamation, merger, arrangement, reorganization or consolidation in respect of the Corporation (the foregoing shall include, for the purposes of this Agreement any transaction or series of transactions, such as a share exchange transaction with the same stated or effective objective) other than:

(a)        an amalgamation, merger, arrangement, reorganization or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) two-thirds or more of the combined voting power of the voting securities of the Corporation or such surviving, combined or parent entity outstanding immediately after such amalgamation, merger, arrangement, reorganization or consolidation, without there occurring as a result or in connection therewith any substantial change in the composition of the Corporation's Board of Directors; or

(b)       an amalgamation, merger, arrangement, reorganization or consolidation  initiated by the Corporation for the purpose of implementing a recapitalization of the Corporation (or similar transaction) provided that pursuant thereto no Person is or becomes the beneficial owner, directly or indirectly (as determined under Rule 13-d-3 promulgated under the United States Securities Exchange Act of 1934), of securities representing twenty per cent (20%) or more of the contained voting power of the voting securities of the Corporation outstanding immediately after such amalgamation, merger, arrangement, reorganization or consolidation;

1.3       the approval by shareholders of the Corporation of any plan or proposal for the complete or effective liquidation or dissolution of the Corporation;

1.4      the issuance by the Corporation of shares in connection with an exchange offer acquisition (including, for the purposes of this Agreement, a series of connected exchange offer acquisitions), if such issuance results in the holders of the Corporation's principal class of publicly listed voting shares (immediately prior to the issuance) holding less than two-thirds of the combined voting power of the voting securities of the Corporation which are outstanding immediately following such issuance and if there occurs in connection therewith any substantial change in the composition of the Corporation's Board of Directors.

1.5       the sale or other disposition of all or substantially all of the assets of the Corporation other than the sale or other disposition of all or substantially all of the assets of the Corporation:

(a)       to a person or persons who beneficially own, directly or indirectly, at least two-thirds of the then outstanding common equity of the Corporation to which are attached at least two-thirds of the combined voting power of the outstanding voting securities of the acquirer; or

(b)        in a manner such that after such sale or other disposition the acquirer is, directly or indirectly, owned or controlled as to at least two-thirds of its then outstanding common equity to which are attached at least two-thirds of the combined voting power of the outstanding voting securities of the acquirer  by shareholders of the Corporation who owned or controlled, immediately prior to such transaction, at least two-thirds of the Corporation's then outstanding common equity to which were attached at least two-thirds of the combined voting power of the outstanding voting securities of the acquirer;

            provided that there does not occur in connection therewith any substantial change in the composition of the Corporation's Board of Directors.

1.6      the completion of the corporate approvals necessary on the part of the Corporation to give effect to any amalgamation, merger, arrangement, reorganization, continuance or consolidation in respect of the Corporation (including any transaction or series of transactions with the same stated or effective objective) pursuant to which the Corporation will not survive as a stand-alone publicly-traded corporation (in this regard, but without limitation, the Corporation shall be deemed not to have survived as a publicly traded corporation should (i) there cease to be a liquid market for the Corporation's common shares on an internationally recognized exchange,  (ii) more than fifty percent (50%) of the Corporation's outstanding common shares to which are attached more than fifty percent (50%) of the then outstanding combined voting power of the outstanding securities of the Corporation be held by a single shareholder or group of shareholders acting jointly or in concert, or (iii) the Corporation become a subsidiary, as defined in the Canada Business Corporations Act, of another Corporation);

1.7       any occurrence pursuant to which individuals who, as of the close of business on the effective date of this Agreement, constitute the Board of Directors (the "Incumbent Directors") cease for any reason to constitute at  least two-thirds of the Board; provided that any person becoming a Director subsequent to the close of business on the effective date of this Agreement, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board of Directors (either by a specific vote or by approval of the Management Proxy Circular of the Corporation in which such person is named a nominee for Director, without objection to such nomination) shall be an Incumbent Director; but further provided, that no individual elected or nominated as a Director of the Corporation initially as a result of an actual or threatened proxy or election contest with respect to Directors, as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board of Directors or as a result of or in connection with any amalgamation, merger, arrangement, reorganization, consolidation or share exchange acquisition transaction by the Corporation with any Person, shall be deemed to be an Incumbent Director;

For the purposes of this Agreement : (i) only the first Change of Control after the date hereof shall be deemed a Change of Control hereunder; (ii) voting power of securities shall be determined by reference to the right to vote in respect of the general election of Directors: (iii) a substantial change in the composition of the Board of Directors of the Corporation shall be any change involving the immediate confirmed departure of at least three Directors or any other change pursuant to which the Directors in office immediately prior thereto cease to constitute at least two-thirds of the members of the Board of Directors; and (iv) no event of Change of Control shall have occurred if immediately prior thereto the Corporation was in a state of insolvency or in a position of being protected from its creditors by virtue of any applicable legislation or court order.

2. Term.  This agreement shall commence on the date hereof and shall expire, unless previously terminated as provided herein, on the earliest of

(a)        the date of the Executive's death or termination as a result of Disability, as defined below;

(b)       subject to Section 3 hereof, the date of the retirement or other termination of the Executive's employment (voluntarily or involuntarily) with the Corporation prior to a Change of Control;

(c)        if, prior to and without causing a Change of Control, the entity for which the Executive is then working ceases to be a subsidiary, (as defined in the Canada Business Corporations Act) of the Corporation; or 

(d)       two years after written notice by the Corporation to the Executive of the termination of this Agreement.

Notwithstanding anything in this Agreement to the contrary, if the Corporation becomes obligated to make any payment to the Executive pursuant to the terms hereof at or prior to the expiration of this Agreement, then this Agreement shall remain in effect for such purposes until all of the Corporation's obligations hereunder are fulfilled. Further, the provisions of paragraph 9.1 hereunder shall survive and remain in effect notwithstanding the termination of this Agreement, the termination of the Executive's employment or any breach or repudiation of alleged breach or repudiation by the Corporation of this Agreement or any one or more of its terms.

Disability shall have the meaning ascribed to such term in the Corporation's long-term disability plan in which the Executive participates.  A termination for Disability shall be deemed to occur when the Executive is terminated by the Corporation by written notice after the disability is established and the Executive remains disabled.

3.         Termination Following Change of Control.

3.1       If, and only if, a Change of Control occurs and one of the following occurs : (i)  the Executive's employment with the Corporation is terminated by the Corporation without Cause other than for Disability, or (ii)  by the Executive for Good Reason, during the period running from the date of the Change of Control to twenty-four (24) months after the date of such Change of Control, then the Executive shall be entitled to the amounts provided in Section 4 upon such termination.

In addition, notwithstanding the foregoing, in the event the Executive is either terminated without Cause or terminates employment for Good Reason within three (3) months prior the occurrence of a Change of Control, such termination shall, upon the occurrence of a Change of Control, be deemed to be covered under the Agreement and the Executive shall be entitled to the amounts provided under Section 4 hereof reduced by any amounts otherwise received in connection with his termination of employment.

3.2       As used in this Agreement, termination for Good Reason shall mean a termination by the Executive within ninety (90) days after the occurrence of the Good Reason event, failing which such event shall not constitute Good Reason under this Agreement. For purposes of this Agreement, "Good Reason" shall mean the occurrence or failure to cause the occurrence of any of the following events without the Executive's express written consent:

(a)        any material diminution in the Executive's duties, responsibilities, and authority (except in each case in connection with the termination of the Executive's employment for Cause or as a result of the Executive's death, or temporarily as a result of the Executive's illness or other absence,);

(b)        a reduction in the Executive's annual base salary rate;

(c)        a relocation of the Executive's principal business location to an area outside the country of the Executive's principal business location at the time of the Change of Control;

(d)        a failure by the Corporation after a Change of Control to continue any annual Executive Performance Award Plan, program or arrangement in which the Executive is then entitled to participate (the "Bonus Plans"), provided that any such plan(s) may be modified at the Corporation's discretion from time to time but shall be deemed terminated if (x) any such plan does not remain substantially in the form in effect prior to such modification and (y) if plans providing the Executive with substantially similar benefits are not substituted therefor ("Substitute Plans"), or a failure by the Corporation to continue the Executive as a participant in the Bonus Plans and Substitute Plans on at least the same basis as to potential amount of the bonus and the achievability thereof as the Executive participated immediately prior to any change in such plans of awards, in accordance with the Bonus Plans and the Substitute Plans;

(e)        a failure to permit the Executive after the Change of Control to participate in cash or equity based long-term incentive plans and programs other than Bonus Plans on a basis providing the Executive in the aggregate with an annualized award value in each fiscal year after the Change of Control at least equal to the aggregate annualized award value being provided by the Corporation to the Executive under such incentive plans and programs immediately prior to the Change of Control (with any awards intended not to be repeated on an annual basis allocated over the years the awards are intended to cover);

(f)         the failure by the Corporation to continue in effect any employee benefit program such as a saving, pension, excess pension, medical, dental, disability, accident, life insurance plan or a relocation plan or policy or any other material plan, program, perquisite or policy of the Corporation intended to benefit the Executive in which the Executive is participating at the time of a Change of Control (or programs providing the Executive with at least substantially similar benefits) other than as a result of the normal expiration of any such employee benefit program in accordance with its terms as in effect at the time of a Change of Control, or taking of any action, or the failure to act, by the Corporation which would adversely affect the executive's continued participation in any of such employee benefit programs on at least as favourable a basis to the Executive as is the case  on the date of a Change of Control; or which would materially reduce the Executive's benefits in the future under any of such employee benefit programs or deprive him of any material benefit enjoyed by the Executive at the time of a Change of Control;

(g)       a material breach by the Corporation of any other written agreement with the Executive that remains uncured for twenty-one (21) days after written notice of such breach is given to the Corporation; or

(h)       failure of any successor (as defined in Section 10 herein) to assume in a writing delivered to the Executive the obligations hereunder within twenty-one (21) days after written notice by the Executive.

For the purposes of the foregoing, there shall be deemed to have occurred a material diminution in the duties and responsibilities of an Executive occupying the position of or performing the functions normally assigned to any of the Chief Executive Officer or other member of the Office of the President, the Chief Financial Officer or the Chief Legal Officer in the event of any Change of Control referred to in any of paragraphs 1.2 to 1.6 (inclusive) above.

3.3       As used in this Agreement, the term "Cause" shall mean:

(a)       the failure by the Executive to attempt to substantially perform his or her duties and responsibilities with regard to the Corporation or any affiliate (other than any such failure resulting from the Executive's incapacity due to physical or mental illness of any such actual or anticipated failure by the Executive for Good Reason, as defined in paragraph 3.2) after demand for substantial performance is delivered by the Corporation that specifically identifies the manner in which the Corporation believes the Executive has failed to attempt to substantially perform his or her duties and responsibilities and a reasonable time for the Executive to correct or remedy;

(b)       the willful engaging by the Executive in misconduct in connection with the Corporation or its business which is materially injurious to the Corporation monetarily or otherwise (including but not limited to conduct which is prohibited by the provisions of Section 9.1 herein); or

(c)       any misappropriation or fraud with regard to the Corporation or any of the assets of the Corporation (other than good faith expense account disputes).

For purposes of this paragraph, no act, or failure to act, on the Executive's part shall be considered "willful" unless done or omitted to be done, by him or her not in good faith and without reasonable belief that his or her action or omission was in the best interests of the Corporation. In the event that the Executive alleges that the failure to attempt to perform his or her duties and responsibilities is due to a physical or mental illness, and thus not "Cause" under paragraph 3.3, the Executive shall be required to furnish the Corporation with a written statement from a licensed physician who is reasonably acceptable to the Corporation which confirms the Executive's inability to attempt to perform due to such physical or mental illness. A termination for Cause after a Change of Control shall be based only on events occurring after such Change of Control; provided, however, the foregoing limitation shall not apply to an event constituting Cause which was not discovered by the Corporation prior to a Change of Control.

4.         Compensation Upon Termination.

4.1       If the Executive's employment is terminated for Cause following a Change of Control or upon the occurrence of a Change of Control the Corporation shall :

(a)        pay to the Date of Termination, the Executive's Base Salary, the prorated amount of the guideline award under the Corporation's Executive Performance Award Plan (EPA) and the cash value of any untaken and accrued vacations to the Date of Termination.  The aggregate amount will be paid within five (5) days of the Date of Termination;

(b)        accrue service under the Corporation's pension plans to the Date of Termination;

(c)        maintain all other benefits and perquisites in which the Executive participates to the Date of Termination, but limited to the coverage in force under those benefit plans on the Date of Notice of Termination; and

(d)       not grant any options to purchase shares under the Alcan Executive Share Option Plan, nor any other long-term incentive plans adopted by the Corporation, to the Executive between the date of Notice of Termination and the actual Date of Termination.

4.2      In the event of Termination for Cause following a Change of Control, the Corporation's obligations to the Executive under this Agreement shall be limited to those under paragraph 4.1.  In all other cases, the Executive shall have each of the following additional rights and entitlements, to the extent applicable.

            If the Executive's employment is terminated after the first occurrence of a Change of Control in a manner described in paragraph 3.1 then, the Executive shall be entitled, without regard to any contrary provisions of any benefit plan and subject to any express limitations hereinafter set forth, to severance pay as follows:

(a)       an amount equal to 36 times the Executive's monthly base salary as of the Date of Termination; and

(b)      an amount equal to 36 times the monthly EPA guideline amount in force as regards the Executive Performance Award Plan as of the Date of Termination;

(c)       an amount payable under the provisions of the TSR Performance Plan (or its equivalent) in the event of a Change of Control, provided that the amount payable shall never be less than the amount payable to the Executive thereunder had he retired on the Date of Termination.

Notwithstanding the foregoing, if the Date of Termination is before the Executive's declared retirement date and the number of months remaining to such retirement date is less than the number specified in paragraphs (a) and (b) above, the number specified in each of sub-paragraphs (a) and (b) above shall be replaced by the number of months remaining to such retirement date.

4.3       The Executive may, in writing, (in the Notice of Termination or otherwise) direct the Corporation that the severance pay pursuant to the paragraph 4.2 hereof shall be paid, either :

(a)       in a lump sum payable within five (5) days of the Date of Termination where in such case, all benefit plan coverage cease on such date, or

(b)       in 36 equal monthly installments, (or for a period consistent with the Corporation's practices as approved by the Human Resources Committee of the Board) after having the Executive transferred to the non-active payroll of the Corporation in which case all benefit plan coverage continue at the previous level for that same number of months except for coverage under the Corporation's short-term and long-term disability plans, vacation program, eligibility in the Alcan Executive Share Option Plan or any other long-term incentive plans adopted by the Corporation and perquisite benefit (car, financial and tax counseling, club membership) all of which shall cease on Date of Termination.

            Monthly installments paid on the non-active payroll shall be excluded in the calculation of pensionable earnings while the duration on the non-active payroll shall be included as service for calculating years of service under the Corporation's pension plans.

4.4       Any loans owing by the Executive to the Corporation shall become due and payable as per the terms of the applicable loan agreement.

4.5       After the occurrence of a Change of Control, as defined in Section 1, all options under the Alcan's Executive Share Option Plan shall become immediately exercisable and all waiting periods and holding periods, as defined in such plan, shall be waived.

5.         Notice of Termination.  After a Change of Control, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 13.  For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment.  The "Date of Notice of Termination" is the date, determined in accordance with Section 13 below, when the Notice of Termination is deemed to have been given. 

6.         Date of Termination.  "Date of Termination", with respect to any purported termination of the Executive's employment after a Change of Control, shall mean the date specified in the Notice of Termination.  In the case of a termination by the Corporation, the Date of Termination shall not be less than thirty (30) days after the Change of Control except in the case of a termination for Cause which shall be the date specified in the Notice of Termination.  In the case of a termination by the Executive for Good Reason, the Date of Termination shall not be earlier than 90 days after the Change of Control. In the event of Notice of Termination by the Corporation, the Executive may treat such notice as having a date of termination at any date between the date of the receipt of such notice and the date of termination indicated in the Notice of Termination by the Corporation; provided, that the Executive must give the Corporation written notice of the Date of Termination if he or she deems it to have occurred prior to the Date of Termination indicated in the notice.

7.         No Duty to Mitigate/Set-off.  The Corporation agrees that if the Executive's employment with the Corporation is terminated pursuant to this Agreement during the term of this Agreement, the Executive shall not be required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Corporation pursuant to this Agreement. Further, the amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation earned by the Executive or benefit provided to the Executive as the result of employment by another employer or otherwise. Except as otherwise provided herein and apart from any disagreement between the Executive and the Corporation concerning interpretation of this Agreement or any term or provision hereof, the Corporation's obligations to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including without limitation, any set-off, counterclaim, recoupment, defense or other right which the Corporation may have against the Executive.

8.        Service with Subsidiaries or the Corporation.  For purposes of this Agreement, employment by the Corporation or subsidiary (as defined in the Canada Business Corporations Act) of the Corporation shall be deemed to be employment by the Corporation and references to the Corporation shall include all such entities, except that the payment obligation hereunder shall be solely that of the Corporation. A Change of Control, however, as used in this Agreement, shall refer only to a Change of Control of Alcan Inc.

9.         Confidentiality and Non-Competition Undertakings.

9.1       Without prejudice to any other confidentiality undertakings or obligations by which the Executive may be bound in favor of the Corporation, the Executive shall not at any time during the term of this Agreement, or thereafter, directly or indirectly, for any reason whatsoever, communicate or disclose to any unauthorized person, firm or corporation, or use for the Executive's own account, without the prior written consent of the Board of Directors, any proprietary processes, trade secrets or other confidential data or information of the Corporation and its related and affiliated companies concerning their businesses or affairs, accounts, products, services or customers, it being understood, however, that the obligations set forth in this Section shall not apply to the extent that the aforesaid matters (i) are disclosed in circumstances in which the Executive is legally required to do so, or (ii) become known to and available for use by the public other than by the Executive's wrongful act or omission.

9.2       Upon the occurrence of a Change of Control, any non-competition agreement between the Corporation and the Executive shall be considered null and void.  For the purposes of this Agreement, a non-competition agreement shall include, without limitation, any provision restricting the Executive's freedom to seek or obtain employment or invest in or advise any corporation or business.

10.       Successors - Binding Agreement.  In addition to any obligations imposed by law upon any successor to the Corporation, the Corporation will require any successor (whether direct or indirect, by purchase, amalgamation, merger, arrangement, reorganization, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to expressly assume and agree in writing to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors and heirs. If the Executive shall die after termination of his employment while any amount would still be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. This Agreement is personal to the Executive and neither this Agreement nor any rights hereunder may be assigned by the Executive.

11.       Miscellaneous.  No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board of Directors. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement and the Employment Agreement constitute the entire agreement between the parties hereto pertaining to the subject matter hereof. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement or the Employment Agreement.  This Agreement supersedes any prior agreement entered into by the parties on the subject matter hereof.  All references to any law shall be deemed also to refer to any successor provisions to such laws.

12.       Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

13.       Notices.  Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, or sent by registered mail, postage prepaid as follows:

            (i)         If to the Corporation, to:

                        Alcan  Inc.

                        1188 Sherbrooke Street West

                        Montreal, Quebec

                        H3A 3G2

                        Attention:  Corporate Secretary

            (ii)        If to the Executive, to his last shown address

                        on the books of the Corporation.

Any such notice shall be deemed given when so delivered personally, or, if mailed, five days after the date of deposit in the Canadian mail. Any party may by notice given in accordance with this Section to the other parties, designate another address or person for receipt of notices hereunder.

14.       Severability.  If any provisions of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof which shall remain in full force and effect.

15.       Legal Fees.  In the event the Corporation does not make the payments due hereunder on a timely basis and the Executive collects any part or all of the payments provided for hereunder or otherwise successfully enforces the terms of this Agreement by or through -legal counsel, the Corporation shall pay all costs of such collection or enforcement, including reasonable legal fees and other reasonable fees and expenses which the Executive may incur. The Corporation shall pay to the Executive interest at the prime lending rate as announced from time to time by Royal Bank of Canada on all or any part of any amount to be paid to Executive hereunder that is not paid when due. The prime rate for each calendar quarter shall be the prime rate in effect on the first day of the calendar quarter.

16.       Non-Exclusivity of rights.  Except as otherwise specifically provided therein, (i) nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive, equity or other plan or program provided by the Corporation and for which the Executive may qualify, nor (ii) shall anything herein limit or otherwise prejudice such rights as the Executive may have under any other currently existing plan, agreement as to employment or severance from employment with the Corporation or statutory entitlements, provided, that to the extent such amounts are paid under paragraph 4.2 hereof or otherwise, such amounts shall be offset against any amounts that the Executive is entitled to under any other program, plan, agreement or statute, including without limitation the Employment Agreement. Amounts that are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Corporation, at or subsequent to the date of termination shall be payable in accordance with such plan or program, except as otherwise specifically provided herein or in the Employment Agreement.

17.       Not an Agreement of Employment.  This is not an agreement assuring employment and the Corporation reserves the right to terminate the Executive's employment at any time with or without cause, subject to the Employment Agreement and the payment provisions hereof if such termination is after, or within three (3) months prior to, a Change of Control, as defined herein. The Executive acknowledges that he is aware that he shall have no claim against the Corporation hereunder or for deprivation of the right to receive the amounts hereunder as a result of any termination that does not satisfy the requirements hereof or as a result of any other action taken by the Corporation. The foregoing shall not affect the Executive's rights under any other agreement with the Corporation.

18.      Governing Law.  This Agreement shall be construed, interpreted, and governed in accordance with the laws of the Province of Quebec.

19.       English Language.  The parties hereto declare that they require that this Agreement and any related documents be drawn up and executed in English.

            Les parties déclarent qu'elles requièrent que cette convention ainsi que tous documents relatifs à cette convention soient rédigés et exécutés en anglais.

 

IN WITNESS WHEREOF, the Corporation and the Executive have caused this Agreement to be duly executed.

                                                                                    ALCAN INC.

                                                                                    By:       /s/ Gaston Ouellet                               

                                                                                    Name:  Gaston Ouellet

                                                                                    EXECUTIVE

                                                                                                    /s/ Michael Hanley                           

                                                                                                      Michael Hanley

EX-10

 Exhibit 10.10

CHANGE OF CONTROL AGREEMENT

A G R E E M E N T

Agreement made as of the 1^st day of May 2005, by and between Alcan Inc., a corporation incorporated under the laws of Canada with its registered office at 1188 Sherbrooke Street West, Montreal, Quebec, Canada H3A 3G2 (the "Corporation") and Michel Jacques (the "Executive").

WITNESSETH:

                        WHEREAS, the Executive is the Senior Vice President of Alcan Inc.

                        WHEREAS, the Corporation believes that the establishment and maintenance of a sound and vital senior management team is essential to the protection and enhancement of the interests of the Corporation and its shareholders; and

                        WHEREAS, the Corporation also recognizes that the possibility of a Change of Control of the Corporation (as defined in Section 1 hereof), with the attendant uncertainties and risks, might result in the departure or distraction of key employees of the Corporation to the detriment of the Corporation and its shareholders;

                        WHEREAS, the Corporation has determined that it is appropriate to take steps to induce key employees to remain with the Corporation, and to reinforce and encourage their continued attention and dedication, when faced with the possibility of a Change of Control of the Corporation;

WHEREAS, the Corporation and the Executive have entered into a Change of Control agreement dated 1 August 2001 which expired on 30 April 2005; and

WHEREAS, the Corporation and the Executive now wish to enter into a new Change of Control agreement.

                        NOW, THEREFORE, in consideration of the premises and mutual covenants herein contained, the parties hereto hereby agree as follows:

1.         Change of Control shall mean any of the following:

1.1       the acquisition of direct or indirect beneficial ownership (as determined under Rule 13d-3 promulgated under the United States Securities Exchange Act of 1934), in the aggregate, of securities of the Corporation representing twenty percent (20%) or more of the combined voting power of the Corporation's then issued and outstanding voting securities by any person or entity or group of associated persons or entities (within the meaning of Section 13(d)(3) or 14(d)(2) of the United States Securities Exchange Act of 1934) acting jointly or in concert (other than its subsidiaries or any employee benefit plan of either) (a "Person"), provided that, if a buyback of shares by the Corporation causes the Person to attain such limit, such limit shall be deemed not to have been attained without such Person having acquired further voting securities of the Corporation;

1.2       any amalgamation, merger, arrangement, reorganization or consolidation in respect of the Corporation (the foregoing shall include, for the purposes of this Agreement any transaction or series of transactions, such as a share exchange transaction with the same stated or effective objective) other than:

(a)        an amalgamation, merger, arrangement, reorganization or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving or parent entity) two-thirds or more of the combined voting power of the voting securities of the Corporation or such surviving, combined or parent entity outstanding immediately after such amalgamation, merger, arrangement, reorganization or consolidation, without there occurring as a result or in connection therewith any substantial change in the composition of the Corporation's Board of Directors; or

(b)        an amalgamation, merger, arrangement, reorganization or consolidation  initiated by the Corporation for the purpose of implementing a recapitalization of the Corporation (or similar transaction) provided that pursuant thereto no Person is or becomes the beneficial owner, directly or indirectly (as determined under Rule 13-d-3 promulgated under the United States Securities Exchange Act of 1934), of securities representing twenty per cent (20%) or more of the contained voting power of the voting securities of the Corporation outstanding immediately after such amalgamation, merger, arrangement, reorganization or consolidation;

1.3       the approval by shareholders of the Corporation of any plan or proposal for the complete or effective liquidation or dissolution of the Corporation;

1.4      the issuance by the Corporation of shares in connection with an exchange offer acquisition (including, for the purposes of this Agreement, a series of connected exchange offer acquisitions), if such issuance results in the holders of the Corporation's principal class of publicly listed voting shares (immediately prior to the issuance) holding less than two-thirds of the combined voting power of the voting securities of the Corporation which are outstanding immediately following such issuance and if there occurs in connection therewith any substantial change in the composition of the Corporation's Board of Directors.

1.5       the sale or other disposition of all or substantially all of the assets of the Corporation other than the sale or other disposition of all or substantially all of the assets of the Corporation:

(a)       to a person or persons who beneficially own, directly or indirectly, at least two-thirds of the then outstanding common equity of the Corporation to which are attached at least two-thirds of the combined voting power of the outstanding voting securities of the acquirer; or

(b)       in a manner such that after such sale or other disposition the acquirer is, directly or indirectly, owned or controlled as to at least two-thirds of its then outstanding common equity to which are attached at least two-thirds of the combined voting power of the outstanding voting securities of the acquirer  by shareholders of the Corporation who owned or controlled, immediately prior to such transaction, at least two-thirds of the Corporation's then outstanding common equity to which were attached at least two-thirds of the combined voting power of the outstanding voting securities of the acquirer;

            provided that there does not occur in connection therewith any substantial change in the composition of the Corporation's Board of Directors.

1.6       the completion of the corporate approvals necessary on the part of the Corporation to give effect to any amalgamation, merger, arrangement, reorganization, continuance or consolidation in respect of the Corporation (including any transaction or series of transactions with the same stated or effective objective) pursuant to which the Corporation will not survive as a stand-alone publicly-traded corporation (in this regard, but without limitation, the Corporation shall be deemed not to have survived as a publicly traded corporation should (i) there cease to be a liquid market for the Corporation's common shares on an internationally recognized exchange,  (ii) more than fifty percent (50%) of the Corporation's outstanding common shares to which are attached more than fifty percent (50%) of the then outstanding combined voting power of the outstanding securities of the Corporation be held by a single shareholder or group of shareholders acting jointly or in concert, or (iii) the Corporation become a subsidiary, as defined in the Canada Business Corporations Act, of another Corporation);

1.7       any occurrence pursuant to which individuals who, as of the close of business on the effective date of this Agreement, constitute the Board of Directors (the "Incumbent Directors") cease for any reason to constitute at  least two-thirds of the Board; provided that any person becoming a Director subsequent to the close of business on the effective date of this Agreement, whose election or nomination for election was approved by a vote of at least two-thirds of the Incumbent Directors then on the Board of Directors (either by a specific vote or by approval of the Management Proxy Circular of the Corporation in which such person is named a nominee for Director, without objection to such nomination) shall be an Incumbent Director; but further provided, that no individual elected or nominated as a Director of the Corporation initially as a result of an actual or threatened proxy or election contest with respect to Directors, as a result of any other actual or threatened solicitation of proxies or consents by or on behalf of any person other than the Board of Directors or as a result of or in connection with any amalgamation, merger, arrangement, reorganization, consolidation or share exchange acquisition transaction by the Corporation with any Person, shall be deemed to be an Incumbent Director;

For the purposes of this Agreement : (i) only the first Change of Control after the date hereof shall be deemed a Change of Control hereunder; (ii) voting power of securities shall be determined by reference to the right to vote in respect of the general election of Directors: (iii) a substantial change in the composition of the Board of Directors of the Corporation shall be any change involving the immediate confirmed departure of at least three Directors or any other change pursuant to which the Directors in office immediately prior thereto cease to constitute at least two-thirds of the members of the Board of Directors; and (iv) no event of Change of Control shall have occurred if immediately prior thereto the Corporation was in a state of insolvency or in a position of being protected from its creditors by virtue of any applicable legislation or court order.

2. Term.  This agreement shall commence on the date hereof and shall expire, unless previously terminated as provided herein, on the earliest of

(a)        the date of the Executive's death or termination as a result of Disability, as defined below;

(b)       subject to Section 3 hereof, the date of the retirement or other termination of the Executive's employment (voluntarily or involuntarily) with the Corporation prior to a Change of Control;

(c)        if, prior to and without causing a Change of Control, the entity for which the Executive is then working ceases to be a subsidiary, (as defined in the Canada Business Corporations Act) of the Corporation; or 

(d)       two years after written notice by the Corporation to the Executive of the termination of this Agreement.

Notwithstanding anything in this Agreement to the contrary, if the Corporation becomes obligated to make any payment to the Executive pursuant to the terms hereof at or prior to the expiration of this Agreement, then this Agreement shall remain in effect for such purposes until all of the Corporation's obligations hereunder are fulfilled. Further, the provisions of paragraph 9.1 hereunder shall survive and remain in effect notwithstanding the termination of this Agreement, the termination of the Executive's employment or any breach or repudiation of alleged breach or repudiation by the Corporation of this Agreement or any one or more of its terms.

Disability shall have the meaning ascribed to such term in the Corporation's long-term disability plan in which the Executive participates.  A termination for Disability shall be deemed to occur when the Executive is terminated by the Corporation by written notice after the disability is established and the Executive remains disabled.

3.         Termination Following Change of Control.

3.1       If, and only if, a Change of Control occurs and one of the following occurs : (i)  the Executive's employment with the Corporation is terminated by the Corporation without Cause other than for Disability, or (ii)  by the Executive for Good Reason, during the period running from the date of the Change of Control to twenty-four (24) months after the date of such Change of Control, then the Executive shall be entitled to the amounts provided in Section 4 upon such termination.

In addition, notwithstanding the foregoing, in the event the Executive is either terminated without Cause or terminates employment for Good Reason within three (3) months prior the occurrence of a Change of Control, such termination shall, upon the occurrence of a Change of Control, be deemed to be covered under the Agreement and the Executive shall be entitled to the amounts provided under Section 4 hereof reduced by any amounts otherwise received in connection with his termination of employment.

3.2       As used in this Agreement, termination for Good Reason shall mean a termination by the Executive within ninety (90) days after the occurrence of the Good Reason event, failing which such event shall not constitute Good Reason under this Agreement. For purposes of this Agreement, "Good Reason" shall mean the occurrence or failure to cause the occurrence of any of the following events without the Executive's express written consent:

(a)        any material diminution in the Executive's duties, responsibilities, and authority (except in each case in connection with the termination of the Executive's employment for Cause or as a result of the Executive's death, or temporarily as a result of the Executive's illness or other absence,);

(b)        a reduction in the Executive's annual base salary rate;

(c)        a relocation of the Executive's principal business location to an area outside the country of the Executive's principal business location at the time of the Change of Control;

(d)        a failure by the Corporation after a Change of Control to continue any annual Executive Performance Award Plan, program or arrangement in which the Executive is then entitled to participate (the "Bonus Plans"), provided that any such plan(s) may be modified at the Corporation's discretion from time to time but shall be deemed terminated if (x) any such plan does not remain substantially in the form in effect prior to such modification and (y) if plans providing the Executive with substantially similar benefits are not substituted therefor ("Substitute Plans"), or a failure by the Corporation to continue the Executive as a participant in the Bonus Plans and Substitute Plans on at least the same basis as to potential amount of the bonus and the achievability thereof as the Executive participated immediately prior to any change in such plans of awards, in accordance with the Bonus Plans and the Substitute Plans;

(e)        a failure to permit the Executive after the Change of Control to participate in cash or equity based long-term incentive plans and programs other than Bonus Plans on a basis providing the Executive in the aggregate with an annualized award value in each fiscal year after the Change of Control at least equal to the aggregate annualized award value being provided by the Corporation to the Executive under such incentive plans and programs immediately prior to the Change of Control (with any awards intended not to be repeated on an annual basis allocated over the years the awards are intended to cover);

(f)         the failure by the Corporation to continue in effect any employee benefit program such as a saving, pension, excess pension, medical, dental, disability, accident, life insurance plan or a relocation plan or policy or any other material plan, program, perquisite or policy of the Corporation intended to benefit the Executive in which the Executive is participating at the time of a Change of Control (or programs providing the Executive with at least substantially similar benefits) other than as a result of the normal expiration of any such employee benefit program in accordance with its terms as in effect at the time of a Change of Control, or taking of any action, or the failure to act, by the Corporation which would adversely affect the executive's continued participation in any of such employee benefit programs on at least as favourable a basis to the Executive as is the case  on the date of a Change of Control; or which would materially reduce the Executive's benefits in the future under any of such employee benefit programs or deprive him of any material benefit enjoyed by the Executive at the time of a Change of Control;

(g)       a material breach by the Corporation of any other written agreement with the Executive that remains uncured for twenty-one (21) days after written notice of such breach is given to the Corporation; or

(h)       failure of any successor (as defined in Section 10 herein) to assume in a writing delivered to the Executive the obligations hereunder within twenty-one (21) days after written notice by the Executive.

For the purposes of the foregoing, there shall be deemed to have occurred a material diminution in the duties and responsibilities of an Executive occupying the position of or performing the functions normally assigned to any of the Chief Executive Officer or other member of the Office of the President, the Chief Financial Officer or the Chief Legal Officer in the event of any Change of Control referred to in any of paragraphs 1.2 to 1.6 (inclusive) above.

3.3       As used in this Agreement, the term "Cause" shall mean:

(a)        the failure by the Executive to attempt to substantially perform his or her duties and responsibilities with regard to the Corporation or any affiliate (other than any such failure resulting from the Executive's incapacity due to physical or mental illness of any such actual or anticipated failure by the Executive for Good Reason, as defined in paragraph 3.2) after demand for substantial performance is delivered by the Corporation that specifically identifies the manner in which the Corporation believes the Executive has failed to attempt to substantially perform his or her duties and responsibilities and a reasonable time for the Executive to correct or remedy;

(b)        the willful engaging by the Executive in misconduct in connection with the Corporation or its business which is materially injurious to the Corporation monetarily or otherwise (including but not limited to conduct which is prohibited by the provisions of Section 9.1 herein); or

(c)        any misappropriation or fraud with regard to the Corporation or any of the assets of the Corporation (other than good faith expense account disputes).

For purposes of this paragraph, no act, or failure to act, on the Executive's part shall be considered "willful" unless done or omitted to be done, by him or her not in good faith and without reasonable belief that his or her action or omission was in the best interests of the Corporation. In the event that the Executive alleges that the failure to attempt to perform his or her duties and responsibilities is due to a physical or mental illness, and thus not "Cause" under paragraph 3.3, the Executive shall be required to furnish the Corporation with a written statement from a licensed physician who is reasonably acceptable to the Corporation which confirms the Executive's inability to attempt to perform due to such physical or mental illness. A termination for Cause after a Change of Control shall be based only on events occurring after such Change of Control; provided, however, the foregoing limitation shall not apply to an event constituting Cause which was not discovered by the Corporation prior to a Change of Control.

4.         Compensation Upon Termination.

4.1       If the Executive's employment is terminated for Cause following a Change of Control or upon the occurrence of a Change of Control the Corporation shall :

(a)        pay to the Date of Termination, the Executive's Base Salary, the prorated amount of the guideline award under the Corporation's Executive Performance Award Plan (EPA) and the cash value of any untaken and accrued vacations to the Date of Termination.  The aggregate amount will be paid within five (5) days of the Date of Termination;

(b)        accrue service under the Corporation's pension plans to the Date of Termination;

(c)        maintain all other benefits and perquisites in which the Executive participates to the Date of Termination, but limited to the coverage in force under those benefit plans on the Date of Notice of Termination; and

(d)       not grant any options to purchase shares under the Alcan Executive Share Option Plan, nor any other long-term incentive plans adopted by the Corporation, to the Executive between the date of Notice of Termination and the actual Date of Termination.

4.2      In the event of Termination for Cause following a Change of Control, the Corporation's obligations to the Executive under this Agreement shall be limited to those under paragraph 4.1.  In all other cases, the Executive shall have each of the following additional rights and entitlements, to the extent applicable.

            If the Executive's employment is terminated after the first occurrence of a Change of Control in a manner described in paragraph 3.1 then, the Executive shall be entitled, without regard to any contrary provisions of any benefit plan and subject to any express limitations hereinafter set forth, to severance pay as follows:

(a)       an amount equal to 24 times the Executive's monthly base salary as of the Date of Termination; and

(b)       an amount equal to 24 times the monthly EPA guideline amount in force as regards the Executive Performance Award Plan as of the Date of Termination;

(c)        an amount payable under the provisions of the TSR Performance Plan (or its equivalent) in the event of a Change of Control, provided that the amount payable shall never be less than the amount payable to the Executive thereunder had he retired on the Date of Termination.

Notwithstanding the foregoing, if the Date of Termination is before the Executive's declared retirement date and the number of months remaining to such retirement date is less than the number specified in paragraphs (a) and (b) above, the number specified in each of sub-paragraphs (a) and (b) above shall be replaced by the number of months remaining to such retirement date.

4.3       The Executive may, in writing, (in the Notice of Termination or otherwise) direct the Corporation that the severance pay pursuant to the paragraph 4.2 hereof shall be paid, either :

(a)       in a lump sum payable within five (5) days of the Date of Termination where in such case, all benefit plan coverage cease on such date, or

(b)       in 24 equal monthly installments, (or for a period consistent with the Corporation's practices as approved by the Human Resources Committee of the Board) after having the Executive transferred to the non-active payroll of the Corporation in which case all benefit plan coverage continue at the previous level for that same number of months except for coverage under the Corporation's short-term and long-term disability plans, vacation program, eligibility in the Alcan Executive Share Option Plan or any other long-term incentive plans adopted by the Corporation and perquisite benefit (car, financial and tax counseling, club membership) all of which shall cease on Date of Termination.

            Monthly installments paid on the non-active payroll shall be excluded in the calculation of pensionable earnings while the duration on the non-active payroll shall be included as service for calculating years of service under the Corporation's pension plans.

4.4      Any loans owing by the Executive to the Corporation shall become due and payable as per the terms of the applicable loan agreement.

4.5       After the occurrence of a Change of Control, as defined in Section 1, all options under the Alcan's Executive Share Option Plan shall become immediately exercisable and all waiting periods and holding periods, as defined in such plan, shall be waived.

5.         Notice of Termination.  After a Change of Control, any purported termination of the Executive's employment (other than by reason of death) shall be communicated by written Notice of Termination from one party hereto to the other party hereto in accordance with Section 13.  For purposes of this Agreement, a "Notice of Termination" shall mean a notice which shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment.  The "Date of Notice of Termination" is the date, determined in accordance with Section 13 below, when the Notice of Termination is deemed to have been given. 

6.         Date of Termination.  "Date of Termination", with respect to any purported termination of the Executive's employment after a Change of Control, shall mean the date specified in the Notice of Termination.  In the case of a termination by the Corporation, the Date of Termination shall not be less than thirty (30) days after the Change of Control except in the case of a termination for Cause which shall be the date specified in the Notice of Termination.  In the case of a termination by the Executive for Good Reason, the Date of Termination shall not be earlier than 90 days after the Change of Control. In the event of Notice of Termination by the Corporation, the Executive may treat such notice as having a date of termination at any date between the date of the receipt of such notice and the date of termination indicated in the Notice of Termination by the Corporation; provided, that the Executive must give the Corporation written notice of the Date of Termination if he or she deems it to have occurred prior to the Date of Termination indicated in the notice.

7.         No Duty to Mitigate/Set-off.  The Corporation agrees that if the Executive's employment with the Corporation is terminated pursuant to this Agreement during the term of this Agreement, the Executive shall not be required to seek other employment or to attempt in any way to reduce any amounts payable to the Executive by the Corporation pursuant to this Agreement. Further, the amount of any payment or benefit provided for in this Agreement shall not be reduced by any compensation earned by the Executive or benefit provided to the Executive as the result of employment by another employer or otherwise. Except as otherwise provided herein and apart from any disagreement between the Executive and the Corporation concerning interpretation of this Agreement or any term or provision hereof, the Corporation's obligations to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including without limitation, any set-off, counterclaim, recoupment, defense or other right which the Corporation may have against the Executive.

8.        Service with Subsidiaries or the Corporation.  For purposes of this Agreement, employment by the Corporation or subsidiary (as defined in the Canada Business Corporations Act) of the Corporation shall be deemed to be employment by the Corporation and references to the Corporation shall include all such entities, except that the payment obligation hereunder shall be solely that of the Corporation. A Change of Control, however, as used in this Agreement, shall refer only to a Change of Control of Alcan Inc.

9.         Confidentiality and Non-Competition Undertakings.

9.1       Without prejudice to any other confidentiality undertakings or obligations by which the Executive may be bound in favor of the Corporation, the Executive shall not at any time during the term of this Agreement, or thereafter, directly or indirectly, for any reason whatsoever, communicate or disclose to any unauthorized person, firm or corporation, or use for the Executive's own account, without the prior written consent of the Board of Directors, any proprietary processes, trade secrets or other confidential data or information of the Corporation and its related and affiliated companies concerning their businesses or affairs, accounts, products, services or customers, it being understood, however, that the obligations set forth in this Section shall not apply to the extent that the aforesaid matters (i) are disclosed in circumstances in which the Executive is legally required to do so, or (ii) become known to and available for use by the public other than by the Executive's wrongful act or omission.

9.2       Upon the occurrence of a Change of Control, any non-competition agreement between the Corporation and the Executive shall be considered null and void.  For the purposes of this Agreement, a non-competition agreement shall include, without limitation, any provision restricting the Executive's freedom to seek or obtain employment or invest in or advise any corporation or business.

10.       Successors - Binding Agreement.  In addition to any obligations imposed by law upon any successor to the Corporation, the Corporation will require any successor (whether direct or indirect, by purchase, amalgamation, merger, arrangement, reorganization, consolidation or otherwise) to all or substantially all of the business and/or assets of the Corporation to expressly assume and agree in writing to perform this Agreement in the same manner and to the same extent that the Corporation would be required to perform it if no such succession had taken place. This Agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors and heirs. If the Executive shall die after termination of his employment while any amount would still be payable to the Executive hereunder if the Executive had continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to the executors, personal representatives or administrators of the Executive's estate. This Agreement is personal to the Executive and neither this Agreement nor any rights hereunder may be assigned by the Executive.

11.       Miscellaneous.  No provisions of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by the Executive and such officer as may be specifically designated by the Board of Directors. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision shall be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time. This Agreement and the Employment Agreement constitute the entire agreement between the parties hereto pertaining to the subject matter hereof. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement or the Employment Agreement.  This Agreement supersedes any prior agreement entered into by the parties on the subject matter hereof.  All references to any law shall be deemed also to refer to any successor provisions to such laws.

12.       Counterparts.  This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

13.       Notices.  Any notice or other communication required or permitted hereunder shall be in writing and shall be delivered personally, or sent by registered mail, postage prepaid as follows:

            (i)         If to the Corporation, to:

                        Alcan  Inc.

                        1188 Sherbrooke Street West

                        Montreal, Quebec

                        H3A 3G2

                        Attention:  Corporate Secretary

            (ii)        If to the Executive, to his last shown address

                        on the books of the Corporation.

Any such notice shall be deemed given when so delivered personally, or, if mailed, five days after the date of deposit in the Canadian mail. Any party may by notice given in accordance with this Section to the other parties, designate another address or person for receipt of notices hereunder.

14.       Severability.  If any provisions of this Agreement shall be declared to be invalid or unenforceable, in whole or in part, such invalidity or unenforceability shall not affect the remaining provisions hereof which shall remain in full force and effect.

15.       Legal Fees.  In the event the Corporation does not make the payments due hereunder on a timely basis and the Executive collects any part or all of the payments provided for hereunder or otherwise successfully enforces the terms of this Agreement by or through -legal counsel, the Corporation shall pay all costs of such collection or enforcement, including reasonable legal fees and other reasonable fees and expenses which the Executive may incur. The Corporation shall pay to the Executive interest at the prime lending rate as announced from time to time by Royal Bank of Canada on all or any part of any amount to be paid to Executive hereunder that is not paid when due. The prime rate for each calendar quarter shall be the prime rate in effect on the first day of the calendar quarter.

16.       Non-Exclusivity of rights.  Except as otherwise specifically provided therein, (i) nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive, equity or other plan or program provided by the Corporation and for which the Executive may qualify, nor (ii) shall anything herein limit or otherwise prejudice such rights as the Executive may have under any other currently existing plan, agreement as to employment or severance from employment with the Corporation or statutory entitlements, provided, that to the extent such amounts are paid under paragraph 4.2 hereof or otherwise, such amounts shall be offset against any amounts that the Executive is entitled to under any other program, plan, agreement or statute, including without limitation the Employment Agreement. Amounts that are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Corporation, at or subsequent to the date of termination shall be payable in accordance with such plan or program, except as otherwise specifically provided herein or in the Employment Agreement.

17.       Not an Agreement of Employment.  This is not an agreement assuring employment and the Corporation reserves the right to terminate the Executive's employment at any time with or without cause, subject to the Employment Agreement and the payment provisions hereof if such termination is after, or within three (3) months prior to, a Change of Control, as defined herein. The Executive acknowledges that he is aware that he shall have no claim against the Corporation hereunder or for deprivation of the right to receive the amounts hereunder as a result of any termination that does not satisfy the requirements hereof or as a result of any other action taken by the Corporation. The foregoing shall not affect the Executive's rights under any other agreement with the Corporation.

18.      Governing Law.  This Agreement shall be construed, interpreted, and governed in accordance with the laws of the Province of Quebec.

19.       English Language.  The parties hereto declare that they require that this Agreement and any related documents be drawn up and executed in English.

            Les parties déclarent qu'elles requièrent que cette convention ainsi que tous documents relatifs à cette convention soient rédigés et exécutés en anglais.

 

IN WITNESS WHEREOF, the Corporation and the Executive have caused this Agreement to be duly executed.

                                                                                    ALCAN INC.

                                                                                    By:       /s/ Gaston Ouellet_______________________

                                                                                    Name:  Gaston Ouellet

                                                                                    EXECUTIVE

                                                                                                /s/ Michel Jacques                   

                                                                                                Michel Jacques

EX-10

 Exhibit 10.11

ALCAN EXECUTIVE SHARE OPTION PLAN

THE PLAN 

1.         General Information 

The Plan was adopted by the Board of Directors and Shareholders effective July 24, 1987 and was amended on April 26, 1990, April 22, 1993, April 28, 2005 and December 8, 2005. Its predecessor plan was originally adopted on February 5, 1981, effective March 26, 1981, by the former parent of the Company.

The purposes of the Plan are to provide a means for encouraging key employees to obtain an increased proprietary interest in the enterprise and an additional incentive to further its growth and development and to assist the Company in retaining and attracting executives with experience and ability.

The Plan provides for the granting to key employees of the Company and its Subsidiaries of Options to purchase Common Shares and, where applicable, SARs. The Committee which administers the Plan may determine in its sole discretion which employees of the Company and its Subsidiaries are eligible to be granted Options.

The Plan is not subject to any of the provisions of the United States Employee Retirement Income Security Act of 1974 nor is it a qualified plan under Section 401(a) of the United States Internal Revenue Code of 1986, as amended.

2.         Definitions 

"Alcan Group" means the Company together with its consolidated subsidiaries and other companies in which the Company owns, directly or indirectly, less than 50% of the voting stock but has significant influence over management;

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"Board of Directors" means the Board of Directors of the Company;

"Change of Control Event" means any of the following:

1.   the acquisition of direct or indirect beneficial ownership of 50% or more of the Shares of the Company by any person or group of associated persons acting together or jointly and in concert;

2.   any amalgamation, merger, arrangement, reorganization or consolidation (or substantially similar transactions or series of transactions) in respect of the Company, other than where (a) the Shares of the Company after the transaction would continue to represent two-thirds or more of the combined voting securities of the resulting entity, without a concurrent substantial change in the composition of the Company's Board of Directors, or (b) it is effected for the purpose of implementing a recapitalization of the Company, without there also occurring an acquisition of direct or indirect beneficial ownership of 20% or more of the Shares of the Company by any person or group of associated persons acting together or jointly and in concert;

3.   the approval by the Company's Shareholders of a plan for the complete or effective dissolution of the Company;

4.   the issuance by the Company of Shares in connection with an exchange offer acquisition if such issuance results in the Shareholders holding less than two-thirds of the combined voting securities of the resulting entity and there is a concurrent substantial change in the composition of the Company's Board of Directors;

5.   the sale of all or substantially all of the assets of the Company, other than (a) to an owner or owners of at least two-thirds of the Company's Shares, or (b) in a manner so that the acquirer is thereafter controlled as to at least two-thirds of its voting securities by the owner or owners of at least two-thirds of the Company's Shares, provided in each case that there is no concurrent substantial change in the composition of the Company's Board of Directors;

6.   the completion of the corporate approvals necessary on the part of the Company to give effect to any amalgamation, merger, arrangement, reorganization, continuance or consolidation (or substantially similar transactions or series of transactions) in respect of the Company pursuant to which the Company will not survive as a stand-alone publicly-traded corporation - without limitation the Company shall be deemed not to have survived as a stand-alone publicly-traded corporation if (a) there is no longer a liquid market for the Shares on the Toronto or New York stock exchanges, (b) more that 50% of the Shares become held by any person or group of associated persons acting together or jointly and in concert, or (c) the Company becomes a subsidiary of another corporation; or

7.   any occurrence pursuant to which individuals who were the incumbent Directors on 1 November 2005 cease for any reason to constitute at least two-thirds of the Company's Board, provided that any individual who became a Director subsequently whose election or appointment was approved by at least two-thirds of the incumbent Directors shall also be considered to be an incumbent Director, but further provided that no individual elected or appointed initially as a result of an actual or threatened proxy contest or solicitation of proxies or in connection with amalgamation, merger, arrangement, reorganization, consolidation or share exchange acquisition transaction (or substantially similar transactions or series of transactions) shall be deemed to be an incumbent Director.

      For the purposes hereof a substantial change in the composition of the Company's Board of Directors shall be any change involving the departure of at least three Directors or any other change pursuant to which the Directors in office prior thereto cease to constitute at least two-thirds of the members of the Board.  In addition, any "change of control event" which occurs for the purposes of a change of control agreement in force between the Company and an employee of the Company or one of its subsidiaries as of the date hereof shall be deemed to be a Change of Control Event hereunder in relation to that employee.

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The Chairman of the Committee may, in order to protect the interests of the Optionees if in his reasonable judgement a Change of Control Event has become imminent but has not yet occurred, declare that a Change of Control Event has occurred in relation to the Plan to enable the Optionees to exercise their Options.

"Committee" means the Human Resources Committee of the Board of Directors;

"Common Share" or "Share" means a Common Share of the Company;

"Company" means Alcan Inc.;

"Director" means a Director of the Company;

"Effective Date" means the date on which an Option is granted;

"Holding Period" has the meaning set out in paragraph 11 below;

"Market Value" means the average of the high and low prices of Shares on the Toronto Stock Exchange on the relevant day, or if two or more sales of Shares shall not have been reported for that day, on the next preceding day for which there have been two or more reported sales;

"Option" means an option to purchase Common Shares granted under the Plan;

"Optionee" means a person who has been or is to be granted an Option;

"Option Period" has the meaning set out in paragraph 9 below;

"Plan" means the Alcan Executive Share Option Plan adopted by the Company on July 24, 1987, as amended from time to time;

"Retirement" means (unless otherwise determined by the Committee):

(i)    retirement in accordance with the provisions of those employee benefit plans of the Company or any Subsidiary covering the Optionee, or

(ii)    if the Optionee is not covered by any such plan, as determined by the Committee, or

(iii)   the placing of a terminated Optionee on the Company's non-active payroll in order to permit such Optionee to attain early retirement age;

"Shareholder" means a holder of Common Share(s);

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"Stock Appreciation Right" or "SAR" means a right, if granted by the Committee, to receive from the Company, in return for the surrender to the Company of the unexercised right to subscribe for a Share pursuant to an Option, cash in an amount equal to the excess of the Market Value of such Share on the date such right is exercised over the subscription price provided in that Option;

"Subsidiary" means any company in which the Company owns, directly or indirectly, more than 50% of the voting stock;

"Waiting Period" means a period of at least three months commencing on the Effective Date and such additional period, if any, as may be established by the Committee at the time of the grant of the Option, such additional period to be subject to such terms and conditions, including conditions for the earlier termination of such additional period, as the Committee may determine.

"Yearly Allotment" means, in respect of a calendar year, 0.75% of the Shares outstanding as at the end of the previous calendar year.

3.         Administration 

The Plan shall be administered by the Committee. The Committee shall have full and complete authority to interpret the Plan and to prescribe such rules and regulations and make such other determinations as it deems necessary or desirable for the administration of the Plan.

The Committee shall determine the grant of Options as set out in paragraph 6 below.

4.         Shares Subject to Grant of Options 

Subject to applicable laws and stock exchange rules and regulations, the Committee may grant during any calendar year Options in respect of a maximum number of Shares which is the aggregate of:

(i)    the Yearly Allotment, and

(ii)    those portions of all previous Yearly Allotments in respect of which Options have not been granted,

provided that the aggregate number of Shares which may be issued after  March 11, 2005 (in respect of Options already granted up to that date and Options to be granted thereafter) shall not exceed 24,844,630 Shares, subject to adjustment in accordance with paragraph 13, below.

5.         Eligibility 

In order to be eligible for the grant of Options by the Committee as provided herein, a person must be an employee of the Company or one of its Subsidiaries.

6.         Grant of Options 

The Committee shall from time to time designate the Optionees as well as the number of Shares to be covered by each Option and shall fix the Effective Date of the Option. Any Optionee may hold more than one Option.

7.         Subscription Price 

The subscription price for each Share covered by an Option shall be established by the Committee at not less than 100% of the Market Value of a Share on the Effective Date.

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8.         Exercise of Option 

An Option may be exercised in the manner prescribed by the Committee in whole at any time or in part from time to time during the Option Period or in such amounts and at such times during the Option Period as the Committee may determine. The subscription price of Shares shall be paid in full in cash at the time of exercise of the Option.

9.         Option Period 

Each Option shall be exercisable by the Optionee during a period ("Option Period") established by the Committee at the time the Option is granted which shall commence after the Waiting Period and shall terminate not later than ten years after the Effective Date, except that:

9.1   in the case of certain Optionees who are, or may be deemed to be, insiders of the Company in accordance with any applicable law, the Waiting Period shall not be shorter than the period prescribed by such law;

9.2   subject to the Option Period stated above, the Option Period shall terminate not later than five years after the earlier of:

(a)     the death of the Optionee, and

(b)     the Retirement of the Optionee; and

9.3   the Option Period shall (unless otherwise determined by the Committee) terminate immediately upon the resignation of the Optionee or other termination (except if paragraph 9.2 applies) of employment of the Optionee by the Company.

In the case of death, the Optionee's estate shall have the right to exercise the Options at any time with respect to all or from time to time with respect to any portion of the Options which the Optionee had not previously exercised.

All rights under an Option unexercised in whole or in part at the termination of the Option Period shall be forfeited.

10.       Stock Appreciation Rights 

Each Option granted under the Plan may, at the discretion of the Committee, have connected therewith SARs in respect of one-half of the Shares covered by the Option.

Each SAR shall be subject to the same terms and conditions as the related Option and shall be exercisable during the Option Period of the related Option except that, in the case of certain Optionees who are, or may be deemed to be, insiders of the Company in accordance with any applicable law, SARs may be exercised only during the periods permitted by such law.

Each exercise of a SAR shall reduce by one the number of Shares covered by the related Option. However, the exercise of an Option will not reduce the number of SARs connected with such Option until one-half of the Shares originally subject to such Option shall have been purchased; thereafter, each exercise of an Option shall reduce the number of SARs connected therewith by the equivalent of the number of Shares subscribed to by reason of such exercise. Unexercised SARs shall terminate on termination of the Option Period, together with the related Option.

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11.       Disposal of Shares Acquired 

Shares issued pursuant to the exercise of an Option may not be disposed of by the Optionee until the expiry of such period ("Holding Period"), if any, as may be prescribed by the Committee at the time of grant of the Option, except that, if such Holding Period has been prescribed:

11.1    in the event of the exercise of an Option by the estate of a deceased Optionee, the estate may dispose of the related Shares immediately;

11.2    in the event of the exercise of an Option after the Retirement of the Optionee, the Optionee may dispose of the related Shares immediately;

11.3    the Committee may, in the light of special circumstances affecting an Optionee and at its discretion, waive any Holding Period which has been prescribed in respect of such Option; and

11.4    notwithstanding the above, in the case of certain Optionees who are, or may be deemed to be, insiders of the Company in accordance with any applicable law, the Holding Period shall not be shorter than the period, if any, prescribed by such law.

12.       Non-assignable 

No Option or any interest therein shall be assignable by the Optionee otherwise than by will or the laws of descent and distribution. During the life of the Optionee, an Option shall be exercisable only by the Optionee or the Optionee's legal representative.

13.       Effects of Certain Transactions 

In the event of any change in the outstanding Shares by reason of any stock dividend, stock split, recapitalization, merger, consolidation, combination or exchange of Shares or other similar corporate change, an equitable adjustment shall be made in the number or kind of Shares issuable under the Plan or subject to outstanding Options or SARs and/or in the subscription price of such Shares and/or in the formula for determining cash payable upon the exercise of SARs. Such adjustment shall be made by the Committee and shall be conclusive and binding for all purposes of the Plan.

14.       Amendment and Termination 

The Board of Directors may at any time and from time to time amend, suspend or terminate the Plan in whole or in part, provided however that the Board of Directors may not, without approval of the holders of a majority of the Shares present and voting in person or by proxy at a meeting of Shareholders of the Company, make any fundamental changes to the Plan such as materially increase the benefits accruing to Optionees (including repricing of Options other than pursuant to paragraph 13, the extension of an Option Period, the reduction of the exercise price but excluding waiver in respect of Waiting Periods and similar conditions), or increase the number of Shares issuable pursuant to the Plan, or materially modify the requirements as to eligibility for participation in the Plan. No such amendment, suspension or termination may, without the consent of the Optionee to whom Options shall theretofore have been granted, adversely affect the rights of such Optionee.

15.       Condition for Issuance of Shares 

The obligation of the Company to issue Shares pursuant to the exercise of Options shall be subject to the condition that such Shares shall have been registered with the Securities and Exchange Commission, Washington, D.C., U.S.A. and shall have been listed or authorized for listing upon the relevant stock exchanges.

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16.       Change of Control 

Upon the occurrence of a Change of Control Event, all Options shall become immediately exercisable and all Waiting Periods and Holding Periods shall be waived, provided that Optionees who are, or may be deemed to be, insiders of the Company in accordance with any applicable law shall be subject to such law.

17.       Taxes 

The Company shall be entitled to withhold the amount of any tax attributable to any amounts payable or Shares deliverable under the Plan, after giving notice to the person entitled to receive such payment or delivery, and the Company may defer making payment or delivery as to any award, if any such tax is payable, until indemnified to its satisfaction. An Optionee may pay all or a portion of any required withholding taxes arising in connection with the exercise of an Option by electing to have the Company withhold Shares having a fair market value equal to the amount required to be withheld.

18.       Governing Law

The Plan and any actions taken in connection herewith shall be governed by and construed in accordance with the laws of Ontario and the laws of Canada applicable therein.

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EX-10

Exhibit 10.18

Amended as of December 8, 2005

ALCAN INC STOCK PRICE APPRECIATION UNIT PLAN

THE PLAN

1.         PURPOSE

The purposes of the Plan are to provide a means for encouraging key employees to obtain an increased proprietary interest in the enterprise and an additional incentive to further its growth and development and to assist the Company in retaining and attracting executives with experience and ability.

The Plan provides for the granting to key employees of the Company and its Subsidiaries of Stock Price Appreciation Unit (''SPAU'') on terms and subject to the conditions set forth in this Plan. The Committee which administers the Plan may determine in its sole discretion which employees of the Company and its Subsidiaries are eligible to be granted SPAUs.

2.         Definitions 

"Alcan Group" means the Company together with its consolidated subsidiaries and other companies in which the Company owns, directly or indirectly, less than 50% of the voting stock but has significant influence over management;

"Board of Directors" means the Board of Directors of the Company;

"Change of Control Event" means any of the following:

1.   the acquisition of direct or indirect beneficial ownership of 50% or more of the Shares of the Company by any person or group of associated persons acting together or jointly and in concert;

2.   any amalgamation, merger, arrangement, reorganization or consolidation (or substantially similar transactions or series of transactions) in respect of the Company, other than where (a) the Shares of the Company after the transaction would continue to represent two-thirds or more of the combined voting securities of the resulting entity, without a concurrent substantial change in the composition of the Company's Board of Directors, or (b) it is effected for the purpose of implementing a recapitalization of the Company, without there also occurring an acquisition of direct or indirect beneficial ownership of 20% or more of the Shares of the Company by any person or group of associated persons acting together or jointly and in concert;

3.   the approval by the Company's Shareholders of a plan for the complete or effective dissolution of the Company;

4.   the issuance by the Company of Shares in connection with an exchange offer acquisition if such issuance results in the Shareholders holding less than two-thirds of the combined voting securities of the resulting entity and there is a concurrent substantial change in the composition of the Company's Board of Directors;

5.   the sale of all or substantially all of the assets of the Company, other than (a) to an owner or owners of at least two-thirds of the Company's Shares, or (b) in a manner so that the acquirer is thereafter controlled as to at least two-thirds of its voting securities by the owner or owners of at least two-thirds of the Company's Shares, provided in each case that there is no concurrent substantial change in the composition of the Company's Board of Directors;

6.   the completion of the corporate approvals necessary on the part of the Company to give effect to any amalgamation, merger, arrangement, reorganization, continuance or consolidation (or substantially similar transactions or series of transactions) in respect of the Company pursuant to which the Company will not survive as a stand-alone publicly-traded corporation - without limitation the Company shall be deemed not to have survived as a stand-alone publicly-traded corporation if (a) there is no longer a liquid market for the Shares on the Toronto or New York stock exchanges, (b) more that 50% of the Shares become held by any person or group of associated persons acting together or jointly and in concert, or (c) the Company becomes a subsidiary of another corporation; or

7.   any occurrence pursuant to which individuals who were the incumbent Directors on 1 November 2005 cease for any reason to constitute at least two-thirds of the Company's Board, provided that any individual who became a Director subsequently whose election or appointment was approved by at least two-thirds of the incumbent Directors shall also be considered to be an incumbent Director, but further provided that no individual elected or appointed initially as a result of an actual or threatened proxy contest or solicitation of proxies or in connection with amalgamation, merger, arrangement, reorganization, consolidation or share exchange acquisition transaction (or substantially similar transactions or series of transactions) shall be deemed to be an incumbent Director.

For the purposes hereof a substantial change in the composition of the Company's Board of Directors shall be any change involving the departure of at least three Directors or any other change pursuant to which the Directors in office prior thereto cease to constitute at least two-thirds of the members of the Board.  In addition, any "change of control event" which occurs for the purposes of a change of control agreement in force between the Company and an employee of the Company or one of its subsidiaries as of the date hereof shall be deemed to be a Change of Control Event hereunder in relation to that employee.

The Chairman of the Committee may, in order to protect the interests of the Optionees if in his reasonable judgement a Change of Control Event has become imminent but has not yet occurred, declare that a Change of Control Event has occurred in relation to the Plan to enable the Optionees to exercise their Options.

"Committee" means those members of the Personnel Committee of the Board of Directors who are not employees of the Company or of any Subsidiary;

"Common Share" or "Share" means a Common Share of the Company;

"Company" means Alcan Inc;

"Director" means a Director of the Company;

"Effective Date" means the date on which a SPAU is granted or any subsequent date so designated by the Committee at the time the SPAU is granted;

"Executive" means a person who has been or is to be granted a SPAU;

"Market Value" means the average of the high and low prices of Shares on The Toronto Stock Exchange on the relevant day, or if two or more sales of Shares shall not have been reported for that day, on the next preceding day for which there have been two or more reported sales;

"Plan" means the Alcan Inc Stock Price Appreciation Unit Plan adopted by the Company on 27 of  September 2001, as amended from time to time;

"Retirement" means (unless otherwise determined by the Committee):

(i)    retirement in accordance with the provisions of those employee benefit plans of the Company or any Subsidiary covering the Executive, or

(ii)   if the Executive is not covered by any such plan, as determined by the Committee, or

(iii)  the placing of a terminated Executive on the Company's non-active payroll in order to permit such Executive to attain early retirement age.

"SPAU" means a right to receive from the Company 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 the grant of such SPAU;

"SPAU Period" has the meaning set out in paragraph 7 below;

"Subsidiary" means any company in which the Company owns, directly or indirectly, more than 50% of the voting stock;

"Waiting Period" means a period of at least three months commencing on the Effective Date and such additional period, if any, as may be established by the Committee at the time of the grant of the SPAU, such additional period to be subject to such terms and conditions, including conditions for the earlier termination of such additional period, as the Committee may determine.

3.         Administration 

The Plan shall be administered by the Committee. The Committee shall have full and complete authority to interpret the Plan and to prescribe such rules and regulations and make such other determinations as it deems necessary or desirable for the administration of the Plan.

The Committee shall determine the grant of SPAU as set out in paragraph 5 below.

4.         Eligibility 

In order to be eligible for the grant of SPAUs by the Committee as provided herein, a person must be an employee of the Company or one of its Subsidiaries.

No member of the Committee shall be eligible to participate in the Plan nor shall have been eligible so to participate within the one-year period immediately prior to membership on the Committee.

5.         Grant of SPAUs 

The Committee shall from time to time designate the Executives as well as the number of SPAUs to be covered by each grant and shall fix the Effective Date of the SPAU. Any Executive may hold more than one SPAU.

6.         Exercise of a SPAU 

A SPAU may be exercised in the manner prescribed by the Committee in whole at any time or in part from time to time during the SPAU Period or in such amounts and at such times during the SPAU Period as the Committee may determine.

7.         SPAU Period 

Each SPAU shall be exercisable by the Executive during a period ("SPAU Period") established by the Committee at the time the SPAU is granted which shall commence after the Waiting Period and shall terminate not later than ten years after the Effective Date, except that:

7.1       in the case of certain Executives who are, or may be deemed to be, insiders of the Company in accordance with any applicable law, the Waiting Period shall not be shorter than the period prescribed by such law;

7.2       subject to the SPAU Period stated above, the SPAU Period shall terminate not later than five years after the earlier of:

(a)        the death of the Executive, and

(b)        the Retirement of the Executive; and

7.3       the SPAU Period shall (unless otherwise determined by the Committee) terminate immediately upon the resignation of the Executive or other termination (except if paragraph 7.2 applies) of employment of the Executive by the Company.

In the case of death, the Executive's estate shall have the right to exercise the SPAUs at any time with respect to all or from time to time with respect to any portion of the SPAUs which the Executive had not previously exercised.

All rights under a SPAU unexercised in whole or in part at the termination of the SPAU Period shall be forfeited.

8.         Non-assignable 

No SPAU or any interest therein shall be assignable by the Executive otherwise than by will or the laws of descent and distribution. During the life of the Executive, a SPAU shall be exercisable only by the Executive or the Executive's legal representative.

9.         Effects of Certain Transactions 

In the event of any change in the outstanding Shares by reason of any stock dividend, stock split, recapitalization, merger, consolidation, combination or exchange of Shares or other similar corporate change, an equitable adjustment shall be made in the formula for determining cash payable upon the exercise of SPAUs. Such adjustment shall be made by the Committee and shall be conclusive and binding for all purposes of the Plan.

10.       Amendment and Termination 

The Board of Directors may at any time and from time to time amend, suspend or terminate the Plan in whole or in part. No such amendment, suspension or termination may, without the consent of the Executive to whom SPAUs shall theretofore have been granted, adversely affect the rights of such Executive.

11.       Change of Control 

Upon the occurrence of a Change of Control Event, all SPAUs shall become immediately exercisable and all Waiting Periods shall be waived, provided that Executives who are, or may be deemed to be, insiders of the Company in accordance with any applicable law shall be subject to such law.

12.       Insiders 

Notwithstanding anything contained herein, if an Executive is, or becomes an insider of the Company for the purposes of any applicable law, the exercise of a SPAU is deemed, for the purposes of this Agreement and all aspects of the Executive's relationship with the Company, to be a disposal of a Share as if subject to trading restrictions under such law and corresponding Company's policies.

EX-10

Exhibit 10.19

ALCAN INC.

DEFERRED SHARE UNIT PLAN

FOR

NON‑EXECUTIVE DIRECTORS

Amended and restated as of 8 December 2005

TABLE OF CONTENTS

1.       PURPOSE AND DEFINITIONS

1.1          Purpose

            The purpose of this Plan is to enhance the Company's ability to attract and retain talented individuals to serve as members of the Board of Directors of the Company and to promote a greater alignment of interests between Members and the shareholders of the Company.

1.2          Definitions

            Unless the context indicates otherwise, the following terms have the following meanings:

(a)     "Account" means a book account maintained by the Company reflecting the Units credited to each Member pursuant to Article 4.1.

(b)     "Average Share Price" means the average of the closing sale prices for board lots for the Shares on The Toronto Stock Exchange and for record lots for the Shares as reported on the New York Stork Exchange ‑ Consolidated Trading, on each day during the last five trading days prior to the date on which Units are awarded with respect to a Quarter pursuant to Articles 4.1.1 and 4.1.2, the dividend declaration date (pursuant to Article 4.1.3) or the redemption date (pursuant to Articles 4.2, 4.3 and 4.4, as applicable), any currency conversion being made at the Bank of Canada noon rate of exchange on the relevant day.

(c)     "Board" means the board of directors of the Company.

(d)     "Change of Control" means any of the following:

1.   the acquisition of direct or indirect beneficial ownership of 50% or more of the Shares of the Company by any person or group of associated persons acting together or jointly and in concert;

2.   any amalgamation, merger, arrangement, reorganization or consolidation (or substantially similar transactions or series of transactions) in respect of the Company, other than where (a) the Shares of the Company after the transaction would continue to represent two-thirds or more of the combined voting securities of the resulting entity, without a concurrent substantial change in the composition of the Company's Board, or (b) it is effected for the purpose of implementing a recapitalization of the Company, without there also occurring an acquisition of direct or indirect beneficial ownership of 20% or more of the Shares of the Company by any person or group of associated persons acting together or jointly and in concert;

3.   the approval by the Company's Shareholders of a plan for the complete or effective dissolution of the Company;

4.   the issuance by the Company of Shares in connection with an exchange offer acquisition if such issuance results in the Shareholders holding less than two-thirds of the combined voting securities of the resulting entity and there is a concurrent substantial change in the composition of the Company's Board;

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5.   the sale of all or substantially all of the assets of the Company, other than (a) to an owner or owners of at least two-thirds of the Company's Shares, or (b) in a manner so that the acquirer is thereafter controlled as to at least two-thirds of its voting securities by the owner or owners of at least two-thirds of the Company's Shares, provided in each case that there is no concurrent substantial change in the composition of the Company's Board of Directors;

6.   the completion of the corporate approvals necessary on the part of the Company to give effect to any amalgamation, merger, arrangement, reorganization, continuance or consolidation (or substantially similar transactions or series of transactions) in respect of the Company pursuant to which the Company will not survive as a stand-alone publicly-traded corporation - without limitation the Company shall be deemed not to have survived as a stand-alone publicly-traded corporation if (a) there is no longer a liquid market for the Shares on the Toronto or New York stock exchanges, (b) more that 50% of the Shares become held by any person or group of associated persons acting together or jointly and in concert, or (c) the Company becomes a subsidiary of another corporation; or

7.   any occurrence pursuant to which individuals who were the incumbent Directors on 1 November 2005 cease for any reason to constitute at least two-thirds of the Company's Board, provided that any individual who became a Director subsequently whose election or appointment was approved by at least two-thirds of the incumbent Directors shall also be considered to be an incumbent Director, but further provided that no individual elected or appointed initially as a result of an actual or threatened proxy contest or solicitation of proxies or in connection with amalgamation, merger, arrangement, reorganization, consolidation or share exchange acquisition transaction (or substantially similar transactions or series of transactions) shall be deemed to be an incumbent Director.

For the purposes hereof a substantial change in the composition of the Company's Board of Directors shall be any change involving the departure of at least three Directors or any other change pursuant to which the Directors in office prior thereto cease to constitute at least two-thirds of the members of the Board.  In addition, any "change of control event" which occurs for the purposes of a change of control agreement in force between the Company and an employee of the Company or one of its subsidiaries as of the date hereof shall be deemed to be a Change of Control Event hereunder in relation to that employee. 

(e)      "Committee" means any committee of the Board and any successor committee (and includes the Human Resources Committee).

(f)       "Company" means Alcan Inc. and any successor corporation whether by amalgamation, merger or otherwise.

(g)      "Director" means a director of the Company.

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(h)      "Employee" means an employee (otherwise than in the capacity of a director) of the Company or of any company in which the Company holds more than fifty percent of the outstanding voting shares.

(i)       "Director's Annual Remuneration" means all amounts payable to a Non-Executive Director by the Company in respect of the services provided to the Company by the Non-Executive Director in a calendar year.

(j)       "Member" means an individual who joins the Plan in accordance with Article 3.

(k)     "Non-Executive Director" means a Director of the Company who is not an Employee.

(l)       "Human Resources Committee" means the Human Resources Committee of the Board and any successor committee.

(m)    "Plan" means this Alcan Inc. Deferred Share Unit Plan for Non-Executive Directors, as amended by the Board from time to time.

(n)     "Quarter" means a period of three consecutive calendar months commencing on the first day of the months of January, April, July or October, as the case may be.

(o)     "Retirement Date" means the date on which a Member ceases to be a Director (subject to Article 4.5).

(p)     "Secretary" means the Secretary of the Company.

(q)     "Share" means a common share of the Company.

(r)      "Spouse" means the person, who, on the day preceding the death of a Member, is the person who has been designated in accordance with Article 5.1 of the Plan and who is legally married to the Member or, in the event the Member is not married, the person who qualifies as a spouse under the laws applying to the Plan.

(s)     "Unit" means a unit of measurement for record-keeping purposes under the Plan, and shall include fractional units.

2.   CONSTRUCTION AND INTERPRETATION

2.1         The Plan was effective as of 1 April, 2001 and was amended on 8 December 2005.

2.2         The Plan shall be governed and interpreted in accordance with the laws of the Province of Quebec and the applicable laws of Canada.

2.3          If any provision of the Plan is determined to be void or unenforceable in whole or in part, such determination shall not affect the validity or enforcement of any other provision or part thereof.

2.4          Headings are for reference purposes only and do not limit or extend the meaning of the provisions of the Plan.

2.5          References to the masculine include the feminine; references to the singular shall include the plural and vice versa.

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3.    ELIGIBILITY MEMBERSHIP AND RETIREMENT

3.1          Every person who is a Non‑Executive Director on 1 April, 2001 shall be eligible to become a Member as of that date.

3.2          Every person who becomes a Non‑Executive Director after 1 April, 2001 shall be eligible to become a Member as of the date he becomes such a Director.

3.3          Upon becoming eligible to become a Member, the Director shall signify his intention of becoming a Member by signing a form prescribed for this purpose and delivering it to the Secretary. Membership in the Plan becomes effective upon receipt by the Secretary of such duly executed prescribed form.

3.4          Subject to Article 4.5, a Member shall be deemed to retire on the date he ceases to be a Director.

3.5          Nothing herein shall be deemed to give any Member the right to be retained as a Director of the Company.

4.    BENEFITS

4.1       Calculation of Benefits

        4.1.1      Annual Compensation of Non-Executive Directors

                              Effective 1 April, 2001, each Member will receive his Director's Annual Remuneration payable quarterly for the Quarter commencing 1 April, 2001 and for each subsequent Quarter as follows:

• 50% in Units; and

• 50% in Units or cash, as elected by the Member pursuant to Article 4.1.2

                              Notwithstanding the provisions set out above in this Article 4.1.1, the Human Resources Committee shall have the right, in its sole discretion, to require payment of a Member's Director's Annual Remuneration solely in cash or Units or a combination of cash and Units as determined by the Human Resources Committee.

                              Units granted to a Member pursuant to this Article 4.1.1 or Article 4.1.2 shall be credited to the Member's Account on the first day following the end of every applicable Quarter.  The portion of Director's Annual Remuneration payable in cash in respect of a Quarter pursuant to this Article 4.1.1 shall be paid as soon as practicable after the last day of the applicable Quarter.

                              The number of Units (including fractional Units) to be credited on each of the dates prescribed in this Article 4.1.1 shall be determined by dividing the amount of the Director's Annual Remuneration to be satisfied by Units on such date by the Average Share Price on such date.

                              Any currency conversion required for the purposes of this Article 4.1 shall be made at the Bank of Canada noon rate of exchange on the relevant day.

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4.1.2      Election to Receive Units

                              To elect a form or forms of payment of Director's Annual Remuneration pursuant to Article 4.1.1(b) for the year in which this Plan becomes effective, the Member shall complete and deliver to the Secretary an initial written election by no later than 15 business days before the last day of the Quarter commencing on or immediately after the effective date of this Plan, respecting the Director's Annual Remuneration payable for such Quarter and the remaining Quarters for that year.  To elect a change in the form of payment of Director's Annual Remuneration for subsequent years, the Member shall complete and deliver to the Secretary a new written election by no later than the last business day of the year preceding the first year in which the Director's Annual Remuneration to which such election applies becomes payable.  The Member's election under this Article 4.1.2 should be in a form prescribed by the Human Resources Committee and shall designate the percentage of his Director's Annual Remuneration that is (i) to be satisfied by Units, and (ii) to be paid in cash, such designation to be in whole percentages only.

                              In the absence of a new election made in accordance with this Article 4.1.2, the Member's election for the latest year with respect to the percentage of the Director's Annual Remuneration that is to be satisfied by Units and paid in cash shall continue to apply to all subsequent Director's Annual Remuneration payments payable pursuant to the Plan until the Member submits another written election in accordance with this Article 4.1.2.  An election shall be irrevocable for the year commencing immediately following the date of the election and for any subsequent year unless the Member makes a new election in accordance with this Article 4.1.2 by the last business day of the year immediately prior to the year in respect of which the new election is intended to apply.

                              If no election is made, and no prior election remains effective, or if the Member does not make an initial election in accordance with this Article 4.1.2, the Member shall be deemed to have elected the Director's Annual Remuneration payable to him pursuant to Article 4.1.1(b) to be paid in cash.

4.1.3      Dividends

In respect of every cash dividend declared on the Shares, each Member's Account will be credited with an additional number of Units, determined as follows:

Units held in each respective Account on dividend declaration date

multiplied by

a dollar amount equal to the dividend declared per Share

divided by

the Average Share Price.

The credit of such additional Units shall be made on the dividend declaration date.

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4.1.4      Certain Adjustments

In the event of a reorganization, recapitalization, reclassification, stock split, stock dividend, combination of shares, merger, amalgamation or consolidation, or the sale, conveyance, lease or other transfer by the Company of all or substantially all of the assets of the Company, pursuant to any of which such events the then outstanding Shares are split or combined or changed into, become exchangeable at the holder's election for, or entitle the holder thereof to, other shares of stock, or any similar change in the Shares or other similar event, each Member's Account shall be adjusted in an equitable manner to reflect such change or other event. Such adjustment shall be made by the Human Resources Committee and shall be conclusive and binding for all purposes of the Plan.  Except as provided for in this Article, Members shall have no other rights as a result of any change in the Shares or of any other event.

For greater certainty, no amount will be paid to, or in respect of, a Member under the Plan or pursuant to any other arrangement, and no additional Units will be granted to such Member to compensate for a downward fluctuation in the price of Shares, nor will any other form of benefit be conferred upon, or in respect of, a Member for such purpose.

4.2       Payment of Benefits on Retirement

4.2.1      On a Member's Retirement Date, the Member will be able to redeem the Units credited to his Account by filing a written notice of redemption with the Secretary, specifying a redemption date of at least 5 business days from the delivery of the said notice to the Company but no later that 15 December of the first calendar year commencing after the Director's Retirement Date.  The Units credited to such Member's Account will then be multiplied by the Average Share Price on such redemption date. In any event, the payment of the Member's benefits under the Plan will take place no later than 31 December of the first calendar year commencing after the Director's Retirement Date.

If a Member fails to advise the Company of his selection of a redemption date within the above‑mentioned period, the redemption date shall be considered to be 15 December of the first calendar year commencing after the Director's Retirement Date.

4.2.2      The value of the redeemed Units shall be paid by the Company to the Member as soon as possible after the determination of the redemption date and the deduction of appropriate taxes and other required withholdings (if any), at the Member's option, in either:

(a)                 cash,

(b)                 Shares, or

(c)                 a combination thereof.

In the case of a payment in Shares, the Company will purchase the Shares on the open market, through a broker, on behalf of the Member.  If, after the broker applies the value of a Member's Units to the purchase of whole Shares as provided in this Article 4.2.2, an amount remains payable under

6

the Plan in respect of a Member, the Company shall pay such amount in cash, net of applicable withholdings, to the Member or the Member's spouse or legal representative, as applicable.

4.3       Benefits Before Retirement

4.3.1      Death

In the event of death of a Member prior to the Retirement Date, the Spouse of such Member, or where there is no surviving Spouse, the Member's legal representative, shall be able to redeem the Units credited to the Member's Account by filing a written notice of redemption with the Secretary, specifying a redemption date of at least 5 business days from the delivery of the said notice to the Company but no later than 15 December of the first calendar year commencing after the death of the Member.  The same conditions of payment will then apply to the Spouse (or the Member's legal representative, as the case may be) as they would have applied to the Member had he retired on that date.

4.4       Death After Retirement

In the event that a Member dies after the Retirement Date, the Spouse of such Member, or where there is no surviving Spouse the Member's legal representative, shall, provided the Member had not already done so, be able to redeem the Units credited to the Member's Account by filing a written notice of redemption with the Secretary, specifying a redemption date of at least 5 business days from the delivery of the said notice to the Company but no later than 15 December of the first calendar year commencing after the death of the Member. The same conditions of payment will then apply to the Spouse (or the Member's legal representative, as the case may be) as they would have applied to the Member.

4.5       Change of Control Event

In the event of death or retirement of a Member within twelve months of a Change of Event of the Company, the Units credited to his Account shall be redeemed on date of death or retirement. The Units credited to such Member's Account will be multiplied by the Average Share Price on the date of a Change of Control Event.

The value of the redeemed Units shall be paid by the Company to the Member no later than twelve months from the Change of Control Event.

In the event of death or retirement of a Member more than twelve months after the Change of Control Event of the Company, the Units credited to his Account shall be subject to the redemption procedure, described above in Articles 4.2, 4.3 and 4.4.

4.6       Suspension of Benefits upon becoming an Employee

4.6.1      Director becoming an Employee

                              If a Member becomes an Employee but continues to be a Director, his membership in the Plan shall be suspended effective the date of the commencement of his employment and shall resume upon termination of such employment.

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                              If prior to the termination of his employment, such Employee Director ceases to be a Director, such Member will be deemed to retire on the date he ceases to be an Employee.

4.7       Taxes

All benefits paid under the Plan or in respect of a Member who is not a resident of Canada to the extent attributable to services performed in Canada are subject to applicable tax legislation.

4.8       Currency

4.8.1      Unless Article 4.7.2 applies, all benefits under the Plan shall be determined in the same currency as the Director's Annual Remuneration.

4.8.2      A Member or his Spouse, or where there is no surviving Spouse the Member's legal representative, may request the Company to pay his benefits in a currency other than the designated currency under Article 4.7.1, in which event the currency conversion shall be made at the Bank of Canada noon rate of exchange on the day preceding the date of payment.

5.   BENEFICIARIES AND CLAIMS FOR BENEFITS

5.1       Every Member, upon becoming a Member, shall advise the Secretary in writing of the name and address of his Spouse on a prescribed form. Every Member shall advise the Company of any change in such information.

5.2       In the event of death of a Member and provided that there is a surviving Spouse, the benefits under the Plan shall only be paid to the Spouse of such Member as named on the latest filing on the prescribed form which has been delivered to the Secretary. Where there is no surviving Spouse, the benefits under the Plan shall be paid to the Member's legal representative pursuant to Articles 4.3 and 4.4.

6.   ADMINISTRATION

6.1      Unless otherwise determined by the Board, the Plan shall remain an unfunded obligation of the Company and all benefits payable to or in respect of Members under the Plan represent merely unfunded, unsecured promises of the Company to pay a sum of money to the Members in the future.

6.2       The Plan shall be administered by the Human Resources Committee and any question regarding the proper administration of the Plan or the construction of any term of the Plan shall be resolved by the Human Resources Committee, in its sole discretion.

6.3       The Plan may be amended or terminated at any time by the Board, except as to rights already accrued hereunder by the Members.  Notwithstanding the foregoing, any amendment or termination of the Plan shall be such that the Plan continuously meets the requirements of paragraph 6801(d) of the regulations under the Income Tax Act (Canada) or any successor to such provision. The Board will elect the termination date of the Plan.

6.4       For the purpose of the above Article 6.3, the accrued right in respect of a Member prior to his Retirement Date shall be a right to receive benefits in accordance with the

8

            terms of the Plan up to but excluding the date of the amendment or termination of the Plan.

6.5       If the Plan is terminated, the value of all DSUs in the Member's Account will be determined by multiplying the number of Units by the Average Share Price on the date of the termination of the Plan. The Units shall be redeemed as soon as possible following the date of termination of the Plan.

6.6       The Company shall keep accurate and detailed records of all transactions for all Accounts and provide quarterly benefit statements to Members.

6.7       All expenses associated with the establishment, maintenance and termination of this Plan shall be borne by the Company.

7.   NON‑ALIENATION

7.1       Except as provided for herein, no transfer by a Member of any right to any payment or benefit under the Plan, whether voluntary or involuntary, by operation of law or otherwise, and whether by means of alienation by anticipation, sale, transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind, shall vest the transferee with any interest or right, and any attempt to so alienate, sell, transfer, pledge, attach, charge or otherwise encumber any such amount, whether presently or thereafter payable shall be void and of no force or effect.

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EX-10

Exhibit 10.20

Alcan Inc.

ALCAN

LONG-TERM

INCENTIVE PROGRAM

• TSR Performance Plan

Approved Plan Text

Montreal, Canada

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1.                  General Information

The Alcan Long-Term Incentive Program is comprised of two separate plans. The first plan is the Alcan Total Shareholder Return Performance Plan and the second plan is Alcan Executive Share Option Plan. The text of the latter is included in the Circular dated April 28,1993.

Following is the description of the Alcan Total Shareholder Return Performance Plan.

2.                  Definitions

In this Plan, the following definitions shall have the following meanings:

"Alcan LTIP" means the Alcan Long-Term Incentive Program which includes the Alcan Executive Share Option Plan and the Alcan Total Shareholder Return Performance Plan;

"Auditors" means PricewaterhouseCoopers LLP or any successor company;

"Award" means an earned Award to a Key Employee in accordance with the provisions of the Plan;

"Award Agreement" means the written agreement evidencing an Award granted to a Key Employee under the Plan and approved by the Committee;

"Board" means the Board of Directors of the Company;

"Closing Prices" means the closing sale prices for record lots for common shares as reported on the New York Stock Exchange - Consolidating Trading;

"Committee" means the Personnel Committee of the Board;

"Company" means Alcan Inc. and any successor corporation whether by amalgamation, merger or otherwise;

"Disability" means the complete permanent inability of a Key Employee to perform all of his duties under the terms of his employment with the Company, as determined by the Committee upon the basis of such evidence, including independent medical reports and data as the Committee deems appropriate or necessary;

"Key Employee" means an employee of the Company or a Subsidiary whose responsibilities and decisions, in the judgement of the Committee, directly affect the performance of the Company and its Subsidiaries and has been designated by the Committee as eligible to participate in the Plan;

"Participant" means an employee of the Company who is a Key Employee and who has received an Award under the Plan;

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"Performance Period" means the period over which performance  for the purposes of an Award shall be measured;

"Plan" means the Alcan Total Shareholder Return Performance Plan;

"Retirement" means (unless otherwise determined by the Committee):

i)    retirement in accordance with the provisions of those retirement benefits plans of the Company or any Subsidiary covering the executive, or

ii)   the placing of a terminated executive a non-active payroll of the Company or a Subsidiary in order to permit such executive to attain early retirement age.

"Share" means a common share of the Company;

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

"Target Cash Award" means a target cash award granted to a Key Employee in accordance with the provisions of the Plan and approved by the Committee;

"TSR" means the Total Shareholder Return, which is a financial measure as described in section 6.4;

3.                  Establishment and Purpose

3.1.

Establishment. The Company has established an incentive compensation plan known as the Alcan TSR Performance Plan. In an effort to increase the Key Employee's awareness of their role in improving shareholder value, the Committee has approved an executive total compensation plan that recognizes that long-term incentives are an integral part of the executive's compensation.

3.2.

Purpose. The purpose of the Plan is to promote the achievement of long-term objectives of the Company i) by tying the Key Employee's long-term incentive opportunities to pre-established goals; ii) by rewarding performance, based on the successful achievement of the pre-established goals; and iii) by attracting, retaining and motivating highly competent Key Employees committed as a group to achieve results through teamwork.

4.                  Administration

4.1.	The Plan shall be administered by the Committee. The Committee shall have full and complete authority to interpret the Plan and prescribe such rules and regulations and make such other determinations as it deems necessary or desirable for the administration of the Plan.
4.2.	Amendment, Modification and Termination. The Committee may at any time and from time to time amend, suspend or terminate the Plan in whole or in part.

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4.3.	Costs of the Plan. All expenses associated with the establishment, maintenance and termination of the Plan shall be borne by the Company.
4.4.	Tax Consequences. The Awards shall be subject to taxes as per the income tax rules of the Key Employee's country of residence. Participants are encouraged to inform themselves of their particular tax situation. All taxes shall be paid by the Participant.
4.5.	Successors. All obligations of the Company under the Plan shall be binding on any successor to the Company.

5.                  Eligibility

5.1. Eligibility. The Plan provides for the granting of a Target Cash Award to designated Key Employees of the Company and its Subsidiaries.  The Committee shall determine at its sole discretion which Key Employees of the Company shall be eligible to be granted a TSR performance Target Cash Award.  It shall also determine the conditions (amount, period) applicable to each Award. Eligibility to participate in the Plan does not confer a right to receive a Target Cash Award. There is no automatic entitlement to any grant.

6.                  Awards

6.1.	Target Cash Award. The target amount of the Key Employee's Target Cash Award shall be determined through competitive market data using appropriate peer companies. The Committee shall approve annually the target long-term incentive compensation amount to be attributed to Key Employees. Half of this amount shall be delivered through the Plan and the other half through the Alcan Executive Share Option Plan. Employees eligible for participation in the Alcan LTIP but not eligible to participate in this Plan shall receive their long-term compensation amount entirely through the Alcan Executive Share Option Plan.
6.2.	Amount of the Award. The amount of the Award, if any, shall be based on the Company's TSR performance at the end of the Performance Period as measured against the TSR performance of the S&P Industrials.
6.3.	Award Frequency and Performance Period. Subject to the terms of the Plan (including sections 4.1, 4.2 and 5.1), Target Cash Awards shall generally be granted annually by the Committee, with each Target Cash Award having a Performance Period of 3 years.
6.4.	Total Shareholder Return and Performance Measure. TSR shall be measured as a change in the market price of the common stock plus cumulative dividend yield over the Performance Period.

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	At the end of the Performance Period, the TSR performance measurement shall be made for all companies in the S&P Industrials Index and the Company's performance will be ranked relative to the other industrial companies in the Index as of the end of the Performance Period.  These measurements will be made by a third party and audited by the Company's Auditors.
6.5.	Calculation of TSR Performance.  The percentage change in stock price is equal to the ratio of (A) the average of the Closing Prices over the five trading days immediately preceding the end of the Performance Period over (B) the average of the Closing Prices over the five trading days immediately preceding the commencement of the Performance Period. Only companies that have been part of the Index for the full Performance Period shall be included in the calculation of TSR performance.
6.6.	Payout Matrix. In order for any payout to be earned, the Company's TSR performance shall be at or above the 30th percentile rank of the companies ranked in the S&P Industrial Index.  At the 30th percentile rank, an Award payout of 60% of the Target Cash Award shall be earned.  At the 50th percentile rank, an Award payout of 100% of Target Cash Award shall be earned, and at the 75th percentile rank, an Award payout of 300% of the Target Cash Award shall be earned (maximum payout). The Award payout will be prorated between these rankings (see sample calculation at Appendix A).
6.7.	Individual Performance. As with other elements of compensation, an Award shall be earned through individual performance.  There shall be no entitlement to an Award.  The actual target Award may also be subject to an upward or downward adjustment based on the individual's performance and contribution to the Company.
6.8.	Payment of Awards. Subject to applicable law, payment with respect to earned Awards may be made in whole or in part in the form of cash and/or Shares of the Company, at the sole discretion of the Committee.
6.9.	Award Agreement. A separate Agreement shall be entered into between the Company and the Participant to cover each Target Cash Award.  This document shall be sent in duplicate to each Participant for signature.  It describes the conditions applying to that particular Award (see Appendix B).

7.                  Termination of Employment

7.1. Termination of Employment Due to Death, Disability or Retirement. In the event of termination of employment due to Retirement (in accordance with the retirement programs rules), Disability or death, the Participant will be entitled to a pro-rata payment of any Awards earned, payable at the time normally due and in accordance with such rules and regulations as may be adopted by the Committee.

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7.2. Termination for Reasons Other than Death, Disability or Retirement. Termination of employment for any other reasons, including resignation, will result in forfeiture of any outstanding Awards under the Plan.  In specific circumstances, the Committee may adopt rules to provide for partial payment as above.

8.                  Beneficiary Designation

8.1.

Designation of Beneficiary. Each Participant shall advise the Company in a written designation, on a prescribed form, the name of the beneficiary who shall be entitled to receive a payout, if any, with respect to an Award upon his death (Appendix C). The Participant shall advise the Company of any change in any such information (see Appendix D). In the event that there shall be no designation of beneficiary made, any amounts to be paid to the Participant's beneficiary shall be paid to the Participant's estate.

8.2.

Death of Beneficiary. In the event that the beneficiary predeceases the Participant, any amounts that would have been paid to the Participant or the Participant's beneficiary under the Plan shall be paid to the Participant's estate.

9.                  Miscellaneous Provisions

9.1.	The effective date of the Plan is 1 January 2002.
9.2.	The Plan shall be governed and interpreted in accordance with the laws of the Province of Quebec and the laws of Canada applicable in Quebec.
9.3.	If any provision of the Plan is determined to be void or unenforceable in whole or in part, such determination shall not affect the validity or enforcement of any other provision or part thereof.
9.4.	Headings are for reference purposes only and do not limit or extend the meaning of the provisions of the Plan.
9.5.	References to the masculine shall include the feminine; references to the singular shall include the plural and vice versa.

10.                Change of Control

10.1.	"Change of Control Event" shall mean any of the following:
	1.	the acquisition of direct or indirect beneficial ownership of 50% or more of the Shares of the Company by any person or group of associated persons acting together or jointly and in concert;

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2.	any amalgamation, merger, arrangement, reorganization or consolidation (or substantially similar transactions or series of transactions) in respect of the Company, other than where (a) the Shares of the Company after the transaction would continue to represent two-thirds or more of the combined voting securities of the resulting entity, without a concurrent substantial change in the composition of the Company's Board, or (b) it is effected for the purpose of implementing a recapitalization of the Company, without there also occurring an acquisition of direct or indirect beneficial ownership of 20% or more of the Shares of the Company by any person or group of associated persons acting together or jointly and in concert;
3.	the approval by the Company's shareholders of a plan for the complete or effective dissolution of the Company;
4.	the issuance by the Company of Shares in connection with an exchange offer acquisition if such issuance results in the Shareholders holding less than two-thirds of the combined voting securities of the resulting entity and there is a concurrent substantial change in the composition of the Company's Board;
5.	the sale of all or substantially all of the assets of the Company, other than (a) to an owner or owners of at least two-thirds of the Company's Shares, or (b) in a manner so that the acquirer is thereafter controlled as to at least two-thirds of its voting securities by the owner or owners of at least two-thirds of the Company's Shares, provided in each case that there is no concurrent substantial change in the composition of the Company's Board;
6.	the completion of the corporate approvals necessary on the part of the Company to give effect to any amalgamation, merger, arrangement, reorganization, continuance or consolidation (or substantially similar transactions or series of transactions) in respect of the Company pursuant to which the Company will not survive as a stand-alone publicly-traded corporation - without limitation the Company shall be deemed not to have survived as a stand-alone publicly-traded corporation if (a) there is no longer a liquid market for the Shares on the Toronto or New York stock exchanges, (b) more that 50% of the Shares become held by any person or group of associated persons acting together or jointly and in concert, or (c) the Company becomes a subsidiary of another corporation; or
7.	any occurrence pursuant to which individuals who were the incumbent Directors on the date of the Plan cease for any reason to constitute at least two-thirds of the Company's Board, provided that any individual who became a Director subsequently whose election or appointment was approved by at least two-thirds of the incumbent Directors shall also be considered to be an incumbent Director, but further provided that no individual elected or appointed initially as a result of an actual or threatened proxy contest or solicitation of proxies or in connection with amalgamation, merger, arrangement, reorganization, consolidation or share exchange acquisition transaction (or substantially similar transactions or series of transactions) shall be deemed to be an incumbent Director.
For the purposes hereof a substantial change in the composition of the Company's Board shall be any change involving the departure of at least three Directors or any other change pursuant to which the Directors in office prior thereto cease to constitute at least two-thirds of the members of the Board.  In addition, any "change of control event" which occurs for the purposes of a change of control agreement in force between the Company and an employee of the Company or one of its subsidiaries as of the date hereof shall be deemed to be a Change of Control Event hereunder in relation to that employee.

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10.2.	Upon the occurrence of a Change of Control Event, in respect of each Target Cash Award granted to the Participant, the Participant will be entitled to an amount equal to the greater of:
	i)	100% of the target amount of the Target Cash Award specified in the grant; or
	ii)	(A)	the amount of the Target Cash Award calculated in accordance with the provisions of section 6 pro-rated relative to the term of the original Performance Period for the period beginning at the start of the term of the original Performance Period to the Change of Control Event; and
		(B)	100% of the target amount of the Target Cash Award specified in the grant pro-rated relative to the term of the original Performance Period for the period beginning at the Change of Control Event to the end of the term of the original Performance Period.
10.3.	The amounts owing to the Participant under section 10.2 hereof shall be payable 30 days following the date of the Change of Control Event.

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APPENDIX A

TSR Rating Scale

EXAMPLE

Target Award (2002)		$100,000
Adjustment for personal performance		$25,000
Adjusted Target Award		$125,000
3-year performance rating at 62.5 percentile	x	200%
		$250,000

Amount paid approx. April 2005

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APPENDIX B

ALCAN INC.

TOTAL SHAREHOLDER RETURN (TSR) PERFORMANCE PLAN

(long-term incentive cash award)

AWARD AGREEMENT

NAME	AWARD YEAR:
PERFORMANCE PERIOD:	TARGET AWARD AMOUNT:

You have been granted a 2002 Target Cash Award (shown above) under the TSR Performance Plan.  This Award was approved by the Personnel Committee of the Board, effective 1 January 2002 and is subject to a three year Performance Period beginning 1 January 2002 and ending 31 December 2004.

The payment value of this Award, if any, will be calculated on the Total Shareholder Return and Alcan's percentile rank relative to the Standard and Poor (S&P) Industrials at the end of the Performance Period.  Total Shareholder Return is measured as the change in the market price of the common stock plus cumulative dividend yield over the Performance Period. The percentage change in stock price is equal to the ratio of (A) the average of the closing share prices over the five trading days immediately preceding the end of the Performance Period over (B) the average of the closing share prices over the five trading days immediately preceding the Performance Period.

At the end of the Performance Period, TSR performance measurements will be made for Alcan and for all companies in the S&P Industrials Index. Alcan's TSR performance will be compared and ranked against the TSR performance of other industrial companies in the Index. Only companies that have been part of the Index for the full 3-year period will be included in the Index.

The payout, if any, will be calculated by adjusting the target award by a performance factor related to Alcan's percentile rank relative to the S&P Industrials as follows:

• At a relative rank below the 30^th percentile no payout will be made

• At a relative rank of the 30^th percentile a payout of 60% of the target amount

• At a relative rank of the 50^th percentile a payout of 100% of the target amount

• At a relative rank of the 75^th percentile a payout of 300% of the target amount (300% is the maximum payout under the Schedule)

• The payout will be prorated between these rankings.

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You must be continuously and actively employed by Alcan over the performance period to be eligible to receive any payment.  The actual payment, if any, will be made as soon as practicable following completion of the Performance Period.  If you terminate your employment during the Performance Period due to retirement, disability or death, your actual Award will be pro-rated for the period up to termination; the amount being paid at the prescribed time and according to such Rules and Regulations of the Plan adopted by the Committee.  Please refer to the Plan description.

Please indicate your acceptance of the above award, the terms and conditions as described herein and the attachments by executing both copies of this Award Agreement and returning one copy to Linda Eggeman, Alcan Inc., Maison Alcan, Montreal.

I hereby accept the terms and conditions of this award:

__________________________                    ________________________

Signature                                                    Date

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APPENDIX C

ALCAN INC.

TOTAL SHAREHOLDER RETURN

PERFORMANCE PLAN

BENEFICIARY DESIGNATION FORM

I, _______________________________, being a Participant of the Total Shareholder Return Performance Plan (TSR Performance Plan), hereby designate the following person as my Beneficiary for purposes of the TSR Performance Plan and acknowledge that said person is:

Name:

Address:

Under the terms of the TSR Performance Plan, I reserve the right to revoke this designation and to designate another person as my Beneficiary.

Signature:

Employee Number:

Date:

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APPENDIX D

ALCAN INC.

TOTAL SHAREHOLDER RETURN

PERFORMANCE PLAN

CHANGE OF BENEFICIARY FORM

I, _______________________________, being a Participant of the Total Shareholder Return Performance Plan (TSR Performance Plan), hereby revoke the designation of ______________________________ as my Beneficiary for purposes of the TSR Performance Plan and designate instead:

Name:

Address:

Under the terms of the TSR Performance Plan, I reserve the right to revoke this designation and to designate another person as my Beneficiary.

Signature:

Employee Number:

Date:

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EX-10

Exhibit 10.22

Alcan Inc.                               

EXECUTIVE

DEFERRED

SHARE

UNIT

PLAN

Montreal, Canada

Amended and Restated as of December 8, 2005

Table of Contents

INTRODUCTION

PURPOSE OF PLAN

TAX STATUS

ELIGIBILITY

TRANSFERS

PARTICIPATION

EPA VALUE

TSR VALUE

DISCRETIONARY DSUs

THE VALUE OF A DSU

BENEFITS

VESTING

IN‑SERVICE WITHDRAWALS

ADJUSTMENTS

BENEFICIARY

REDEMPTION

RISKS AND UNCERTAINTIES

NON‑ALIENATION

AMENDMENT OR TERMINATION OF DSUP BY ALCAN

ADMINISTRATION

FORMS

• EPA Value Election Form

• TSR Value Election Form

• Beneficiary Designation Form

• Change of Beneficiary Form

• Redemption Form

Introduction

This booklet sets out the terms of the Alcan Deferred Share Unit Plan (DSUP) as amended and restated as at April 23, 2003. Deferred Share Units granted before, shall be administered and paid in accordance with the terms of the DSUP as they existed immediately prior to this amendment and restatement. If you require legal, tax or other professional advice on whether or not to participate in the DSUP, you should speak to your personal, legal or tax advisor.

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Purpose of Plan

The DSUP is a recent addition to the range of benefits offered by Alcan to employees to assist in their personal financial planning. It is a compensation benefit plan which works in conjunction with the cash‑based Executive Performance Award (EPA) Plan and in conjunction with the Total Shareholder Return Performance Plan (TSR Performance Plan). Under the DSUP, an eligible employee may elect to receive a selected portion of the potential value of his or her EPA award (EPA Value) in the form of Deferred Share Units (EPA DSUs) instead of cash and may also elect to receive a selected portion of the potential value of his or her TSR Performance Plan award (TSR Value) in the form of Deferred Share Units (TSR DSUs) instead of cash. Except where specifically provided otherwise in this booklet, EPA DSUs and TSR DSUs will be referred to as DSUs. DSUs represent a notional investment in Alcan shares and attract dividend credits which are also invested in DSUs. The balance of the EPA Value (if any) is payable under the EPA Plan in cash and the balance of the TSR Value (if any) is payable under the TSR Performance Plan in cash.

It is hoped that the DSUP will strengthen the link between the interests of employees (like yourself) and the interests of Alcan's shareholders, by encouraging the former to voluntarily elect to have a portion of their remuneration tied to the long‑term performance of Alcan shares.

Tax Status

The DSUP was introduced in March 1997, effective as of 1 January 1997, after approval from Revenue Canada and Revenu Québec. Both Canada Customs and Revenue Agency (formerly Revenue Canada) and Revenue Québec issued tax rulings confirming that the issue of DSUs and Additional DSUs (corresponding to dividends paid on Alcan shares, as explained on page 8) will not attract Federal income taxes or Québec until they are redeemed as provided for in the DSUP (see page 10).

The DSUP has been amended and restated as at April 23, 2003, after Canada Customs and Revenue Agency issued a tax ruling confirming that the issue of DSUs and Additional DSUs on and after April 23, 2003 under the DSUP as amended will not attract Federal income taxes until they are redeemed as provided for in the DSUP.

These rulings are based on the provisions of the Income Tax Act and the Loi sur les impôts as they existed at the time the rulings were given. No Alcan Group Company will be liable for any tax or other cost, loss or reduction in rights incurred by you (or any other person entitled to benefits hereunder) as a result of any change in these tax laws or the withdrawal of either of the above rulings.

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Eligibility

To participate in the DSUP in respect of the EPA Value in any year (the EPA year), you must meet every one of the following criteria on the last day of the previous year:

•    You must be an active, permanent employee of an Alcan Group Company in Canada

•    You must be a resident of Canada; and

•    You must be in the following Grades on the North American and Canadian Salary Scales:

‑    43A or above

or

-     40A or 41A or 42A and at least 50 years of age.

To participate in the DSUP in respect of the TSR Value in respect of a Performance Period (as defined in the TSR Performance Plan), you must meet every one of the following criteria on the last day previous to the beginning of the Performance Period:

•    You must be an active, permanent employee of an Alcan Group Company in Canada;

•    You must be a resident of Canada; and

•    You must be eligible for a potential cash‑based Award under the TSR Performance Plan

Transfers

If you are transferred to an Alcan Group Company outside Canada, the option selected on your Annual Election Form will be applied to the EPA Value (if any) earned by you during your service in Canada. Similarly, if you are transferred to an Alcan Group Company in Canada, the option selected on your TSR Value Election Form will be applied to the TSR Value (if any) earned by you during your service in Canada.

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Participation

Participation in the DSUP is entirely voluntary on your part.

You may participate if you meet either of the eligibility tests on page 4.

EPA Value

If you are eligible and wish to participate with respect to your EPA Value, you must complete and file an Annual Election Form with the Plan Administrator before mid‑December of the year preceding the EPA year. In this Form, you will be asked to indicate what portion (in tranches of 10%) of the EPA Value (if any) shall be provided under the DSUP and what portion of the EPA Value will be provided under the EPA Plan.

Your election made as above will be valid for the particular EPA year. An election once made cannot be revoked or altered.

If you do not file an Annual Election Form by mid‑December as stated above, it will be assumed that you do not wish to participate in the DSUP for the EPA Value (if any) to be provided in respect of the particular EPA year.

If you first become eligible to participate in the DSUP during an EPA year, you may only do so effective the following EPA year.

A new election must be made for every EPA year. Therefore, you need not participate in the DSUP with respect to your EPA Value each and every year.

TSR Value

If you are eligible and wish to participate with respect to your TSR Value, you must complete and file a TSR Value Election Form with the Plan Administrator at least 12 months prior to the end of the applicable Performance Period. In this Form, you will be asked to indicate what portion (in tranches of 10%) of the TSR Value (if any) shall be provided under the DSUP and what portion of the TSR Value will be provided under the TSR Performance Plan.

If you do not file a TSR Value Election Form by the deadline stated above, it will be assumed that you do not wish to participate in the DSUP for the TSR Value (if any) to be provided in respect of that Performance Period. Your election made as above will be valid for the particular Performance Period. An election once made cannot be revoked or altered. A new election must be made for every Performance Period. Therefore, you need not participate in the DSUP with respect to each and every Performance Period.

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Discretionary DSUs

The Alcan Board may, from time to time, grant additional DSUs (Discretionary DSUs) to individuals employed by an Alcan Group Company, on such dates, in such amounts and subject to such time based vesting requirements as the Board may in its sole discretion determine. Except where specifically provided otherwise in this booklet, Discretionary DSUs will be referred to as DSUs.

The Value of a DSU

The Value of a DSU on any particular date is calculated as follows:

The average of the closing prices for Alcan Common Shares in board lots on The Toronto Stock Exchange and in round lots on the New York Stock Exchange over the five consecutive trading days preceding the particular date in question.

The Value of a DSU related to the TSR Value is calculated in U.S. currency. The Value of a DSU related to the EPA Value is calculated in Canadian currency.  Any currency conversion required is to be made at the Bank of Canada noon rate of exchange on the relevant day for the purpose of calculating the Value of a DSU. 

This Value is used for calculation purposes under the DSUP, such as, to determine the number of DSUs and Additional DSUs to be issued to you (see page 8) and the amounts payable on the redemption of your DSUP account (see page 10) and the termination of the DSUP (see page 13).

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Benefits

EPA DSUs issued under DSUP	If you choose to participate in DSUP with respect in your EPA Value, you will receive DSUs calculated by dividing the portion of your EPA Value determined according to your election by the Value of one DSU (calculated as described above on the last day of the year preceding the EPA year) and the result will be rounded to three decimal places. These EPA DSUs will be credited to your DSUP account on the same day as the disbursement of the balance of your EPA Value (if any). Here is an example:
	Your Election: Your EPA Value: DSU Value: EPA DSUs to be issued to you:	50% under DSUP Can. $50,000.00 Can. $46.40 50% of 50,000.00    =    538.793 EPA DSUs          46.40
	The balance of your EPA Value will be paid to you in cash under the EPA Plan on the same day. Effective the next calendar quarter after that day, these newly‑issued DSUs will earn Additional DSUs in respect of cash dividends declared on Alcan Common Shares (see below).
TSR DSUs issued under DSUP	If you choose to participate in the DSUP with respect to your TSR Value, you will receive TSR DSUs calculated by dividing the portion of your TSR Value determined according to your election by the Value of one DSU (calculated as described above on the last day of the Performance Period) and the result will be rounded to three decimal places. These TSR DSUs will be credited to your DSUP as soon as possible after the end of the Performance Period. Here is an example:
	Your Election: Your TSR Value: DSU Value: TSR DSUs to be issued to you:	50% under the DSUP U.S. $150,000.00 U.S. $50.00 50% of 150,000   =   1,500.00 TSR DSUs 50.00
	The balance of your TSR Value will be paid to you in cash under the TSR Performance Plan. Commencing in the next quarter following the end of the applicable Performance Period, these newly‑issued TSR DSUs will earn additional DSUs in respect of cash dividends declared on Alcan Common Shares (see below).

 

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Discretionary DSUs issued under DSUP	If you are granted Discretionary DSUs, you will be advised in writing by Alcan of the number of such DSUs to be credited to your DSUP account, the date on which such DSUs are granted, the value of such DSUs as at the date of grant and the vesting requirements (if any) applicable to such DSUs. Effective the next calendar quarter after the date of grant of the Discretionary DSUs, these newly‑issued DSUs will earn Additional DSUs in respect of cash dividends declared on Alcan Common Shares (see below).
Additional DSUS in respect of Dividends on Alcan Shares	Whenever a cash dividend is declared on Alcan Common Shares, your DSUP account will be credited with Additional DSUs as explained below: 1.  Dividends on Alcan Common Shares are declared in U.S. currency. The Canadian currency equivalent of any such dividend will be determined at the Bank of Canada noon rate of exchange on the date that dividend is declared for the EPA DSUs. 2.  The EPA DSUs, TSR DSUs and discretionary DSUs (if any) in your account will qualify, for a credit computed on the basis of the dividend declared (excluding any DSUs of the above issued in the same calendar quarter as the dividend declaration date). 3.  The dollar amount (in Canadian currency for the EPA DSUs and in U.S. currency for TSR DSUs) obtained by multiplying your qualifying DSUs by the dividend calculated as in (1) above is divided by the Value of a DSU (calculated as on the date of dividend declaration) and the result is rounded to three decimal places. 4.  The resulting DSUs are credited to your account.
	Here is an example:
		EPA DSUs	TSR DSUs
	Your current balance of DSUs: DSUs issued this calendar quarter Balance qualifying for Additional DSUs DSU Value on dividend declaration Date Dividend declared per Alcan share Additional DSUs to be credited Your new balance of DSUs	2,903.447                    538.793                 2,364.654              Can. $47.05                Can. $0.23 2,364.654 x 0.23  =  11.559                47.05                 2,915.006	2,903.447                 538.793              2,364.654       U.S. $36.01         U.S. $0.15 2,364.654 x 0.15 = 9.850              36.01              2,913.297

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Vesting

All EPA DSUs and all TSR DSUs are fully vested in your favour as soon as they are credited to your DSUP account. Discretionary DSUs will vest in accordance with the terms of the written agreement between you and Alcan relating to the issue of such DSUs (see page 8). For greater certainty, additional DSUs issued in respect of dividends declared on Alcan Common Shares (see page 8) will have the same vested status as the DSUs to which those additional DSUs relate. This means that additional DSUs corresponding to the EPA DSUs and TSR DSUs in your DSUP account will be fully vested in your favour as soon as they are credited to your account and additional DSUs corresponding to Discretionary DSUs (if any) in your DSUP account will vest at the same time as the corresponding Discretionary DSUs.

In‑Service Withdrawals

As long as you are employed by an Alcan Group Company, you may not withdraw any part of the balance in your DSUP account.

Adjustments

In the event of a stock split, stock dividend, combination or exchange of shares by Alcan, a merger or any other event which materially affects the Alcan Common Shares, the necessary and proportionate adjustments, as determined by the Alcan Board, will be made with respect to the EPA DSUs, TSR DSUs and vested discretionary DSUs (if any) in your DSUP account.

Beneficiary

Upon joining the DSUP for the first time, you are required to complete a Beneficiary Designation Form indicating the name of your beneficiary (who must be either your spouse or the legal representative of your estate) to whom the benefits under your DSUP account will be paid in the event that you die while your DSUP account is still open. It is not necessary to complete a Beneficiary Designation Form every year; however, a Change of Beneficiary Form must be completed if you wish to change the name of your beneficiary at any time.

If your designated beneficiary, predeceases you or if you have not designated a beneficiary, all benefits under your DSUP account are payable to the legal representative of your estate.

Page 9

Redemption

	The EPA DSUs, TSR DSUs and vested discretionary DSUs (if any) in your DSUP account may be redeemed in whole or in part only when you are no longer employed by any Alcan Group Company or following your retirement from the Alcan Group of Companies or following death. Discretionary DSUs (if any) which are not vested at the time of your termination of employment, retirement or death shall be forfeited and you (and your beneficiary or legal representative) will have no further right or interest in such DSUs. The EPA DSUs, TSR DSUs and vested discretionary DSUs in your DSUP account may be redeemed completely on one date or in portions on several dates.  This redemption of DSUs will be made as follows:
Termination of employment or Retirement	You may redeem your DSUs not earlier than the date of your termination of employment or retirement but not later than 15 December of the next calendar year. In order to redeem your EPA DSUs, TSR DSUs and vested discretionary DSUs (if any) as above, you must file your Redemption Form indicating your chosen date of redemption determined as above the portion of EPA DSUs, TSR DSUs and vested discretionary DSUs (if any) that you choose to redeem on such date.  The Redemption Form must be received by Alcan at least five working days prior to the chosen date of redemption. If you do not include a redemption date, it will be assumed to be five working days after receipt of your Redemption Form (but not earlier than the date of your termination of employment or retirement and not later than 15 December of the next calendar year following your termination of employment or retirement). On the date of redemption determined as above, the EPA DSUs, TSR DSUs and vested Discretionary DSUs (if any) in your DSUP account will be redeemed in cash based on the Value of a DSU as determined on page 6.
Death	If you should die prior to termination of employment or retirement, your designated beneficiary or (if you have no surviving beneficiary) the legal representative of your estate may redeem your EPA DSUs, TSR DSUs and vested Discretionary DSUs (if any) any time between the date of your death and 15 December of the following year by filing a Redemption Form. If you should die after termination of employment or retirement but without having filed a Redemption Form, your beneficiary or (if you have no surviving beneficiary) the legal representative of your estate may redeem your EPA DSUs, TSR DSUs and vested Discretionary DSUs by filing a Redemption Form on or before 15 December of the year following your termination of employment or retirement.

Page 10

	If you should die after termination of employment or retirement and after filing a Redemption Form, your EPA DSUs, TSR DSUs and vested Discretionary DSUs will be redeemed in accordance with your Redemption Form and neither your designated beneficiary nor the legal representative of your estate will be permitted to file another Redemption Form.
	All other rules as stated in this Redemption section will apply.
Change of Control	If you retire, die or are terminated, within twelve months of a Change of Control Event of Alcan, the EPA DSUs, TSR DSUs and vested Discretionary DSUs (if any) in your DSUP account will be redeemed in cash on the date of retirement, death or termination based on the Value of DSU as determined on page 6 as of the date of a Change of Control Event. The amount of the redeemed DSUs must be paid no later than twelve months from the Change of Control Event. If you retire, die or are terminated more than twelve months after the Change of Control Event of Alcan, the EPA DSUs, TSR DSUs and vested Discretionary DSUs (if any) in your DSUP account will be subject to the redemption procedure described on page 10. A "Change of Control Event" shall mean any of the following: 1.         the acquisition of direct or indirect beneficial ownership of 50% or more of the Alcan Common Shares by any person or group of associated persons acting together or jointly and in concert; 2.         any amalgamation, merger, arrangement, reorganization or consolidation (or substantially similar transactions or series of transactions) in respect of Alcan, other than where (a) the Alcan Common Shares of Alcan after the transaction would continue to represent two-thirds or more of the combined voting securities of the resulting entity, without a concurrent substantial change in the composition of Alcan's Board of Directors, or (b) it is effected for the purpose of implementing a recapitalization, without there also occurring an acquisition of direct or indirect beneficial ownership of 20% or more of the Alcan Common Shares by any person or group of associated persons acting together or jointly and in concert; 3.         the approval by Alcan's Shareholders of a plan for the complete or effective dissolution of Alcan; 4.         the issuance of Alcan Common Shares in connection with an exchange offer acquisition if such issuance results in the Shareholders holding less than two-thirds of the combined voting securities of the resulting entity and there is a concurrent substantial change in the composition of Alcan's Board of Directors; 5.         the sale of all or substantially all of the assets of Alcan, other than (a) to an owner or owners of at least two-thirds of Alcan's Common Shares, or (b) in a manner so that the acquirer is thereafter controlled as to at least two-thirds of its voting securities by the owner or owners of at least two-thirds of Alcan's Common Shares, provided in each case that there is no concurrent substantial change in the composition of the Alcan's Board of Directors;

Page 11

	6.         the completion of the corporate approvals necessary on the part of Alcan to give effect to any amalgamation, merger, arrangement, reorganization, continuance or consolidation (or substantially similar transactions or series of transactions) in respect of Alcan pursuant to which Alcan will not survive as a stand-alone publicly-traded corporation - without limitation Alcan shall be deemed not to have survived as a stand-alone publicly-traded corporation if (a) there is no longer a liquid market for the Alcan Common Shares on the Toronto or New York stock exchanges, (b) more that 50% of the Alcan Common Shares become held by any person or group of associated persons acting together or jointly and in concert, or (c) Alcan becomes a subsidiary of another corporation; or 7.         any occurrence pursuant to which individuals who were the incumbent Directors on 1 November 2005 cease for any reason to constitute at least two-thirds of Alcan's Board, provided that any individual who became a Director subsequently whose election or appointment was approved by at least two-thirds of the incumbent Directors shall also be considered to be an incumbent Director, but further provided that no individual elected or appointed initially as a result of an actual or threatened proxy contest or solicitation of proxies or in connection with amalgamation, merger, arrangement, reorganization, consolidation or share exchange acquisition transaction (or substantially similar transactions or series of transactions) shall be deemed to be an incumbent Director. For the purposes hereof a substantial change in the composition of the Alcan's Board of Directors shall be any change involving the departure of at least three Directors or any other change pursuant to which the Directors in office prior thereto cease to constitute at least two-thirds of the members of the Board.  In addition, any "change of control event" which occurs for the purposes of a change of control agreement in force between Alcan and an employee of Alcan or one of its subsidiaries as of the date hereof shall be deemed to be a Change of Control Event hereunder in relation to that employee.
Automatic Redemption	If you, your designated beneficiary or the legal representative of your estate do not file the Redemption Form as described above, then the redemption shall take place on 15 December of the next calendar year following the year of the earliest of your termination of employment, retirement or death.
Additional DSUs after Termination of employment, Retirement or Death	During the period between termination of employment, retirement or death and the actual payment date, your DSUP account will be credited with Additional DSUs whenever cash dividends are declared on Alcan Common Shares (see page 8).
Payment of redeemed DSUs	The cash value of your DSUP account, determined as above, will be paid by the Alcan Group Company in Canada that last employed you (Final Canadian Alcan Employer).  If you were employed by more than one Alcan Group Company in Canada while you participated in the DSUP, your Final Canadian Alcan Employer shall be reimbursed by

Page 12

each of your other Alcan employers in Canada for an amount equal to the portion of the EPA DSUs, TSR DSUs and vested discretionary DSUs redeemed by you, including any amount withheld in respect of taxes and other source deductions, that is attributable (as determined by the DSUP administrator) to your period of employment with each such Alcan employer in Canada.  If you were employed by only one Alcan Group Company in Canada while you participated in the DSUP, there will be no such reimbursement and the EPA DSUs, TSR DSUs and vested discretionary DSUs redeemed by you shall be paid only by your Final Canadian Alcan Employer.

The cash value of your DSUP account, determined as above, will in any event be paid on or before the earlier of (a) 30 days from the date of redemption or (b) 31 December of the next calendar year following the year of the earliest of your termination of employment from the Alcan Group of Companies, retirement or death.

Federal and Provincial taxes will be deducted from such payment as required by law irrespective of the country of residence at the time of redemption.

Page 13

Risks and Uncertainties

The Value of a DSU is based on the price of an Alcan Common Share (see page 6). No amount shall be paid under the DSUP, the EPA Plan, the TSR Performance Plan, or any other arrangement (nor will any other form of benefit be conferred) to compensate you or your beneficiary or estate, as the case may be, should the price of an Alcan Common Share be lower on redemption than at the time of election.

Unless otherwise determined by the Board, the DSUP will remain an unfunded obligation of Alcan and all benefits payable under the DSUP represent merely unfunded, unsecured promises of Alcan to pay a sum of money in the future. No funds will be contributed by any person to a third party or otherwise set aside to secure benefits under the DSUP.

Non-Alienation

Except for the designation of your beneficiary (see page 9), no transfer by you or your beneficiary or estate, as the case may be, of any right to any payment or benefit under the DSUP, whether by operation of law or otherwise, and whether by means of alienation by sale, transfer, assignment, bankruptcy, pledge, attachment, charge or encumbrance of any kind, shall vest the transferee with any interest or right, and any attempt to so alienate, sell, transfer, pledge, attach, charge or otherwise encumber any such amount, whether presently or thereafter payable, shall be void and of no force or effect.

Page 14

Amendment or

Termination of DSUP by

Alcan

The DSUP may be amended or terminated at any time by the Alcan Board of Directors provided that such amendment or termination shall not reduce any rights which you have acquired prior to the amendment or termination date. No such amendment or termination shall contravene the requirements of Income Tax Regulation 6801(d). The Board of Directors will determine the termination date of the DSUP.

In the event of termination of the DSUP and for greater certainty, any EPA Value granted to you after the date the DSUP is terminated will be paid under the EPA Plan in cash, and no part of such EPA Value will be issued in DSUs and any TSR Value granted to you after the date the DSUP is terminated will be paid under the terms of the TSR Performance Plan. Additional DSUs in respect of dividends declared on Alcan Common Shares will not continue to accumulate in your DSUP account. No new participant will be admitted to the DSUP after that date.

If the DSUP is terminated, the cash value of all DSUs in your account will be determined in accordance with page 6 on the date of the termination of the DSUP and these DSUs will be redeemed as soon as possible following the termination of the DSUP.

Administration

Once every year, you will be provided with a statement showing the transactions in your DSUP account including the vested status of your Discretionary DSUs (if any).

On‑going administration of the DSUP will be handled jointly by Alcan's Corporate Human Resources (Executive Compensation) Department and Alcan Compensation Services Canada.

The DSUP is governed by the laws of the Province of Québec and the laws of Canada.

Page 15

If any part of the DSUP is determined to be void or unenforceable, the validity and enforceability of remaining parts of the DSUP will not be affected as a consequence.

Nothing contained in the DSUP will be deemed to give an employee the right to be retained in the service of any Alcan Group Company or to interfere with the rights of any Alcan Group Company to discharge or lay off an employee at any time.

Page 16

ALCAN INC. DEFERRED SHARE UNIT PLAN

Annual Election Form for the EPA Year _________________

I,                                                                                  , hereby exercise my option with respect to participation in the Alcan Deferred Share Unit Plan (DSUP) in respect of the value of my EPA for the above EPA year as follows:

         %     in DSUP

         %     in cash

  100%     Total

I understand and acknowledge that:

1. This election is irrevocable, and

2. I have read and understood the booklet setting out the terms of the DSUP.

3. For the EPA Year commencing                              , my election to participate in the DSUP will be conditional upon receipt by Alcan of the advance tax ruling described on page 3 of the booklet setting out the terms of the DSUP.

I hereby recognize that any advantage derived from my participation in the DSUP is solely as a result of a provision of the Canadian Tax Laws and therefore has no compensation value.  If I become ineligible to participate in the DSUP by virtue of an international assignment or otherwise, I will receive no compensation from Alcan for the loss of such eligibility.

Signature

Employee Number

Date

This election form must be returned by _______________ to the Plan Administrator; or to Alcan's Human Resources (Executive Compensation) Department.

If you do not return this form as aforesaid, you mill be deemed to have declined participation in the DSUP for the above EPA year.

Page 17

ALCAN INC. DEFERRED SHARE UNIT PLAN

TSR Value Election Form for the Performance Period

commencing                               and ending                                     

I,                                                                                  , hereby exercise my option with respect to participation in the Alcan Deferred Share Unit Plan (DSUP) in respect of the value of my TSR Performance Plan for the above Performance Period as follows:

         %     in DSUP

         %     in cash

  100%     Total

I understand and acknowledge that:

1. This election is irrevocable, and

2. I have read and understood the booklet setting out the terms of the DSUP.

I hereby recognize that any advantage derived from my participation in the DSUP is solely as a result of a provision of the Canadian Tax Laws and therefore has no compensation value.  If I become ineligible to participate in the DSUP by virtue of an international assignment or otherwise, I will receive no compensation from Alcan for the loss of such eligibility.

Signature

Employee Number

Date

This election form must be returned at least 12 months prior to the end of the Performance Period to the Plan Administrator; or to Alcan's Human Resources (Executive Compensation) Department. 

If you do not return this form as aforesaid, you mill be deemed to have declined participation in the DSUP for the above Performance Period.

Page 18

ALCAN INC. DEFERRED SHARE UNIT PLAN

Beneficiary Designation Form

I,                                    , being a Participant of the Deferred Share Unit Plan (DSUP) hereby designate the following person as my Beneficiary for purposes of the DSUP and acknowledge that said person is:

Name:                                                                       

Address:                                                                   

Under the terms of the DSUP, I reserve the right to revoke this designation and to designate another person as my Beneficiary.

Signature

Employee Number

Date

Page 19

ALCAN INC. DEFERRED SHARE UNIT PLAN

Change of Beneficiary Form

I,                                              , being a Participant of the Deferred Share Unit Plan (DSUP) hereby revoke the Designation of                                                as my Beneficiary for purposes of the DSUP and designate instead:

Name:                                                                       

Address:                                                                   

Under the terms of the DSUP, I reserve the right to revoke this designation and to designate another person as my Beneficiary.

Signature

Employee Number

Date

 Page 20

ALCAN INC. DEFERRED SHARE UNIT PLAN

Redemption Form

1.        Participant's name:                                                                                             

2.        I am:

___    the Participant

___    the Beneficiary of the Participant

___    a legal representative of the estate of the Participant

3.        I hereby wish to redeem the Deferred Share Units vested in the name of the Participant in following proportion:

___    Partial Redemption:                     _____ % of Deferred Share Units

___    Complete Redemption (i.e. 100% of Deferred Share Units)

4.    I hereby wish to redeem the Deferred Share Units on the following date:

Redemption Date*

Signature

Employee Number (if applicable)

Date

*Please refer to the Deferred Share Unit Plan Booklet for instructions.

Page 21

EX-21

EXHIBIT 21:  SUBSIDIARIES, RELATED COMPANIES, ETC.

With the exception of a number of Subsidiaries which, considered in the aggregate, would not constitute significant Subsidiaries, the Subsidiaries of Alcan, as of 31 December 2005, are listed below.  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 and 11.

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 ALUMINIUM AG	Switzerland	100.00
ALCAN PACKAGING RORSCHACH AG	Switzerland	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
ALCAN PACKAGING CAPSULES OF CALIFORNIA, LLC	California	100.00
PECHINEY METALS LLC	Delaware	100.00
ALCAN INTERNATIONAL NETWORK USA INC.	New York	92.88 (9)
ALCAN INTERNATIONAL NETWORK CANADA INC.	Quebec	100.00
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 HOLDINGS, INC.	Delaware	100.00
ALCAN ROLLED PRODUCTS - RAVENSWOOD, LLC	Delaware	100.00
PECHINEY CAST PLATE, INC.	Delaware	100.00
HOWMET INSURANCE COMPANY, INC.	Vermont	100.00
PECHINEY PLASTIC PACKAGING TEXAS, INC.	Delaware	100.00
CEBAL MEXICANA LP	Texas	99.00 (31)
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
PMC LEASE CO.	Delaware	100.00
PRP PROPERTY AND EQUIPMENT COMPANY, LLC	Delaware	100.00
TECHPACK AMERICA LLC	Delaware	100.00

1

ALCAN INC.
Subsidiaries, Related Companies, Etc.	Organized Under the Laws of	% of Voting shares Held by Immediate Owner
HENLOPEN MANUFACTURING CO. INC.	New York	100.00
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 (70)
TECHPACK LATIN AMERICA S.A.	Venezuela	100.00
TPI MEXICANA S.A. de C.V.	Mexico	99.98 (73)
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 INTERNATIONAL CORPORATION	Delaware	100.00
BALTEK LIMITED	England and Wales	100.00
PACIFIC TIMBER LIMITED	England and Wales	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 (54) (55) (56) (57)
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 (49) (50)
SANLAM CORPORATION	New York	100.00
ALCAN EUROPE LIMITED	England and Wales	100.00
ALCAN FINANCES B.V.	Netherlands	100.00
ALCAN FINANCES (Bda) LTD.	Bermuda	100.00
ALCAN ASIA LIMITED	Hong Kong	100.00
ALCAN PACKAGING (SUZHOU) CO., LTD	China	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
NINGXIA DABA POWER GENERATING COMPANY LIMITED	China	43.50
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 (46)
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	9.10 (60)
ALCAN HOLDING ITALIA S.p.A.	Italy	100.00
ALCAN PACKAGING ITALIA S.r.l.	Italy	89.00 (10)
bp EUROPACK S.r.l.	Italy	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 PACKAGING CAPSULES OF AUSTRALIA PTY LTD	Australia	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 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	Island of Jersey	100.00
ALCAN FINANCE JERSEY LIMITED	Island of Jersey	100.00
ALCAN DÉCIN EXTRUSIONS s.r.o.	Czech Republic	100.00
ALCAN FINANCES SWITZERLAND AG	Switzerland	100.00
ALCAN HOLDINGS EUROPE B.V.	Netherlands	100.00
A-L FINANCIAL PRODUCTS LTD.	England and Wales	100.00
ALCAN DISTRIBUZIONE srl	Italy	100.00
ALCAN EXTRUSIONS SLOVENSKO s.r.o.	Slovakia	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	98.75
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	100.00

3

ALCAN INC.
Subsidiaries, Related Companies, Etc.	Organized Under the Laws of	% of Voting shares Held by Immediate Owner
DEUTSCHE ALUMINIUM VERPACKUNG RECYCLING GmbH	Germany	30.00
ALCAN HOLDINGS NEDERLAND B.V.	Netherlands	100.00
ALCAN NEDERLAND B.V.	Netherlands	100.00
S.A. ALCAN BELGIUM N.V.	Belgium	99.37 (69)
ALCAN PACKAGING AMSTERDAM BV	Netherlands	100.00
ALCAN PACKAGING BRABANT BV	Netherlands	100.00
ALCAN PACKAGING ZUTPHEN BV	Netherlands	100.00
ALU-VASTGOED B.V.	Netherlands	100.00
ALUMINIUM & CHEMIE ROTTERDAM B.V.	Netherlands	53.30 (24)
ALCAN HOLDINGS UK LIMITED	England and Wales	100.00
ALCAN PACKAGING CRAMLINGTON LTD.	England and Wales	100.00
LAWSON MARDON PACKAGING LTD.	England and Wales	100.00
ALCAN PACKAGING UK LTD	England and Wales	100.00
KOTERS (LIVERPOOL) LIMITED	England and Wales	100.00
LAWSON MARDON FIBRENYLE LTD.	England and Wales	100.00
FIBRENYLE (CORBY) LIMITED	England and Wales	100.00
LAWSON MARDON FLEXIBLE LIMITED	England and Wales	100.00
MARDON FLEXIBLE PACKAGING (KENTON) LIMITED	England and Wales	100.00
LAWSON MARDON SMITH BROTHERS LTD.	England and Wales	100.00
LMG IRIDON LIMITED	England and Wales	100.00
LAWSON MARDON THERMOPLASTICS LTD.	England and Wales	100.00
WHEATON UK LTD.	England and Wales	100.00
LAWSON MARDON NORTHERN LIMITED	England and Wales	100.00
LAWSON MARDON READING LTD.	England and Wales	100.00
STALCON PLASTICS LIMITED	England and Wales	100.00
ALCAN PACKAGING (UK SALES) LTD.	England and Wales	100.00
HEADLEY (READING) LIMITED	England and Wales	100.00
HEADLEY LTD.	England and Wales	100.00
LUSTRETEX LTD	England and Wales	100.00
THE UV COMPANY LIMITED	England and Wales	100.00
UVIPAK (FINISHING) LIMITED	England and Wales	100.00
LAWSON MARDON GROUP INTERNATIONAL LIMITED	England and Wales	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 SANAYI VE TICARET ANONIM SIRKETI	Turkey	100.00
LAWSON MARDON PACKAGING SALES LTD.	England and Wales	100.00
ALCAN JAPAN LTD.	Japan	100.00
ALCAN PACKAGING MOSCOW LTD.	Russia	100.00
ALCAN PACKAGING ST.PETERSBURG 000	Russia	100.00
ALCAN PACKAGING ZLOTOW SP. ZO.O.	Poland	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 and Wales	99.00 (48)
ALCAN PACKAGING KREUZLINGEN AG (SA/LTD.)	Switzerland	100.00

4

ALCAN INC.
Subsidiaries, Related Companies, Etc.	Organized Under the Laws of	% of Voting shares Held by Immediate Owner
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 (45)
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	100.00
ALCAN PROPACK CHENGDU CO LTD	China	40.00
EVERWEAL INTERNATIONAL LIMITED	Hong Kong	100.00
HUIZHOU PROPACK PLASTIC LIMITED	China	100.00
JIANGYIN PROPACK ADVANCED PACKING CO., LIMITED	China	100.00
JIANGYIN PROPACK PACKING CO., LIMITED	China	100.00
PROPACK HUIZHOU LIMITED	China	73.47 (58)
PROPACK HUIZHOU NEW MATERIAL CO LTD	China	100.00
VPS PROPACK BEIJING CO., LTD.	China	55.00 (75)
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	100.00
MINERAÇÃO OURO VERMELHO LTDA.	Brazil	100.00
MINERAÇÃO RIO DO NORTE S.A.	Brazil	12.50
TPI MOLPLASTIC Ltda	Brazil	100.00
ALCAN REALTY LIMITED	Canada	100.00
ALCAN SHIPPING SERVICES LIMITED	Canada	100.00
ALCAN SMELTERS AND CHEMICALS LIMITED	Canada	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

5

ALCAN INC.
Subsidiaries, Related Companies, Etc.	Organized Under the Laws of	% of Voting shares Held by Immediate Owner
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 (61)
QUEENSLAND ALUMINA SECURITY CORPORATION	Delaware	20.00
TRANS TERRITORY PIPELINE PTY LIMITED	Australia	100.00
ALUMINERIE ALOUETTE INC.	Quebec	20.00 (17)
ALUMINUM COMPANY OF CANADA LIMITED	Canada	100.00
ALCAN FINANCES USA LLC	Delaware	100.00
BRITISH ALCAN ALUMINIUM plc	England and Wales	100.00
ALCAN CHEMICALS EUROPE LIMITED	England and Wales	100.00
ALCAN CHEMICALS LIMITED	England and Wales	100.00
ALCAN FARMS LIMITED	England and Wales	100.00
TBAC LIMITED	England and Wales	100.00
ALCAN ALUMINIUM UK LIMITED	England and Wales	85.00 (2)
BRITISH ALCAN OVERSEAS INVESTMENTS LIMITED	England and Wales	100.00
SARATOGA RESOURCES N.V.	Netherlands 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 and Wales	50.00
INTERGLASS INC.	Canada	100.00
PECHINEY	France	100.00
ALCAN ALPHA 2004	France	99.76
ALCAN BETA 2004	France	100.00
ALUMINIUM DE GRÈCE S.A.I.C.	Greece	7.18
DELPHES & DISTOMON (SOCIÉTÉ MINIÈRE DE)	Greece	99.98
ALCAN CENTRE DE RECHERCHES DE VOREPPE	France	100.00
ALCAN CMIC SAS	France	100.00
ALCAN DELTA 2004	France	100.00
ALCAN EPSILON 2004	France	100.00
ALCAN FINANCES (IRELAND) COMPANY	Ireland	100.00
ALCAN FRANCE EXTRUSIONS SAS	France	100.00
ALCAN GAMMA 2004	France	100.00
ALCAN PACKAGING FRANCE	France	100.00
ALCAN PACKAGING GLASS PHARMA	France	100.00
ALCAN PACKAGING SAINT MAUR	France	100.00
CIVILE IMMOBILIÈRE CELI	France	99.50 (34)
ALCAN PACKAGING SARREBOURG SAS	France	100.00
ALCAN PACKAGING SELESTAT	France	100.00
ALCAN PECHINEY FINANCE S.A.	France	99.96 (14)
ALCAN 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
ALUMINIUM DU MAROC S.A.	Morocco	15.69 (18)
PECHINEY AVIATUBE	France	100.00
PECHINEY SERVICES FINANCE	France	46.53 (52) (53)

6

ALCAN INC.
Subsidiaries, Related Companies, Etc.	Organized Under the Laws of	% of Voting shares Held by Immediate Owner
PECHINEY SOFTAL	France	100.00
RHENAROLL S.A.	France	49.85
ALUMINIUM DUNKERQUE	France	100.00
ALUMINIUM PECHINEY	France	98.75 (19)
AFFIMET	France	100.00
ALCAN  ABRASIFS RÉFRACTAIRES CERAMIQUES	France	100.00
ALUCAM - COMPAGNIE CAMEROUNAISE DE L'ALUMINIUM	Cameroon	46.67
ALUBASSA	Cameroon	70.09 (15)
ALUCONGO	Congo	55.86 (16)
CENTRE MÉDICAL DES ENTREPRISES DE LA SANAGA	Cameroon	74.89 (32) (33)
COLALU	Central African Republic	57.35 (35)
HOSTELLERIE DE LA SANAGA	Cameroon	67.50
SOCATRAL - SOCIÉTÉ CAMEROUNAISE DE TRANSFORMATION DE L'ALUMINIUM	Cameroon	52.55 (62)
SOTRALGA - SOCIÉTÉ DE TRANSFORMATION DE L'ALUMINIUM AU GABON	Gabon	38.33 (67)
ALUMINIUM PECHINEY SERVICE	France	99.36 (21)
ALUMINIUM PECHINEY SPV	France	100.00
ALUMINIUM PECHINEY UO 5	France	99.80 (22) (23)
BAOTOU PECHINEY AND BAOLU HIGH PURITY ALUMINIUM COMPANY LIMITED	China	51.00
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	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 - Dormant	Philippines	99.99
PECHINEY TECHNOLOGY LTD.	Quebec	100.00
PECHINEY VÉNÉZUELA, S.A.	Venezuela	100.00
PECHINEY SERVICIOS	Venezuela	100.00
SOCIÉTÉ IMMOBILIÈRE ALPES PROVENCE - SIAP	France	89.44 (65)
CRÉDIT IMMOBILIER DE SAVOIE	France	21.58
SOCIÉTÉ POUR LE DÉVELOPPEMENT DE L'AFRIQUE CENTRALE ET DE L'OUEST -  SODAFE	France	62.85 (66)
BRANDEIS (BROKERS) LIMITED	England and Wales	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
ALCAN EMPAQUES MEXICO, S.A. DE C.V.	Mexico	100.00
ALCAN PACKAGING MEXICO, S.A. DE C.V.	Mexico	100.00
CEBAL MEXICO, S.A. de C.V.	Mexico	100.00
CELPLY S.A. DE C.V.	Mexico	100.00
CEBAL AMERICA RECURSOS HUMANOS S. de R.L. de C.V	Mexico	99.00 (28)
CEBAL AMERICAS DE REYNOSA S. de R.L. de C.V.	Mexico	99.00 (29)
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

7

ALCAN INC.
Subsidiaries, Related Companies, Etc.	Organized Under the Laws of	% of Voting shares Held by Immediate Owner
PECHINEY BÂTIMENT	France	100.00
PECHINEY HOLDINGS UK LIMITED	England and Wales	100.00
ALCAN INTERNATIONAL NETWORK UK LIMITED	England and Wales	100.00
ALCAN INTERNATIONAL NETWORK GULF LIMITED	England and Wales	100.00
ALCAN INTERNATIONAL NETWORK LIMITED	England and Wales	100.00
ALUMINIUM PECHINEY (U.K.) LIMITED	England and Wales	100.00
PECHINEY UK LIMITED	England and Wales	100.00
BRANDEIS LIMITED	England and Wales	100.00
CEBAL UK LIMITED	England and Wales	100.00
FEEP HOLDINGS UK LIMITED	England and Wales	100.00
KENPAK (EUROPE) LIMITED	England and Wales	100.00
PECHINEY AVIATUBE LIMITED	England and Wales	100.00
PECHINEY CEBAL PACKAGINGS LTD	England and Wales	100.00
PECHINEY TRADING LIMITED	England and Wales	100.00
TECHPACK U.K. LIMITED	England and Wales	100.00
FINANCIÈRE EUROPÉENNE D'EMBALLAGES PECHINEY	France	100.00
ALCAN PACKAGING ALZIRA SL	Spain	100.00
ALCAN INTERNATIONAL NETWORK ESPANA S.A.	Spain	100.00
CEBAL ENTEC S.A.	Spain	100.00
INDUSTRIAS METALICAS CASTELLO S.A.	Spain	100.00
POLIBOL S.A.	Spain	100.00
SOPLARIL PORTUGAL	Portugal	99.99
ALCAN PACKAGING CAPSULES	France	100.00
ALCAN PACKAGING CAPALUX INC.	Canada	100.00
INDUSTRIAS ALCAN PACKAGING ENOCAP LIMITADA	Chile	99.99 (47)
ALCAN PACKAGING CEBAL VERPACKUNGEN GmbH	Germany	100.00
CEBALSOL s.r.o.	Czech Republic	100.00
ALCAN PACKAGING FLEXIBLE FRANCE	France	100.00
ALCAN LEBENSMITTEL VERPACKUNGEN GmbH	Germany	100.00
ALCAN BETRIEBS-UND VERWALTUN GmbH	Germany	100.00
ALCAN PACKAGING MÜHLTAL GmbH & CO. KG	Germany	100.00
SCHEUCH UNTERSTUETZUNGSKASSE GmbH	Germany	100.00
ALUFIN GmbH TABULAROXID	Germany	100.00
ALCAN PACKAGING FOOD FRANCE	France	100.00
ALCAN PACKAGING ARENZANO SPA	Italy	100.00
AVENIR PRINT SERVICE	France	100.00
ALCAN PACKAGING SKRIVANY s.r.o.	Czech Republic	100.00
CEBAL	France	97.94 (27)
ALCAN PACKAGING MOHAMMEDIA	Morocco	49.39 (11)
AL WIFAQ 5	Morocco	99.95
SOCIÉTÉ MÉTALLURGIQUE DE MOHAMMEDIA - S.M.M.	Morocco	79.00
CEBAL AÉROSOL FRANCE	France	100.00
CEBAL ITALIANA SPA	Italy	96.56 (30)
CEBAL SVENSKA AB	Sweden	100.00
CEBAL TUBA SP ZO.O.	Poland	80.00
CEBAL ZHONGSHAN CO. LTD	China	60.00
COPAL	France	51.00
COTUPLAS	France	76.96 (36)
SOCIÉTÉ MANUFACTURE MAROCAINE DE MOHAMMEDIA - S.M.M.M.	Morocco	99.94
DANAFLEX PACKAGING CORPORATION LIMITED	New Zealand	100.00
PECHINEY BOUTEILLES PLASTIQUES	France	100.00
SOCIÉTÉ DE FINANCEMENT DES RISQUES INDUSTRIELS - SOFIRI	Luxembourg	90.00 (64)
FINANCIÈRE TECHPACK	France	100.00
ALCAN PACKAGING BEAUTY SERVICES	France	100.00

8

ALCAN INC.
Subsidiaries, Related Companies, Etc.	Organized Under the Laws of	% of Voting shares Held by Immediate Owner
BENSON SRL	Italy	100.00
COSMETECH MABLY EUROPE	France	100.00
LIR FRANCE	France	100.00
MT PACKAGING	France	100.00
PT TECHPACK ASIA	Indonesia	95.00
SFG - SOCIÉTÉ FRANÇAISE DE GALVANOPLASTIE	France	100.00
TECHPACK DEUTSCHLAND GmbH	Germany	100.00
FRANCE ALUMINIUM RECYCLAGE SA	France	59.99
INTERFILIÈRES MATÉRIAUX	France	20.00
GIE - PECHINEY RECHERCHE	France	93.00 (39) (40) (41) (42) (43) (44)
LAWSON MARDON TRENTESAUX SA	France	99.99
PECHINEY CONSOLIDATED AUSTRALIA PTY LIMITED	Australia	55.52 (51)
ALCAN PRIMARY METAL AUSTRALIA (PTY) LTD	Australia	100.00
ALUMINIUM PECHINEY HOLDINGS PTY LTD	Australia	99.00 (20)
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	36.05 (71)
TOMAGO ALUMINIUM JOINT-VENTURE	Australia	36.05 (72)
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.	Netherlands	85.00
PECHINEY PHI 2000	France	100.00
PECHINEY WORLD TRADE S.A.S	France	100.00
ALCAN HELLAS S.A.	Greece	99.46 (6)
ALCAN INTERNATIONAL NETWORK AUSTRALASIA (PTY) LIMITED	Australia	100.00
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 BRASIL LTDA.	Brazil	100.00
ALCAN INTERNATIONAL NETWORK DEUTSCHLAND GmbH	Germany	100.00
COFRANEX Gesellschaft für Industrielle Importe und Dienstleistungen mbH	Germany	100.00
ALCAN INTERNATIONAL NETWORK EURASIA LLC	Russia	100.00
ALCAN INTERNATIONAL NETWORK HANDELSGESELLSCHAFT m.b.H. AUSTRIA	Austria	100.00
ALCAN INTERNATIONAL NETWORK ITALY	Italy	100.00
ALCAN INTERNATIONAL NETWORK JAPAN	Japan	100.00
ALCAN INTERNATIONAL NETWORK MEXICO, SA DE CV	Mexico	100.00
ALCAN INTERNATIONAL NETWORK NEDERLAND BV	Netherlands	100.00
ALCAN INTERNATIONAL NETWORK NORDIC AS	Denmark	100.00
ALCAN INTERNATIONAL NETWORK PORTUGAL - IMPORTAÇÕES E EXPORTAÇÕES LDA	Portugal	99.87 (8)
ALCAN INTERNATIONAL NETWORK SA  (Pty) Ltd	South Africa	100.00
ALCAN INTERNATIONAL NETWORK SOUTH EAST ASIA PTE LTD	Singapore	100.00
CHROMEX MINING CO (PTY) LIMITED	South Africa	100.00
PECHINEY CHILE LIMITADA	Chile	100.00
PECHINEY DIS TICARET LIMITED SIRKETI	Turkey	99.99
PECHINEY FAR EAST LIMITED	Hong Kong	99.90
ALCAN INTERNATIONAL NETWORK SHANGHAI LIMITED	China	100.00
PECHINEY SVERIGE AB	Sweden	100.00
PECHINEY TRADING FRANCE	France	100.00
SEFRANEX DUBAI LTD	England and Wales	100.00
SEFRANEX	France	100.00

9

ALCAN INC.
Subsidiaries, Related Companies, Etc.	Organized Under the Laws of	% of Voting shares Held by Immediate Owner
SOCIÉTÉ COMMERCIALE PECHINEY EGYPTE SAE	Egypt	95.00 (63)
ALCAN INTERNATIONAL NETWORK MIDDLE EAST LIMITED	Egypt	98.00
QUIMICA E METALURGICA MEQUITAL LTDA	Brazil	100.00
SATMA	France	100.00
SOCIÉTÉ D'ENTREPRISES, CARRIÈRES ET MINES DE L'ESTEREL - S.E.C.M.E.	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 (74)
VAW INTERNATIONAL CAPSULES S.A.S.	France	100.00
PT. ALCAN PACKAGING FLEXIPACK	Indonesia	99.99 (59)
SOCIÉTÉ DES ALUMINES ET BAUXITES DE PROVENCE SARL	France	100.00
SOHAR ALUMINIUM CO. L.L.C.	Oman	20.00
SUBTANEE HOLDING COMPANY LIMITED	Thailand	98.20 (68)
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

(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)    COMPAGNIE GÉNÉRALE DE PARTICIPATION INDUSTRIELLE ET FINANCIÈRE  0.13

(9)    COMPAGNIE GÉNÉRALE DE PARTICIPATION INDUSTRIELLE ET FINANCIÈRE  7.12

(10)   bp EUROPACK S.r.l.  11.00

(11)   SOCIÉTÉ MANUFACTURE MAROCAINE DE MOHAMMEDIA - S.M.M.M.  13.45

(12)   ALCAN SINGEN GmbH  0.10

(13)   SANGTHIEN HOLDING COMPANY LIMITED  25.61

(14)   COMPAGNIE GÉNÉRALE DE PARTICIPATION INDUSTRIELLE ET FINANCIÈRE  0.04

(15)   SOCIÉTÉ POUR LE DÉVELOPPEMENT DE L'AFRIQUE CENTRALE ET DE L'OUEST - SODAFE  12.64

(16)   SOCIÉTÉ POUR LE DÉVELOPPEMENT DE L'AFRIQUE CENTRALE ET DE L'OUEST - SODAFE  25.00

(17)   ALCAN ALUMINIUM QUEBEC AND COMPANY, LIMITED PARTNERSHIP  20.00

(18)   ALCAN PACKAGING MOHAMMEDIA  5.97

(19)   ALCAN RHENALU  1.25

(20)   ALUMINIUM PECHINEY  1.00

(21)   FINANCIÈRE EUROPÉENNE D'EMBALLAGES PECHINEY  0.64

(22)   ALUMINIUM PECHINEY SERVICE  0.04

(23)   ÉLECTRIFICATION CHARPENTE LEVAGE - E.C.L.  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  2.06

(28)   CEBAL MEXICANA LP  1.00

(29)   CEBAL MEXICANA LP  1.00

(30)   CEBAL ITALIANA SPA  3.32

(31)   PECHINEY PLASTIC PACKAGING, INC.  1.00

(32)   HOSTELLERIE DE LA SANAGA  0.05

(33)   SOCATRAL - - SOCIÉTÉ CAMEROUNAISE DE TRANSFORMATION DE L'ALUMINIUM  0.07

(34)   PECHINEY  0.50

10

(35)   SOCIÉTÉ POUR LE DÉVELOPPEMENT DE L'AFRIQUE CENTRALE ET DE L'OUEST - SODAFE  25.00

(36)   ALCAN PACKAGING CEBAL VERPACKUNGEN GmbH  5.00

(37)   ECL SERVICES, INC.  10.00

(38)   ECL SCES AFRICA ENGINEERING   14.29

(39)   ALUMINIUM PECHINEY  1.00

(40)   PECHINEY AVIATUBE  1.00

(41)   SOCIÉTÉ DES FONDERIES D'USSEL  1.00

(42)   ALCAN RHENALU  1.00

(43)   PECHINEY SOFTAL  1.00

(44)   SATMA  1.00

(45)   GOVE ALUMINIUM LIMITED  30.00

(46)   ALUMINIUM PECHINEY  10.47

(47)   ALCAN PACKAGING CAPSULES OF CALIFORNIA, LLC  0.01

(48)   LAWSON MARDON PACKAGING LTD.  1.00

(49)   COMPANIA ECUATORIANA DE BALSA S.A.  41.67

(50)   BALMANTA S.A.  1.25

(51)   PECHINEY HOLDINGS, INC.  44.48

(52)   ALUMINIUM PECHINEY  45.63

(53)   ALCAN CENTRE DE RECHERCHES DE VOREPPE  7.84

(54)   BALMANTA S.A.  20.01

(55)   COMPANIA ECUATORIANA DE BALSA S.A.  10.03

(56)   PRODUCTOS DEL PACIFICO S.A.  10.03

(57)   MADERAS SECAS C.A.   10.03

(58)   EVERWEAL INTERNATIONAL LIMITED  23.65

(59)   ALUMINUM COMPANY OF CANADA LIMITED  0.01

(60)   COMPAGNIE GÉNÉRALE DE PARTICIPATION INDUSTRIELLE ET FINANCIÈRE  6.07

(61)   PECHINEY RESOURCES PTY, LIMITED  20.00

(62)   ALUMINIUM PECHINEY  5.44

(63)   SEFRANEX  5.00

(64)   COMPAGNIE GÉNÉRALE DE PARTICIPATION INDUSTRIELLE ET FINANCIÈRE  10.00

(65)   PECHINEY  10.56

(66)   UGINA  1.95

(67)   SOCIÉTÉ POUR LE DÉVELOPPEMENT DE L'AFRIQUE CENTRALE ET DE L'OUEST - SODAFE  25.00

(68)   ALCAN HOLDINGS (THAILAND) LIMITED  1.80

(69)   ALCAN HOLDINGS SWITZERLAND AG (SA/LTD.)  0.62

(70)   HENLOPEN MANUFACTURING CO. INC.  0.50

(71)   CATHJOH HOLDINGS PTY LIMITED  15.50

(72)   CATHJOH HOLDINGS PTY LIMITED  15.50

(73)   HENLOPEN MANUFACTURING CO. INC.  0.02

(74)   SOCIÉTÉ GÉNÉRALE DE RECHERCHES ET D'EXPLOITATIONS MINIÈRES - SOGEREM  0.02

(75)   ALCAN INC.  20.00

11

EX-23

Exhibit 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. 333-89711 and 333-111555, 333-124528 and 333-128710) of Alcan Inc., of our reports dated 8 March 2006 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 Differences dated 8 March 2006, which appear 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 under the heading "Controls and Procedures" in this Form 10-K.

Montreal, Canada
8 March 2006	/s/ PricewaterhouseCoopers LLP
	PricewaterhouseCoopers LLP

EX-24

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 3rd day of March 2006.

Signed:   /s/ L. Denis Desautels                                               
Name:    L. Denis Desautels
Title:       Director

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 3rd day of March 2006.

Signed:   /s/ Richard B. Evans                                                           
Name:    Richard B. Evans
Title:       Director, Executive Vice President and Chief Operating Officer

 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 3rd day of March 2006.

Signed:   /s/ L. Yves Fortier                                               
Name:    L. Yves Fortier
Title:       Director

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 3rd day of March 2006.

Signed:   /s/ Jean-Paul Jacamon                                               
Name:    Jean-Paul Jacamon
Title:       Director

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 3rd day of March 2006.

Signed:   /s/ William R. Loomis, Jr.                                               
Name:    William R. Loomis, Jr.
Title:       Director

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 3rd day of March 2006.

Signed:   /s/ Yves Mansion                                               
Name:    Yves Mansion
Title:       Director

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 3rd day of March 2006.

Signed:   /s/ Gwyn Morgan                                               
Name:    Gwyn Morgan
Title:       Director

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 3rd day of March 2006.

Signed:   /s/ Christine Morin-Postel                                               
Name:    Christine Morin-Postel
Title:       Director

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 3rd day of March 2006.

Signed:   /s/ H. Onno Ruding                                               
Name:    H. Onno Ruding
Title:       Director

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 3rd day of March 2006.

Signed:   /s/ Guy Saint-Pierre                                               
Name:    Guy Saint-Pierre
Title:       Director

Exhibit 24.11

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 3rd day of March 2006.

Signed:   /s/ Gerhard Schulmeyer                                               
Name:    Gerhard Schulmeyer
Title:       Director

Exhibit 24.12

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 3rd day of March 2006.

Signed:   /s/ Paul M. Tellier                                               
Name:    Paul M. Tellier
Title:       Director

EX-31

Exhibit 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 officer 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 officer 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: 8 March 2006     

                                                                                                                                                  /s/ Travis Engen                                  

Travis Engen

                                                         President and Chief Executive Officer

EX-31

Exhibit 31.2

CERTIFICATION

I, Michael Hanley, 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 officer 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 officer 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: 8 March 2006                                                          

/s/ Michael Hanley                                                                                                                                                                 Michael Hanley

                                                                                                                                      Executive Vice President and

                                                                                                                                      Chief Financial Officer

EX-32

Exhibit 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 31 December 2005 (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: 8 March 2006                                                           /s/ Travis Engen                              

                                                                                        Travis Engen

President and Chief Executive Officer

The foregoing certification is being furnished solely pursuant to § 1350 and is not being filed as part of the Annual Report on Form 10-K or as a separate disclosure document.

EX-32

Exhibit 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 31 December 2005 (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: 8 March 2006                                                           /s/ Michael Hanley                          

                                                                                        Michael Hanley

Executive Vice President and

Chief Financial Officer

The foregoing certification is being furnished solely pursuant to § 1350 and is not being filed as part of the Annual Report on Form 10-K or as a separate disclosure document.

EX-99

Notice of Annual Meeting

of Shareholders

27 April 2006

Proxy Circular

Dear Shareholder:

You are cordially invited to attend the 104^th Annual Meeting of Shareholders of Alcan Inc., which will take place on Thursday, 27 April 2006, in the Auditorium of the Centre Mont-Royal, 2200 Mansfield Street, 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 ensure that your instructions are made known in accordance with the procedures set out in the enclosed Proxy Circular.

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.
27 February 2006

(i)

	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
10	Corporate Governance Practices
16	Report of the Audit Committee
17	Auditors
18	Report on Executive Compensation
22	Performance Graph
23	Executive Officers' Compensation
31	Employment Agreements
31	Directors' Compensation
33	Indebtedness of Directors, Executive Officers and Employees
33	Directors' and Officers' Liability Insurance
33	Additional Information
34	Approval of the Board of Directors
35	Schedule A: Board of Directors Charter
36	Schedule B: Shareholder Proposal

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.

(ii)

Notice of Annual Meeting of Shareholders of Alcan Inc.

The 104^th Annual Meeting of the holders of the Common Shares of Alcan Inc. will be held on Thursday, 27 April 2006 at 10:00 a.m. in the Auditorium of the Centre Mont-Royal, 2200 Mansfield Street, Montreal, Quebec, Canada, for the following purposes: 1.    receiving the financial statements and the Auditors' Report for the year ended 31 December 2005, 2.    electing Directors, 3.    appointing Auditors and authorizing the Directors to fix their remuneration, and   4.     considering a Shareholder Proposal 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 27 February 2006      

1

Proxy Circular

(As of 27 February 2006, 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 27 April 2006 (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.,   "Auditors" means Alcan's external auditors, currently 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 27 April 2006 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 24,   "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,   "Shareholder Proposal" means a proposal duly advanced by certain Shareholders in accordance with the CBCA to the Company for consideration by Shareholders of a specific matter at the Meeting, as set out in Schedule B hereto,   "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.

2

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 $10,000, 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; the appointment of PricewaterhouseCoopers LLP as the Auditors and authorization given to the Directors to fix the Auditors' remuneration; and a Shareholder Proposal. Q:  How will these matters be decided at the meeting? A:   A simple majority of the votes cast, by proxy or in person, will carry each of the matters specified in this Circular. Q:  What documents are available to shareholders? A:   The documents available to Shareholders are the Alcan 2005 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, a consent form for electronic delivery of documents and a voting instruction letter.  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 Street West, Montreal, Quebec, Canada, H3A 3G2.

Q:  Who is entitled to vote? A:   On 27 February 2006, 373,693,379 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 issued 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. To vote your proxy by telephone (in Canada and the U.S. only), you must call 1-866-271-1207.  If your Shares are registered in the name of a nominee, please see "Voting by Non-Registered Shareholders" on page 5.  Q:  What if I plan to attend the meeting and vote in person? A:  If you plan to attend the Meeting on 27 April 2006 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.

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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 business 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 or by telephone, 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 26 April 2006.   Q:  How will my shares be voted if i return my proxy? A:  All Shares represented by a properly executed proxy 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. The named proxyholders 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 and AGAINST the Shareholder Proposal.   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 26 April 2006, 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 2007 annual meeting? A:   The final date for submitting Shareholder Proposals to Alcan is 29 November 2006. 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 it owned 8.6% of Alcan Shares on 31 December 2005.

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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.

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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 2005 and the Auditors' Report for 2005 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 2005 annual report that is being sent to Shareholders who have required it 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.      Shareholder Proposal Attached to this Circular as Schedule B is the Shareholder Proposal which has been submitted for consideration at the Meeting, the supporting statement of the proposing Shareholder and the explanation of the Board of Directors and management of their reasons for opposing this Shareholder Proposal.

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Nominees for Election as Directors

(as at 1 March 2006)

Roland Berger	68, Director since 2002 Munich, Germany	L. Yves Fortier+, c.c., q.c.	70, 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. CGC, HRC, EHSC 7,472 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.  Mr. Fortier is a trustee of the International Accounting Standards Committee. CGC (C), EHSC 1,000 Common Shares 27,178 Deferred Share Units
L. Denis Desautels, o.c., f.c.a.	62, Director since 2003 Ottawa, Ontario	Jean-Paul Jacamon	58, 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 vice chair of the Accounting Standards Oversight Council of the Canadian Institute of Chartered Accountants. CGC, AC (C) 960 Common Shares 5,971 Deferred Share Units		Mr. Jacamon is non-executive chairman of Cameron France Holding 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, ASTEEL and AMEC plc.  CGC, HRC, EHSC 136 Common Shares 4,024 Deferred Share Units
Richard B. Evans	58, Director since 2005 Montreal, Quebec	Yves Mansion	55, Director since 2004 Paris, France
	Mr. Evans has been Executive Vice President and Chief Operating Officer of Alcan since October 2005 and was appointed President and Chief Executive Officer effective 12 March 2006. Prior to joining the Company in 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. 30,702 Common Shares 35,698 Executive Deferred Share Units 588,764 Options to purchase Shares 85,530 Stock Price Appreciation Units		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. CGC, AC, NC 8,282 Deferred Share Units

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Gwyn Morgan	60, Director since 2006 Calgary, Alberta	Guy Saint-Pierre, c.c.	71, Director since 1994 Montreal, Quebec
	Mr. Morgan is executive vice chairman of EnCana Corporation, where he was founding president and chief executive officer until December 2005. From 1994 to 2002, he was president and chief executive officer of Alberta Energy Company which merged with PanCanadian Energy Corporation to create EnCana Corporation. He is the lead director of HSBC Bank Canada, a director of SNC-Lavalin Group Inc. and a member of the energy advisory board of Accenture Ltd. CGC, HRC 15,000 Common Shares		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 its chairman from 1996 to 2002.  He was previously a director of BCE Inc., Bell Canada, Telesat Canada and General Motors of Canada. CGC, HRC, NC 17,734 Common Shares 11,345 Deferred Share Units
Christine Morin-Postel	59, Director since 2003 Neuilly sur Seine, France	Gerhard Schulmeyer	67, Director since 1996 Greenwich, Connecticut
	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, Royal Dutch Shell plc and Pilkington plc. CGC, HRC 9,790 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. CGC, HRC (C) 2,421 Common Shares 11,158 Deferred Share Units
H. Onno Ruding	66, Director since 2004 Brussels, Belgium	Paul M. Tellier, p.c., c.c., q.c.	66, Director since 1998 Montreal, Quebec
	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 and director 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 Citigroup and the Federal Reserve Bank of New York. CGC, AC 112 Common Shares 2,712 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.  From 1985 to 1992, he was Clerk of the Privy Council Office and Secretary to the Cabinet of the Government of Canada. He is a director of McCain Foods, Bell Canada, BCE Inc. and the advisory board of General Motors of Canada.  He is also a strategic advisor to Société Générale (Canada). In 2005, Mr. Tellier was an advisor to the Government of Canada in the softwood lumber negotiations with the United States. CGC, AC, EHSC (C) 1,969 Common Shares 19,123 Deferred Share Units

 

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Milton K. Wong, c.m.	67, Director since 2003 Vancouver, British Columbia	Committee Memberships CGC:       Corporate Governance Committee AC:         Audit Committee HRC:       Human Resources Committee EHSC:     Environment, Health and Safety Committee NC:         Nominating Committee C:           Committee chairman + Mr. Fortier is a former 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 issued on 17 May 2004 as a result of Nortel's failure to file financial statements in a timely manner. The cease trade order was lifted on 21 June 2005.
	Mr. Wong is non-executive chairman of HSBC Asset Management (Canada) Ltd.   He was founder and chairman of M. K. Wong and Associates until it was sold in 1996 to HSBC. Mr. Wong is Chancellor Emeritus of Simon Fraser University of Burnaby, British Columbia. 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 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. CGC, AC, HRC 40,000 Common Shares 10,890 Deferred Share Units

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Corporate Governance Practices

Alcan has rigorous corporate governance practices, which the Board and management believe 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 U.S. 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 National Instrument 58-101 "Disclosure of Corporate Governance Practices" adopted by the Canadian Securities Administrators ("CSA Disclosure Practices") and regulatory requirements and ensure transparency and effective governance of the Company.    Alcan's Board regularly reviews its corporate governance practices in light of developing requirements and practices 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. The Board of Directors The Board has the responsibility for the stewardship of the Company, including the responsibility to require that it is managed in the interest of its Shareholders as a whole, while taking into account the interests of other stakeholders.   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 committees of the Board, 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 plans, (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.  The charter of the Board of Directors is reviewed annually and is posted on Alcan's Internet site (www.alcan.com) and is attached to this Proxy Circular as Schedule A. 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. 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 independent of management, in accordance with regulatory and stock exchange requirements. 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. The definition of an Independent Director under the Guidelines on Independence encompasses the definition of an "independent" director within the meaning of the CSA Disclosure Practices and 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 must not have any 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"). 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 conforms to the audit committee member independence qualification within the meaning of SOX. To meet 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.  

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The present Board is composed of fifteen Directors.  Travis Engen is President and CEO of Alcan; Richard B. Evans is Executive Vice President and Chief Operating Officer of Alcan.  Except for Messrs. Engen and Evans, all Directors are Independent Directors. In particular, the Board has determined that Mrs. Morin-Postel and Messrs. Berger, Desautels, Fortier, Jacamon, Loomis, Mansion, Morgan, Ruding, Saint-Pierre, Schulmeyer, Tellier and Wong are Independent Directors. Messrs. Engen and Loomis are not standing for re-election as Directors. To assist the Board with its determination, all Directors annually complete a detailed questionnaire about their business relationships.   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.  The Board charter describes the responsibilities of the Chairman of the Board and the chairmen of the committees of the Board.   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 fees for all legal services rendered by it for Alcan in each of the past five years amount 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.   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.   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. The committees of the Board are: the Corporate Governance Committee, the Audit Committee, the Human Resources Committee and the Environment, Health and Safety Committee.  The Nominating Committee is constituted as a sub-committee of the Corporate Governance Committee.   The committee charters are reviewed annually and are posted on Alcan's Internet site.   Corporate Governance Committee The Corporate Governance Committee has the broad responsibility of regularly reviewing corporate governance practices in general within Alcan.   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.  The Committee develops position descriptions for the Board of Directors, the Chairman and the chairman of each committee. These descriptions are included in the charter of the Board. The Committee has developed a CEO position description which is posted on Alcan's Internet site. In the Guidelines on Independence, the Committee has developed standards to be applied in making determinations as to the presence or absence of material relationships between the Company and a Director.   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.  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 Committee also assesses the Board's relationship with management and recommends, where necessary, limits on management's authority to act without explicit Board approval.   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 responsibilities to the Committee is provided in the charter of the Corporate Governance Committee.   When reviewing candidates, the Committee takes into consideration factors such as skill, judgment, independence, time availability and business experience of the individual candidates and their expected contribution to the experience, diversity and 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. Mr. Morgan was recommended for election to the Board by the Committee following a search conducted by a third-party search firm.

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Shareholders representing five per cent of the Shares may propose nominees for election as Directors by following the procedure set out in the CBCA. Accordingly, there is no need for Alcan to have a specific policy regarding Board nominees put forward by Shareholders.   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.  It assists the Board in fulfilling its functions relating to corporate accounting and reporting, as well as overseeing financial and accounting controls and reviewing and approving financial statements. The Committee reviews 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. The Committee also oversees pension governance, funding and investment matters.   With respect to compliance and disclosure matters, the Committee ensures that the Company has effective procedures relating to the timely disclosure of activities that would materially impact its financial statements and that all potential material claims against the Company have been properly evaluated, accounted for and disclosed.   The Committee reviews financial information prepared in accordance with generally accepted accounting principles ("GAAP") and non-GAAP financial information included within quarterly earnings releases.  It reviews major accounting issues 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 for the appointment of auditors.    The chairman of the Committee reviews the terms of engagement of the Auditors and signs the 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. 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 Auditors' former 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 of SOX.   Mr. Desautels and Dr. Ruding each serve on the audit committees of four public companies, including Alcan's Audit Committee. The Board has determined that their simultaneous service on other audit committees does not impair the ability of these Directors to effectively serve on the Company's Audit Committee, because they have in each case the required time available to serve on audit committees in question. The Company believes that Mr. Desautels' and Dr. Ruding's service on the other audit committees is of significant benefit to it because of the experience such service provides.    The Audit Committee reviews the Company's process for monitoring compliance and dealing with violations of Alcan's Worldwide Code of Employee and Business Conduct. In particular, the Audit Committee has established procedures involving 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 means of 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 policies 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 management, 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 resources management.

12

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 18). The Committee makes recommendations to the Board on Director compensation. The Committee engages its own independent consultants to advise on the compensation practices of the Company including in comparison with comparator peer groups. Towers Perrin, the external consultant to the Committee, earned $310,000 in fees related to work on executive compensation matters for the Committee in 2005. Towers Perrin also provides consultation services for the Company in the areas of pensions and human resources organization. The individuals who provide services to the Committee are excluded from providing services to the Company. Environment, Health and 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 as well as 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. Board and committee meetings held in 2005:			Attendance of current Directors in 2005:
			Director	Board Meetings		Committee Meetings
			Roland Berger	11 of 13	85%	6 of 7 (CGC)	86%
						6 of 6 (HRC)	100%
						1 of 1 (EHSC)*	100%
			L. Denis Desautels	13 of 13	100%	7 of 7 (CGC)	100%
						9 of 9 (AC)	100%
						3 of 3 (HRC)**	100%
			Travis Engen	12 of 13	92%	***
			Richard B. Evans	2 of 2	100%	***
			L. Yves Fortier	13 of 13	100%	7 of 7 (CGC)	100%
						2 of 2 (EHSC)	100%
			Jean-Paul Jacamon	13 of 13	100%	7 of 7 (CGC)	100%
						6 of 6 (HRC)	100%
						1 of 1 (EHSC)*	100%
			William R. Loomis	13 of 13	100%	7 of 7 (CGC)	100%
						9 of 9 (AC)	100%
						0 of 1 (EHSC)**	0%
						3 of 3 (NC)	100%
			Yves Mansion	13 of 13	100%	7 of 7 (CGC)	100%
Board (1)	13					9 of 9 (AC)	100%
Corporate Governance Committee(2)	7					3 of 3 (NC)*	100%
Audit Committee(3)	9		Christine Morin-Postel	11 of 13	85%	7 of 7 (CGC)	100%
Human Resources Committee	6					3 of 3 (AC)**	100%
Environment, Health and Safety Committee	2					3 of 3 (HRC)*	100%
Nominating Committee	3		H. Onno Ruding	11 of 13	85%	6 of 7 (CGC)	86%
(1)       Includes 5 telephone conference Board meetings.						5 of 6 (AC)*	83%
(2)       Includes 1 telephone conference Corporate Governance Committee meeting.						2 of 2 (HRC)**	100%
(3)       Includes 5 telephone conference Audit Committee meetings.			Guy Saint-Pierre	12 of 13	92%	7 of 7 (CGC)	100%
						3 of 3 (AC)**	100%
						6 of 6 (HRC)	100%
						3 of 3 (NC)	100%
			Gerhard Schulmeyer	13 of 13	100%	7 of 7 (CGC)	100%
						6 of 6 (HRC)	100%
						1 of 1 (EHSC)**	100%
			Paul M. Tellier	11 of 13	85%	6 of 7 (CGC)	86%
						9 of 9 (AC)	100%
						2 of 2 (EHSC)	100%
			Milton K. Wong	13 of 13	100%	7 of 7 (CGC)	100%
						6 of 6 (AC)*	100%
						2 of 2 (EHSC)	100%
		Committees Memberships: CGC:    Corporate Governance Committee AC:       Audit Committee HRC:     Human Resources Committee EHSC:   Environment, Health and Safety Committee NC:        Nominating Committee *   Member from 28 April 2005. **  Member until 28 April 2005. *** Messrs. Engen and Evans attend Committee meetings at      the request of the Committees, excluding the executive      sessions thereof.

13

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 and corporate development matters are presented by management and reviewed and approved by the Board.   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 and, as necessary, during telephone Board meetings, the Non-Executive Directors meet in executive session, presided by the Chairman, without senior management and non-Independent Directors being present. The procedure at in-person meetings is that the Board (including non-Independent Directors) will meet without members of senior management present, at the beginning and end of each meeting. In addition, at the end of the meeting, the Independent Directors will meet without the non-Independent Directors present. Matters discussed during these sessions are included in the minutes of the meeting, as appropriate.   The Directors are expected to attend the annual meetings of Shareholders; all Directors attended the 2005 annual meeting of Shareholders except for Mr. Ruding who was unable to attend.   Information to the Board Alcan's Corporate Secretary maintains a Directors' Manual which includes among other items: the articles of incorporation, the by-laws, the Directors' standing resolutions, the Board and committee charters, Alcan's insider trading, disclosure, environment, health and safety and competition law compliance policies, information on Director and Officer indemnification and insurance, the Guidelines on Independence of Directors, the Shareholder Rights Plan, the Worldwide Code of Employee and Business Conduct and information on Director responsibilities and liabilities. The information is updated as necessary. The Corporate Secretary also maintains a manual for the Audit Committee which includes the Auditor services pre-approval procedure, the mandate of the Ombudsman (see below), the mandate of the disclosure committee (see below), the internal audit department charter, the Code of Ethics for Senior Financial Officers (see below), the Alcan directive on employment relationships with Auditors and information on Audit Committee financial experts and on the responsibilities of members of the Audit Committee. 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, business 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. 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 these documents are posted on the Company's Internet site. Alcan will promptly disclose any 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 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.

14

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 of management has been constituted with responsibility for the accuracy and timeliness of the disclosure of material information.   The Company's annual report on Form 10-K for the year ended 31 December 2005 contains an assessment of the effectiveness of Alcan's internal control over financial reporting by management, as required by s. 404 of SOX . 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.   Management's authority to act in certain matters that could have a significant 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, issuance of securities, 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 U.S 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. 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.   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 Board of Directors charter is also attached to this Circular as Schedule A.   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 Gwyn Morgan Christine Morin-Postel H. Onno Ruding Guy Saint-Pierre Gerhard Schulmeyer Paul M. Tellier Milton K. Wong

15

Report of the Audit Committee     

In accordance with its charter, the Audit Committee of the Board is responsible for overseeing Alcan's financial reporting process and internal control functions for which management has primary responsibility. The Audit Committee's roles and responsibilities are summarized on page 12 and are set out in its charter posted on Alcan's Internet site.   The Audit Committee regularly discusses and receives written communication from the Auditors 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 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 and management's discussion and analysis, 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 and management's discussion and analysis, the Committee approves the Company's quarterly earnings releases and quarterly reports on Form 10‑Q. 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 page 17).   In accordance with the CBCA, the Shareholders appoint the Company's Auditors.  In carrying out its responsibilities, the Audit Committee has reviewed the qualifications and performance of the Auditors and recommends to the Board and to the Shareholders that PricewaterhouseCoopers LLP, Montreal, Canada be appointed as Auditors at the Meeting.   The Audit Committee   L. Denis Desautels, chairman of the Committee William R. Loomis, Jr. Yves Mansion H. Onno Ruding Paul M. Tellier Milton K. Wong  

 

16

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 2004 and 2005 are:			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 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 2005 quarterly financial statements and have discussed these and the quarterly earnings releases with management and members of the Audit Committee prior to their issuance.
	2004 ($'000)	2005 ($'000)
Audit Fees	27,624	22,385
Audit-Related Fees	172	969
Tax Fees	67	238
All Other Fees	20	99
Total	27,833	23,692
"Audit fees" include professional services for the audit of consolidated financial statements and local statutory audit work. Included in the audit fees for 2005 are fees incurred in connection with audit work related to Alcan and the assessment of internal controls over financial reporting in accordance with s. 404 of SOX. "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 subscriptions to tax and accounting publications from the Auditors. The Audit Committee approved a procedure that prohibits the Company from engaging the Auditors for certain non-audit services specified by SOX.

17

Report on Executive Compensation

 

General The Human Resources Committee of the Board ("Committee") is responsible for setting and implementing the compensation policy for the Company's executives. The compensation policy is focused on attracting, retaining and motivating executives who have the talent, skills, knowledge and ability to improve the performance of the Company to maximize value for Shareholders. The Committee has established objectives within the compensation policy of the Committee to: attract, retain and motivate highly qualified individuals; align the interest of executives with those of Shareholders; reward executives for achieving specific business and strategic objectives; and encourage talented personnel within the Company to aspire to executive positions. The Committee conducts periodic comprehensive reviews of the compensation of the Company's executives around the world and the effectiveness of compensation policies.  The Committee is assisted by an external consultant, Towers Perrin (see page 13 for more detail), in its study of other global companies based in North America and Europe.  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 110 large multinational companies with revenues of $10 billion or more. 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 the elements of compensation of executives and of Alcan's current 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 referred to above.	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 executives, compensation is set against U.S. competitive compensation practices, irrespective of the countries in which the executives work. Relative Weighting of Each Compensation Element The relative weighting of each element of compensation (base salary, short-term incentive and long-term incentive) is aligned with the Executive Officers' ability to influence business results, ensuring appropriate emphasis on each performance period. The incentive opportunity varies with the individual Executive Officer's level of responsibility and is established through regular reviews of competitive practice. The table below shows the percentage of each component that comprises the Executive Officers' total direct compensation, averaged in relation to the title indicated.
		Title	Base salary	Short- Term Incentive	Long- Term Incentive
		CEO	11%	18%	71%
		Executive Vice Presidents	18%	16%	66%
		Senior Vice Presidents	25%	19%	56%
		Vice Presidents	39%	20%	41%
	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. 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 Executive Officer's 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. For 2005, the EPA had two components, each based on a different aspect of performance:

18

1.   Economic Value Added ("EVA" - a registered trademark of Stern Stewart & Co.). Ninety percent 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 measured against the pre-established EVA objective 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. Actual amounts paid under this component are subject to certain adjustments for factors such as accounting changes, metal prices and exchange rates.   2.   Environment, Health and Safety ("EHS") objectives.  Ten percent of the incentive compensation opportunity of an Executive Officer is based on the achievement of the EHS objectives as measured against pre-established targets.   As with the EVA, the EHS component of incentive compensation for Executive Officers who are part of corporate head office is contingent upon performance versus the pre-established  targets for the Company, while the incentive compensation for Executive Officers who are responsible for a business group is contingent on meeting the pre-established targets of their respective business group. The achievement of the objectives is validated by the Committee for the Company and the business groups. In 2005, the objectives related to the safety performance in terms of recordable case rates, lost-time injuries and illness and EHS strategic initiatives for the business groups. The overall EPA award paid is the sum of the weighted results of each component (i.e., EVA and EHS) modified by rating for individual performance and contribution to the Company.    The award paid may vary from zero when the results achieved are less than the minimum threshold level set by the Committee, to 200% of the target award when the results achieved are at or exceed the upper threshold level which was set by the Committee.    For 2005, the Committee approved EPA awards for Executive Officers that were above the target amounts reflecting performance that was above target.   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 2005, 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 U.S. dollar-denominated 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 Standard & Poor's ("S&P") Industrial Composite Index on the New York Stock Exchange 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 2005, a total target award of $17,564,915 was granted to 102 key employees around the world. The actual amount of awards in relation to this target (if any) would be paid in 2008. The amount of the target award is expensed throughout the three-year period through an accounting accrual.  For more details on TSR Plan grants, see page 28. In 2005, a cash award of $18,077,183 was paid out to 61 key employees for the three-year period that commenced 1 October 2002 and terminated on 30 September 2005. This cash award was the subject of an adjustment for the Company's performance before and after the Novelis Spin-off, resulting in a total cash payout of 226% of the target award.  2.  The Option Plan (see page 24) 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.  

19

The Option Plan provides for the granting of Options to key employees of the Company and its Subsidiaries to purchase Common Shares.  The exercise price is denominated in Canadian dollars and the performance levels to be achieved before the Options vest is determined by Share prices on the Toronto Stock Exchange. 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 2005, all options granted were performance-based "C" Options. For more details, see pages 24.   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 26).   Executive Deferred Share Unit Plan   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. These Executive Officers may also elect, at least 12 months prior to the end of the Performance Period of the TSR Plan, to receive EDSUs for their Total Shareholder Performance award for that Performance Period, 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 for the EDSUs related to the EPA and at the end of the Performance Period for the EDSUs related to the TSR Plan.  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) and therefore EDSUs align the interest of participating Executive Officers with those of Shareholders. 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.   Compensation of the chief executive officer   The CEO's annual compensation is administered by the Board, based on the evaluation of the CEO's performance by the Committee and on its recommendations 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. Mr. Engen has indicated his intention to retire at the end of the term of this employment agreement on 11 March 2006.   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 18).    The CEO's total direct compensation (base salary, target annual incentives and target long-term incentives) was set by the Committee at the 75^th percentile of the U.S. market.   In 2005, Mr. Engen's base salary was $1,500,000. An annual EPA award based on an established target and on performance objectives was paid. For 2005, the target was 167% of the base salary. The actual amount paid for 2005 was $3,500,000.   Mr. Engen received an Option to purchase 450,100 Shares (see page 26). This performance-based "C" Option was granted on 21 September 2005 at an exercise price of Can. $38.26 per Share with an estimated value of $5,000,000, based on a Black-Scholes evaluation.  This Option 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 2008) under the terms and conditions of the TSR Plan (see page 28).   Mr. Engen received a TSR Plan cash award of $5,642,750 for the three-year period that commenced 1 October 2002 and terminated on 30 September 2005.   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.  

20

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 was eligible for a termination payment in the event his employment had been terminated by the Company without cause or by him for defined reasons. Mr. Engen would have received an amount equal to three times the sum of his highest annualized base salary and target bonus.  Mr. Engen would also have been entitled to the acceleration of vesting of all Options and the continuation of employee benefits and additional service credits to total five years. In addition, Mr. Engen and the Company entered into a change of control agreement which would have been 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 have been entitled to an amount equal to 36 times the sum of his (a) monthly base salary on the date of termination and (b) EPA guideline amount in effect at the date of termination. He will also be entitled to an amount determined under the TSR Plan.

The table below highlights the salary, bonus and other annual compensation earned and the expected value of the long-term compensation awarded to Mr. Engen in 2005 as established by the Committee.

Compensation	2005		2004		2003
Base salary	1,500,000		1,350,000		1,300,000
EPA	3,500,000		2,031,750		2,008,100
Other annual compensation	(942,664)	(1)	402,073	(1)	1,272,151	(1)
Grant of Options for Shares	5,000,000	(2)	5,000,000	(2)	4,350,000	(2)
Grant of TSR Plan target cash amount	5,000,000	(3)	5,000,000	(3)	4,350,000	(3)
Value of defined contribution pension plans	67,500		60,750		58,500
Total	14,124,836		13,844,573		13,338,751

(1) Detailed information on these amounts is presented in the "Summary Compensation Table" on page 23.

(2) Not in the form of a payment - the estimated value is based on a Black-Scholes evaluation of the Options. Actual gains, if any, on exercise will depend on the value of the Shares on the date of exercise.

(3) Not in the form of a payment - the target amount under the TSR Plan for the Performance Period. Actual payment, if any, will depend on the total shareholder return as calculated in accordance with the TSR Plan (see page 19 for a description of the TSR Plan). In 2005, Mr. Engen received a TSR Plan cash award of $5,642,750 for a TSR Plan target granted in September 2002 for the three-year period which commenced on 1 October 2002 and terminated on 30 September 2005 (see page 20).

Approval of this Report on Executive

Compensation

The Committee, whose members are named below, has approved the issue of this report and its inclusion in this Circular.

Gerhard Schulmeyer, chairman of the Committee

Roland Berger

Jean-Paul Jacamon

Gwyn Morgan

Christine Morin-Postel

Guy Saint-Pierre

Mrs. Morin-Postel joined the Committee on 28 April 2005 and Mr. Morgan joined the Committee on 11 February 2006.

21

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 Industrial Composite 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	2000	2001	2002	2003	2004	2005
Alcan Inc.	$100	$113	$94	$125	$123	$114
S&P/TSX Composite Index	$100	$87	$77	$97	$111	$138
S&P Industrial Composite Index	$100	$94	$71	$75	$76	$77
S&P Diversified Metals & Mining Index	$100	$93	$101	$206	$211	$310

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	2000	2001	2002	2003	2004	2005
Alcan Inc.	$100	$106	$89	$145	$153	$146
S&P/TSX Composite Index	$100	$81	$71	$107	$129	$163
S&P Industrial Composite Index	$100	$88	$68	$87	$96	$99
S&P Diversified Metals & Mining Index	$100	$88	$97	$238	$265	$401

All amounts are expressed in U.S. dollars.

22

Executive Officers' Compensation

The following table sets out the compensation for the CEO, the Chief Financial Officer, the former Chief Financial Officer and the three other most highly compensated Executive Officers (collectively, the "Named Executive Officers") for the year ended 31 December 2005 and for each of the two preceding years.

Summary Compensation Table

		Annual Compensation					Long-Term Compensation
							Awards				Payouts
Name and Principal Position	Year	Salary  ($)	Bonus (Executive Performance Award) (1) ($)		Other Annual Compensation  (2) ($)		Shares Under Options Granted (3) (#)		Shares or Restricted Share Units (4) (5) (#)		Long-Term incentive Plan Payouts (6) ($)	All Other Compensation (2) ($)
Travis Engen President and Chief Executive Officer	2005 2004 2003	1,500,000 1,350,000 1,300,000	3,500,000 2,031,750 2,008,100	(7)	(942,664) 404,073 1,272,151	(8)	450,100 348,000 312,000	(10) (10) (10)	0 0 0		5,642,750 0 0	80,775 96,031 77,411
Richard B. Evans Executive Vice President and Chief Operating Officer	2005 2004 2003	781,200 781,200 600,000	950,000 932,257 210,704		368,346 656,598 440,907	(9)	141,500 5,702 110,700 69,600 10,000	(10) (11) (10) (10) (11)	0 0 18,067		2,200,673 0 0	35,396 32,966 65,061
Geoffery E. Merszei (12) Executive Vice President and Chief Financial Officer	2005 2004 2003	311,200 622,400 522,500	270,373 759,474 627,032		348,546 383,264 77,921	(9)	0 63,600 49,500	(10) (10)	0 15,000 0	(13)	0 0 0	20,704 21,364 57,233
Michael Hanley (14) Executive Vice President and Chief Financial Officer	2005 2004 2003	537,858 404,300 330,000	625,000 410,202 441,670		31,524 29,045 25,084		84,600 33,600 27,600	(10) (10) (10)	0 0 0		800,819 0 0	13,672 10,368 40,383
Cynthia Carroll Senior Vice President and President and Chief Executive Officer, Primary Metal Group	2005 2004 2003	542,000 542,000  455,000	527,139 645,331 556,138		314,320 275,466 427,335	(9)	62,900 48,000 44,700	(10) (10) (10)	0 0 0		1,263,073 0 0	14,461 19,145 56,285
Michel Jacques Senior Vice President and President and Chief Executive Officer, Engineered Products Group	2005 2004 2003	427,700 407,700 225,193	731,756 689,257 68,535	(17)	135,710 176,399 108,673	(15)	0 0 0		55,700 39,300 26,100 1,909	(16) (16) (16) (17)	179,891 0 0	0 56 4,214

(1)    See page 18 for description of the Executive Performance Award Plan.

(2)    See Other Compensation on page 24.

(3)    See page 24 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 26 for description of the Alcan Stock Price Appreciation Unit Plan.

(6)    See page 28 for description of the Total Shareholder Return Performance Plan.

(7)    See Compensation of the Chief Executive Officer on page 20.

(8)    Included in this amount is an adjustment for 2004 of ($ 961,075), which represents a refund of previous tax equalization payments that have been reduced by the receipt of U.S. foreign tax credits accruing from Mr. Engen's non-Alcan income.

        Tax equalization payments are made to adjust Mr. Engen's net income after taxes so that it would be not less than it would have been in the U.S. (see p. 21). Mr. Engen has paid $435,654 to the Company and the remaining amount will be received

        from tax authorities through his income tax returns for 2005.

(9)    Tax equalization: R. B. Evans $333,875, G. E. Merszei $298,385 and C. Carroll $273,299.

(10)  Granted as C Options (see page 24 for description).

(11)  Grant of D Options became effective (see page 24 for description).

(12)  G. E. Merszei resigned from the Company in May 2005.

(13)  Received Common Shares after completion of 3 years of service as part of his employment agreement with the Company.

(14)  M. Hanley was appointed interim Chief Financial Officer in May 2005 and Chief Financial Officer on 19 October 2005.

(15)  Received $71,136 for housing assistance.

(16)  Granted as Stock Price Appreciation Units.

(17)  Received the EPA from January to August 2003 in the form of 1,909 Deferred Share Units, based on the Share price (Can. $46.49) at the end of 2002 and received the EPA from September to

        December 2003 in cash ($68,535).

23

Executive Performance Award   The Executive Performance Award Plan and the related Executive Deferred Share Unit Plan are described on pages 18 and 19.   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 19 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 20). Options may be exercised only for so long as the optionee remains an employee. No repricing of Options is permitted. The Option Plan is administered by the Human Resources Committee.   The Human Resources Committee may make rules 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.   The Board is entitled to amend, suspend or terminate the Option Plan. Shareholder approval is required for any fundamental change to the Option Plan.   Following the Novelis Spin-off, all Options were adjusted in terms of number and exercise price to preserve the economic value of the Options.   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 Officers on page 33). B Options Beginning on 22 April 1993, the Option Plan provides for Options, 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, 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.   D Options   In respect of B and C Options granted to certain senior executives in 1996, 1997 and 1998, Alcan has granted further Options, 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.

 

24

E Options   Options granted under the share option plan of Alusuisse Group Ltd. (a Subsidiary of Alcan after its acquisition in 2000) were converted into Options for Shares, 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 Alusuisse Group Ltd. 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 acquisition, no further E Options will be granted. As at May 2005, all E Options had been exercised or had expired.   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, referred to as "F Options" in accordance with liquidity agreements signed with the holders thereof. There are 11 series of Pechiney options, several without current value. 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.  

Securities Authorized for Issuance Under Equity Compensation Plans

The following table provides information 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 for 2005.

Equity Compensation Plan Information for 2005

Plan category	Number of securities to be issued upon exercise of options		Weighted-average exercise price of outstanding options	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)		(b)	(c)
Equity compensation plans approved by security holders
Alcan Executive Share Option Plan (except F Options)	11,295,130	(1)	Can. $43.40	12,300,141	(2)
F Options	3,669,792	(3)	31.63
Equity compensation plans not approved by security holders	-		-	-
	14,964,922		N/A	12,300,141
Total

(1)    This represents 3% of the total outstanding Shares of Alcan.

(2)    This represents 3.3% of the total outstanding Shares of Alcan.

(3)    This represents 0.99% of the total outstanding Shares of Alcan.

25

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").   Grants are made under the SPAU Plan instead of under the Option Plan due to certain local conditions of countries of the employees' residence. 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 24). Following the Novelis Spin-off, all SPAUs were adjusted in terms of number and exercise price to preserve the economic value of the SPAUs.

 

The following table provides information pertaining to Options granted to the Named Executive Officers during 2005.

Option Grants during 2005

Name(1)	Shares Under Options Granted (#)		Percent of Total Options Granted to Employees in 2005	Exercise Price and Market Value on Date of Grant (Can. $/Share)	Expiration Date
T. Engen	450,100	(2)	15.7	38.26	20 September 2015
R. B. Evans	141,500 5,702	(2) (3)	5.1	38.26 38.50	20 September 2015 4 October 2008
M. Hanley	84,600	(2)	3.0	38.26	20 September 2015
C. Carroll	62,900	(2)	2.2	38.26	20 September 2015

(1)    G. E. Merszei was not granted any Options since he resigned from Alcan in May 2005.

(2)    C Option grant on 21 September 2005.

(3)    A C Option granted on 5 October 1998 was exercised for 5,000 Shares on 30 May 2005 and the associated D Option grant (adjusted following the Novelis Spin-off), became effective (see D Options on page 24).

The following table provides information pertaining to SPAUs granted to the Named Executive Officers during 2005.

SPAU Grants during 2005

Name(1)	Units Granted (#)		Percent of Total SPAUs Granted to Employees in 2005	Exercise Price and Market Value on Date of Grant (Can. $/Share)	Expiration Date
M. Jacques	55,700	(1)	25.7	38.26	20 September 2015

(1)   Granted on 21 September 2005.

26

The following table summarizes, for each of the Named Executive Officers, (a) the number of Shares acquired by Options exercised during 2005, (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 30 December 2005, and (d) the aggregate value of unexercised in-the-money Options at 30 December 2005, which is the difference between the exercise price of the Options and the market value of the Shares on 30 December 2005, which was Can. $47.76 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 2005 and Year-End Option Values

Name	Shares Acquired on Exercise (#) (a)	Aggregate Value Realized (Can. $) (b)	Shares Underlying Unexercised Options at 30 Dec. 2005 (1) (#) (c)		Value of Unexercised In-the-Money Options at 30 Dec. 2005 (1) (Can. $) (d)
T. Engen	0	0	E: U:	220,097 2,045,520	E: U:	0 4,740,470
R. B. Evans	5,702	46,015	E: U:	176,687 412,077	E: U:	1,698,512 2,145,572
G. E. Merszei	47,669	149,919	E: U:	0 0	E: U:	0 0
M. Hanley	0	0	E: U:	25,925 172,943	E: U:	335,728 1,045,037
C. Carroll	0	0	E: U:	99,653 208,680	E: U:	1,041,723 1,062,991
M. Jacques	1,483	912	E: U:	23,076 8,628	E: U:	199,232 76,748

(1)  E: Exercisable    U: Unexercisable

27

Total Shareholder Return Performance Plan

 

The TSR Plan, described on page 19, 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 2005

Name(1)	Securities, Units or other Rights (#) (2)	Performance Period	Estimated Future Payouts
			Threshold ($)	Target ($)	Maximum ($)
T. Engen	0	1 Oct. 2005 __ 30 Sept. 2008	0	5,000,000	15,000,000
R. B. Evans	0	1 Oct. 2005 __ 30 Sept. 2008	0	1,571,500	4,714,500
M. Hanley	0	1 Oct. 2005 __ 30 Sept. 2008	0	939,400	2,818,200
C. Carroll	0	1 Oct. 2005 __ 30 Sept. 2008	0	698,500	2,095,500
M. Jacques	0	1 Oct. 2005 __ 30 Sept. 2008	0	619,300	1,857,900

(1) G. E. Merszei was not granted any target cash performance award under the TSR Plan since he resigned from Alcan in May 2005.

(2) The TSR Plan provides for a grant of a target cash award; the actual payment of an award, if any, will depend on the total shareholder return as calculated in accordance with the TSR Plan - no securities, units or other rights were granted.

28

Retirement Benefits Canadian Plan During 2005, M. Hanley and M. Jacques participated in the Alcan Pension Plan (Canada) and the Alcan Supplemental Retirement Benefits Plan (Canada), together herein referred to as the "Canadian Plan". Pensions up to a statutory limit are payable under the former and, in excess thereof, under the latter. The Canadian Plan is available to Alcan salaried employees in Canada and provides for pensions calculated on service with the Company and eligible earnings which consist of the average annual salary and EPA at its guideline amount up to a maximum, 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.  After this date, the maximum eligible earnings of each Named Executive Officer was set out according to the position prior to becoming an Executive Officer. 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.							The U.S. Plan is available to Alcan salaried employees in the 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.
								Eligible Earnings	Years of Service
									10	15	20	25	30	35
								$500,000 __ $600,000	17%	25%	34%	42%	50%	59%
								$700,000 __ $1,300,000	17%	25%	34%	42%	51%	59%
								$1,400,000 __ $2,000,000	17%	26%	34%	43%	51%	60%
Eligible Earnings	Years of Service						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 2005 eligible earnings and projected service upon normal retirement age of 65 under the U.S. Plan were as follows: C. Carroll, $616,800 and 33 years; R.B. Evans, $1,048,900 and 16 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 under the Pension Plan for Officers ("PPO"). This 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.
	10	15	20	25	30	35
$400,000	17%	25%	33%	42%	50%	59%
$500,000 __ $600,000	17%	25%	34%	42%	50%	59%
$700,000 __ $2,000,000	17%	25%	34%	42%	51%	59%
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 2005 eligible earnings and projected service upon normal retirement age of 65 under the Canadian Plan were as follows: M. Hanley, $424,700 and 32 years; M. Jacques, $368,100 and 21 years. U.S. Plan During 2005, C. Carroll and R.B. Evans 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".

29

The PPO provides benefits only in respect of services rendered while an officer. A total of nine individuals participated in the PPO in 2005, including the four aforementioned Named Executive Officers. The PPO 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 PPO upon normal retirement age after 60 according to years of service as an officer.				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 Canadian Plan and the U.S. Plan were, respectively, 12.9% and 11.9% of their membership's eligible earnings in 2005 (equivalent to $301,000 for the four aforementioned Named Executive Officers). The service cost of the PPO was $529,000 in 2005 for the four aforementioned 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 (except G. E. Merszei) 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 2005. The table also indicates the PBO at 31 December 2005 in relation to these Named Executive Officers.
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 PPO is an unfunded obligation of Alcan and pensions are paid from operating cash flows of the Company. The 2005 salary and EPA at its guideline amount and projected service as an officer upon retirement age of 65 under the PPO were as follows: C. Carroll, $959,100 and 24 years; R.B. Evans, $1,400,700 and 16 years, M. Hanley, $992,100 and 29 years; M. Jacques, $806,300 and 14 years. Individual Pension Undertakings T. Engen does not participate in any of the pension plans sponsored by the Company (see Compensation of the Chief Executive Officer on page 20). G.E. Merszei was a participant of the Alcan Pension Plan (Canada) which provides for pensions up to a statutory limit. His annual pension accrued at termination of employment was $8,000 and will be payable from age 65. Individual pension undertakings are unfunded obligations of Alcan and pensions are paid from operating cash flows of the Company.  Value of the Retirement Benefits A measure of the value of the Canadian Plan, the U.S. Plan and the PPO that can be deemed to be part of the total 2005 compensation of the four aforementioned Named Executive Officers is the service cost of the plans. The service cost is the estimated present value of benefits attributable by the pension benefit formula to services rendered by the plan members during a given period.
					Name	Projected Annual pension payable at age 65 ($)	Projected Benefit Obligation as at 31 December 2005 ($)
					T. Engen	386,000	4,313,000
					R.B. Evans	418,300	2,640,000
					M. Hanley	520,900	1,517,000
					C. Carroll	503,900	2,179,000
					M. Jacques	288,000	801,000
				The service cost and the PBO amounts are only estimates of the discounted value of contractual entitlements using prevailing interest rates. The value of these estimated entitlements will 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 2005 annual financial statements. There is no contractual undertaking by the Company to pay benefits of equivalent amounts.

 

30

Employment Agreements

On various dates, Alcan entered into employment agreements with the Named Executive Officers including C. Carroll, R. B. Evans, M. Hanley and M. Jacques, 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.  They are 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. G. E. Merszei had entered into an employment agreement with Alcan on 13 June 2001.  The terms of his employment agreement were similar to those of the other above Named Executive Officers.  During 2005, the Company renewed change of control agreements with certain Executive Officers, including the Named Executive Officers.  The terms of these 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 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.  The Named Executive Officers will also be entitled to an amount determined under the TSR Plan. For information relating to T. Engen, see Compensation of the Chief Executive Officer on page 20.

 

Directors' Compensation

 

Each Non-Executive Director is entitled to receive compensation equal to $150,000 per annum, except that Non-Executive Directors who are members of the Audit Committee are entitled to $155,000 per annum. The Chairman is entitled to receive compensation equal to $350,000 per annum and the chairman of the Audit Committee is entitled to receive $175,000 per annum. 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. All payments are effected on a quarterly basis. A majority of Non-Executive Directors receive all their compensation in DDSUs.   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.   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.   This plan 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 Director has 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 2005, Messrs. Jacamon, Ruding and Schulmeyer were reimbursed $2,000, $2,000 and $1,500, respectively, for this purpose.   An employee of Alcan who is a Director is not entitled to receive fees for serving on the Board.

31

The following table sets out the compensation of each Non-Executive Director for 2005.

Name	Annual Fees	Portion of Fees in				DDSUs/ Common Shares	Cash ($)
		Director's Deferred Share Unit Plan		Share Investment Plan for Directors	Cash
Roland Berger	$150,000	50%	*	-	50%	2,958	75,000
L. Denis Desautels(1)	$175,000	50%		12.5%	37.5%	3,439	65,625
L. Yves Fortier(2)	$350,000	100%		-	-	12,688	-
Jean-Paul Jacamon	$150,000	50%		-	50%	2,457	75,000
William R. Loomis, Jr. (3)	$155,000	100%		-	-	5,773	-
Yves Mansion(3)	$155,000	100%		-	-	5,074	-
Christine Morin-Postel(4)	$151,250	100%		-	-	5,197	-
H. Onno Ruding(5)	$153,750	50%		-	50%	2,314	76,875
Guy Saint-Pierre(4)	$151,250	50%		50%	-	4,939	-
Gerhard Schulmeyer	$150,000	50%		$1,250 per quarter	balance	3,636	70,000
Paul M. Tellier(3)	$155,000	100%		-	-	6,649	-
Milton K. Wong(5)	$153,750	100%		-	-	5,423	-

*     As of 1 January 2006, Mr. Berger has elected to receive 100% of his fees in DDSUs.

(1)   Chairman of the Audit Committee.

(2)   Chairman of the Board.

(3)   Member of the Audit Committee.

(4)   Member of the Audit Committee until 28 April 2005.

(5)   Member of the Audit Committee from 28 April 2005.

Mr. Morgan joined the Board on 18 January 2006 and has elected to receive 100% of his fees in DDSUs.

The following table sets out each Non-Executive Director's equity ownership in the Company and any changes in the ownership interest since 1 March 2005.

Name	Equity Ownership as at 1 March 2005		Equity Ownership as at 1 March 2006		Market Value of Equity as at 1 March 2006(1)
	Common Shares	DDSUs	Common Shares	DDSUs
Roland Berger	-	5,185	-	7,472	327,871
L. Denis Desautels	573	3,349	960	5,971	304,132
L. Yves Fortier	1,000	16,633	1,000	27,178	1,236,451
Jean-Paul Jacamon	136	1,795	136	4,024	182,541
William R. Loomis, Jr.	10,000	8,406	10,000	13,093	1,013,321
Yves Mansion	-	3,675	-	8,282	363,414
Gwyn Morgan	-	-	15,000	-	658,200
Christine Morin-Postel	-	5,268	-	9,790	429,585
H. Onno Ruding	112	449	112	2,712	123,917
Guy Saint-Pierre	16,170	8,976	17,734	11,345	1,275,987
Gerhard Schulmeyer	2,245	8,809	2,421	11,158	595,847
Paul M. Tellier	1,958	14,334	1,969	19,123	925,517
Milton K. Wong	40,000	6,274	40,000	10,890	2,233,053

(1)      The market value is determined based on the Share price ($43.88) on this date.

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Indebtedness of Directors, Executive Officers and Employees

Directors and former 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)	554,957	-
Other	4,440,432	-

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 2005 ($)	Amount Outstanding as at 27 February 2006 (1) ($)	Financially Assisted Share Purchases During 2005  (#)	Security for Indebtedness	Amount Forgiven During 2005
G. Ouellet Senior Vice President	Lender	45,648	42,136	0	(2)	0

(1)    Represents a loan in respect of A Options.

(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 2005 was $2,994,500 and the limit of insurance is $225 million per loss and in the aggregate per year. Additional Information   Additional information relating to Alcan may be found on Alcan's Internet site at www.alcan.com, on SEDAR (website of the Canadian Securities Administrators) at www.sedar.com or EDGAR (website of the U.S. Securities and Exchange Commission) at www.sec.gov. Financial information is provided in Alcan's financial statements and management's discussion and analysis reports, which appear on the above websites and paper copies of 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.  

33

 

Approval of the Board of

Directors

The Board of Directors has approved the contents of this Circular and its sending to Shareholders.

Roy Millington

Corporate Secretary

34

Schedule A: Board of Directors Charter

I.          STATEMENT OF POLICY

The Board of Directors of Alcan Inc. (the "Company") is elected by the Company's Shareholders to supervise the management of the business and affairs of the Company. The prime stewardship responsibility of Alcan's Board is to promote the viability of the Company and to require that it is managed in the interest of the Shareholders as a whole while taking into account the interests of other stakeholders. 

The Board sets policy for the Company and advises the Chief Executive Officer and senior executive Officers who manage the Company's business and affairs.  

II.      COMPOSITION AND ORGANIZATION OF THE BOARD

1.         Selection of Members

The Corporate Governance Committee of the Board maintains an overview of the desired size of the Board, the need for recruitment and the expected experience of the new candidates. The Corporate Governance Committee, directly or through a sub-committee, reviews and recommends to the Board the candidates for nomination as Directors.  The Board approves the final choice of candidates for nomination and election by the Shareholders.  

2.         Membership Criteria

Board members must have an appropriate mix of skills, knowledge and experience in business and an understanding of the regions in which the Company operates.  Directors selected should be able to commit the requisite time for all the Board's business. 

3.       Independent Directors

A majority of the Board shall be composed of Directors who must be determined to have no material relationship with the Company and who, in the reasonable opinion of the Board, must be unrelated and independent under the laws, regulations and listing requirements to which the Company is subject. The Board has approved Guidelines on the Independence of Directors of Alcan which contain specific criteria for determining Director independence.

4.       Chairman

The Board shall appoint its Chairman and Vice-Chairman (if one is to be appointed) from among the Company's Directors.  In the event that the Chairman is a Director who is an executive of the Company, the Board shall also appoint a Lead Director from among the non-executive Directors to chair the Board at all meetings where Management is absent and to assume other appropriate functions.  

The Chairman's responsibilities include the following:

(a)     presiding at meetings of Shareholders and the Board;

(b)     providing leadership to enhance Board effectiveness and focus;

(c)     acting as liaison between the Board and Management;

(d)     assisting in representing the Company to external groups; and

(e)     overseeing the application of good corporate governance.

5.       Retirement Age

A Director who has attained the age of 72 prior to the Annual Meeting of Shareholders in any year shall retire from office at such Annual Meeting.

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6.       Term of Directors

The Directors are elected by the Shareholders at every Annual Meeting.  The term of office of each Director shall expire at the close of the Annual Meeting of Shareholders following that at which he or she was elected.

III.MEETINGS OF THE BOARD

1.      Board Agenda

The Chairman of the Board, in consultation with the appropriate members of Management and with input of other Directors as required, develops the agenda for Board Meetings.

2.      Board Material Distribution

Information and materials that are important to the Board's understanding of the agenda items and related topics are distributed in advance of the meeting. The Company will deliver information on the business, operations and finances of the Company to the Board on a monthly basis and on an as-required basis.

3.      Board Meeting Frequency and Schedule

A minimum of six regularly-scheduled Board meetings shall be held each year. Additional meetings may be held when required. The Chairman of the Board, in consultation with the Directors and Management, will set the frequency and length of Board meetings.  Board members may participate in additional meetings by means of conference calls or similar communications equipment by means of which all persons participating in the meeting can communicate with each other.

4.Management at Meetings

Management participates by invitation in Board meetings and makes presentations to allow Directors to gain additional understanding and insight into the Company's businesses.

5.      In-camera Meetings

Every meeting of the Board shall include one or more in-camera sessions at which no executive Directors or other members of senior Management are present, to allow free and open discussion and communication among the non-executive Directors.

IV.    DUTIES AND RESPONSIBILITIES OF THE BOARD

In addition to its statutory responsibilities, the Board has the following duties and responsibilities:

(a)     receiving confirmation that Alcan is operated so as to preserve its financial integrity and in accordance with policies approved by the Board;

(b)     appointing its Chief Executive Officer, developing his or her position description and ensuring succession preparedness with the recommendations of the Corporate Governance Committee;

(c)     adopting a strategic planning process and thereafter reviewing and approving the overall business strategy for the Company, all of which are developed at first by Management;

(d)     in conjunction with Management, identifying the principal risks of the Company's businesses and overseeing the implementation of appropriate systems to manage these risks;

(e)     requiring that appropriate structures and procedures are in place so that the Board and its committees can function independently of Management;

(f)      providing a source of advice and counsel to Management on critical and sensitive problems;

(g)     reviewing and approving key policy statements developed by Management on various issues such as ethics, compliance, communications, environment and public disclosures;

(h)     ensuring that its expectations of Management are understood, that the appropriate matters come before the Board and that the Board is kept informed of Shareholder feedback;

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(i)      verifying that members of senior Management are of the calibre required for their roles, are adequately trained and monitored and that planning for their succession is ongoing;

(j)      verifying that members of senior Management have the integrity required for their roles and the capability to promote a culture of integrity within the Company;

(k)     conducting, through the Corporate Governance Committee, an annual review of Board practices and Board, Chairman and Committee performance (including Directors' individual contributions);

(l)      reviewing with the Human Resources Committee the adequacy and form of the compensation of non-executive Directors and ensuring their compensation adequately reflects the responsibilities and risks involved in being an effective Director;

(m)    evaluating, through the Human Resources Committee, the performance and reviewing the compensation of the Chief Executive Officer and ensuring that such compensation is competitive and measured according to benchmarks which reward contribution to shareholder value;

(n)     selecting, upon the recommendation of the Corporate Governance Committee or a sub-committee thereof, nominees for election as Directors;

(o)     selecting the Chairman of the Board;

(p)     reviewing with the Corporate Governance Committee that the Board as a whole, the Committees of the Board and the Directors are capable of carrying out and do carry out their roles effectively;

(q)     requiring that new Directors are provided with adequate education and orientation facilities;

(r)      overseeing the quality and integrity of the Company's accounting and financial reporting systems, disclosure controls and procedures and internal controls;

(s)     approving projects requiring an investment or disposition of a certain threshold; acquisitions where environmental or other liabilities exist and which could result in significant exposure to the Company are also subject to Board approval, irrespective of amounts;

(t)      reviewing alternate strategies in response to any possible takeover bid in order to maximize value for shareholders;

(u)     discussing and developing the Company's approach to corporate governance in general, with the involvement of the Corporate Governance Committee;

(v)      considering and approving any changes to the committee charters recommended by each committee;

(w)     reviewing this Charter at least annually and approving any changes.

V.      EXPECTED QUALITIES OF BOARD MEMBERS

Board members are expected to possess the following characteristics and traits:

(a)      demonstrate high ethical standards and integrity in their personal and professional dealings;

(b)      act honestly and in good faith with a view to the best interest of the Company;

(c)      devote sufficient time to the affairs of the Company and exercise care, diligence and skill in fulfilling their responsibilities both as Board members and as a Committee members;

(d)      provide independent judgment on a broad range of issues;

(e)      understand and challenge the key business plans of the Company;

(f)       be willing to work in a team and be open to opinions of others;

(g)      raise the appropriate difficult questions and issues to facilitate active and effective participation in the deliberation of the Board and of each Committee on which he or she serves;

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(h)     make all reasonable efforts to attend all Board and Committee meetings;

(i)      review the materials provided by Management in advance of the Board and Committee meetings;

(j)      inform the Chairman and Vice-Chairman (if applicable) of the Board before accepting membership on any other board of directors or audit committee and also inform them of any change in the Director's interests that could affect his or her relationship to the Company.

VI.     BOARD COMMITTEES

1.      Number, Structure and Jurisdiction of Committees

The Board delegates certain of its functions to Committees, each of which has a written charter. There are four Committees of the Board: the Audit, the Human Resources, the Environment, Health and Safety and the Corporate Governance Committees. Other Committees or sub-committees may be established from time to time by Board resolution. The roles and responsibilities of each Committee is described in the respective Committee charters.  "Task Force" Committees may be established on an ad hoc basis to deal with specific subjects.

2.      Independent Committee Members

Members of the Audit Committee, Human Resources Committee and the Corporate Governance Committee (or a sub-committee thereof with delegated nominating functions) shall each have no material relationship with the Company and each Member shall be otherwise unrelated and independent under the laws, regulations and listing requirements to which the Company is subject.

3.      Committee Chairmen

The Committee shall appoint its Chairman from among the members of the Committee. The Committee Chairman's responsibilities include the following:

              a)      presiding at meetings of the Committee;

              b)      providing leadership to enhance the effectiveness and focus of the Committee;

              c)      acting as liaison between the Committee and Management;

              d)      developing, in consultation with the appropriate members of Management, the agenda for Committee meetings.

4.       Committee Report to Board

At the next Board meeting following each meeting of a Committee, the Committee Chairmen report to the Board on the Committees' activities.  Minutes of Committee meetings are provided to all Directors.

5.       Assignment and Rotation of Committee Members

The responsibility for the assignment and rotation of Committee Members rests with the Chairman of the Board, who makes recommendations in relation thereto in consultation with the Directors. Rotation is not required but changes are made occasionally to accommodate the Board's needs and individual interest and skills.

6.       Frequency and Length of Committee Meetings

The Chairman of Committees, in consultation with Committee Members and Management, will set the frequency and length of Committee meetings.

VII.     ADMINISTRATIVE MATTERS

1.       Board Performance Assessment

The Board will ensure that regular formal assessments of the Board, its Committees and the individual Directors are carried out in order to enhance their performance.

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2.       Board Compensation

The Human Resources Committee of the Board regularly reviews and makes recommendations on Director compensation. Any proposed change to the compensation of Directors must be formally approved by the full Board.

3.       Director Share Ownership

In order to ensure alignment of the interests of Directors with those of the Shareholders, at least one-half of Directors' fees are paid to non-executive Directors in Deferred Share Units, being the economic equivalent of the Common Shares of the Company.

4.       Board Confidentiality

Directors will maintain the absolute confidentiality of the deliberations and decisions of the Board of Directors and information received at meetings, except as may be specified by the Chairman or if the information is publicly disclosed by the Company.

5.       Board Interaction with Third Parties

If a third party approaches a Director on a matter of interest to the Company, the Director should bring the matter to the attention of the Chairman who shall determine whether this matter should be reviewed with Management or should more appropriately be dealt with by the Board in an in camera session.

6.       Communication with the Board

Shareholders and other constituencies may communicate with the Board and individual members by contacting the Corporate Secretary's office.

7.       Code of Conduct

The Company has a comprehensive code of business conduct and ethics entitled the Worldwide Code of Employee and Business Conduct that governs all employees of Alcan as well as the Directors.

8.       Board Visits

Visits by Directors are made to the Company's plant and business locations in different parts of the world to meet local personnel and to gain insight into the Company's business and operations.

9.       Orientation and Information

The Corporate Secretary prepares a Directors' Manual containing information on Company policies and Director responsibilities and liabilities, which is updated as necessary.  Detailed current information on the Company and its business, operations and finances are sent on a monthly basis to the Directors. Particularly important items and information requiring urgent attention is conveyed immediately.  In addition, 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, business 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.

VIII.    RESOURCES AND AUTHORITY OF THE BOARD

The Board shall have the resources and authority appropriate to discharge its duties and responsibilities, including the authority to retain counsel or other experts, as it deems appropriate, without seeking approval of Management.

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Schedule B: Shareholder Proposal

The following Shareholder Proposal has been submitted to Alcan for consideration at the Meeting and is presented in unedited form.

The Shareholder Proposal has been submitted by Les Missionnaires Oblats de Marie Immaculée, 3456 Du Musée Avenue, Montreal, Quebec, H3G 2C7 and Ethical Funds Inc., 800-111 West Georgia Street, Vancouver, British Columbia, V6E 4T6.

PROPOSAL: Free, prior and informed consent

WHEREAS Alcan is a 45% partner in a large bauxite mine and alumina production project (UTKAL) in the Kashipur region, in India, which calls for the use of land and water on which a vulnerable tribal population depends for survival, 

WHEREAS Alcan is committed to sustainability and recognizes the economic necessity of securing a social license to operate wherever it conducts its activities,

WHEREAS, in the case of UTKAL, various independent and reliable reports indicate that the vulnerable people who will be affected by the project were allegedly neither adequately informed nor consulted,

WHEREAS, despite several requests to that effect by shareholders, Alcan has not succeeded in reconciling the wide variance between its impact assessment, notably regarding the number of persons affected by the project, and the assessment of other stakeholders,

WHEREAS, after a field investigation conducted by its lawyers in January 2005, the Indian-based NGO People's Union for Civil Liberties has reported that Indian authorities have created a climate of fear surrounding the UTKAL project and intimidated the local population with show of force, such as harassment, threats and confinement, demonstrating ipso facto that the consent needed for the social licensing of the project is not entirely secured,

WHEREAS, as a result, Alcan has been drawn into a public controversy which could lead to significant financial risks, such as operational delays, reputation damage, lower than expected revenues, higher security costs, legal claims or project cancellation, and finally,

WHEREAS other companies in similar context, notably Hydro-Québec, HSBC and BHP, have developed processes and tools based on the principle of free, prior and informed consent of the communities to insure that they address the concerns and requests of the people affected by their projects, and to secure their trust and acceptance,

BE IT RESOLVED, that by request of the shareholders, Alcan sponsors an independent advisory committee to work in Kashipur in order to issue recommendations on improving UTKAL's impact assessment, notably the definition of the project-affected persons, as well as community relations with a view to strengthening the acceptance needed for the social licensing of the project, consistent with industry best practices based on the principle of free, prior and informed consent of the whole population.

SUPPORTING STATEMENT

Free, prior and informed consent (FPIC) describes both the process of engagement by which companies obtain social license to operate and the substantive outcome of that process. FPIC empowers the communities with the necessary leverage to ensure they share equitably in the benefits of the projects affecting them. In so doing, FPIC also ensures the social legitimacy of these projects, thereby avoiding costly setbacks to companies. FPIC is recognized by several international instruments and underlies management tools such as the AccountAbility 1000 Assurance Standard.

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ALCAN'S POSITION: 

Alcan's Board of Directors and management recommend voting AGAINST the Shareholder proposal. Alcan has a proven history of making investment decisions that take into consideration all the economic, social and environmental dimensions of sustainability.  As part of this approach, Alcan engages in open dialogue with its stakeholders based on the principle of free, prior and informed consent.

The Utkal Project (the "Project") involves the proposed development of a new bauxite mine and a 1.0 to 1.5 million tonne-per-year alumina refinery in India's Orissa state.  Utkal Alumina International Limited ("Utkal") is a joint venture between Alcan (45%) and Hindalco Industries Ltd. (55%).  Hindalco is part of the larger Aditya Birla group, based in India.

Measures have been taken to ensure minimum impact on the local community.  Three villages totalling approximately 200 individuals or families would be displaced approximately one kilometre from their current locations.  Each individual or family would be relocated to new land with a new house, in a village with potable water, a sanitation system and electricity and would be eligible for rehabilitation benefits under the Government of Orissa's Rehabilitation and Resettlement ("RR") package.  The RR package sets out the terms under which Utkal would acquire the land it requires and the conditions for relocation.  Other individuals affected by the establishment of the Project because of the acquisition of their land but who are not required to be displaced will be given employment/compensation as per eligibility outlined in the RR package. There would be approximately 1,000 - 1,500 individuals affected, including those in the three villages.

In relation to the principle of free, prior and informed consent, Utkal has undertaken, and continues to undertake, consultations with the local community, particularly in respect of the RR package.  Following the initial consultations, the package was approved by the elected representatives of the affected individuals.

Utkal has also been working closely with the community on a significant number of development initiatives related to education, health and sanitation, women awareness, infrastructure development and communication. 

Senior Alcan personnel have visited the Project site and witnessed first-hand the progress being made in relation to development initiatives.  Alcan will continue to support and monitor these activities. 

The Project is in development phase.  Alcan is taking all the steps required to make an informed investment decision, including its own due diligence to ensure that the Project meets Alcan's internationally-recognized criteria of sustainability from an economic, social and environmental perspective.  Alcan will only invest in the Project if these criteria are met.

Alcan believes that, throughout the Project development process, it is able to assess the Project's impact without the duplication of effort and additional cost that the establishment of an independent advisory committee may bring about. 

For these reasons the Board of Directors and management recommend voting AGAINST the Shareholder Proposal.

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EX-99

EXHIBIT 99.2 - - 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, 2005)

OVERVIEW

Higher interest rates and rising commodity prices worked together to slow economic growth in North America, Western Europe and Japan in 2005.  In late summer, hurricanes Katrina and Rita added further pressure on the United States (U.S.) economy just as it looked poised to rebound.  In contrast, China continued to grow rapidly throughout the year and provided a much needed boost to world economic growth as well as the growth of other developing and newly-industrialized nations in Asia.

Global primary aluminum demand grew by more than 4% in 2005, while primary production grew at a faster rate, almost 7% year over year.  As a result, the aluminum market went from an almost 700-kt supply deficit in 2004 to a balanced supply/demand position in 2005.  The announcement of smelter closures by a number of aluminum producers, including Alcan, in response to rising energy prices in Europe and North America, together with the threat of further announcements helped to push aluminum prices sharply higher during the latter half of the year. The benchmark 3-month aluminum price on the London Metal Exchange (LME) reached $2,290 per tonne (/t) by year-end, its highest level since 1989. Aluminum prices also rose in terms of other major currencies for the first time in several years.

Despite a challenging business environment, Alcan performed well during 2005. The benefit of higher prices, increased volumes as well as synergy gains associated with the Pechiney acquisition more than offset the penalties from substantially higher costs for key inputs, the weaker U.S. dollar and the loss of contribution from the rolled products businesses spun-off into Novelis on January 6, 2005. Net income was reduced by charges for Other Specified Items (OSIs) of $670 million, mainly related to the restructuring of certain packaging operations and the closure of two smelters.

During the year, Alcan continued to make excellent progress on key operating and growth initiatives. The Company successfully completed the two-year synergy program undertaken following the acquisition of Pechiney, achieving a run rate of $400 million; well in excess of its $360 million target. As well, the Company made good headway on the ongoing optimization of its portfolios of value-added engineered products and packaging businesses. The expansion of the Gove alumina refinery in Australia, which will nearly double that facility's capacity and significantly improve Alcan's cost position in alumina, continued on budget and on schedule; with first production expected towards the end of 2006. The Company's 20% participation in a 350-thousand tonne per year (kt/y) smelter in Oman, scheduled to begin production in 2008, will fully leverage Alcan's leading-edge technology, operational know-how and management expertise.

While currency movements and rising input costs have pushed the industry smelter cost curve substantially higher over the last two years, Alcan's relative cost position has further improved; bringing to the forefront the Company's unique competitive advantage of low-cost, wholly-owned power generation.

The information presented in this Management's Discussion and Analysis (MD&A) includes Pechiney's results as of January 1, 2004 except for the balance sheet which includes Pechiney beginning on December 31, 2003. The information contained in the MD&A includes the businesses transferred to Novelis for all periods prior to 2005. In the Operating Segment Review on page 21, these businesses are included in "Entities transferred to Novelis".

MARKET REVIEW

World Primary Aluminum Balance 

Supply and Demand

World primary aluminum demand grew by about 4.5% in 2005 to 31.9 million tonnes (Mt); less than half of the 9.7% growth seen in 2004.  The 2004 growth rate had been augmented by customer inventory restocking and material substitution effects due to relatively higher prices for other metals such as steel, copper and secondary aluminum.  While Chinese primary aluminum demand grew almost 20% in 2005, Western World* demand growth fell to under 2%; below the long-term trend of around 3% per annum.

As it had in the previous year, world primary aluminum production increased by about 7% in 2005, reaching 31.8 Mt.  China continued to be by far both the largest and fastest growing producer, with production up roughly 18% year over year to 7.7 Mt.  Output from Western World smelters grew by 4.3% in 2005 mainly due to smelter expansions in Bahrain, Canada and Dubai in the first half of the year as well as restarts in North America, which more than offset closures in that region. Primary aluminum production in the C.I.S. was up 2% to about 4.2 Mt.

*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
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	30.4
2005	30.6	31.8	32.5	32.6
Demand (seasonally adjusted)
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	30.8	30.2
2005	31.1	31.3	32.6	32.4

Balance

With supply increasing faster than demand in 2005, the primary aluminum market was in relative balance for the year compared to the 685-kt supply deficit in 2004.  By the end of 2005, inventories held on the LME, the New York Mercantile Commodities Exchange (COMEX) and by aluminum producers had fallen marginally to just below 3.9 Mt, which represented about nine weeks of Western World supply.  Driven by rising smelter costs and the threat of closures in Europe and North America, the average LME 3-month aluminum price rose over 10% to $1,900/t for 2005, its highest level since 1989, and up from $1,721/t in 2004.

Total Aluminum Inventories and Ingot Prices

	Q1	Q2	Q3	Q4
LME 3-month aluminum price (US$/t)
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	1,667	1,687	1,716	1,813
2005	1,887	1,796	1,846	2,069
Total inventories (IAI*, LME and COMEX warranted) (kt)
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	4,538
2004	4,242	3,975	3,711	3,903
2005	3,830	3,776	3,794	3,882
*  International Aluminium Institute

Outlook

In the first half of 2006, the small amount of new smelter capacity starting up in Brazil, China and India will only serve to offset already announced power-related closures in Western Europe, the U.S. and China.  Consequently, any demand growth should lead to inventory declines.  Market tightness could ease somewhat later in the year as smelter expansions in Dubai, Iceland and Russia begin coming on stream. The supply/demand balance could also be affected by possible restarts of idled capacity in the U.S. Pacific Northwest, due to new power arrangements, as well as in China, facilitated by major alumina refinery expansions in Australia and Brazil.  For 2006, primary shipments are forecast to rise 5% globally, while world primary aluminum production is expected to increase by about 4%.  This would lead to a primary aluminum deficit of about 300 kt for the year, which would provide a supportive environment for aluminum prices.

Total Aluminum Consumption

Total global aluminum consumption (measured as semi-fabricated aluminum, castings, forgings, etc.) grew by an estimated 5% in 2005 to about 43 Mt.  Of this, about 32 Mt was sourced from primary aluminum with the other 11 Mt coming from secondary/recycled metal.

Total aluminum consumption was up in all major regions of the world, but in each case the growth rate was lower than in 2004.  China continued to enjoy strong growth in 2005.  Consumption in China increased nearly 10%, reaching roughly 10 Mt for the year and surpassing the U.S. for the first time in terms of absolute size.  Shipments were also up about 10% in the C.I.S. and 6% in the rest of Eastern Europe.  For the Western World, total aluminum consumption rose just over 2% year on year, led by a 6% increase in Latin America and a 5% increase in Asia (excluding China).  Growth in Western Europe continued to be weak, up only about 2%.  Finally, after being inflated by restocking and material substitution effects in the previous year, there was virtually no growth in North America in 2005.  Consumption growth in the U.S. is still about 4% below the peak levels reached in 1999 and 2000.

2

For a second straight year, aluminum consumption rose in every end-use market.  The strongest growth rates, at around 5%, were in machinery and equipment, electrical, building and construction, and automobiles.  The latter two are also the largest aluminum markets at 8.6 Mt and 7.4 Mt, respectively, and were boosted by strong growth in China.  Increased automobile production in Japan together with higher aluminum penetration ratios helped to offset the impact of production declines in the U.S. and Western Europe. Housing starts were strong in the U.S. and Japan, which contributed to the higher growth in building and construction consumption.  The slowest growth in aluminum consumption, at less than 2%, came from beverage cans, a mature end-market in which competing materials, such as polyethylene terephalate (PET), continue to make gradual inroads.  There was moderate growth for other packaging, principally foil, consumer durables, and other transportation such as heavy trucks, aerospace, buses, trains and ships..

Total Global Consumption by End-Use Market - - 2005 

Containers and Packaging	16%
Building and Construction	20%
Electrical	10%
Transportation	27%
Consumer Durables	7%
Machinery and Equipment	8%
Other	12%
Total	100%

Total Global Consumption by Geographic Market - 2005 

North America	24%
Western Europe	22%
Asia (excl. China)	21%
Latin America	5%
Africa and Oceania	2%
Western World	74%
China	22%
Eastern Europe	2%
CIS	2%
Total	100%

Alcan's Revenues by Geographic Market - 2005

North America	36%
Europe	47%
Asia/Pacific/Africa	16%
South America	1%
Total	100%

RESULTS OF OPERATIONS

Presentation of Financial Information

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 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 were similar to those of Novelis. Also included in Novelis are the assets, liabilities and operations relating to portions of the Sierre facility, located in Switzerland.  The spin-off created a company that was named Novelis Inc. (Novelis). The information contained in the MD&A includes the businesses transferred to Novelis for all periods prior to 2005.  In the Operating Segment Review on page 21, these businesses are included in "Entities transferred to Novelis". Alcan continues 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 Alcan patents, trademarks and other intellectual property rights, and the use of certain buildings, machinery and equipment, technology and employees.  As a result of the significant continuing involvement and cash flows from Novelis, the spin-off did not meet the criteria for classification as a discontinued operation for 2004 and prior years.

3

Earnings Summary

Income from Continuing Operations

	2005	2004	2003
Income from continuing operations (US$M)	155	243	262
Foreign currency balance sheet translation
and Other Specified Items (US$M)	(756)	(557)	(283)
Average LME 3-month aluminum price (US$/t)	1,900	1,721	1,428
In 2005, income from continuing operations was lower than the prior year mainly reflecting significant impairment and restructuring charges.

In 2005, income from continuing operations was $155 million compared to $243 million in 2004 and $262 million in 2003. Lower results for 2005 reflected an increase in charges for Other Specified Items (OSIs) of $266 million, offset in part by a positive year-over-year change in foreign currency balance sheet translation of $67 million.  Details concerning OSIs and translation effects are discussed below.  In 2005, the Company benefited from higher prices, an improved sales mix and increased volumes in the primary aluminum and engineered products businesses, as well as synergy gains associated with the Pechiney acquisition.  LME prices were up on average 10% compared to 2004 reflecting further improvement in industry fundamentals.  Offsetting these positive factors were substantially higher costs for key inputs across all businesses, the negative effects of the weaker U.S. dollar on operating costs and the loss of contribution from the rolled products businesses spun-off into Novelis on January 6, 2005. Cost pressures were especially severe in the packaging business where prices for raw materials, most notably resins and films, have experienced a sharp increase since mid-2004.  The Packaging group has been largely successful in mitigating the resulting pressure on margins through selling price increases and operational improvements.

In 2004, results were affected by a negative year-over-year change in OSIs of $447 million, offset in part by a positive impact of $173 million resulting from lower foreign currency balance sheet translation losses.    During 2004, the Company benefited from significantly higher prices, increased volumes, an improved product mix, cost-reduction initiatives and synergy gains 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.   On a pro forma basis, giving effect to the spin-off of Novelis as of January 1, 2004, income from continuing operations for 2004 was $222 million.

After including the results of discontinued operations and the cumulative effect of an accounting change, the Company's net income was $129 million in 2005 compared to $258 million in 2004 and $64 million in 2003.  The after-tax loss from discontinued operations was $26 million in 2005 compared to income of $15 million in 2004 and a loss of $159 million in 2003.  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.

Net Income
(in millions of US$)	2005	2004	2003
Included in income from continuing operations are:
Foreign currency balance sheet translation	(86)	(153)	(326)
Other Specified Items:
Synergy costs	(57)	(44)	(14)
Restructuring charges	(162)	(41)	(26)
Asset impairments	(314)	(66)	(4)
Goodwill impairment	(122)	(154)	(28)
Gains from non-routine sales of assets, businesses and investments, net	36	54	39
Tax adjustments	(37)	13	72
Novelis costs	(21)	(31)	-
Legal and environmental provisions	-	(7)	(17)
Pechiney financing-related gains (losses)	-	(2)	65
Purchase accounting and related adjustments	-	(122)	(32)
Other	7	(4)	(12)
Total Other Specified Items	(670)	(404)	43
Income from continuing operations	155	243	262
Income (Loss) from discontinued operations	(26)	15	(159)
Cumulative effect of accounting change	-	-	(39)
Net Income	129	258	64

4

Included in income from continuing operations for 2005 were foreign currency balance sheet translation losses of $86 million compared to losses of $153 million in 2004 and $326 million in 2003. 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. While lower than in the previous year, the translation losses in 2005 reflected the continued weakening of the U.S. dollar against the Canadian dollar, partially offset by the appreciation of the U.S. dollar against the Australian dollar.  At December 31, 2005, the closing value of the U.S. dollar was 3% lower against the Canadian dollar than the value at December 31, 2004 (7% lower at December 31, 2004 versus December 31, 2003).  At December 31, 2005, the closing value of the U.S. dollar was 7% higher against the Australian dollar than the value at December 31, 2004 (4% lower at December 31, 2004 versus December 31, 2003). 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 2005 included a net after-tax charge of $670 million for OSIs compared to a charge of $404 million in 2004 and a gain of $43 million in 2003.  In 2005, OSIs included restructuring and asset impairment charges of $162 million and $314 million, respectively, mainly for the restructuring of certain packaging businesses, notably Global Beauty Packaging and Food Packaging Europe, the closures of the Steg and Lannemezan smelters in Europe and the rationalization of certain Engineered Products operations, including the Vernon, California, cast plate facility.  Also included in OSIs was a goodwill impairment charge of $122 million. As required under GAAP, the Company annually tests for goodwill impairment. Due to an increasingly competitive environment for Global Beauty Packaging, the Company has concluded that part of the goodwill associated with this business should be written down. OSIs also reflected costs incurred in connection with the capture of Pechiney acquisition synergies of $57 million. 

The most significant OSIs in 2004 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 related to Pechiney of $122 million, primarily on inventory; asset impairment charges of $65 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 (U.K.) and Belgium; synergy costs of $44 million related to the Pechiney and FlexPac acquisitions; gains of $54 million on the sale of assets and investments principally related to the 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.

The most significant items in 2003 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 U.K., 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 U.S.; environmental and legal provisions of $17 million mainly due to an environmental reserve for a site in the U.S.; and synergy costs of $14 million related to the FlexPac acquisition.

Sales and Operating Revenues

Revenues and Aluminum Volumes

	2005	2004	2003
Third-party sales and operating revenues (US$M)	20,320	24,948	13,850
Total aluminum volume* (kt)	4,339	6,296	4,508
*Includes ingot and rolled product shipments, conversion of customer-owned metal (tolling) as well as aluminum used in engineered products and packaging.
Lower revenues in 2005 principally reflected the impact of the Novelis spin-off, which more than offset the benefit of higher LME prices and price increases in downstream businesses.

Sales Price Realizations

(US$/t)	2005	2004	2003
Ingot product realizations	2,036	1,876	1,607
LME 3-month aluminum price	1,900	1,721	1,428
Realizations increased in line with higher LME aluminum prices.

Sales and operating revenues were $20.3 billion in 2005, a decrease of $4.6 billion, or 19%, compared to 2004.  The decrease reflected the impact of the Novelis spin-off.  Sales and operating revenues increased by 4% in 2005 compared to 2004 based on Alcan's pro forma 2004 sales of $19.6 billion as shown in note 7, Spin-Off of Rolled Products Businesses, of the consolidated financial statements. After giving effect to the Novelis spin-off, the increase was mainly due to higher LME aluminum prices, which were up on average 10% compared to 2004, increased ingot shipments and higher prices and volumes in downstream businesses. 

Sales and operating revenues were $24.9 billion in 2004, an increase of $11.1 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 aluminum 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.

5

Revenues by Market - 2005                                                                               

Packaging	30%
Aluminum Ingot	30%
Beverage Cans	3%
Building and Construction	3%
Electrical	3%
Transportation	8%
Other	23%
Total	100%

Costs and Expenses

Based on current raw material, energy and currency exposures post the Pechiney and Novelis transactions, Alcan estimates that its cost base has increased by approximately $1 billion since 2003 due to increased costs for energy, freight and key raw materials such as coke, pitch, plastics and resins as well as from the impact of the weaker U.S. dollar. While the depreciation of the U.S. dollar was less of a factor in 2005 than it was in 2004 and 2003, it nonetheless had a significant unfavourable impact on costs incurred in other currencies, which are translated into U.S. dollars for reporting purposes. The economic impact of the depreciation in the U.S dollar over the last three years has been marked in countries such as Canada and Australia, where the Company's bauxite, alumina and aluminum smelting operations have a local currency cost base but U.S. dollar revenues.  This has resulted in escalating costs in U.S. dollar terms without any offsetting increase in revenues, inflating overall costs as a percentage of sales.  Through cost reductions, productivity improvements, 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.

Value of U.S. Dollar - Average Annual Percentage Change (%)	Cumulative	2005	2004	2003
Canadian dollar	(23)	(7)	(7)	(11)
Australian dollar	(29)	(3)	(11)	(17)
Euro	(24)	-	(9)	(16)

Continuous Improvement (CI) is a core component of Alcan's Integrated Management System (AIMS).  It equips Alcan entities with the tools necessary to consistently maximize improvement opportunities and thereby enhance the Company's competitive position. Alcan estimates that improvement initiatives have contributed about $120 million to Business Group Profit (BGP) since the introduction of CI in 2003.  Refer to the Operating Segment Review on page 14 for a definition of BGP. Crucial to its ability to capitalize on improvement opportunities, Alcan now has 2,500 trained CI experts, known as Black Belts and Green Belts, throughout the Company.

At the end of 2005, the Company reached the successful conclusion of its two-year Pechiney synergy program, achieving a run rate of $400 million pre-tax, well in excess of the original target of $360 million.  This was an excellent performance considering that approximately $30 million of the originally targeted benefits were no longer available following the spin-off of Novelis and the sale of Aluminium de Grèce (AdG).  In 2005, the Company realized total in-year benefits of $330 million, which represented incremental savings of $230 million over 2004.  By business, the Packaging group and corporate functions are responsible for close to 60% of the $400 million synergy run rate, with the remainder coming from the three remaining business groups.

In addition to the $400 million of annual synergy benefits, there were also tax synergies of about $65 million in 2005 resulting from the Pechiney acquisition that were not included in the original target.  These benefits are cash savings that result mainly from the use of tax loss carryforwards acquired with Pechiney. Additional benefits of approximately $85 million are expected over the next two years.  

Costs and Expenses

(in millions of US$, except where indicated)	2005	% of sales	2004	% of sales	2003	% of sales
Cost of sales and operating expenses	16,135	79.4	20,270	81.2	11,171	80.7
Depreciation and amortization	1,080	5.3	1,337	5.4	862	6.2
Selling, administrative and general expenses	1,402	6.9	1,615	6.5	758	5.5
Research and development expenses	227	1.1	239	1.0	190	1.4
Restructuring charges - net	685	3.4	87	0.3	26	0.2
Other expenses (income) - net	(4)	-	321	1.3	105	0.8

6

Total Aluminum Volume and Purchases

(kt)	2005	2004	2003
Total aluminum volume *	4,339	6,296	4,508
Total purchases	843	2,172	1,843
* Includes ingot and rolled product shipments, conversion of customer-owned metal (tolling) as well as aluminum used in engineered products and packaging.

In 2005, cost of sales and operating expenses were 79.4% of sales and operating revenues compared to 81.2% in 2004 and 80.7% in 2003.  The improvement mainly reflected higher prices for aluminum ingot and fabricated products, increased volumes, an improved product mix and Pechiney synergy benefits, which together more than offset increased energy and raw material costs and the negative impact of the weaker U.S. dollar. During the year, the Packaging group was largely successful in passing on the higher cost of resins and films through increases in selling prices. The increase in the percentage from 2003 to 2004 reflected higher realized prices for aluminum, alumina and products sold through downstream businesses, together with increased volumes, which more than offset the adverse impact of the weaker U.S. dollar on operating costs and increased costs for fuel and raw materials. 

Depreciation and amortization expense was $1,080 million in 2005, a decrease of $257 million compared to 2004.  The decrease was mainly attributable to the Novelis spin-off.  Depreciation and amortization expense was $1,337 million in 2004, an increase of $475 million compared to 2003.  Close to 90% 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.

Following the acquisition of Pechiney at the end of 2003, selling, administrative and general (SA&G) expenses increased as a percentage of sales and operating revenues. The percentage for 2005 was 6.9% compared to 6.5% in 2004 and 5.5% in 2003. The increase in large part reflects the changing composition of Alcan's structure and in particular the greater relative weight of the downstream businesses. The Company believes that it can reduce expenses as a percentage of sales to approximately 6% by the end of 2007.  In 2005, SA&G expenses were $1,402 million, $213 million lower than in 2004. The decrease in 2005 compared to 2004 was mainly attributable to the Novelis spin-off. SA&G expenses were $1,615 million in 2004, $857 million higher than in 2003.  Close to 80% of the year-over-year 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.

Alcan's research and development (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 $227 million in 2005, 5% lower than in the previous year. The decrease mainly reflected the impact of the Novelis spin-off. R&D spending was $239 million in 2004, 26% higher than in 2003.  The increase in 2004 was due to the addition of Pechiney.   

Interest 

Interest	2005	2004	2003
Interest expense (US$M)	350	346	212
Capitalized interest (US$M)	29	11	5
Effective average interest rate (%)	5.6	3.7	5.2
Despite the significant reduction in debt subsequent to the Novelis spin-off, interest expense increased in 2005 due to increased interest rates and a shift to longer-term debt.

Interest expense was $350 million in 2005, compared to $346 million in 2004 and $212 million in 2003.  While total debt decreased by about $2.5 billion following the Novelis spin-off, higher interest rates and a shift in the mix of borrowings toward longer-term debt led to slightly higher interest expense.  The increase in interest expense in 2005 compared to 2004 reflected 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. 

Alcan's effective average interest rate on debt was 5.6% in 2005 compared to 3.7% in 2004 and 5.2% in 2003.  The higher rate in 2005 compared to 2004 reflected higher interest rates on floating and short-term debt and a shift in the maturity profile to longer-term debt as the Company issued $800 million of notes in May 2005 in replacement of commercial paper.  The lower effective rate in 2004 compared to 2003 reflected 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 (interest expense and capitalized interest) 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. To calculate the effective rate for 2005, the prior year-end debt balance as at December 31, 2004 was adjusted on a pro-rata basis for the debt settlement related to the Novelis spin-off.  To calculate the effective rate for 2003, the year-end debt balance as at December 31, 2003 was adjusted on a pro-rata basis for the debt raised to finance the Pechiney acquisition and excludes Pechiney debt assumed as no interest costs were incurred on this debt in 2003.  These adjustments provide a more representative debt level on which interest was incurred for those periods.

7

Restructuring Charges 

In 2005, the Company recorded restructuring charges of $685 million.  The most significant items included: a charge of $485 million in connection with its plans to restructure certain packaging businesses, notably Global Beauty Packaging and Food Packaging Europe, reflecting the continuing drive to reshape the Packaging portfolio, counter increasing competitive pressures in Western countries and improve margins; and charges of $115 million related to the closure of its aluminum smelters in Lannemezan, France, and Steg, Switzerland, due to escalating energy costs.  The closure process for Lannemezan is expected to be completed during the course of 2008 while the closure of Steg is expected to be completed by the end of April 2006.   

In 2004, the Company recorded restructuring charges of $87 million.  The most significant items included: charges of $39 million related to exit costs incurred in connection with certain non-strategic packaging facilities located in the U.S. and France; charges of $19 million related to the consolidation of a U.K. aluminum sheet rolling activities in Rogerstone, Wales; charges of $14 million related to the permanent shutdown of Söderberg capacity at a primary aluminum facility in Saguenay, Quebec; and charges of $7 million related to the closure of two corporate offices in the U.K. and Germany. 

In 2003, the Company recorded restructuring charges of $26 million. The most significant items included: closure and exit costs of $36 million related to certain flexible Packaging operations in Europe and certain Engineered Products cable operations in the U.S.; asset impairment charges of $28 million mainly related to the closure of Söderberg capacity at its primary aluminum facility in Saguenay, Quebec, flexible packaging operations in Europe, and a packaging converting facility in Charlotte, North Carolina; and a recovery of restructuring charges of $38 million that included a gain of $19 million principally for the sale of the Borgofranco power facilities in Italy and income of $15 million on the sale of extrusions operations in Malaysia and sales of assets in the U.K. 

Other Expenses (Income) - Net 

In 2005, the Company recorded other income (net of other expenses) of $4 million. The most significant items included: interest revenue of $73 million of which $33 million related to income tax refunds; gains of $32 million resulting from disposal of businesses and investments; asset impairment charges of $28 million related principally to certain Bauxite and Alumina project costs in Australia and certain Engineered Products assets primarily in Germany and Brazil; losses of $49 million related to the marking-to-market of derivatives; and foreign exchange losses of $10 million. 

In 2004, the Company recorded other expenses (net of other income) of $321 million. The most significant items included:  asset impairment charges of $69 million principally related to certain rolling assets in Italy that were transferred to Novelis in 2005; severance and other exit costs of $34 million that were not part of major restructuring plans; losses of $36 million related to the marking-to-market of derivatives, foreign exchange losses of $61 million; Pechiney integration costs of $38 million; and gains of $35 million resulting from disposal of businesses and investments mainly related to a dilution in the Company's interest in an anode-producing operation in the Netherlands.

In 2003, the Company recorded other expenses (net of other income) of $105 million. The most significant items included:  foreign exchange losses of $116 million mainly related to balance sheet translation; a gain of $34 million on the sale of the Company's remaining portfolio investment in Nippon Light Metal Company, Ltd. (NLM); impairment charges of $8 million related to operations in Canada; an environmental provision of $25 million for a site in the U.S.; and gains of $30 million related to the marking-to-market of derivatives.

Income Taxes

Income tax expense of $257 million for 2005 represented an effective tax rate of 80%, compared to 65% in 2004 and 52% in 2003.  This compares to a composite of the applicable statutory corporate income tax rate of 32% (32% in 2004 and 39% in 2003).  In 2005, the difference between the effective and composite tax rates was principally due to goodwill and other impairment charges for which tax benefits could not be recorded, non-deductible foreign currency balance sheet translation losses, as well as a $42 million increase in deferred tax liabilities due to an increase in the Quebec corporate tax rate.  In 2004, the difference in the rates was mainly due to goodwill and other impairment charges for which tax benefits could not be recorded and non-deductible foreign currency balance sheet translation losses.  In 2003, the difference between the effective and composite tax 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.

8

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 2005, Alcan had $4,713 million of goodwill on its balance sheet, excluding goodwill included in equity-accounted entities, compared to $5,496 million at the end of 2004 and $4,686 million at the end of 2003.  The decrease in goodwill in 2005 reflected amounts transferred to Novelis, foreign currency translation effects and an impairment charge. The increase in goodwill in 2004 reflected the finalization of purchase accounting following the acquisition of Pechiney at the end of 2003, offset in part by an impairment charge.   As required under Generally Accepted Accounting Principles (GAAP), goodwill is tested for impairment on at least an annual basis. Following testing in the fourth quarter of 2005, the Company concluded that an impairment charge of $122 million should be taken in order to reflect the increasingly competitive environment in the Global Beauty Packaging business, resulting from weaker local market conditions, increased foreign competition, rising input costs and adverse foreign currency effects. 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. In 2004, the strong appreciation of the euro and aluminum prices, together with a reassessment of plan assumptions, 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. Goodwill in equity-accounted entities was $665 million in 2005 compared to $837 million in 2004 and $173 million in 2003.

LIQUIDITY AND CAPITAL RESOURCES

Operating Activities

Cash Flow from Operating Activities and Free Cash Flow from Continuing Operations

(in millions of US$)	2005	2004	2003
Cash flow from operating activities in continuing operations	1,628	1,759	1,801
Free cash flow from continuing operations	(438)	230	752
In 2005, cash flow from operations decreased due to the loss of contribution from Alcan's former rolled products businesses, which more than offset the inflows from higher aluminum prices.  Negative free cash flow in 2005 reflected $863 million of spending on the Gove alumina refinery expansion in Australia.

Free Cash Flow from Continuing Operations - Reconciliation with Cash Flow from Operating Activities

(in millions of US$)	2005	2004	2003
Cash flow from operating activities in continuing operations	1,628	1,759	1,801
Dividends
Alcan shareholders (including preference)	(229)	(227)	(200)
Minority interests	(2)	(13)	(11)
Capital expenditures in continuing operations	(1,835)	(1,289)	(838)
Free Cash Flow from Continuing Operations	(438)	230	752

Over the last three years, the Company's financial discipline and stringent management of working capital has resulted in strong cash flows from operating activities in continuing operations.  In 2005, cash flow from operating activities was $1,628 million, a strong performance given the reduced size of the Company following the Novelis spin-off at the start of 2005.  The cash flows for 2003 and 2004 included cumulative contributions of approximately $700 million from the Company's former rolled products businesses. In 2005, cash flow benefited from higher prices and volumes for aluminum ingot and fabricated products. Operating working capital increased by $295 million in 2005 mainly reflecting an increase in receivables of $331 million, partially offset by an increase in payables of $42 million.  The higher level of receivables at the end of 2005 mainly reflected the impact of rising metal prices, which were up on average 10% from the prior year.

In 2004, cash flow from operating activities in continuing operations was $1,759 million, only slightly lower than the record cash flow achieved in 2003.  Operating working capital increased by $179 million in 2004 mainly reflecting an increase in receivables of $437 million, partially offset by an increase in payables of $234 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, cash flow from operating activities in continuing operations was a record $1,801 million. Management action contributed to operating working capital, most notably receivables, being reduced by $469 million in 2003.

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. The most directly comparable financial measure calculated and presented in accordance with GAAP is cash flow from operating activities in continuing operations, as shown above.

9

Free cash flow from continuing operations was negative $438 million in 2005 compared to positive $230 million in 2004 and positive $752 million in 2003.  The deterioration in 2005 compared to 2004 was principally due to increased spending on the Gove expansion in Australia and the impact of the Novelis spin-off. The decrease of $522 million in 2004 compared to 2003 was mainly attributable to a higher level of capital spending relative to 2003.  Free cash flow from continuing operations was a record $752 million in 2003, reflecting the record level of cash flow from operating activities and disciplined capital spending.  Capital expenditures are further discussed under Investment Activities.

Financing Activities

Total Borrowings and Equity

	2005	2004	2003
Borrowings * (US$M)	6,415	9,405	9,543
Equity ** (US$M)	9,711	10,962	10,680
Debt as a percentage of invested capital (%) ***	40	46	47
* Includes borrowings of operations held for sale
** Includes minority interests and preference shares
*** Definition on page 11
In 2005, total debt and debt as a percentage of invested capital decreased significantly subsequent to the Novelis spin-off.

Cash used for financing activities in continuing operations was $2,647 million in 2005, mainly reflecting the settlement of short-term borrowings following the Novelis spin-off offset in part by funding requirements for the Gove expansion. Cash used for financing activities in continuing operations was $538 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 addition to its existing $3-billion commercial paper program in Canada, the Company has reinstated in 2005, two new commercial paper programs, one in France of €1 billion and another in the U.S. of $2 billion. The Company guarantees the commercial paper issued under the two new programs. Starting April 2005, Alcan Pechiney Finance S.A. replaced Pechiney S.A. as the commercial paper issuer in Europe. In October 2005, a new commercial paper program in the U.S. was also initiated with Alcan Corporation as the issuer; it replaced the program of Alcan Aluminum Corporation, which was cancelled in early 2005 following the spin-off of Novelis. At any point in time, the total combined issuance limit for all three programs cannot exceed $3 billion.

In May 2005, the Company issued $500 million of 5.0% global notes, due in 2015, and $300 million of 5.75% global notes, due in 2035.  The net proceeds of these offerings were used to repay outstanding commercial paper debt.

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 of 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 that were also issued by Alcan Aluminum Corporation in 2003.  Both term loans were repaid in 2005. 

In May 2003, the Company issued $500 million of 4.5% global notes, due 2013.  The proceeds were partially used to fund the acquisition of a packaging business (FlexPac), 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 U.S. 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 2014, and the other for $750 million with a coupon of 6.125%, due 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, and were repaid in 2004. 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 also assumed the debt of companies acquired, which amounted to approximately $2.1 billion in 2003. 

Alcan has access to a $3.0-billion committed credit facility that is primarily used to support Alcan's commercial paper programs.  As at March 8, 2006, Alcan has $895 million 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 2005, Standard & Poor's (S&P) Rating Services reduced the rating on Alcan's long-term debt to BBB+ from A- and maintained the rating on short-term debt at A2.  S&P's rationale for the long-term debt downgrade is based on the impact on the Company's credit metrics of Alcan's capital expenditures program for 2005 and 2006 to expand the upstream bauxite and alumina capacity.  Comparable ratings from Moody's Investors Services were maintained at Baa1 and P2, respectively. Credit rating agencies apply their own criteria and may change the ratings at any time.

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Debt as a percentage of invested capital was 40% at the end of 2005, down from 46% at the end of 2004 and 47% at the end of 2003.  The decrease in 2005 reflected the impact of the Novelis spin-off.  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. In line with its objective to maintain a solid investment grade credit rating, Alcan has a target debt to invested capital ratio of 35%.

Debt as a Percentage of Invested Capital As at December 31 (in millions of US$)	2005	2004	2003
Debt
Short-term borrowings	348	2,486	1,764
Debt maturing within one year	802	569	341
Debt not maturing within one year	5,265	6,345	7,437
Debt of operations held for sale	-	5	1
Total debt	6,415	9,405	9,543
Equity
Minority interests	67	236	403
Shareholders' equity
Redeemable non-retractable preference shares	160	160	160
Common shareholders' equity	9,484	10,566	10,117
Total equity (including minority interests)	9,711	10,962	10,680
Invested capital	16,126	20,367	20,223
Debt as a Percentage of Invested Capital (%)	40	46	47

Investment Activities

In 2005, investment activities generated cash of $854 million. This reflected the receipt of about $2.6 billion in settlement of amounts due from Novelis, partially offset by $1,835 million of capital expenditures.  Capital expenditures increased year over year due to the expansion of the Gove alumina refinery in Australia.  In 2004, cash used for investment activities was $1,728 million, which included capital expenditures for expansions at the 40%-owned Alouette aluminum smelter in Quebec and the Gove refinery as well as the purchase of the remaining shares of Pechiney.  Cash used for investment activities in 2003 was $4,594 million, which mainly reflected the acquisition of a 92.2% stake in Pechiney.  For further details, refer to note 8, Acquisition of Pechiney, of the consolidated financial statements. 

Capital Expenditures and Depreciation in Continuing Operations

(in millions of US$)	2005	2004	2003
Capital expenditures for continuing operations	1,835	1,289	838
Depreciation and amortization expense	1,080	1,337	862
In 2005, the increased level of capital spending mainly reflects the Gove alumina refinery expansion.  Excluding the spending on the Gove expansion, capital expenditures as a percentage of depreciation and amortization expense was 90%.

Capital Expenditures 

Capital expenditures for 2005 were $1,835 million, up $546 million from 2004 mainly reflecting a full year of spending on the Gove alumina refinery expansion.  In 2005, the Company spent $863 million on the Gove expansion compared to $100 million in 2004.  The total cost of the project is expected to be approximately AUD2.0 billion which corresponds to the project's initial control currency budget.  As a result of a stronger Australian dollar since the project investment decision was made in September 2004, the U.S. dollar cost is expected to be about $1.5 billion, up from $1.3 billion. Production start-up of the expansion should commence in the fourth quarter of 2006. Capital expenditures for 2004 were $1,289 million, up from $838 million in 2003.  The increase in 2004 mainly reflected the inclusion of capital expenditures by former Pechiney business units as well as spending on the Gove alumina refinery expansion.  Spending in 2003 reflected the expansion of the Alouette smelter in Quebec, in which Alcan has a 40% stake. The Alouette expansion was completed in early 2005 at a total cost to Alcan of approximately $400 million of which about half was spent in 2004. 

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Excluding capital expenditures on the Gove expansion, capital spending was below the level of depreciation and amortization expense for the last three years, a reflection of the Company's continuing emphasis on financial discipline. In 2006, Alcan's capital spending is expected to be approximately $1.6 billion, including about $600 million of spending to complete the Gove expansion, which the Company plans to fund using internally generated cash flow. Excluding Gove, the remaining capital expenditures are expected to be below depreciation.  Of the remaining capital expenditures, about 50% 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 Novelis spin-off at the start of 2005.  Cash used for acquisitions was $112 million in 2005 compared to $466 million in 2004 and $3,819 million in 2003.  The higher level in 2003 mainly reflected the acquisition of Pechiney as well as a number of smaller investments.

During 2005, a number of small investments were completed as part of ongoing efforts to optimize the portfolio of businesses in both the Engineered Products and Packaging groups.  For further details refer to the Operating Segment Review on page 14 and note 21, Sales and Acquisitions of Businesses and Investments, of the consolidated financial statements.

In December 2005, the Company announced that together with Oman Oil Company S.A.O.C. and the Abu Dhabi Water and Electricity Authority, it will proceed with the construction of a $1.7-billion primary aluminum smelter in Sohar, Oman. Alcan is to take a 20% stake in the 350-kt/y smelter, which is expected to begin production in the second quarter of 2008.

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, for a 50% participation in a 150-kt/y 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 acquired 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.

Business Divestments

Proceeds from the disposal of businesses, investments and other assets totalled $266 million in 2005 compared to $35 million in 2004 and $63 million in 2003.  During 2005, a number of small divestments were completed as part of ongoing efforts to optimize the portfolio of businesses in both the Engineered Products and Packaging groups.  The most significant sales included a portfolio holding in Impress Metal for $60 million, the plate operations in the U.K. for $51 million and a print finishing business in the U.K. for $29 million. For further details refer to the Operating Segment Review on page 14 and note 21, Sales and Acquisitions of Businesses and Investments, of the consolidated financial statements.

On February 27, 2006, the Company announced that it had reached an agreement to sell selected assets of its North American Packaging Plastic Bottle business to Ball Corporation for $180 million.  The sale is subject to compliance with the Hart-Scott-Rodino Act of 1976.

On March 6, 2006, the Company announced that it had reached an agreement in principle for the sale of its Chambéry, France, operation to CGA (Compagnia Generale Alluminio SpA). Chambéry manufactures Rollbond panels used primarily as fluid circulators in refrigeration units. CGA is an Italian company specializing in domestic refrigeration and air conditioning.

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 from 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). Alcan completed the sale of AdG in March 2005 and the sale of PEM in June 2005.

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 U.K., as well as the Company's remaining stake 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 U.K. 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.

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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 U.S.

The spin-off transaction resulted in a net payment to Alcan by Novelis of approximately $2.5 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. 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.  For further details, refer to note 7, Spin-Off of Rolled Products Businesses and note 29, 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, 2005. There are no material off-balance sheet arrangements.

Contractual Obligations  As at December 31, 2005 (in millions of US$)	Payments due by period
	Total	2006	2007-2008	2009-2010	2011 and thereafter
Long-term debt (1)	6,067	802	493	715	4,057
Interest payments (2)	4,014	328	568	495	2,623
Capital lease obligations	18	4	7	-	7
Operating leases	317	89	112	54	62
Purchase obligations	4,824	1,135	866	542	2,281
Unfunded pension plans (4)	2,230	65	120	122	1,923
Other post-employment benefits (4)	2,627	67	149	166	2,245
Funded pension plans (4) (5)	(5)	246	503	518	(5)
Guarantees (3)	211	80	46	20	65
Total		2,816	2,864	2,632

⁽¹⁾  Refer to note 24, Debt Not Maturing Within One Year, of the accompanying consolidated financial statements.

⁽²⁾  Interest payments were calculated using the interest rate in effect and the outstanding debt balance as at December 31, 2005.

⁽³⁾  Refer to note 29, Commitments and Contingencies, of the accompanying consolidated financial statements.

⁽⁴⁾  Refer to note 33, Post-Retirement Benefits, of the accompanying consolidated financial statements.

⁽⁵⁾ 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 2010 are projected to be in the same range as in prior years and to grow in relation with payroll.

ENVIRONMENT, HEALTH AND SAFETY (EHS)

A core component of AIMS, EHS FIRST 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.   It also underpins Alcan's commitment to be a recognized industry leader in EHS excellence.  EHS FIRST, however, is more than just a system; it represents an attitude, a mindset and an endorsement by all employees of their responsibility in the implementation of EHS best practices in the Company's operations worldwide.

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. Newly acquired facilities must be fully compliant with all corporate and business group standards within two years of their acquisition.  By the end of 2005, 88% of the Company's facilities were ISO 14001 certified, as compared to 60% in 2004, and 86% were OHSAS 18001 certified, as compared to 53% the year prior.

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EHS FIRST is designed to help Alcan employees recognize significant EHS risks in their daily work life and to implement efficient methods of eliminating or minimizing them. For EHS-related liabilities originating from past Alcan activities as well as from acquired industrial activities, an Alcan-wide program has been adopted that systematically evaluates and manages these liabilities and develops strategies that will ultimately increase the value of  related assets.

At the heart of EHS FIRST is a performance data management system, which standardizes data gathering and reporting at all levels of the organization and at each facility. A comprehensive overview of EHS FIRST performance, including greenhouse gas (GHG) emission data and other sustainability issues, is published yearly in the Alcan Sustainability Report, available on the Company's website.

Alcan's capital expenditures to protect the environment and improve working conditions were $91 million in 2005 and are projected to be $207 million in 2006 and $212 million in 2007. In addition, expenditures charged against income for environmental protection were $138 million in 2005 and are expected to be $203 million in 2006 and $186 million in 2007.

In early 2006, and for the fourth consecutive year, Alcan was selected as the leading aluminum-sector company on the Dow Jones Sustainability World Index for 2005. The Index ranking was in recognition of Alcan's high integration of sustainability indicators with core management systems, as well as achievements in GHG emission reductions, eco-efficiency performance and proactive stakeholder dialogue. In addition, the Company was selected as one of two Canadian companies on the Carbon Disclosure Project's 2005 Climate Leadership Index for its work in addressing global climate change issues.  Alcan was also selected best-in-class in the metals and mining industry for the second year in a row on the "2006 Global 100 Most Sustainable Corporations in the World" listing. The list recognizes the best companies' exceptional capacity to address sector-specific environmental, social and governance risks and opportunities.

OPERATING SEGMENT REVIEW

Throughout 2005, the Company had four business groups or operating segments: Bauxite and Alumina; Primary Metal; 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, pension actuarial gains and losses and other adjustments, as well as certain OSIs including restructuring costs (relating to major corporate-wide acquisitions or initiatives), impairment and other special charges 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. Where necessary, the business group's BGP is restated to reflect the classification of businesses as discontinued operations. 

Financial information for individual business groups presented in this section includes the results of equity-accounted joint ventures and certain other investments on a proportionately consolidated basis, which reflects the way the business groups are managed. However, as required under U.S. GAAP, the BGP of these joint ventures and investments is removed under the caption "Adjustments for equity-accounted joint ventures and certain investments" and their net after-tax results are reported as equity income in the consolidated statement of income.

The change in the fair 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.  The Company believes this presentation provides a more accurate portrayal of underlying business group results and is in line with its portfolio approach to risk management. 

Following the spin-off of Novelis, Alcan continues to operate five rolling mills in four countries. The rolled products facilities retained by Alcan are Neuf-Brisach and Issoire, both in France, Sierre in Switzerland, and Ravenswood in the U.S.; all of which are part of the Engineered Products group. The Singen facility in Germany is shared between the Engineered Products and Packaging groups.  The Sierre facility in Switzerland is shared between Engineered Products and Novelis.

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. 

Additional operating segment information is presented in note 35, 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 their sales.  

Third-Party Revenues by Business Group - 2005

Bauxite and Alumina	7%
Primary Metal	34%
Engineered Products	30%
Packaging	29%
Total	100%

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Bauxite and Alumina

A recognized leader and supplier of alumina refinery technology, the Bauxite and Alumina (B&A) group comprises Alcan's worldwide activities related to bauxite mining and refining into smelter-grade and specialty aluminas. The group owns and/or operates six bauxite mines and deposits in five countries, five smelter-grade alumina plants in four countries and six specialty alumina plants in three countries.  B&A also purchases bauxite and alumina from third parties.  At the end of 2005, the group's smelter-grade alumina production capacity stood at 5.2 Mt/y.

Over the last several years, B&A has made several changes to its asset portfolio with the aim of improving its competitive position by successfully repositioning its production base around low-cost bauxite and alumina assets.  Expansions at the Company's wholly-owned Gove refinery in Australia and 10%-owned Alumar refinery in Brazil are expected to further enhance its alumina cost position and significantly contribute to the achievement of the group's objective of having 50% of production in the lowest quartile of the industry cost curve and 75% in the lower half by 2009.

The group's alumina production capacity declined in 2005 with the completion of two transactions. As part of the spin-off of Novelis, the group disposed of its 135-kt/y alumina refinery and 500-kt/y bauxite mine in Ouro Preto, Brazil.  In March 2005, Alcan sold its 60.2% interest in AdG and related contracts. The AdG operations included a 780-kt/y alumina refinery.

In addition to its existing R&D facility in Arvida, Canada, a new facility was established in Brisbane, Australia, in July 2005.  This facility focuses on developing new technologies and enhancing alumina production processes to improve productivity, environmental performance, and employee safety.  Combined, the two facilities place the Company in a unique position to provide innovative technology for the global alumina industry.

Due to the exhaustion of fluorspar reserves in the Tarn region of France, Alcan announced in September 2005 that its subsidiary, Sogerem, will cease mining operations during 2006.

In November 2005, Alcan and its partner Alcoa World Alumina LLC signed a Basic Agreement with the Government of Guinea that sets forth the framework for the development of a 1.5-Mt/y alumina refinery in Guinea.  Alcan and its partner initiated a detailed feasibility study, which is expected to cost between $25 million and $30 million.  An investment decision is expected to be made in 2007.

In December 2005,  Alcan announced that it will participate in the expansion of the world-class Alumar refinery in Brazil, in which it holds a 10% interest  The expansion of the refinery will increase total capacity from 1.4 Mt/y to 3.5 Mt/y, giving Alcan an additional 210 kt/y of capacity at a capital cost of $129 million.  Production start-up of the expansion is expected to commence in the first half of 2008.

The expansion of the 2.1-Mt/y Gove alumina refinery in Australia, which began in late 2004, is progressing on schedule and with a best-in-class safety record.  When fully operational in 2007, the expanded facility is expected to have the capacity to produce 3.8 Mt/y of smelter grade alumina and will enjoy significant efficiency and environmental performance gains.   First production is scheduled for the fourth quarter of 2006.  The total cost of the project is expected to be approximately AUD2.0 billion which corresponds to the project's initial control currency budget.  As a result of a stronger Australian dollar since the project investment decision was made in September 2004, the U.S. dollar cost is expected to be about $1.5 billion, up from $1.3 billion.

Sales and Production - B&A *

	2005	2004	2003
Third-party sales and operating revenues (US$M)	1,478	1,487	528
Intersegment sales and operating revenues (US$M)	1,515	1,575	853
Hydrate production (kt)	5,665	5,630	4,156
*Data has been restated to exclude entities transferred to Novelis.

In 2005, sales were flat compared to 2004 as higher alumina prices were offset by lower volumes and an unfavourable mix resulting from lower spot sales in the current year. Alumina prices, which are linked to the LME price for aluminum, benefited from the 10% increase in the average LME price year over year.  In addition, strong demand for alumina, largely driven by the strength of the Chinese economy, caused the alumina market to be extremely tight, which kept prices on the spot market at very high levels for the second year in a row.  In 2004, average realized prices had also increased compared to 2003 as the LME was up on average 21%.

In 2005, the group's alumina refineries, with the exception of Gove, all established new production records; and total production exceeded the prior year's record level by 35 kt.  Gove's operations were affected by a cyclone in March 2005, which resulted in some loss of production.   In 2005, the group's bauxite production also established a new record.

In 2005, Alcan's average production cost per tonne of alumina was up 18% over the prior year mainly due to higher energy, caustic soda and maritime freight costs as well as the impact of the weakening U.S. dollar.  While this was an industry-wide phenomenon, Alcan's increase was somewhat higher than the industry average of 17% due to its greater reliance on oil in the production process.  The group's cost reduction efforts and the implementation of best practices across the group helped to mitigate some of the increase.  In 2004, average production costs per tonne had increased 14% over the prior year due to the addition of higher-cost Pechiney facilities, higher maritime freight costs and the impact of foreign currency movements.

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BGP - B&A

	2005	2004	2003
BGP (US$M) *	435	460	187
LME (US$/t)	1,900	1,721	1,428
*Data has been restated to exclude entities transferred to Novelis.

In 2005, BGP was $435 million, 5% lower compared to 2004.  The decline reflected a significant increase in energy prices, principally oil, higher maritime freight costs on bauxite shipments, higher caustic soda costs, the impact of a weaker U.S. dollar, a decrease in alumina shipments, as well as an OSI charge of $13 million related to the closure of Sogerem, a fluorspar operation in France.  In 2005, the price of crude oil increased by approximately 40% year over year, while caustic soda prices more than doubled.  The recent rise in oil prices underscores the importance of the group's continuing efforts to secure a source of natural gas for the Gove refinery.  The pressure on operating costs was partly offset by higher selling prices for alumina and alumina hydrate as well as by Pechiney-related synergies and continuous improvement efforts.

In 2004, the increase in BGP compared to 2003 reflected higher alumina prices and the addition of the former Pechiney operations. These positive factors were partly offset by the unfavourable impact of higher energy and maritime freight costs, as well as the impact of the weaker U.S. dollar on operating costs.

Six alumina refineries produce specialty aluminas for a wide range of applications, including solid surface products, refractory bricks, ceramics, catalysts, absorbents and public water treatment. In 2005, BGP for B&A included $24 million from specialty aluminas as compared to $2 million in the prior year.  The improvement was mainly attributable to an improved product mix and pricing strategy. 

Primary Metal

Alcan is recognized as the world's leading supplier of smelting technology and one of the two largest primary aluminum producers in the world.  The Primary Metal group operates or has interests in 22 smelters with a total capacity of 3.5 Mt/y, including its 40% interest in the newly-expanded Alouette smelter in Quebec.  Alcan's renowned competitive strength in smelting is underpinned by its excellent position in energy, a key input in the production of aluminum.  Approximately 50% of the Company's energy requirements for smelting are met by self-generated, environmentally sound power, compared with an industry average of about 25%. A further 40% of Alcan's power requirements are secured under competitive long-term contracts.   With a sharp focus on cost reduction, productivity improvement and technology development, Alcan seeks to continuously reinforce its low-cost primary metal position.  In 2005, close to 50% of the Company's smelter capacity was in the first quartile of the industry cash cost curve, while 90% of the production was at costs that were lower than the world average. With the recently announced closures of its aluminum smelters in Lannemezan, France, and Steg, Switzerland, the group is pursuing its objective of having 55% of smelter production in the first quartile by 2009, while maintaining at least 80% of its production at costs that are better 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 industry products.

Alcan has announced that it will permanently close two of its older, less efficient and less environmentally sound smelters in Europe. In October 2005, the Company announced that it has begun discussions with its local stakeholders over a project regarding the progressive closure of its 50-kt/y aluminum smelter in Lannemezan, France. The closure process is expected to begin by June 2006 and be completed during the course of 2008.  In January 2006, Alcan announced the closure of the 44-kt/y Steg smelter as well as the cessation of anode production in Sierre, both located in Switzerland. The closures are expected to be completed by the end of April 2006.  Related closure costs as well as environmental provisions totalling $115 million were recorded in 2005 of which $11 million related to the Steg closure was included in the group's BGP. 

In September 2005, the Company announced the successful completion of the $1.1 billion (CAN$1.5 billion) expansion of the Alouette smelter in Quebec, in which it holds 40% stake.   The expansion, which came in on budget and ahead of schedule, more than doubled Alouette's capacity, from 245 kt/y to 550 kt/y.  The expanded smelter is the largest in the Americas. 

In October 2005, the Company announced that it had signed a Letter of Intent with the Government of Cameroon for the potential upgrade and expansion of the joint-venture Alucam smelter. Under the proposed project, the smelter's capacity would be increased from 90 kt/y to approximately 260 kt/y and a new hydroelectric power station would be constructed at a total estimated cost of $900 million. The Government of Cameroon and Alcan each own 46.7% of Alucam. Alcan plans to undertake the necessary technical studies and make a decision during the course of 2006.

In December 2005, the Company announced that together with Oman Oil Company S.A.O.C. and the Abu Dhabi Water and Electricity Authority, it will proceed with the construction of a $1.7-billion primary aluminum smelter in Sohar, Oman. Alcan is to take a 20% stake in the 350-kt/y smelter, which is expected to begin production in the second quarter of 2008. The smelter is expected to be in the lowest quartile of the industry cash cost curve and add approximately 2% to Alcan's global smelting base. Under a technology transfer agreement, the Company will provide the operator of the smelter, Sohar Aluminium Company LLC, with a license and related technical services necessary to implement Alcan's AP35 technology.   Alcan will have the right to acquire up to 60% of a planned second potline of similar capacity.

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The feasibility study for the construction of a new aluminum smelter in South Africa as well as related energy contract negotiations are progressing.  A decision on the smelter, which would be built in partnership with the South African government and their Industrial Development Corporation, is expected to be reached in 2006.

In December 2005, a Memorandum of Understanding (MOU) was signed with Big Rivers Electric Corporation and Kenergy Corporation to restructure and extend the existing electricity service contract for the Company's 196-kt/y Sebree smelter in Kentucky from 2007 through 2023. The MOU is an important milestone in supporting and securing the long-term sustainability of the Sebree smelter.

Detailed engineering studies and project cost evaluations were completed for an 80-kt/y spent potlining treatment facility, which is expected to be built in the Saguenay - Lac-Saint-Jean region of 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.

During 2005, the group successfully negotiated a new three-year collective labour agreement with unionized employees at its Kitimat smelter in British Columbia.  Contracts covering several facilities in Quebec expire at the end of 2006.   

Sales and Production - Primary Metal *

	2005	2004	2003
Third-party sales and operating revenues (US$M)	6,877	4,586	2,596
Intersegment sales and operating revenues (US$M)	1,898	3,741	2,217
Aluminum production (kt)	3,420	3,273	2,247
* Data has been restated to exclude entities transferred to Novelis.

In 2005, group revenues reached a record $8.8 billion; reflecting increased LME prices and improved product premiums and mix. The significant year-over-year increase in third-party ingot product shipments principally reflects third-party sales of ingot to Novelis that were previously classified as intercompany sales. 

In 2005, Alcan's production of primary aluminum increased by 147 kt versus the prior year, reflecting the full-year benefit of the June 2004 acquisition of a 50%-interest in a smelter in China, output from the completed expansion of the 40%-owned Alouette smelter and the restart in December 2004 of the idled production resulting from a strike at the 25%-owned Aluminerie Bécancour smelter in Quebec. Also contributing to the increase were benefits from production improvements at smelters in the U.K., Australia and Canada.  In 2004, production of primary aluminum was approximately one million tonnes higher than in the prior year largely due to the addition of former Pechiney facilities.

Half of the group's smelters set new annual production records in 2005.  Most of Alcan's smelter production is in the form of value-added ingot. Record sales levels were achieved in North America for both remelt ingot and value added products, including sheet ingot, extrusion billet and rod. Globally, the group achieved record sales of value-added products such as rod and billet, as well as remelt ingot.  In addition, the group successfully reduced inventories to record low levels in all regions. Power generation by the Company's hydroelectric facilities in Kitimat, British Columbia, was also a new record.

BGP - Primary Metal

	2005	2004	2003
BGP (US$M) *	1,751	1,462	780
Average realized price (US$/t)	2,036	1,876	1,607
LME 3-month aluminum price (US$/t)	1,900	1,721	1,428
* Data has been restated to exclude entities transferred to Novelis.

BGP, at $1,751 million in 2005, was a record for the group and represented a 20% increase over the previous year. The improvement reflected higher realized selling prices for ingot, improved product mix, benefits from synergies, increased metal shipments and power sales, as well as favourable balance sheet translation effects.  The increased metal shipments reflected the completion of the Alouette expansion, the restart of idled capacity in the Aluminerie Bécancour smelter and a full year's production at the smelter in China. These favourable factors were partially offset by the impact of the weaker U.S. dollar on operating costs, increased alumina, purchased energy and fuel-related raw materials costs, as well as OSI charges of $15 million mainly for the closure of the Steg smelter.  In 2005, synergies benefits surpassed targets mainly reflecting increased procurement savings.  

In 2004, BGP from continuing operations improved by $682 million, as compared to 2003, 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 closure of the remaining Söderberg capacity at the Arvida complex.

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Engineered Products

The Engineered Products group is a portfolio of businesses that provide innovative, high value-added product solutions for a wide range of applications in the aerospace, automotive, mass transportation, marine, electrical, beverage container, display and architectural and building markets. To meet the diverse needs of its customer base, the group manufactures an equally wide range of products including hard and soft alloy extrusions, sheet, plate, castings, forgings, cable, rod and strip, engineered shapes and structures as well as composite materials such as balsa-core, aluminum-plastic, fibre-reinforced plastic and foam plastic.  The group operates 52 manufacturing facilities in 11 countries, two world-class research and development centers, a global sales organization with 33 offices in 29 countries and network of 33 service centers in 11 European countries specializing in value-added services and distribution support.

Organized into nine business units, the EP group is focused on maximizing value and improving its BGP margin through operational excellence and the active management of its product offering and portfolio.   The group has a target of achieving a BGP margin from operations of 10% by 2009.

As previously mentioned, on March 6, 2006, the Company announced that it had reached an agreement in principle for the sale of its Chambéry, France, operation to CGA.

Sales and BGP - Engineered Products *

	2005	2004	2003
Third-party sales and operating revenues (US$M)	6,015	5,525	2,140
Intersegment sales and operating revenues (US$M)	202	725	156
BGP (US$M)	403	379	190
BGP margin (%)**	6%	6%	8%
BGP margin from operations (%)***	7%	6%	8%
* Data has been restated to exclude entities transferred to Novelis. ** BGP as a percentage of total third-party and intercompany sales and operating revenues.
*** BGP margin excluding OSIs described below.

In 2005, third-party sales and operating revenues were $6 billion, up $490 million from the prior year, due to strong growth from the aerospace business and increased demand for specialty sheet, cable and composites products, which more than offset the sales lost due to exits from less profitable product lines and businesses. BGP was up $24 million, or 6%, over 2004.  Included in BGP for 2005 were OSI charges of $61 million compared to $4 million in 2004 and nil in 2003. OSIs for 2005 included restructuring provisions for the Sierre, Switzerland, and Singen, Germany, facilities as well as costs associated with the closures of the cast plate business in Vernon, California, and the downsizing of the mass transportation systems business. Excluding OSIs, BGP improved by $81 million, or 21%, mainly due to strong growth in aerospace volumes, a shift in sales mix towards higher value-added products and synergies realized from the Pechiney acquisition, which more than offset the increases in energy, raw material, and freight costs. In 2004, third-party sales revenues and BGP were up 158% and 99%, respectively, over the prior year largely reflecting the impact of the Pechiney acquisition.

Engineered Products - Revenues by Business Unit - 2005

Aerospace, Transportation & Industry	23%
Automotive Structures	3%
Cable	10%
Composites	10%
Extruded Products	12%
International Network	14%
Service Centres	7%
Specialty Sheet	19%
Ventures	2%
Total	100%

Engineered Products Business Units

The Aerospace, Transportation and Industry (ATI) business unit is a key supplier of high value-added sheet, plate and extruded products for the aerospace market, as well as products for marine, transportation and industrial applications.  The group is the leading aluminum supplier to the aerospace industry in Europe and the second largest worldwide, as well as Europe's premier supplier of large profile extrusions for the transportation market. Increased demand and strong volumes for plate and coil led to record high revenues of $1.4 billion in 2005, an increase of 7% over the prior year. Volume gains together with a higher value-added sales mix resulted in strong year-over-year improvement in profitability. The turnaround of ATI's Ravenswood, West Virginia, sheet and plate mill was also a major contributor. During 2005, Ravenswood was focused on upgrading its product mix and increasing capacity through small investments in new equipment. In December 2005, Alcan announced a $27-million expansion of aerospace plate production at the facility, scheduled to come on stream in the second half of 2006. The aerospace market is expected to be a significant source of future growth, and Alcan is well positioned as a lead supplier of aluminum plate products for Airbus' super jumbo aircraft, the A380, and for Boeing's 737, 777 and new 787 Dreamliner commercial aircraft programs. 

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The Automotive Structures business unit had third-party sales and operating revenues of $207 million in 2005, 26% higher than in 2004. The business provides automobile manufacturers with an array of sophisticated, lightweight engineered components and shaped products. In North America, a new bumper assembly plant started operation in Novi, Michigan, at the end of 2004, with output steadily increasing throughout 2005. The construction of the Saguenay bumper plant in Quebec was completed in the first half of 2005 and production commenced at mid-year. In Europe, operations are focused on the design and manufacture of crash management systems and other similar applications.

The Cable business is a fully integrated manufacturer of aluminum cable, pre-wired systems, and rod and strip products in North America. It supplies many sectors of the electrical industry including utilities, distributors and original equipment manufacturers. Business conditions in 2005 remained brisk and sales revenues reached a record high $618 million, an increase of 11% compared to 2004. The higher level of sales mainly reflected the benefit of price increases implemented in order to recover sharply rising raw material costs. As in the previous year, the business benefited from increased activity due to hurricane recovery efforts in the southern U.S. In July 2005, Alcan acquired PreWired Systems LLC, thus expanding its product offering and strengthening its position with distributors and end-use customers in the highly profitable building wire segment.

The Composites business supplies a wide range of products for customers in the display and graphic arts, architecture, transportation and industrial markets. Sales and operating revenues were $584 million in 2005, up 6% from 2004, reflecting increased demand in the core material market, especially in the wind power and marine market segments. The high cost of energy, resins, and aluminum lifted raw material costs to unprecedented levels in 2005. Raw material cost increases were largely offset by operational improvements, price increases and strong demand.

The Extruded Products business, a leading supplier of extrusions for rail, bus, marine, automotive and engineering applications, had third-party sales and operating revenues of $737 million in 2005, down 1% from 2004. After a positive start to the year, demand in the second half of 2005 softened as customers postponed orders in response to surging aluminum prices. Despite challenging market conditions, cost cutting measures along with price and mix improvements led to a significant improvement in profitability. Alcan announced the construction of a new extrusion facility in Slovakia, expected to start up in early 2007, which will improve capabilities.

Alcan International Network (AIN) is engaged in marketing and commercial agency services for EP and other Alcan business groups. In 2005, AIN had third-party operating revenues of $858 million. The business's profitability improved substantially driven by the strong performance of the chemicals business and strong demand for metal products in Japan and China.                                        

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    $412 million in 2005, 5% higher than in 2004. Good performance in the growing aerospace market was partly offset by weak European demand mainly in industrial markets. The sale of Almet France was finalized in April 2005. In July 2005, Alcan purchased the remaining 36% minority interest in the Almet Germany operations.

The Specialty Sheet business manufactures aluminum sheet products mainly for the beverage can, automotive, building and construction, industrial and distribution markets. The business, which comprises the Neuf Brisach rolling mill in France and the Singen rolling mill in Germany, had third-party sales and operating revenues of $1.1 billion in 2005, an increase of 11% over 2004. Sales benefited from higher volumes of both can stock and automotive sheet. Margins came under pressure primarily due to changes in product mix, the higher costs of energy and oil-based materials and higher maintenance costs.

The Ventures business consists of seven smaller, independent businesses located in France, Switzerland and Germany including high purity aluminum smelting and rolling, capacitor foil, refrigerator panels, rail and bus engineering, composite structures components and air freight containers. The rail and bus engineering activity has been restructured and exited during 2005. The air freight containers business was sold in June 2005. In October, an agreement in principle was reached for the sale of the remaining activities at the Mercus facility, a high purity metal operation in France. In January 2006, an agreement in principle was reached for the sale of the Froges rolling mill in France. The Ventures unit had third-party sales and operating revenues of $108 million in 2005, down 53% compared to 2004 mainly due to business exits. 

Packaging

The Packaging group is a global leader in value-added specialty packaging for the food, pharmaceutical and medical, beauty and personal care, and tobacco markets throughout Europe, the Americas and Asia. It takes a multi-material approach to providing customers with innovative packaging solutions. The group's broad product offering includes both technology and materials, including plastics, engineered films, aluminum, paper, paperboard and glass. With 150 plants in 30 countries, Alcan Packaging has a leading presence in all its business segments.

As part of the continuing drive to reshape its portfolio, counter increasing competitive pressures in Western countries and improve margins, the Packaging group intends to restructure certain businesses, notably Global Beauty Packaging and Food Packaging Europe. The group is pursuing a strategy of establishing a network of centres of excellence focused on customers in key geographic and end markets while increasing the share of its capacity in emerging markets. This will result in a manufacturing system comprised of fewer, larger, more specialized plants, better able to serve existing and future customers and intended to move the group toward its stated objective of achieving a 15% BGP margin by 2009.  Implementation of this strategy in 2005 resulted in largely non-cash charges totalling $485 million for asset impairments and restructuring costs, of which $28 million were reflected in the group's BGP.  Also in 2005, the Company's annual testing of goodwill resulted in an impairment charge of $122 million, largely reflecting the increasingly competitive environment for the Global Beauty Packaging business. This non-cash charge was also not reflected in the group's BGP.

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Overall, 2005 was a year of consolidating the gains arising from the Pechiney and Flexpac acquisitions. Synergy programs exceeded expectations, with significant benefits of $124 million in the year coming from procurement activities, asset optimization and general and administrative expense reductions.   Capital spending was focused mainly on growth/synergy projects in order to fully capitalize on recent acquisitions and extend the group's geographic footprint into emerging markets.

As previously mentioned, the Company announced on February 27, 2006, that it had reached an agreement to sell selected assets of its North American Packaging Plastic Bottle business to Ball Corporation for $180 million.

Sales and BGP - Packaging

	2005	2004	2003
Third-party sales and operating revenues (US$M)	6,004	6,024	2,787
Intersegment sales and operating revenues (US$M)	5	69	59
BGP (US$M)	595	656	352
BGP margin (%)*	10%	11%	12%
BGP margin from operations (%)**	10%	11%	13%
* BGP as a percentage of total third-party and intercompany sales and operating revenues.
** BGP margin excluding OSIs described below.

Third-party sales and operating revenues for 2005 were $6.0 billion, slightly below the previous year. Benefits from price increases were more than offset by the combined effects of lower volumes due to softening European demand and the successful divestment of several non-core businesses.  In 2004, sales and operating revenues were more than double the prior year's level, mainly reflecting the impact of the Pechiney acquisition.

Two major phenomena impacted the packaging business in 2005; rising raw material costs and the further slowing of economic conditions in Europe.  The rise in costs for resins and films that started in mid-2004 in the wake of spiralling world oil prices temporarily peaked in mid-2005. By the end of the third quarter, the group had successfully passed on close to 100% of the rise in costs through increases in product prices.  However, the severe 2005 hurricane season in the southern U.S. resulted in renewed upward pressure on costs towards year-end.  Due to normal time lags in adjusting product prices, as of year end, the group had not been able to fully pass through more recent cost increases. 

Weak European demand persisted throughout the year across all businesses, but most notably in Food Packaging where industry overcapacity and raw material price pressure resulted in intense competition for volume. Increasingly, business is moving to online internet-based auctions, which is further exacerbating price pressure. Customer and competitor growth strategies are now focusing increasingly on investment in lower-cost geographic areas.

Despite significant success in countering cost pressures, BGP for 2005 was $595 million, approximately 9% lower than in the prior year. The main factors behind the decline were the continuing raw material margin squeeze, restructuring costs and structural issues in Global Beauty Packaging.  Included in BGP for 2005 were OSI charges of $28 million compared to $3 million in 2004 and $12 million in 2003.  BGP in 2004 was $304 million higher than in 2003 mainly due to contributions from former Pechiney businesses as well as operational improvements and synergies.   

A notable success in 2005 was the group's strong cash flow performance, despite weaker BGP. This reflected focused capital discipline and the rollout of a group-wide working capital best practices program, which achieved significant year-on-year working capital reductions.

Packaging Revenues by Market - - 2005

Food	63%
Pharmaceutical	16%
Beauty	14%
Tobacco	7%
Total	100%

Packaging Revenues by Region - - 2005 

Europe	49%
North America	38%
South America	6%
Asia/Pacific/Africa	7%
Total	100%

Packaging Revenues by Type of Input - - 2005 

Film	27%
Resins	22%
Chemical products	14%
Aluminum	21%
Paper	4%
Other	12%
Total	100%

Packaging Business Sectors

The Packaging group comprises six business sectors: Food Packaging Europe, Food Packaging Americas, Food Packaging Asia, Global Pharmaceutical and Medical, Global Beauty and Personal Care and Global Tobacco Packaging.

Demand for Food Packaging Europe continued to be weak in 2005.  Reasons for the weak market conditions included changing snack/confectionary habits and the continued move to private label packaging in dairy products. Price increases implemented in order to recover higher material costs further contributed to volume losses. Growth initiatives were focused on emerging markets and included the acquisition and subsequent expansion of the former Parkside International flexible packaging plant in Zlotow, Poland, and the construction of a plant in Moscow, Russia, where manufacturing is expected to commence by the end of July 2006. As mentioned previously, significant restructurings were initiated in the fourth quarter of 2005 aimed at addressing these issues and returning the business to profitable growth.

Food Packaging Americas benefited from strong volume gains in the U.S. for meat and dairy, labels and bottles, continued growth in Mexico, where a new plant was acquired in January 2006. Improved profitability reflected the sector's success in recovering increased raw material costs, realizing synergies and reducing manufacturing costs across most of its operations. These more than offset significantly higher energy costs and volume softness in the U.S. food and specialties market. Significant investment programs have been launched to create centers of excellence for major conversion technologies, capitalize on key product positions and to support expansion in Mexico.

Food Packaging Asia enjoyed another year of strong growth in 2005, driven mainly by increasing demand from China and Thailand. Profitability, however, was tempered by market limitations on passing through higher raw material costs. The acquisition of the remaining minority interests in operations in China and Thailand will provide greater flexibility in the pursuit of a regional growth strategy.  During the year a flexible packaging plant in China was acquired in order to further extend both geographic and product range.

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The Global Beauty and Personal Care business continued to progress on its strategy of expanding in emerging countries in order to establish a low-cost manufacturing system. During 2005, a new plant was commissioned in Suzhou, China, for the production of plastic and aluminum packaging for make-up and skincare products.   An agreement was also reached for a joint venture in Russia for the production of tubes and packaging for mascara. From an operations standpoint, however, 2005 was a difficult year.  Both European and North American operations faced severe structural issues due to rapidly changing market conditions.  As mentioned previously, significant restructurings were initiated in the fourth quarter of 2005 aimed at addressing these issues and returning the business to profitable growth.

Global Pharmaceutical and Medical performance was driven primarily by strong volume and productivity improvements in the pharma flexibles unit. Profit growth, particularly in North America, was constrained by significantly increased raw material and energy costs. The contract plastic packaging business and the glass tubing business in the Americas have taken steps to streamline operations and improve productivity.

The expansion of Global Tobacco Packaging continued in 2005 with the acquisition of CM Printing Sdn. Bhd., a tobacco packaging company in Malaysia and the inauguration of a brownfield plant in the Philippines; both targeted at better serving key customers in Asia. Construction also commenced on a greenfield plant in St. Petersburg, Russia. Industry leadership in North America was confirmed with the signing of a nine-year, $60-million supply agreement for tobacco cartons with R.J. Reynolds Tobacco Company.  Following the agreement, construction began on a new plant located in Reidsville Industrial Park, North Carolina, which is expected to come on stream by mid-2006. In Europe, the closure of a plant in the Netherlands was announced as part of a program to consolidate production in the face of chronic overcapacity due to customer migration to low-cost countries and to meet the coming requirement for pictorial health warnings on tobacco packaging. 

Entities Transferred to Novelis

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 and 2003, 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 continues to operate five rolled product facilities, which are under the management of the Engineered Products group.  Results for these operations are included within Engineered Products' results.

The results of these spun-off entities are not included in Alcan's results as of January 1, 2005.  For prior-year discussion of these businesses, please refer to the 2004 Annual Report.

(US$M)	2005	2004	2003
Third-party sales and operating revenue	n/a	7,321	5,745
BGP	n/a	654	521

Sales and operating revenues were up 27% in 2004 compared to 2003. The impact of higher LME prices passed on to customers accounted for most of the improvement in sales and operating revenues.  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 higher shipments mainly from the acquisition of four Pechiney rolling plants and foreign currency translation effects. 

BGP was up 26% in 2004 compared to 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, difficult market conditions in Europe, negative exchange effects due to a weakening U.S. dollar as well as higher costs.

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, the South American businesses were 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.

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 cans 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.  

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RISKS AND UNCERTAINTIES

For further details, refer to note 29, Commitments and Contingencies, note 30, Currency Gains and Losses and note 31, Financial Instruments and Commodity Contracts, of the consolidated financial statements.

Risk Management

As an international company with a significant exposure to commodity prices, Alcan's financial performance is influenced by fluctuations in the price of aluminum, exchange rates, energy and other raw material prices and interest rates. The Company's Corporate Risk Measurement and Control group takes a very structured approach to the identification and quantification of each risk and develops an integrated risk profile that takes into account historical correlations among the various risk factors. Cash Flow at Risk is the key metric used by Alcan to measure cash flow volatility and it is reviewed on a regular basis with the Company's Risk Management Committee and the Audit Committee of the Board of Directors.  The volatility of future cash flow is evaluated in the context of Alcan's expected future cash flow as well as its capital structure strategy and target.  This allows the Company to decide whether the reduction of cash flow volatility, through the use of financial instruments or commodity contracts, is desirable. The decision whether and when to hedge, along with the duration of the hedge, can thus 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. As described in note 31, Financial Instruments and Commodity Contracts, of the consolidated financial statements, other than forward fixed price sales agreements, the Company is currently not entering into additional forward sales of aluminum.

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 25,000 tonnes, and for a small foreign exchange trading portfolio not exceeding $50 million.  

Sensitivities

The following table provides the estimated annualized after-tax impact of currency and LME price movements on income from continuing operations.

	Increase in	US$M	US$ per share
	rate / price
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	$ (160)	$ (0.43)
Australian dollar	+ US$0.10	$   (30)	$ (0.08)
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.

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. 

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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 and financial condition.           

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 including the long-term rate of return on pension assets, discount rates for pension and other post-retirement benefit obligations, expected service period, salary increases, retirement ages of employees and health care 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 spot-rate yield curves and individual bond-matching models for pension plans in Canada and the U.S., and on published long-term high-quality corporate bond indices for pension plans in other countries, at the end of each fiscal year.  In light of the average long duration of pension plans in other countries, no adjustments were made to the index rates.  The weighted-average discount rate used to determine the benefit obligation was 4.9% as at December 31, 2005, compared to 5.3% for 2004 and 5.6% for 2003. The weighted average discount rate used to determine the net periodic benefit cost is the rate used to determine the benefit obligation in the previous year.  An increase in the discount rate of 0.5%, assuming inflation remains unchanged, will result in a decrease of $832 million in the pension and other post-retirement obligations and in a decrease of $82 million in the net periodic benefit cost.  A decrease in the discount rate of 0.5%, assuming inflation remains unchanged, will result in an increase of $907 million in the pension and other post-retirement obligations and in an increase of $86 million in the net periodic benefit cost. The calculation of the estimate of the expected return on assets is described in note 33, Post-Retirement Benefits, of the consolidated financial statements.  The weighted-average expected return on assets was 7.0% for 2005, 7.0% for 2004 and 7.1% for 2003.  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, 2005, the average actual return on assets exceeded the expected return by 2.1% per year. A variation in the expected return on assets by 0.5% will result in a variation of approximately $44 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. 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. In order to estimate the likelihood of a future event occurring, the Company exercises its professional judgment based on case facts and experience.

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-lived assets. The Company's estimated weighted-average cost of capital, which in 2005 equated to a discount rate of 7.7%, is used. In estimating future cash flows, the Company uses its internal plans, which incorporate 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 its carrying amount. As discussed in the notes to the consolidated financial statements, the Company reviewed specific PP&E for impairment in 2005 due to situations where circumstances indicated that the carrying value of specific assets could not be recovered.  The Company made assumptions about the sum of the undiscounted expected future cash flows from these assets and determined that they were less than their carrying amount, resulting in the recognition of an impairment loss 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.

23

Goodwill

Goodwill is not amortized but is tested at least annually for impairment at the reporting unit level.  Goodwill is tested 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 involve inherent uncertainties that management may not be able to control. In addition, growth and profitability levels are compared to reporting unit peers.  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 lives of the underlying assets, and assumes no terminal value, while for 2005, the remaining business groups used, for the most part, a range of 5 to 15 years for discrete future cash flow periods and bases terminal values on growth rates ranging from 0% to 1.5%.  A discount rate of 7.7%, which is the Company's estimated weighted-average cost of capital for 2005, is used for all reporting units.   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.  In 2005, an impairment charge of $122 million was identified in the Global Beauty Packaging reporting unit.  In 2004, an impairment loss of $154 million relating to several fabricating facilities in the Engineered Products group, mainly in Europe, was recognized and in 2003, an impairment loss of $28 million relating to the extrusions business in the Engineered Products group in Europe was recorded.

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 the enacted income tax legislation that is expected to apply when the asset is realized or the liability settled.  The Company records a valuation allowance on deferred tax assets when it is more likely than not the asset will not be realized.  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.

Reconciliation of Canadian to U.S. GAAP

Significant differences between U.S. and Canadian GAAP are described below.  As mentioned in note 2, Change in Reporting Generally Accepted Accounting Principles, of the consolidated financial statements, the Company will cease to prepare a reconciliation to Canadian GAAP subsequent to 2005, as permitted by the Canadian Securities Administrators. A reconciliation of Alcan's Consolidated Statement of Income and Consolidated Balance Sheet between U.S. GAAP and Canadian GAAP is contained in note 36 of the consolidated financial statements.

GAAP	2005		2004		2003
(US$ per common share)	CDN	U.S.	CDN	U.S.	CDN	U.S.
Income from continuing operations per share - basic	0.36	0.40	0.63	0.64	0.95	0.79
Net income per share - basic	0.29	0.33	0.68	0.69	0.46	0.18

24

In 2005, net income per common share under Canadian GAAP was $0.29 compared to $0.33 under U.S. GAAP.  The difference relates principally to accounting for derivatives. 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.  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 operating working capital in continuing operations at December 31, 2005 by $173 million compared to $30 million at December 31, 2004 and $7 million at December 31, 2003 under Canadian GAAP compared to U.S. GAAP.  Under Canadian GAAP, net property, plant and equipment at December 31, 2005 was $841 million higher than under U.S. GAAP compared to $1,179 million at         December 31, 2004 and $831 million at December 31, 2003. Under Canadian GAAP, goodwill was higher by $650 million at December 31, 2005 compared to $837 million at December 31, 2004 and $174 million at December 31, 2003.  Under Canadian GAAP, investments were $1,354 million lower at December 31, 2005 compared to $1,639 million at December 31, 2004 and $708 million at December 31, 2003 as compared to U.S. GAAP.

Debt as a percentage of invested capital as at December 31, 2005, December 31, 2004 and December 31, 2003 was not materially different between Canadian and U.S. GAAP.  For 2005, interest expense under Canadian GAAP was higher than under U.S. GAAP by $17 million compared to $11 million for 2004 and $6 million for 2003. 

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 ($12) million, nil and $21 million for the years ended December 2005, 2004 and 2003, 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 $450 million at December 31, 2005 compared to $550 million at December 31, 2004 and  $350 million at December 31, 2003.  At December 31, 2005, total assets were lower by $329 million compared to $253 million at December 31, 2004 and $224 million at December 31, 2003. As at December 31, 2005, total pension liabilities were lower by $981 million compared to $1,036 million at December 31, 2004 and $730 million at December 31, 2003, under Canadian GAAP. 

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.

25

Cautionary Statement

Certain 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 the U.S. Private Securities Litigation Reform Act of 1995.  Terms such as "believes, expects, may, will, could, should, estimates, intends and anticipates" and the negative thereof and variations on terms such as these signify forward-looking statements. All statements that address the Company's expectations or projections about the future including statements about the Company's growth, cost reduction goals, operations reorganization plans, expenditures and financial results are forward-looking statements. 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.  Reference should be made to the Risk Factors listed in the Company's report on Form 10-K for the year ended December 31, 2005. Important factors which could cause such differences include: changes in global supply and demand conditions for aluminum and other products, changes in 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; fluctuations in the supply of and prices for power in the areas in which the Company maintains production facilities; 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 or disposition of businesses; major changes in technology that affect the Company'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 the Company having 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 the Company'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 the Company operates or sells products and; other factors affecting the Company's operations including, but not limited to, litigation, labour relations and negotiations and changes in fiscal regimes.

The Company 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. 

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 8, 2006.

26

EX-99

Exhibit 99.3

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 on page 2.

((Signature))

Travis Engen, President and Chief Executive Officer

((Signature))

Michael Hanley, Executive Vice-President and Chief Financial Officer

March 8, 2006

Management's Report on Internal Control over Financial Reporting

Management of Alcan is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 15a-15(d) under the Securities Exchange Act of 1934). Alcan's internal control over financial reporting is a process designed under the supervision of Alcan's Chief Executive Officer and Chief Financial Officer 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, 2005, 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.  Based on this assessment, management concluded that the Company's internal control over financial reporting as of December 31, 2005 was effective.

Management's assessment of the effectiveness of the Company's internal control over financial reporting as of December 31, 2005 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing on page 2.

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, 2005, 2004 and 2003 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, 2005. We have also audited the effectiveness of the Company's internal control over financial reporting as at December 31, 2005, 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 Alcan's 2005, 2004, and 2003 consolidated financial statements, an opinion on management's assessment as at December 31, 2005 and an opinion on the effectiveness of the Company's internal control over financial reporting as at December 31, 2005 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.

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, 2005, 2004 and 2003 and the results of its operations and its cash flows for each of the years in the three year period ended December 31, 2005 in accordance with accounting principles generally accepted in the United States of America. Also, in our opinion, management's assessment that the Company maintained effective internal control over financial reporting as of December 31, 2005, is fairly stated, in all material respects, based on criteria established in Internal Control - Integrated Framework issued by the COSO.  Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as at December 31, 2005 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 8, 2006

2

Independent Auditors' Report (cont'd)

Comments by Auditor for U.S. Readers 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. Our report to the shareholders dated March 8, 2006, is expressed in accordance with Canadian reporting standards which do not require 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

Chartered Accountants

Montreal, Quebec

March 8, 2006

3

Alcan Inc. 

CONSOLIDATED STATEMENT OF INCOME

Year ended December 31

(in millions of US$, except per share amounts)

	2005	2004	2003
Sales and operating revenues	20,320	24,948	13,850
Costs and expenses
Cost of sales and operating expenses, excluding depreciation and
amortization noted below	16,135	20,270	11,171
Depreciation and amortization (NOTE 9)	1,080	1,337	862
Selling, administrative and general expenses	1,402	1,615	758
Research and development expenses	227	239	190
Interest	350	346	212
Restructuring charges - net (NOTE 10)	685	87	26
Goodwill impairment (NOTE 9)	122	154	28
Other expenses (income) - net (NOTE 16)	(4)	321	105
	19,997	24,369	13,352
Income from continuing operations before income taxes and
other items	323	579	498
Income taxes (NOTE 11)	257	375	258
Income from continuing operations before other items	66	204	240
Equity income (NOTE 12)	88	54	38
Minority interests	1	(15)	(16)
Income from continuing operations	155	243	262
Income (Loss) from discontinued operations (NOTE 5)	(26)	15	(159)
Income before cumulative effect of accounting change	129	258	103
Cumulative effect of accounting change, net of income
taxes of nil (nil in 2004 and $17 in 2003) (NOTE 4)	-	-	(39)
Net income	129	258	64
Dividends on preference shares	7	6	7
Net income attributable to common shareholders	122	252	57
Earnings (Loss) per share (NOTE 6)
Basic and Diluted
Income from continuing operations	0.40	0.64	0.79
Income (Loss) from discontinued operations	(0.07)	0.05	(0.49)
Cumulative effect of accounting change	-	-	(0.12)
Net income per common share - basic and diluted	0.33	0.69	0.18
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)

	2005	2004	2003
ASSETS
Current assets
Cash and time deposits	181	184	686
Trade receivables (net of allowances of $56 in 2005, $99 in 2004, and
$92 in 2003) (NOTES 14 AND 15)	2,308	3,247	2,948
Other receivables	946	936	686
Deferred income taxes (NOTE 11)	150	214	49
Inventories (NOTE 17)	2,734	4,040	3,682
Current assets held for sale (NOTE 5)	119	791	1,063
Total current assets	6,438	9,412	9,114
Deferred charges and other assets (NOTE 18)	1,052	1,130	755
Investments (NOTE 19)	1,511	1,747	808
Deferred income taxes (NOTE 11)	863	870	892
Property, plant and equipment (NOTE 20)
Cost (excluding construction work in progress)	16,990	21,595	21,727
Construction work in progress	1,604	1,177	972
Accumulated depreciation	(7,561)	(9,478)	(8,539)
	11,033	13,294	14,160
Intangible assets, net of accumulated amortization of $233 in 2005, $172
in 2004, and $86 in 2003 (NOTE 9)	1,013	1,230	1,160
Goodwill (NOTE 9)	4,713	5,496	4,686
Long-term assets held for sale (NOTE 5)	15	162	373
Total assets	26,638	33,341	31,948

The accompanying notes are an integral part of the financial statements.

 5

 

Alcan Inc.

CONSOLIDATED BALANCE SHEET (cont'd)

As at December 31

(in millions of US$, except where indicated)

	2005	2004	2003
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Payables and accrued liabilities	4,608	5,843	4,858
Short-term borrowings	348	2,486	1,764
Debt maturing within one year (NOTE 24)	802	569	341
Deferred income taxes (NOTE 11)	25	23	81
Current liabilities of operations held for sale (NOTE 5)	62	335	547
Total current liabilities	5,845	9,256	7,591
Debt not maturing within one year (NOTES 24 AND 31)	5,265	6,345	7,437
Deferred credits and other liabilities (NOTE 23)	1,608	1,521	1,391
Post-retirement benefits (NOTE 33)	3,037	3,465	2,920
Deferred income taxes (NOTE 11)	1,172	1,543	1,696
Long-term liabilities of operations held for sale (NOTE 5)	-	249	233
Minority interests	67	236	403
Shareholders' equity
Redeemable non-retractable preference shares, issuable in series; unlimited number of shares authorized (NOTE 25):
Series C: stated value $106, number of shares authorized 5,700,000;
outstanding 5,699,900 in 2005; 5,700,000 in 2004 and 2003	106	106	106
Series E: stated value $54, number of shares authorized 3,000,000;
outstanding 2,999,000 in 2005; 3,000,000 in 2004 and 2003	54	54	54
Common shareholders' equity
Common shares, unlimited number of shares authorized,
outstanding (in thousands) 371,921 in 2005; 369,930 in 2004;
365,181 in 2003 (NOTE 26)	6,181	6,670	6,461
Additional paid-in capital (NOTES 8 AND 27)	683	112	128
Retained earnings (NOTE 28)	3,048	3,362	3,331
Common shares held by a subsidiary (NOTE 26)	(31)	(35)	(56)
Accumulated other comprehensive income (loss)	(397)	457	253
	9,484	10,566	10,117
	9,644	10,726	10,277
Commitments and contingencies (NOTE 29)
Total liabilities and shareholders' equity	26,638	33,341	31,948

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$)

	2005	2004	2003
OPERATING ACTIVITIES
Net income	129	258	64
Loss (Income) from discontinued operations	26	(15)	159
Income from continuing operations	155	243	223
Adjustments to determine cash from operating activities:
Cumulative effect of accounting change	-	-	39
Depreciation and amortization	1,080	1,337	862
Deferred income taxes	123	45	(2)
Equity income, net of dividends	(33)	(16)	(11)
Asset impairment charges	428	100	36
Goodwill impairment	122	154	28
Stock option compensation	19	11	13
Write-off of acquired in-process research and development	-	-	50
Gain on disposals of businesses and investments - net	(32)	(47)	(44)
Change in operating working capital
Change in  receivables	(331)	(437)	339
Change in inventories	(6)	24	69
Change in payables and accrued liabilities	42	234	61
Change in deferred charges, other assets, deferred credits
and other liabilities, and post-retirement benefits -  net	81	36	101
Other - net	(20)	75	37
Cash from operating activities in continuing operations	1,628	1,759	1,801
Cash from operating activities in discontinued operations	27	113	11
Cash from operating activities	1,655	1,872	1,812
FINANCING ACTIVITIES
Proceeds from issuance of new debt - net of issuance costs	1,272	1,768	3,638
Debt repayments	(1,695)	(1,615)	(593)
Short-term borrowings - net	(2,056)	(540)	577
Common shares issued*	67	100	42
Dividends
- Alcan shareholders (including preference)	(229)	(227)	(200)
- Minority interests	(2)	(13)	(11)
Other	(4)	(11)	-
Cash from (used for) financing activities in continuing operations	(2,647)	(538)	3,453
Cash used for financing activities in discontinued operations	(55)	(38)	(29)
Cash from (used for)  financing activities	(2,702)	(576)	3,424

*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$)

	2005	2004	2003
INVESTMENT ACTIVITIES
Purchase of property, plant and equipment	(1,835)	(1,289)	(838)
Business acquisitions and purchase of investments, net of cash and time
deposits acquired (NOTES 8 AND 21)	(112)	(466)	(3,819)
Net proceeds from disposal of businesses, investments and other assets	266	35	63
Settlement of amounts due from Novelis (NOTE 7)	2,535	-	-
Other	-	(8)	-
Cash from (used for) investment activities in continuing operations	854	(1,728)	(4,594)
Cash from (used for) investment activities in discontinued operations	60	(22)	17
Cash from (used for) investment activities	914	(1,750)	(4,577)
Effect of exchange rate changes on cash and time deposits	(26)	16	21
Increase (Decrease) in cash and time deposits	(159)	(438)	680
Cash and time deposits  ─  beginning of year	340	778	98
Cash and time deposits  ─  end of year in continuing operations	181	184	686
Cash and time deposits  ─  end of year in current assets held for sale (NOTE 5)	-	156	92
Cash and time deposits ─  end of year	181	340	778

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$)

	Comprehensive 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 2002		160	4,731	42	3,467	-	(108)	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 unreleased 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 a	10,277

The accompanying notes are an integral part of the financial statements.

9

Alcan Inc.

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (cont'd) 

Year ended December 31

(in millions of US$)

	Comprehensive 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 unreleased 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 b	10,726

The accompanying notes are an integral part of the financial statements.

10

Alcan Inc.

CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (cont'd)

Year ended December 31

(in millions of US$)

	Comprehensive 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
Spin-off of Novelis (NOTE 7)			(576)	572	(214)	4	(71)	(285)
Net income - 2005	129				129			129
Other comprehensive income:
Net change in deferred translation
adjustments	(695)
Net change in excess of market value
over book value of  "available-for-
sale" securities	(4)
Reclassification to net income	-
Net change in minimum pension liability
- net of taxes of $21	67
Net change in unreleased gains and
losses on derivatives - net of taxes
of $78:
Net change from periodic
revaluations	(196)
Net amount reclassified to income	45
Comprehensive income	(654)						(783)	(783)
Dividends:
Preference					(7)			(7)
Common					(222)			(222)
Stock option expense				19				19
Exercise of stock options			20	(20)				-
Common shares issued for cash:
Executive share option plan			46					46
Dividend reinvestment and share
purchase plans			17					17
Liquidity Agreement			4					4
Balance at end of 2005		160	6,181	683	3,048	(31)	(397) c	9,644

a.    Comprised of deferred translation adjustments of $609, unrealized gain on "available-for-sale" securities of $6, minimum pension liability of ($350) and unreleased loss on derivatives of ($12).

b.     Comprised of deferred translation adjustments of $1,063, unrealized gain on "available-for-sale" securities of $8, minimum pension liability of ($550) and unreleased loss on derivatives of ($64).

c.     Comprised of deferred translation adjustments of $264, unrealized gain on "available-for-sale" securities of $4, minimum pension liability of ($450) and unreleased loss on derivatives of ($215).

The accompanying notes are an integral part of the financial statements.

11

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 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, 2005, Alcan, together with its subsidiaries, joint ventures and related companies, had bauxite holdings in five countries, produced alumina in five countries, smelted primary aluminum in 11 countries, had engineered products plants in 11 countries, had packaging facilities in 30 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.  Alcan's consolidated financial statements as at and for the years ended December 31, 2004 and 2003 include the assets, liabilities, results of operations and cash flows of businesses transferred to Novelis.  The results of operations and cash flows of the businesses transferred to Novelis have been included in continuing operations during 2003 and 2004.  Alcan's consolidated financial statements as at and for the year ended December 31, 2005 exclude the assets, liabilities, results of operations and cash flows of businesses transferred to Novelis.   Management concluded that all income earned and cash flows generated by Novelis entities from January 1 to 5, 2005, were insignificant, except as described in note 7 - Spin-off of Rolled Products Businesses.  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

Prior to 2004, Alcan had 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 36 - Differences between United States and Canadian Generally Accepted Accounting Principles (GAAP) provides an explanation and reconciliation of differences between U.S. and Canadian GAAP.  Alcan will cease to prepare a reconciliation to Canadian GAAP subsequent to 2005, as permitted by the Canadian Securities Administrators (CSA).

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.

12

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 acquired and liabilities assumed 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, and the accounts of variable interest entities for which Alcan 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 or in the period that the derivatives no longer qualify as cash flow hedges.  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 for hedge accounting, 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 had entered into forward exchange contracts to hedge its ownership interest in certain subsidiaries denominated in foreign currencies.  All such contracts are reported at fair value on the consolidated balance sheet.  Changes in fair value were 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.  In December 2005, the Company discontinued this hedging relationship.  See note 31 - Financial Instruments and Commodity Contracts.

13

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.

For technology sales contracts involving multiple deliverables, where the deliverables are governed by more than one authoritative accounting standard, the Company applies the Financial Accounting Standards Board (FASB) Emerging Issues Task Force (EITF) Issue No. 00-21, Revenue Arrangements with Multiple Deliverables, and evaluates each deliverable to determine whether it represents a separate unit of accounting. Technology sales contracts generally have four deliverables: technology license, engineering documentation packages, supervision services and training services.  Revenues from the technology license and the engineering documentation packages, which are considered one unit of accounting, are recognized in full once the final engineering documentation package is delivered, provided there are no substantive remaining performance obligations.  Revenues from the supervision services and training services, which are each considered a separate unit of accounting, are recognized on an as-performed basis using the proportional performance method.   

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 $1,740 (2004: $1,193), Cost of sales and operating expenses by $1,749 (2004: $1,182), and increased Other expenses (income) ─ net by $9 (2004: reduced by $11), for the year ended December 31, 2005.

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 that the Company has entered into 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 and designated 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.  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 not qualifying as hedges, changes in fair value are recorded in Other expenses (income) - net.

All oil, natural gas and electricity futures contracts, swaps and options that the Company has entered into serve to hedge certain future identifiable energy price exposures.  For these contracts, the fair values of the derivatives are recorded on the consolidated balance sheet.  For contracts qualifying and designated 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.  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 not qualifying for hedge accounting, changes in fair value are recorded in Other expenses (income) - net. 

Certain physical aluminum purchase and sales contracts with third parties that are derivatives are considered to be held for trading purposes.  These contracts, as well as related aluminum forward contracts 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 physical purchase or sale 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.

14

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

3.             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

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.

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 affected 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.  Intangible assets also include prior service costs included in pensions.

15

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

3.             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

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. 

Asset Retirement Obligations

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 recorded as asset retirement obligations.

The Company accounts for its asset retirement obligations in accordance with Statement of Financial Accounting Standards (SFAS) No. 143, Accounting for Asset Retirement Obligations and FASB Interpretation (FIN) 47, Accounting for Conditional Asset Retirement Obligations, an Interpretation of FASB Statement No. 143.  Under these standards, the Company recognizes liabilities, at fair value, 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.

Environmental Costs and Liabilities

Environmental costs that are not legal asset retirement obligations are expensed or capitalized, as appropriate, on an undiscounted basis.  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. 

Pensions and Post-Retirement Benefits

The Company's defined benefit pension plans are accounted for in accordance with 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 measured based on the change in the common share price during the period, are recognized in income over the vesting period of awards.  The majority of 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.  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. 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.      

16

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

3.             SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont'd)

The Company records a valuation allowance on deferred tax assets when it is not more likely than not that the assets will be realized. The Company uses 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.

The Company is subject to income taxes in Canada and numerous foreign jurisdictions.  Significant judgment is required in determining the worldwide provision for income taxes and recording the related assets and liabilities.  In accordance with the requirements of SFAS No. 5, Accounting for Contingencies, the Company establishes tax reserves and interest thereon when, despite the Company's belief that the tax return positions are fully supportable, the Company expects that certain of these positions will be challenged, and that the Company may not succeed in defending its positions. The Company believes that the accruals for tax liabilities reflect the probable outcome of all material tax contingencies.

Investment tax credits are accounted for as a reduction in income tax expense.

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 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 29 - Commitments and Contingencies.

Recently Issued Accounting Standards

Accounting Changes and Error Corrections

In June 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3.  This statement applies to all voluntary changes in accounting principle and changes the requirements for accounting for and reporting of a change in accounting principle.  The statement requires retrospective application to prior periods' financial statements of a voluntary change in accounting principle versus including the cumulative effect of changing to the new accounting principle in net income.  SFAS No. 154 carries forward many provisions of APB Opinion No. 20 without change, including the provisions related to the reporting of a change in accounting estimate, a change in the reporting entity, and the correction of an error.  SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005.   

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 January 1, 2006.  The Company adopted the fair-value based method of accounting for stock options 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.  The Company is currently reviewing this standard to determine if there is any remaining material impact on its results of operations or its financial position, as a result of the requirement to measure share-based payment liabilities at fair value. 

Inventory Costs

In November 2004, the FASB issued SFAS No. 151, Inventory Costs.  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 affected by this statement.

17

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

4.             ACCOUNTING CHANGES

Conditional Asset Retirement Obligations

Effective December 31, 2005, the Company adopted FIN 47, Accounting for Conditional Asset Retirement Obligations, an interpretation of FASB Statement No. 143.  FIN 47 clarifies that the term conditional asset retirement obligation as used in SFAS No. 143, Accounting for Asset Retirement Obligations, refers to a legal obligation to perform an asset retirement activity in which the timing and/or method of settlement are conditional on a future event that may or may not be within the control of the entity.  According to FIN 47, uncertainty about the timing and/or method of settlement of a conditional asset retirement obligation should be factored into the measurement of a liability when sufficient information exists rather than preclude the need to record a liability.  The adoption of this interpretation did not impact the Company's financial statements.   

Exchanges of Nonmonetary Assets

On July 1, 2005, the Company adopted the provisions of 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.  The adoption of this standard did not impact the Company's financial statements. 

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 was the primary beneficiary of Logan Aluminum Inc. (Logan), a variable interest entity.  As a result, the consolidated balance sheet for 2004 includes the assets and liabilities of Logan.  Logan managed 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 were recorded by the Company. Prior periods were not restated.  The Company's investment, plus any unfunded pension liability, related to Logan totalled approximately $37, representing the Company's maximum exposure to loss. Creditors of Logan did not have recourse to the general credit of the Company as a result of including it in the Company's financial statements.

As a result of the spin-off of Novelis on January 6, 2005, the Company no longer holds an interest in Logan.  As of this date, the Company ceased consolidating Logan's financial statements.  

Discontinued Operations

In December 2004, the Company adopted the provisions of EITF 03-13, Applying the Conditions in Paragraph 42 of FASB Statement No. 144, Accounting for the Impairment or Disposal of Long-Lived Assets, 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 businesses 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 had no impact on the Company's financial statements. 

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 had no impact on the Company's financial statements.

18

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

4.             ACCOUNTING CHANGES (cont'd)

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.  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.  For the year ended December 31, 2003, net income was reduced by $1 due to the adoption of the standard.

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 classified this business in discontinued operations and assets held for sale during the fourth quarter of 2004. The Company owned approximately 13 million shares in AdG, representing a 60.2% equity interest.  The transaction was completed on March 15, 2005 at a value of $104.  Under the terms of this agreement, Mytilineos Holdings and certain affiliated companies acquired 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 any remaining interest, at a price equivalent to the selling price of the shares. 

Primary Metal

On June 1, 2005, the Company completed the sale of Pechiney Électrométallurgie (PEM) to Ferroatlántica, S.L. of Spain for net proceeds of $150.  The Company 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.

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 for $5.

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, Mercus and Froges, in France.  These businesses were classified in discontinued operations and assets held for sale during the fourth quarter of 2004.  In the second quarter of 2005, the Company announced a change in its strategy of selling the businesses due to changes in market and economic conditions.  The Company envisioned suspending one of two activities at the Mercus high purity metal processing mill and closing the Froges rolling mill.  As a result of the change in strategy, these two businesses no longer met the criteria for discontinued operations and, accordingly, were reclassified to assets held and used and included in continuing operations.  The reclassification did not have a significant impact on Income from continuing operations for the years ended December 31, 2005 and 2004.  See note 21 - Sales and Acquisitions of Businesses and Investments.

Also in the fourth quarter of 2004, the Company committed to a plan to sell its service centres in France that were not part of its core operations.  These assets were classified as held for sale and were included in discontinued operations.  On April 20, 2005, the Company completed the sale of these service centres for net proceeds of $4 to Amari Metal France Ltd., which specializes in distributing aluminum, stainless steel and cuprous metal products.

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)

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 was not required to divest Ravenswood.  Accordingly, in December 2004, Ravenswood was reclassified into continuing operations and assets held and used. 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 were 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 comprised three manufacturing facilities in France, the Netherlands and Switzerland as well as a sales office in Germany.  Suner Cartons comprised 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.

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.  In the fourth quarter of 2005, a decision was taken to close the Company's copper trading business.  The closure  was substantially completed by the end of 2005.

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 $24 for the year ended December 31, 2005 (2004: $5; 2003: $159), 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	2005	2004	2003
Sales	339	1,419	337
Income (Loss) from operations	5	26	(6)
Gain (Loss) on disposal - net	(2)	27	(8)
Asset impairment charges	(24)	(5)	(159)
Pre-tax income (loss)	(21)	48	(173)
Income taxes recovered (expense)	(5)	(33)	14
Income (Loss) from discontinued operations	(26)	15	(159)

20

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

 

5.         DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE (cont'd)

The major classes of Assets held for sale and Liabilities of operations held for sale are as follows:

	2005	2004	2003
Current assets held for sale:
Cash and time deposits	-	156	92
Trade receivables	30	308	373
Other receivables	51	40	155
Deferred income taxes	2	2	4
Inventories	36	285	439
	119	791	1,063
Long-term assets held for sale:
Deferred charges and other assets	13	21	30
Deferred income taxes	-	6	65
Property, plant and equipment, net	2	85	198
Intangible assets, net	-	50	58
Goodwill, net	-	-	22
	15	162	373
Current liabilities of operations held for sale:
Payables and accrued liabilities	62	330	546
Short-term borrowings	-	5	1
	62	335	547
Long-term liabilities of operations held for sale:
Deferred credits and other liabilities	-	101	103
Deferred income taxes	-	7	14
Minority interests	-	141	116
	-	249	233

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.

	2005	2004	2003
Numerator:
Income from continuing operations	155	243	262
Less: dividends on preference shares	(7)	(6)	(7)
Income from continuing operations attributable to common shareholders	148	237	255
Denominator (number of common shares in millions):
Weighted average of outstanding shares	370	368	322
Effect of dilutive stock options	1	2	-
Adjusted weighted average of outstanding shares	371	370	322
Earnings per common share - basic and diluted (in US$)	0.40	0.64	0.79

Options to purchase 5,057,698 common shares (2004: 3,656,500; 2003: 3,443,855) at a weighted average grant price of CAN$49.66 per share (2004: CAN$58.94; 2003: CAN$54.32) 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, 2005, there are 371,921,195 common shares outstanding (2004: 369,930,252; 2003: 365,181,101).

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.

 21

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

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), 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 effect of the spin-off on the Company's balance sheet is described in the table below.  The net assets were transferred at their historical cost. 

Carrying amount of spun-off businesses(1)
Current assets	2,924
Non-current assets	2,738
Current liabilities	(3,117)
Non-current liabilities	(2,229)
Accumulated other comprehensive income	(71)
Total	245
Derivatives(2)	(31)
Total amount recorded in retained earnings	214

⁽¹⁾   The agreements giving effect to the spin-off provide for various post-transaction adjustments and the resolution of outstanding matters, which are expected to be carried out by the parties in 2006.  See note 33 - Post-Retirement Benefits for the treatment of the pension assets and liabilities transferred to Novelis.

⁽²⁾    Alcan is the counterparty to certain derivative contracts with Novelis; prior to the spin-off, these derivatives were eliminated in the consolidated financial statements.  Subsequent to the spin-off, the derivatives are presented in the balance sheet at their fair value.  The amount of ($31) represents the mark-to-market adjustment to the derivatives for the period from January 1 to 5, 2005.  As described in note 1 - Nature of Operations - Spin-Off of Rolled Products Businesses - Basis of Presentation, all income earned and cash flows generated by Novelis entities during the period from January 1, 2005 to the spin-off date of January 6, 2005 were attributed to Novelis due to immateriality.  In addition, the transactions between Alcan and Novelis during this period were also immaterial, with the exception of a net derivative gain as described above.

The spin-off of Novelis reduced total Shareholders' equity by $285 by way of a reduction in Common shares of $576, an increase in Additional paid-in capital of $572, a reduction in Retained earnings of $214, a reduction in Common shares held by a subsidiary of $4 and a reduction in Accumulated other comprehensive income of $71.  Any gain or loss resulting from post-transaction adjustments will be recorded as an adjustment to total Shareholders' equity.

Following the spin-off, the Company settled amounts due from Novelis and used the net proceeds of $2.6 billion from Novelis to settle third-party debt of Alcan, as described in note 24 - Debt Not Maturing Within One Year, and to cover a preliminary payment of $100 made by the Company to Novelis in accordance with a separation agreement between the parties.

22

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

7.             SPIN-OFF OF ROLLED PRODUCTS BUSINESSES (cont'd)

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. 

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	4,183	(1,761)	1,637	(c)	3,810
			(312)	(g)
			58	(j)
			5	(k)
Deferred income taxes	214	-	-		214
Inventories	4,040	(1,226)	143	(a)	2,957
Current assets held for sale	791	-	-		791
Total current assets	9,412	(3,018)	1,531		7,925
Deferred charges, other assets, investments 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	13,294	(2,348)	-		10,946
Intangible assets, net	1,230	(35)	-		1,195
Goodwill	5,496	(256)	-		5,240
Long-term assets held for sale	162	-	-		162
Total assets	33,341	(5,954)	1,609		28,996
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Payables and accrued liabilities	5,843	(1,260)	1,247	(c)	5,162
			(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	335	-	-		335
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, and post-
retirement benefits	4,986	(472)	17	(k)	4,531

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 Balance Sheet (cont'd)

As at December 31, 2004

	Alcan	Removal of Novelis	Pro Forma Adjustments		Alcan Pro Forma
Deferred income taxes	1,543	(249)	49	(a)	1,343
Long-term liabilities of operations held for sale	249	-	-		249
Minority interests	236	(140)	-		96
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

24

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	24,948	(7,755)	2,409	(b)	19,602
Costs and expenses
Cost of sales and operating expenses	20,270	(6,856)	(67)	(a)	15,756
			2,409	(b)
Depreciation and amortization	1,337	(246)	-		1,091
Selling, administrative and general expenses	1,615	(268)	30	(f)	1,377
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 and restructuring
charges - net	408	(28)	(26)	(d)	311
			(38)	(e)
			4	(f)
			(2)	(k)
			(7)	(j)
	24,369	(7,530)	2,358		19,197
Income from continuing operations before
income taxes and other items	579	(225)	51		405
Income taxes	375	(166)	17	(l)	226
Income from continuing operations before other items	204	(59)	34		179
Equity income	54	(6)	-		48
Minority interests	(15)	10	-		(5)
Income from continuing operations	243	(55)	34		222
Income from discontinued operations	15	-	-		15
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$)	0.64	(0.15)	0.09		0.58
Net income per common share - basic and diluted
(in US$)	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

25

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.       

26

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

In the fourth quarter of 2003 and the first quarter of 2004, Alcan acquired, for a combination of cash and Alcan common stock, all of the equity securities of Pechiney.  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).  Prior to the acquisition, 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 entitiy'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 Investments.

	Final Purchase Price Allocation	Tentative Purchase Price Allocation
Fair value of net assets acquired at date of acquisition
Trade receivables	1,490	1,486
Other receivables	117	110
Deferred income taxes - current	42	49
Inventories	1,616	1,594
Current assets held for sale	926	962
Deferred charges and other assets and investments(1)	1,131	357
Deferred income taxes - non-current	699	677
Property, plant and equipment	2,849	4,141
Intangible assets	730	601
Goodwill (2)	3,164	2,283
Long-term assets held for sale	123	315
Total assets	12,887	12,575
Payables and accrued liabilities	2,202	2,005
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	498	488
Debt not maturing within one year	1,006	1,004
Deferred credits and other liabilities and post-retirement benefits	1,898	1,678
Deferred income taxes - non-current	423	618
Long-term liabilities of operations held for sale	227	224
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 related to equity-accounted entities.

⁽²⁾ See note 9 - Goodwill and Intangible Assets.

27

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

8.             ACQUISITION OF PECHINEY (cont'd)

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 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.                            

9.         GOODWILL AND INTANGIBLE ASSETS

Goodwill

The changes in the carrying amount of goodwill for the year ended December 31, 2005, are as follows:

	BALANCE AS AT JANUARY 1, 2005	DIVEST-MENTS	ADDITIONS	DEFERRED TRANSLATION ADJUSTMENTS	ADJUST-MENTS	IMPAIRMENT LOSSES	BALANCE AS AT DECEMBER 31, 2005
Bauxite and Alumina	1,117	-	-	(1)	(40)	-	1,076
Primary Metal	1,509	-	2	(72)	(65)	-	1,374
Engineered Products	409	-	3	(40)	(18)	-	354
Packaging	3,044	(44)	18	(196)	(126)	(122)	2,574
Entities transferred to Novelis	254	(254)	-	-	-	-	-
Goodwill excluding amount
included in Long-term assets
held for sale	6,333	(298)	23	(309)	(249)	(122)	5,378
Goodwill included in equity-
accounted entities	837	-	2	(22)	(152)	-	665
Goodwill excluding amount
included in equity-accounted
entities	5,496	(298)	21	(287)	(97)	(122)	4,713

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, 2004, are as follows:

	BALANCE AS AT JANUARY 1, 2004	DIVEST-MENTS	ADDITIONS	DEFERRED TRANSLATION ADJUSTMENTS	ADJUST-MENTS*	IMPAIRMENT LOSSES	BALANCE AS AT    DECEMBER 31, 2004
Bauxite and Alumina	558	-	-	-	559	-	1,117
Primary Metal	534	-	4	24	947	-	1,509
Engineered Products	184	-	-	10	369	(154)	409
Packaging	1,276	-	4	64	1,700	-	3,044
Pechiney	2,283	-	-	-	(2,283)	-	-
Entities transferred to Novelis	24	-	-	2	228	-	254
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.

The changes in carrying amount of goodwill for the year ended December 31, 2003, are as follows:

	BALANCE AS AT JANUARY 1, 2003	DIVEST-MENTS	ADDITIONS	DEFERRED TRANSLATION ADJUSTMENTS	ADJUST-MENTS	IMPAIRMENT LOSSES	BALANCE AS AT    DECEMBER 31, 2003
Bauxite and Alumina	546	-	-	-	12	-	558
Primary Metal	511	-	6	18	(1)	-	534
Engineered Products	163	-	33	17	(1)	(28)	184
Packaging	1,060	-	75	124	17	-	1,276
Pechiney	-	-	2,283	-	-	-	2,283
Entities transferred to Novelis	23	-	-	3	(2)	-	24
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

29

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

9.             GOODWILL AND INTANGIBLE ASSETS (cont'd)

In 2005, adjustments were made to reduce goodwill by $97.  Included in this amount is $5 (2004: $12; 2003: $7) principally relating to a decrease in the valuation allowance related to future income tax assets acquired in the combination with Alusuisse Group Ltd. (algroup), but which were not recognized at the date of the business combination because, at the time, it was unlikely they would be recovered.  Also included in the 2005 adjustments is an amount of $60, relating to the favourable resolution of income tax contingencies, and $5 relating to a reduction in restructuring provisions. 

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. 

As a result of the annual test, conducted as at October 31, 2005, to determine whether, as at that date, there was an impairment in the carrying amount of goodwill, an impairment loss of $122 relating to the Global Beauty Packaging reporting unit, was recognized as a charge to income in 2005.  The impairment loss arose due to an increasingly competitive environment in this business, reflecting weaker local market conditions, increased foreign competition, rising input costs and the evolution of exchange rates.  For the year ended December 31, 2004, 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.  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.  The fair value of all reporting units was determined using discounted future cash flows.

Intangible Assets with Finite Lives

	GROSS CARRYING AMOUNT	ACCUMULATED AMORTIZATION	NET BOOK VALUE
		DECEMBER 31, 2005
Trademarks	170	54	116
Patented and non-patented technology	421	108	313
Purchase contracts	291	67	224
Customer contracts	35	4	31
Prior service costs included in pensions	329	-	329
	1,246	233	1,013
		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

30

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

9.          GOODWILL AND INTANGIBLE ASSETS (cont'd)

The aggregate amortization expense for the year ended December 31, 2005, was $85 (2004: $79; 2003: $26).  The estimated amortization expense for the five succeeding fiscal years is approximately $85 per year.  In 2005, the Company acquired intangible assets of $3 (2004: nil) comprised of customer contracts.  In 2003, intangible assets acquired of $721 were comprised of trademarks of $27, patented and non-patented technology of $313, purchase contracts of $266 and customer contracts of $115.  In 2004, the intangible assets were increased by $71 relating to the finalization of the Pechiney purchase price allocation.

10.        RESTRUCTURING PROGRAMS

2005 Restructuring Activities 

As part of the continuing drive to reshape its portfolio, counter increasing competitive pressures in Western countries and improve margins, the Packaging Group is pursuing plans to restructure certain businesses, notably Global Beauty Packaging and Food Packaging, Europe.  A restructuring charge of $485 was taken in 2005 to reflect the ongoing implementation of this strategy.  This charge is comprised of severance costs of $94, asset impairment charges of $331 and other charges of $60.  In addition to these restructuring charges, other costs of $2 were recorded in Cost of sales and operating expenses.  The Company expects to incur an additional $88 of charges related to the activities initiated and approved as of December 31, 2005, and these restructurings should be completed during the first half of 2007.

On November 29, 2005, the Company announced that it will close its Vernon, California, aluminum cast plate facility (Engineered Products) effective January 21, 2006 as a result of its struggle to remain competitive in a challenging economic environment.  The closure is expected to be substantially completed during the first quarter of 2006.  In addition to the Vernon closure, Engineered Products underwent continued restructuring in 2005.  The Company recorded restructuring charges of $17 related to these activities consisting of severance costs of $13, and asset impairment charges of $4.  In addition to these restructuring charges, $14 of additional pension costs related to the Vernon closure, and $4 of additional environmental costs related to other restructurings, were recorded in Cost of sales and operating expenses.  No further charges are expected to be incurred in connection with the Vernon closure.

In the fourth quarter of 2005, the Company recorded restructuring charges of $115 related to the closure of its aluminum smelter in Lannemezan, France, and its Steg primary aluminum smelter in Switzerland (Primary Metal) due to escalating energy costs.  The closure process for Lannemezan is expected to begin by June 2006 and be completed, at the latest, during the course of 2008.  The closure of Steg is expected to be completed by the end of April 2006.  These charges were comprised of severance costs of $43, asset impairment charges of $61, and other charges of $11.  No further charges are expected to be incurred in connection with these closures.

On September 14, 2005, the Company announced that its subsidiary, Société Générale de Recherches et d'Exploitations Minières (Sogerem) (Bauxite and Alumina), had begun an information and consultation process with its employee representatives and local partners due to the exhaustion of mining resources in the Tarn region of France. The discussions focused on identifying solutions for all those that would be affected by the potential conclusion of its fluorspar mining operations during the first half of 2006.  In relation to this activity, the Company recorded restructuring charges of $9 comprising $6 of severance costs, $2 of other costs and $1 of asset impairment charges during the third quarter of 2005.  In addition to the $9 of restructuring charges, $5 relating principally to additional asset retirement obligations were recorded, as a result of this activity, in Cost of sales and operating expenses.  No further charges are expected to be incurred in connection with this activity.

In the second quarter of 2005, the Company announced the restructuring of its Engineered Products facilities in Singen, Germany, and Sierre, Switzerland, in order to improve efficiency and ensure their long-term viability.  Alcan will integrate its extrusion activities at the Singen and Sierre sites and restructure the automotive structures and composites into its operations at Singen.  The Company incurred $30 of severance charges.  This restructuring is expected to be completed by the end of 2006.  The Company expects to incur an additional $3 of charges related to these activities. 

31

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

10.          RESTRUCTURING PROGRAMS (cont'd)

In 2005, the Company incurred $5, mostly related to severance costs, in connection with the suspension of one of two activities at the Mercus high-purity-metal processing mill in France (Engineered Products), which is expected to occur during the first quarter of 2006.  No further charges are expected to be incurred in connection with this activity.    

In 2005, the Company recorded other restructuring charges of $9 consisting of severance costs of $6 relating principally to additional Pechiney involuntary termination costs in Primary Metal and the closure of a Balsa composites plant in Guayaquil, Ecuador (Engineered Products), asset impairment charges of $2 related to a Pechiney facility in China (Engineered Products) and other costs of $1 in Primary Metal.

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 Barcelona, Spain (Packaging), $17 relating to a planned plant closure in Flemalle, Belgium (Entities transferred to Novelis), $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).  A restructuring provision of $21 related to the plant closure in Flemalle has been transferred to Novelis in 2005 following the spin-off.

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, in December 2004.  The charges include $6 of severance costs, $8 of asset impairment charges, $2 of pension costs, $3 of decommissioning, environmental costs and other charges.  These entities and the related restructuring provision of $5 have been transferred to Novelis in 2005 following the spin-off.

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.  In 2005, the Company incurred additional exit costs of $2 in relation to the closure of its corporate office in the U.K.,  The restructuring provision of $3 related to the closure of the corporate office in Germany has been transferred to Novelis in 2005 following the spin-off.

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.  In 2005, the Company incurred additional severance charges of $4, asset impairment charges of $1 and other costs of $3 relating to the downsizing of this business.  In addition, the Engineered Products group incurred restructuring charges of $9 in 2004 relating to both the closure of a composites facility in the U.S., and process reengineering at certain facilities in Switzerland and Germany.  The 2004 charges consisted of severance costs of $6, asset impairment charges of $2 and other costs of $1. 

In 2004, the Company incurred restructuring charges of $39 relating to the exit costs incurred in connection with certain non-strategic packaging facilities located in the United States and France.  These charges consist of severance costs of $23, asset impairment charges of $11 and other charges of $5. 

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.  In 2005, the Company incurred additional restructuring charges of $5 consisting of severance costs of $3 and other costs of $2. 

32

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

10.      RESTRUCTURING PROGRAMS (cont'd)

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. 

In 2004, the Company recorded charges related to the 2001 restructuring program of $7, relating principally to the closure of facilities in the U.K. (Bauxite and Alumina) and the closure of cable operations in Canada and the U.S. (Engineered Products), and recorded recoveries of $14 relating principally to the sale of assets related to the closure of facilities in Glasgow, U.K. (Entities transferred to Novelis) and other recoveries related to the closure of facilities in the U.K. (Bauxite and Alumina).  Following the spin-off, $16 of the restructuring provision has been transferred to Novelis.

In 2003, restructuring charges of ($38), pre-tax were recorded, which included recoveries of severance and other costs of $29 and other special charges of $9.  The $29 recovery consists of $3 for the reversal of an excess redundancy provision in the U.K., a gain of $19 principally for the sale of the Borgofranco power facilities in Italy, income of $6 on the sale of extrusions operations in Malaysia, which are all related to Entities transferred to Novelis, and a gain of $9 relating to sales of assets in the U.K. ($5: Bauxite and Alumina; $4: Packaging), partially offset by other costs of $8 principally in the U.K. (Packaging).

Other 2003 Restructuring Activities

In 2003, the Company recorded other restructuring charges of $64 consisting of severance and other exit costs of $36 at flexible packaging operations in Europe and closure costs for certain cable operations in the U.S. (Engineered Products), $28 of asset impairment charges consisting of $14 for the closure of the Jonquière Söderberg primary aluminum facility in Saguenay, Quebec (Primary Metal), $7 for flexible packaging operations in Europe, and $7 for a converting facility in Charlotte, North Carolina (Packaging).

33

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

10.      RESTRUCTURING PROGRAMS (cont'd)

The schedule provided below shows details of the provision balances and related cash payments for the significant restructuring activities:

As at December 31, 2005	SEVERANCE COSTS	ASSET IMPAIRMENT CHARGES*	OTHER	TOTAL
Provision balance as at December 31, 2002	71	-	42	113
2003:
Charges (recoveries) recorded in the statement of income	15	28	(8)	35
Cash payments	(60)	-	(35)	(95)
Non-cash items	-	(28)	33	5
Acquisition of Pechiney	54	-	8	62
Provision balance as at December 31, 2003	80	-	40	120
2004:
Charges recorded in the statement of income	44	30	13	87
Charges recorded in the allocation of the
Pechiney purchase price	175	-	18	193
Cash payments	(99)	-	(33)	(132)
Non-cash items	-	(30)	8	(22)
Provision balance as at December 31, 2004	200	-	46	246
2005:
Provisions transferred to Novelis	(31)	-	(14)	(45)
Charges recorded in the statement of income	204	400	81	685
Cash payments - net	(118)	-	(40)	(158)
Non-cash items	(12)	(400)	(16)	(428)
Provision balance as at December 31, 2005	243	-	57	300

* 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

Year ended December 31, 2005	SEVERANCE COSTS	ASSET IMPAIRMENT CHARGES	OTHER	TOTAL
Bauxite and Alumina	6	1	2	9
Primary Metal	51	61	14	126
Engineered Products	53	7	3	63
Packaging	94	331	60	485
Other	-	-	2	2
Total	204	400	81	685

 34

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

10.      RESTRUCTURING PROGRAMS (cont'd)

Year ended December 31, 2004	SEVERANCE COSTS	ASSET IMPAIRMENT CHARGES	OTHER	TOTAL
Bauxite and Alumina	-	-	(3)	(3)
Primary Metal	4	5	5	14
Engineered Products	7	6	4	17
Packaging	23	11	5	39
Entities transferred to Novelis	8	8	-	16
Other	2	-	2	4
Total	44	30	13	87
Year ended December 31, 2003	SEVERANCE COSTS	ASSET IMPAIRMENT CHARGES	OTHER	TOTAL
Bauxite and Alumina	-	-	(5)	(5)
Primary Metal	1	14	-	15
Engineered Products	6	-	1	7
Packaging	8	14	20	42
Entities transferred to Novelis	-	-	(24)	(24)
Total	15	28	(8)	35

For the year ended December 31, 2005, $588 of the restructuring charges (recoveries) above are excluded from the measurement of the profitability of the Company's operating segments (Business Group Profit), as they relate to major corporate-wide acquisitions or initiatives (2004: $55; 2003: ($1)).  See note 35 - Information by Operating Segments. 

Charges forming part of the allocation of the Pechiney purchase price in 2004

Year ended December 31, 2004	SEVERANCE COSTS	OTHER	TOTAL
Primary Metal	50	2	52
Engineered Products	12	6	18
Packaging	42	5	47
Entities transferred to Novelis	17	2	19
Other	54	3	57
Total	175	18	193

11.          INCOME TAXES

	2005	2004	2003
Income (Loss) from continuing operations before income taxes and other items
Canada	198	(144)	(201)
Other countries	125	723	699
	323	579	498
Current income taxes
Canada	(29)	9	18
Other countries	163	321	242
	134	330	260
Deferred income taxes
Canada	133	89	120
Other countries	(10)	(44)	(122)
	123	45	(2)
Income tax provision	257	375	258

35

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

11.          INCOME TAXES (cont'd)

The composite of the applicable statutory corporate income tax rates in Canada is 32% (2004: 32%; 2003: 39%).

Effective January 1, 2004, the general and the 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:

	2005	2004	2003
Income taxes at the composite statutory rate	104	185	195
Differences attributable to:
Effect of a change in tax laws or enacted tax rates	42	(32)	(75)
Exchange translation items	69	89	96
Exchange revaluation of deferred income taxes	19	44	112
Unrecorded tax benefits - net	65	85	1
Investment and other allowances	(25)	(22)	(35)
Goodwill impairment	39	50	11
Withholding taxes	8	34	6
Reduced rate or tax exempt items	(13)	(25)	(11)
Foreign tax rate differences	(31)	(40)	(43)
Prior years' tax adjustments	(26)	(23)	(18)
Other - net	6	30	19
Income tax provision	257	375	258

At December 31, the principal items included in Deferred income taxes are:

	2005	2004	2003
Liabilities
Property, plant, equipment and intangibles	1,376	1,765	2,118
Inventory valuation	25	75	131
Other - net	140	113	122
	1,541	1,953	2,371
Assets
Tax benefit carryovers	1,468	1,505	1,429
Accounting provisions not currently deductible for tax	1,348	1,496	1,255
	2,816	3,001	2,684
Valuation allowance (amounts not likely to be recovered)	1,459	1,530	1,149
	1,357	1,471	1,535
Net deferred income tax liability	184	482	836
Amounts recognized in the consolidated balance sheet consist of:
Deferred income tax asset - current	(150)	(214)	(49)
Deferred income tax asset - non-current	(863)	(870)	(892)
Deferred income tax liability - current	25	23	81
Deferred income tax liability - non-current	1,172	1,543	1,696
Net deferred income tax liability	184	482	836

Based on rates of exchange at December 31, 2005, tax benefits of approximately $1,237 relating to prior and current years' operating losses and $37 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 $1,116 of these tax benefits have no expiry date, $8 expire in 2006 and the rest expire in varying amounts between 2007 and 2025.  The majority of the valuation allowance relates to the loss carryforwards of French companies, because of uncertainty regarding their realization.   

36

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

11.          INCOME TAXES (cont'd)

If the valuation allowance is subsequently reversed, approximately $1,142 of the valuation allowance would be allocated to reduce goodwill because it relates to future income tax assets acquired in business combinations but which were not recognized at the date of the business combinations since their realization was not more likely than not.  In 2005, $5 (2004: $13;  2003: $5) of the valuation allowance was reversed, all of which was applied to reduce goodwill (2004: $12; 2003: $4). 

12.          INVESTMENT IN UNCONSOLIDATED AFFILIATES

At December 31, 2005, investments accounted for using the equity method and the ownership held by Alcan include principally:

Sor-Norge Aluminium AS (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. (40%); Mineração Rio Do Norte S.A. (13%); Pechiney Reynolds Quebec Inc. (50%); Alucam - Compagnie Camerounaise de l'Aluminium (46.67%); Socatral - Société Camerounaise de Transformation de l'Aluminium (29.96%); Alcan Ningxia Aluminium Company Limited (50%); Sohar Aluminium Co. L.L.C. (20%); and Carbone Savoie (30%).

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 Cameroon, as well as packaging operations in France and China, engineered products operations in the Czech Republic, and cathode block production facilities in France and Brazil.

As described in note 4 - Accounting Changes - Consolidation of Variable Interest Entities, in 2004, the Company consolidated, under the provisions of FIN 46(R), the financial statements of Logan, in which it held a 40% interest.  Prior to 2004, the Company's investment in Logan was accounted for using the equity method.  As a result of the spin-off of Novelis on January 6, 2005, the Company no longer holds an interest in Logan.  As of this date, the Company ceased consolidating Logan's financial statements.

A summary of the combined financial information for these equity-accounted companies is set forth below.

Summary of Combined Financial Position

	2005	2004	2003
Current assets	951	1,091	881
Non-current assets	3,112	3,628	2,381
Total assets	4,063	4,719	3,262
Current liabilities	870	1,122	981
Non-current liabilities	813	1,052	791
Total liabilities	1,683	2,174	1,772
Net assets	2,380	2,545	1,490
Alcan's equity in net assets	1,470	1,690*	724

*Includes $642 of goodwill arising from the Pechiney acquisition.  See note 8 - Acquisition of Pechiney.

Summary of Combined Operations

	2005	2004	2003
Revenues	2,308	1,954	1,122
Costs and expenses	1,829	1,648	885
Income taxes	172	114	59
Net income	307	192	178
Alcan's share of net income as reported in equity income	88	54	38

37

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 Cameroon, as well as packaging operations in France and China, engineered products operations in the Czech Republic, and cathode block production facilities in France and Brazil.  These transactions are reflected in the consolidated financial statements as follows:

	2005	2004	2003
Year ended December 31:
Sales and operating revenues	115	95	42
Cost of sales and operating expenses	613	528	315
Other expenses (income) - net	(5)	(1)	(2)
As at December 31:
Trade receivables	29	184	142
Deferred charges and other assets	36	28	-
Payables and accrued liabilities	56	122	56
Short-term borrowings	79	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:                                     

			ADDITIONS
	BALANCE AT	TRANSFERS	CHARGED TO						BALANCE
	BEGINNING	TO	COSTS &			WRITE-			AT END OF
YEAR	OF YEAR	NOVELIS	EXPENSES	ACQUISITIONS	RECOVERIES	OFFS	DIVESTMENTS	EXCHANGE	YEAR
2005	99	(33)	17	-	(6)	(15)	(1)	(5)	56
2004	92	-	27	-	(7)	(17)	-	4	99
2003	56	-	12	31	-	(7)	-	-	92

38

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

15.                SALES OF RECEIVABLES  

In March 2005, the Company entered into a program to sell to a third party an undivided interest in certain trade receivables, with limited recourse, for maximum cash proceeds of $200.  In December 2005, the program was amended to increase the maximum cash proceeds to $215.  The maximum credit exposure to the Company is held in reserve by the third party and is recorded in Deferred charges and other assets.  The Company acts as a service agent and administers the collection of the receivables sold.  As at December 31, 2005, the Company sold trade receivables of $249 under this program, with $34 held in reserve by the third party.  This program replaces a $300 program that was discontinued in January 2005 due to the spin-off of Novelis.  Under this previous program, the Company sold trade receivables of $345 as at December 31, 2004 (2003: $336), with $45 (2003: $43) held in reserve by a third party.

The Company has also entered into other programs with certain financial institutions to sell certain trade receivables.  Under one program, the Company entered into agreements to sell up to $112 (€ 95 million) (2004: $129 (€ 95 million); 2003: $211   (€ 168 million)) of selected receivables without recourse.  As at December 31, 2005, the Company sold trade receivables of $112 (€ 95 million) (2004: $129 (€ 95 million); 2003: $143 (€ 114 million)) under this program, with $8 (€ 7 million) (2004: $10 (€ 7 million); 2003: $11 (€ 9 million)) held in reserve by third parties.  Under another program, the Company entered into an agreement to sell certain trade receivables of $60 (2004 and 2003: $60).  As at December 31, 2005, the Company sold trade receivables under this program of $60 (2004: $59; 2003: nil) with $6 (2004: $6; 2003: nil) held in reserve by a third party.  On January 27, 2006, this agreement was amended to reduce the maximum amount of certain trade receivables that can be sold to $50.   

16.                OTHER EXPENSES (INCOME) - NET 

Other expenses (income) - net comprise the following elements:

	2005	2004	2003
Asset impairment charges not included in restructuring programs	28	69	8
Gain on disposal of businesses and investments - net (NOTE 21)	(32)	(35)	(14)
Provisions for legal claims (NOTE 29)	20	8	1
Environmental provisions	6	20	29
Interest revenue	(73)	-	(19)
Pechiney integration	3	38	-
Exchange losses	10	61	116
Derivatives losses (gains) - net	49	36	(30)
Other	(15)	124	14
	(4)	321	105

The 2005 asset impairment charges consist of $12 related principally to the write-off of certain Bauxite and Alumina project costs in Australia, and $13 related to the impairment of certain Engineered Products assets primarily in Germany and Brazil.  The majority of these charges arose as a result of negative projected cash flows. 

Included in 2005 interest revenue is $33 related to interest received on income tax refunds.

The 2004 asset impairment charges consist principally of $65 related to the impairment of certain rolling assets in Italy that were transferred to Novelis in 2005 and arose as a result of negative projected cash flows.  Fair values were determined based on either discounted cash flows or selling price.

Included in the 2004 other expenses is $34 related to severance and other exit costs not included in note 10 - Restructuring Programs as they were not part of major restructuring plans.

39

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

17.          INVENTORIES

	2005	2004	2003
Aluminum operating segments
Aluminum	912	1,881	1,901
Raw materials	704	733	489
Other supplies	365	576	469
	1,981	3,190	2,859
Packaging operating segment
Raw materials and other supplies	297	347	317
Work in progress	133	147	143
Finished goods	323	356	363
	753	850	823
	2,734	4,040	3,682

18.          DEFERRED CHARGES AND OTHER ASSETS

Deferred charges and other assets comprise the following elements: 

	2005	2004	2003
Prepaid pension costs (NOTE 33)	176	197	210
Income taxes recoverable	-	-	31
Available-for-sale securities	76	52	51
Prepaid mining expenses	47	49	51
Debt financing costs	52	43	47
Reserve for receivables sold (NOTE 15)	42	10	43
Amount receivable on currency swap of debt	-	62	16
Long-term notes and other receivables	594	585	164
Other	65	132	142
	1,052	1,130	755

19.          INVESTMENTS

Investments comprise the following elements:

	2005	2004	2003
Companies accounted for under the equity method (NOTE 12)	1,470	1,690	724
Investments accounted for under the cost method	41	57	84
	1,511	1,747	808

20.          PROPERTY, PLANT AND EQUIPMENT

	2005	2004	2003
Cost (excluding Construction work in progress)
Land and property rights	550	686	506
Buildings	3,011	3,909	3,841
Machinery and equipment	13,429	17,000	17,380
	16,990	21,595	21,727

Accumulated depreciation relates primarily to Buildings, and Machinery and equipment. 

40

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

21.          SALES AND ACQUISITIONS OF BUSINESSES AND INVESTMENTS

2005

Acquisitions

In 2005, the Company made the following seven acquisitions for a total cost of $75:

Canada

Interglass, a privately owned company located in Woodbridge, Ontario, Canada, specializing in the converting of glass tubing. 

United States

PreWired Systems LLC based in Pacoima, California, a company specializing in manufactured wiring systems for the electrical industry. 

Asia and Other Pacific

The tobacco packaging interests of CM Printing Sdn Bhd in Malaysia.  Located at Rawang, Alcan Packaging Malaysia Sdn Bhd will incorporate modern equipment and infrastructure to further complement Alcan Packaging's existing tobacco and flexibles printing capability in South-East Asia.

The capsules and closures distribution businesses of Classic Packaging and Nellie Products,  which were subsidiaries of Foster's Group, an Australian beer, wine and spirit producer.

The remaining 35% stake of Alcan Packaging Propack Co. Limited, the Company's Chinese subsidiary specialized in food flexible and pharmaceutical packaging.

France, United Kingdom, Germany, Other Europe

The assets of Parkside International's flexible food packaging plant in Zlotow, Poland, following the approval of Polish and German anti-trust authorities.

Alcan Service Centres, part of the Engineered Products business group, took full ownership of Almet AG by purchasing the outstanding 36.6% minority interest held by its then current management team.

Sales

On October 7, 2005, the Company announced that it had reached an agreement in principle with Praxair Inc. for the sale of its high-purity activity at the Mercus processing mill in France.  The transaction should be completed in the first quarter of 2006.

On January 4, 2006, the Company announced that it has signed an agreement in principle for the sale of its Froges, France, rolling mill to Industrie Laminazione Alluminio S.p.a based in Sardinia, Italy.  The transaction should be completed in the first quarter of 2006.

On February 27, 2006, the Company announced that it had reached an agreement to sell selected assets of its North American Packaging Plastic Bottle business to Ball Corporation for $180.  The sale is subject to compliance with the Hart-Scott-Rodino Act of 1976.

On March 6, 2006, the Company announced that it had reached an agreement in principle for the sale of its Chambéry, France, operation to CGA (Compagnia Generale Alluminio SpA). Chambéry manufactures Rollbond panels used primarily as fluid circulators in refrigeration units. CGA is an Italian company specializing in domestic refrigeration and air conditioning.

In 2005, the Company sold the following businesses and investments:

France, United Kingdom, Germany, Other Europe

Guardian Espanola S.A. to its then current local management team for net proceeds of nil, and recorded a gain on disposal of $2.  Located in Vitoria, Spain, Guardian Espanola S.A. produces flexible packaging and promotional items.

The aluminum tubes business for net proceeds of $10 and recorded a loss on disposal of $15 to its then current management team and 21 Centrale Partners, an investment fund specialized in high potential mid-size industrial companies.  The sale consists of three plants located in Saumur (France), Kolin (Czech Republic) and Cividate al Piano (Italy).

The air freight container business, a minor part of its operations at its Singen, Germany, facility, to Driessen Aerospace Group in the Netherlands, a manufacturer of containers, trolleys and related products for the aerospace market.  The recognition of the sale was deferred until the fourth quarter of 2005 due to the Company's continuing involvement in the business.  Net proceeds on the sale of this business were $3 and the gain on disposal was $2.

Decoplast, its European Beauty blow-molded bottle business, to IPH Groupe Spid, a French leader in plastic conversion, for net proceeds of nil and recorded a loss on disposal of $7.  The sale includes the two sites of Decoplast in La Roche-sur-Foron and Senlis in France.

41

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

21.          SALES AND ACQUISITIONS OF BUSINESSES AND INVESTMENTS (cont'd)

Pet Plas Packaging Ltd., a food plastic bottles company to Esterform Packaging Limited, based in the U.K., for net proceeds of $19 and recorded a loss on disposal of $7.

Alcan Print Finishers Ltd., the U.K. decorative print finishing company, to Celloglas Holdings Limited for net proceeds of $29 and recorded a loss on disposal of $2.

Alcan Packaging Sutton Ltd. in the U.K. and the Italian Laffon plant.   Alcan Packaging Sutton Ltd., a major supplier of tinplate cans and decorated tinplate containers, was sold to the Impress Group for net proceeds of $51 and the Company recorded a gain on disposal of $18.  The Laffon plant, located in Venegono, Italy, manufactures mass-market stock compacts and was sold to its General Manager, Luca Rossi, for net proceeds of ($3) and a loss on disposal of $4 was recorded.

A 50% investment in AirlesSystems SAS for net proceeds of $17 and recorded a gain on sale of $9.

A cost investment in Impress Metal for net proceeds of $60 and recorded a gain on disposal of $42. 

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 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. 

Subsequent to a protocol of negotiation signed on November 24, 2004, on November 22, 2005, the Company and Alcoa World Alumina LLC (Alcoa) announced that they signed a Basic Agreement with the Government of the Republic of Guinea that sets the framework for the development of a 1.5-million tonne per year (Mt/y) alumina refinery in the West African nation with further expansion potential. 

Subsequent to a Memorandum of Understanding signed 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).  On December 12, 2005, the Company announced that, together with its partners, they will proceed with the construction of a $1.7 billion, 350-kt per year (kt/y) primary aluminium smelter in Sohar, Oman, in which the Company will hold a 20% equity interest. The Company will license its AP35 smelter technology for use in the newly constructed smelter as well as provide assistance and support for the construction and operation of the smelter.   Production is expected to begin in the second quarter of 2008 and the smelter is expected to be fully operational by the fourth quarter of that year. The smelter will be in the lowest quartile of the industry cash cost curve and will add approximately 2% to the Company's global smelting base.  The Company has the option of acquiring up to 60% of a planned second potline for an additional 350 kt/y of aluminum.

42

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

21.          SALES AND ACQUISITIONS OF BUSINESSES AND INVESTMENTS (cont'd) 

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 charge.

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 the acquisition.

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.

 43

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

21.          SALES AND ACQUISITIONS OF BUSINESSES AND INVESTMENTS (cont'd)

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.

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 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.

44

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

22.          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 and, effective December 31, 2005, adopted FIN 47.  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 (AROs).

	2005	2004	2003
Balance ─ beginning of year	624	563	389
Acquisition of Pechiney	-	8	101
Liabilities incurred	82	20	35
Liabilities settled	(15)	(36)	(25)
Accretion expense	27	26	25
Exchange	(5)	40	91
Revisions in estimated cash flows	(54)	3	(53)
Balance ─ end of year	659	624	563

The Company may have other AROs that may arise in the event of a plant closure.  An ARO has not been recorded for these obligations due to the fact that the liability is not reasonably estimable, as the plant assets have indeterminate economic lives.

23.          DEFERRED CREDITS AND OTHER LIABILITIES

Deferred credits and other liabilities comprise the following elements:

	2005	2004	2003
Asset retirement obligations	610	582	499
Environmental liabilities	183	237	156
Restructuring liabilities	76	13	40
Claims	130	155	240
Fair value of derivatives	321	235	75
Long-term payables	-	-	140
Other	288	299	241
	1,608	1,521	1,391

45

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

24.          DEBT NOT MATURING WITHIN ONE YEAR

	2005	2004	2003
Alcan Inc.
Commercial paper - CAN$ (CAN$498 million)(A)	428	703	1,346
Commercial paper - US$(A)	238	116	304
5.5% Euro note, due 2006 (€ 600 million)	710	813	753
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	500
5.20% Global notes, due 2014	500	500	500
5.00% Global notes, due 2015	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	750
5.75% Global notes, due 2035	300	-	-
Bank loans(B)	-	29	68
Bank loan (B) (D)	-	500	-
Other debt, due 2017 and 2033 (CAN$14  million)	12	11	10
Pechiney S.A.(G)
Bank loan, due 2008 (€ 138 million) (B)	163	187	174
Bank loan, due 2008 (€ 45 million)(B)(J)	53	61	56
3.45% Bank loan, due 2006 (€ 40 million)	48	54	50
Commercial paper − Euro (A)	-	160	-
5.10% Debentures	-	313	303
2.15% Equity link bonds	-	83	73
3.25% Convertible bonds (OCEANEs)(F)	-	-	20
5.14% FOCOMO bond(H)	-	-	7
6.03% FOCOMO bond (H)	-	-	10
6.20% FOCOMO bond(H)	-	-	12
5.69% FOCOMO bond(H)	-	-	10
4.81% FOCOMO bond(H)	-	-	3
Bank loans, due 2006/2010 (€ 11 million)(K)	13	-	-
Other debt, due 2006/2013 (€ 14 million)(B)	17	15	13
Aluminium Pechiney SPV
Bank loan, due 2005/2013(B)	88	89	50
Aluminium Dunkerque(G)
Credit facility, due 2016 (€ 39 million)	30	63	40
Bank loan	-	27	88
Alcan Finance Jersey Limited
Euro Medium Term Note Program (EMTN)
EMTN, due 2008 (€ 13 million)(B) (C)	15	18	17
EMTN, due 2008 (€ 8 million)(B) (C)	10	11	10
Teckpack Asia
Bank loans, due 2006/2010(B)	22	26	26
Alcan Holdings France
Bank loans (B) (K)	-	18	18
Alcan Taihan Aluminium Limited(I)
4.55% Bank loan	-	70	-
4.80% Bank loan	-	39	30
4.55% Bank loan	-	24	20
Other bank loans	-	2	2

46

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

24.          DEBT NOT MATURING WITHIN ONE YEAR (cont'd)

	2005	2004	2003
ALA (Nevada) Inc.
Bank loan	-	60	60
Alcan Aluminum Corporation
Floating Rate Notes (B) (D)	-	-	500
Pechiney Pacific (Pty) Ltd
Credit facility(B) (E)	-	-	78
Credit facility(B) (E)	-	-	105
Alcan Packaging Canada Limited
6.24% Bank loan	-	-	30
Other
Bank loans, due 2006/2015(B)	30	28	30
Other debt, due 2006/2033(B)	40	44	112
	6,067	6,914	7,778
Debt maturing within one year included in current liabilities	(802)	(569)	(341)
	5,265	6,345	7,437

(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 and a € 700 million short-term revolving credit facility, which were 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.

In addition to its existing commercial paper program in Canada ($3,000), the Company has reinstated in 2005, two commercial paper programs, one in France (€ 1 billion) and another in the U.S. ($2,000). The Company guarantees the commercial paper under these two programs. Starting April 2005, Alcan Pechiney Finance S.A. replaced Pechiney S.A. as the commercial paper issuer in Europe. In October 2005, a new commercial paper program in the U.S. was also initiated with Alcan Corporation as the issuer; it replaced the program of Alcan Aluminum Corporation, which was cancelled in early 2005 following the spin-off of Novelis. At any point in time, the total combined issuance limit for all three programs cannot exceed $3,000.

The pre-swap interest rates on the CAN$ denominated commercial paper ranged from 2.69% to 3.51% in 2005 (2004: 2.23% to 2.78%; 2003: 2.76% to 2.97%).  The interest rates on the US$ denominated commercial paper ranged from 4.05% to 4.46% in 2005 (2004: 1.75% to 2.53%; 2003: 1.17% to 1.32%).  In 2004, interest rates on the Euro-denominated commercial paper ranged from 2.16% to 2.67%.               

As at December 31, 2005, 2004 and 2003, 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.       

Following the Novelis spin-off, Alcan settled amounts due from Novelis and received net proceeds of approximately $2.6 billion in the first quarter of 2005. In addition to these proceeds, approximately $200 in debt was transferred to Novelis. These net proceeds were used to reduce two term loans and Alcan's commercial paper balance included in Short-term borrowings and in Debt maturing within one year in Alcan's consolidated financial statements as at December 31, 2004.

47

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

24.  DEBT NOT MATURING WITHIN ONE YEAR (cont'd)

In 2005, CAN$ denominated commercial paper borrowings of CAN$498 million (2004: CAN$2,433 million; 2003: CAN$1,747 million) were swapped through the use of forward exchange contracts for $425 (2004: $1,995; 2003: $1,332).

(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 EMTNs of principal amounts of € 13 million and € 8 million were swapped for £9 million and £5 million, respectively.

(D)  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.

(E)   As at December 31, 2004, Pechiney Pacific (Pty) Ltd had a $125 short-term committed credit facility. Drawn amounts on this facility were fully repaid in early 2005 and the facility was terminated at the end of 2005. As at December 31, 2003, Pechiney Pacific had borrowings of $78 and $105 under two long-term credit facilities that were repaid in 2004.

(F)   The purchase of the Pechiney OCEANEs outstanding at December 31, 2003, was completed on February 6, 2004, for a price of $19.

(G)   Upon its acquisition by Alcan, Pechiney's debt was recorded at fair market value. 

(H)    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.

(I)    In December 2004, Alcan Taihan Aluminium Limited (ATA) entered into a $70 floating rate long-term loan, which was subsequently swapped for a 4.55% fixed rate KRW 73 billion loan. In 2004, ATA also entered into two new long-term floating rate loans of KRW 40 billion and KRW 25 billion that were swapped for fixed rates of 4.80% and 4.45%, respectively. These loans replaced the KRW 30 billion and KRW 20 billion floating rate loans, that were outstanding in 2003 and that matured in 2004, of which $25 was swapped to fixed interest rates. In 2004, interest on the KRW 2 billion loans ranged from 3.00% to 5.50% (2003: 2.75% to 5.83%). 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.

(J)   On November 14, 2005, Alcan exercised an option to convert the interest rate on this loan from fixed (4.80%) to floating.

(K)    In 2005, the debt of Alcan Holdings France was transferred to Pechiney S.A. 

In 2004, the Company had swapped interest rates to 2007 on $63 (2003: $25) of its floating rate debt to fixed. In 2003, the Company had swapped interest rates on $660 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 $802 in 2006, $28 in 2007, $465 in 2008, $692 in 2009 and $23 in 2010.

25.          PREFERENCE SHARES

Authorized

An unlimited number of preference shares issuable in series. All shares are without nominal or par value.

Authorized and Outstanding 

In 2005, 2004, and 2003, there were 5,700,000 series C and 3,000,000 series E non-retractable preference shares authorized, of which 5,699,900 and 2,999,000, respectively, were outstanding as at December 31, 2005 (2004 and 2003: 5,700,000 series C shares and 3,000,000 series E shares), with stated values of $106 and $54, respectively.

48

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

25.          PREFERENCE SHARES (cont'd)

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.

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.

26.          COMMON SHARES 

The authorized common share capital is an unlimited number of common shares without nominal or par value.  On February 27, 2006, there were 373,693,379 common shares outstanding. Changes in outstanding common shares are summarized below:

	NUMBER (IN THOUSANDS)			STATED VALUE
	2005	2004	2003	2005	2004	2003
Outstanding - beginning of
year	369,930	365,181	321,470	6,670	6,461	4,731
Net impact of Novelis spin-off	-	-	-	(576)	-	-
Issued for cash:
Executive share option plan (NOTE 27)	1,354	1,760	699	46	60	22
Liquidity Agreement (NOTE 27)	118	276	2	4	12	-
Dividend reinvestment and share
purchase plans	519	631	597	17	28	20
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	-	-	-	20	27	7
Outstanding - end of year	371,921	369,930	365,181	6,181	6,670	6,461

* As at December 31, 2005, 872 of these shares with a stated value of $31 are held by a subsidiary (2004: 872 shares at a stated value of $35; 2003: 1,418 shares at a stated value of $56).  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 with no amendments at the 2002 Annual Meeting.  The plan was again reconfirmed for a three-year period with further amendments at the 2005 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, 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.

49

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

27.          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. In respect of certain options granted to certain senior executives in 1996, 1997 and 1998, the Company granted further options.  The grant shall become effective upon the exercise of the associated options and upon the executive placing at least one-half of the common shares resulting from the exercise of these options, in trust with an agency named by the Company, for a minimum period of five years.  The exercise price of these options is based on the market value of the common shares on the exercise date of the associated options.  These options are exercisable in the same manner, and will also terminate on the same date, as the associated options.  The vesting provisions of these options are identical to those of the associated options.

On January 6, 2005, Alcan executive share options to purchase 1,368,686 shares, granted to Novelis employees who were Alcan employees immediately prior to the spin-off, were cancelled.

As a result of the spin-off of Novelis, Alcan executive share options held prior to the spin-off of Novelis have been converted to new options, the number and exercise prices of which were based on the trading prices of Alcan shares immediately before and immediately after the effective date of the spin-off to preserve the economic value of the option grants.  This amounts to a conversion ratio of one share under the original grants to 1.1404 shares under the new options and the exercise price per option was reduced accordingly.

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$)
	2005	2004	2003	2005	2004	2003
Outstanding - beginning of year	10,410	9,566	8,687	50.96	47.49	46.08
Net impact of Novelis spin-off	(100)	-	-	N/A	-	-
Granted	2,866	2,679	1,609	38.26	58.13	52.58
Exercised (NOTE 26)	(1,354)	(1,760)	(699)	39.84	43.25	41.85
Forfeited	(527)	(75)	(31)	45.11	45.95	45.29
Outstanding - end of year	11,295	10,410	9,566	43.40	50.96	47.49
Exercisable - end of year	3,411	4,285	5,852	40.59	45.98	44.98

Shares under Options Outstanding at December 31, 2005

NUMBER OF SHARES UNDER OPTIONS (IN THOUSANDS)	RANGE OF EXERCISE PRICE (CAN$)	WEIGHTED AVERAGE EXERCISE PRICE (CAN$)	WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE (YEARS)
1,083	30.43-35.00	33.67	5.55
3,385	35.01-40.00	38.40	8.49
2,126	40.01-45.00	41.33	3.04
1,403	45.01-50.00	46.23	7.26
3,298	50.01-56.34	51.85	7.40
11,295	30.43-56.34	43.40

Shares under Options Exercisable at December 31, 2005

NUMBER OF SHARES UNDER OPTIONS (IN THOUSANDS)	RANGE OF EXERCISE PRICE (CAN$)	WEIGHTED AVERAGE EXERCISE PRICE (CAN$)
772	30.43-35.00	33.52
539	35.01-40.00	39.18
1,608	40.01-45.00	41.50
136	45.01-50.00	46.71
356	50.01-56.34	51.64
3,411	30.43-56.34	40.59

At December 31, 2005, the Company had reserved for issue under the executive share option plan 23,595,271 shares.

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 24% to 27% of the exercise price. 

50

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

27.          STOCK OPTIONS AND OTHER STOCK-BASED COMPENSATION (cont'd)

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 2005 is $8.71 (2004: $9.23; 2003: $10.52).

The weighted average fair value of stock options granted in 2004 and 2003 was revised due to the modification of stock options outstanding subsequent to the spin-off of Novelis on January 6, 2005.

The fair value of each option grant is estimated on the date of grant.  However, as a result of the spin-off of Novelis on January 6, 2005, the fair value of stock options outstanding subsequent to the spin-off was modified.  The following weighted average assumptions were used for calculating the fair values of option grants:

	2005	2004	2003
Dividend yield (%)	1.76	1.71	1.71
Expected volatility (%)	27.97	25.16	25.16
Risk-free interest rate (%)	4.05	3.88	3.71
Expected life (years)	6	6	6

Stock options expense was $19 in 2005 (2004: $11; 2003: $13).  Included in the 2005 expense is $2 related to the incremental cost that arose as a result of the modification of certain stock-option terms pursuant to the spin-off of Novelis. 

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 allowed 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 (€)
	2005	2004	2003	2005	2004	2003
Outstanding - beginning of year	3,327	3,889	-	35.92	34.71	-
Impact of Novelis spin-off (1)	461	-	-	N/A	-	-
Shares subject to the Liquidity
Agreement	-	-	3,891	-	-	34.71
Exercised (Note 26)	(118)	(276)	(2)	27.44	27.03	22.62
Exercised for Pechiney shares(2)	-	(152)	-	-	24.11	-
Forfeited	-	(134)	-	-	32.43	-
Outstanding and exercisable -
end of year	3,670	3,327	3,889	31.63	35.92	34.71

⁽¹⁾     As a result of the spin-off of Novelis, the Pechiney options were converted in the same manner as described under the Alcan Executive Share Option Plan.

⁽²⁾    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. 

51

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

27.          STOCK OPTIONS AND OTHER STOCK-BASED COMPENSATION (cont'd) 

Shares under Pechiney Options Outstanding and Exercisable at December 31, 2005 

NUMBER OF SHARES UNDER  OPTIONS (IN THOUSANDS)	RANGE OF EXERCISE PRICE (€)	WEIGHTED AVERAGE EXERCISE PRICE (€)	WEIGHTED AVERAGE REMAINING CONTRACTUAL LIFE (YEARS)
382	16.73-19.92	19.72	6.68
165	23.50-25.89	23.64	2.85
1,617	29.07-31.36	29.74	4.65
1,506	37.53-37.67	37.54	6.19
3,670	16.73-37.67	31.63

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. 

Other Stock-Based Compensation Plans

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.  On January 6, 2005, 211,035 SPAUs, representing SPAUs held by Novelis employees who were Alcan employees immediately prior to the spin-off, were cancelled.   The remaining SPAUs were converted in the same manner as described under the Alcan Executive Share Option Plan.

In 2005, 222,337 units (2004: 274,650 units; 2003: 254,200 units) were granted.  At December 31, 2005, 1,019,474 units (2004: 923,789 units; 2003: 720,309 units) were outstanding, of which 359,290 units (2004: 319,780 units; 2003: 260,685 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 (EPA) in respect of that year, instead of a cash payment. These executive officers may also elect, at least 12 months prior to the end of the three-year period of the Total Shareholder Return Performance Plan, to receive EDSUs for their Total Shareholder Performance Award for that period, 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 for the EDSUs related to the EPA, and at the end of the three-year period for the EDSUs related to the Total Shareholder Return Performance Plan. 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 cash 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.  On January 6, 2005, EDSUs held prior to the spin-off of Novelis were converted in the same manner as described under the Alcan Executive Share Option Plan. 

In 2005, 8,988 units (2004: 31,307 units; 2003: 25,038 units) were granted and 18,878 units (2004: 167,865 units; 2003: 24,935 units) were redeemed. At December 31, 2005, 90,952 units (2004: 88,414 units; 2003: 224,972 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 that 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 Industrial Composite Index measured over three-year periods commencing on October 1, 2005, 2004 and 2003. If the performance results for the Company's common shares ranks below the 30th percentile compared to all companies in the Standard & Poor's Industrial Composite Index, the employee will not receive an award.  At the 30th percentile rank, the employee will be paid an award equal to 60% of the target.  At the 50th percentile rank, the employee will earn a payout of 100% of the target, and 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 three-year period. The actual amount of the award (if any) will be prorated between the percentile rankings. In 2005, a total target cash award of $18 (2004: $17; 2003: $15) was granted to specific key employees.    

52

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

27.          STOCK OPTIONS AND OTHER STOCK-BASED COMPENSATION (cont'd)

On January 6, 2005, all Novelis employees who were Alcan employees immediately prior to the spin-off ceased to actively participate in and accrue benefits under this plan.  No cash payments were made to these employees as a result of the spin-off nor does Alcan have any liability to make future cash payments to these individuals. 

In 2005, a cash award of $18 was paid out to eligible employees for the Total Shareholder Return Performance Plan that commenced October 1, 2002 and terminated in 2005. 

As described above, under the Executive Deferred Share Unit Plan, executive officers based in Canada may elect, at least 12 months prior to the end of the three-year period of the Total Shareholder Return Performance Plan, to receive EDSUs for their total award earned under the Total Shareholder Return Performance Plan for that period instead of a cash payment.  In 2005, 7,118 units were granted to eligible executive officers. 

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 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 cash 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. On January 6, 2005, Non-Executive DDSUs held prior to the spin-off of Novelis have been converted in the same manner as described under the Alcan Executive Share Option Plan.  

In 2005, 47,914 units were granted (2004: 35,306 units; 2003: 28,011 units) and 15,378 units were redeemed (2004: 7,547 units; 2003: 16,742 units).  At December 31, 2005, 132,863 units (2004: 87,240 units; 2003: 59,481 units) were outstanding.

Restricted Stock Units

A small number of employees are granted Restricted Stock Units (RSUs). Additional RSUs are credited to each holder thereof corresponding to dividends declared on common shares.  RSUs usually vest three years after the grant date. Each RSU carries the right to an amount equal to the average price of a common share on the Toronto and New York stock exchanges on the five trading days ending on the vesting date.  As a result of the spin-off, RSUs held prior to the spin-off of Novelis have been converted in the same manner as described under the Alcan Executive Share Option Plan. 

In 2005, 13,511 units were granted (2004: 627 units; 2003: 45,500 units), 10,214 units were redeemed, and 1,581 units were cancelled (2004: no units redeemed, and 963 units cancelled).  At December 31, 2005, 51,787 units were outstanding (2004: 45,164 units; 2003: 45,500 units). 

Deferred Share Agreements

Deferred share agreements were also entered into with a small number of executive officers whereby they had the right to receive a certain number of common shares after having completed three years of service. As a result of the spin-off of Novelis, 33,500 deferred shares held by a Novelis employee who was an Alcan employee immediately prior to the spin-off were cancelled.  In 2004, 15,000 deferred shares were vested.  At December 31, 2005, there were no outstanding deferred shares under these arrangements.

Compensation Cost

Stock-based compensation expense for other stock-based compensation plans was $6 in 2005 (2004: $16; 2003: $25).

28.          RETAINED EARNINGS

At December 31, 2005, consolidated retained earnings include $2,094 (2004: $2,929; 2003: $2,591) of undistributed earnings of foreign subsidiaries, some part of which may be subject to certain taxes.  Consolidated retained earnings at December 31, 2005 also include $242 (2004: $175; 2003: $155) 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.

53

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

29.          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 the Company 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, the Company 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) and Powerex assigned its claims in both the Enron and EPMI bankruptcies to the Company.   In November 2005, the Company and Enron entered into a stipulated agreement that (i) confirmed that the Powerex bankruptcy claims assigned to the Company were allowed claims, (ii) confirmed the amount of the claims, and (iii) expunged the Company's claims against Enron/EPMI (which arose out of the same facts and therefore were duplicative of the Powerex claims).  On December 15, 2005, the United States Bankruptcy Court approved the stipulated agreement (the 10-day appeal period has since lapsed).  On January 19, 2006, the Company sold the claims to a financial institution for combined proceeds of $62, which will be recorded in the first quarter of 2006.

The Company has guaranteed the repayment of approximately $211 of indebtedness by third parties.  Alcan believes that none of these guarantees is likely to be invoked. These guarantees relate primarily to debt held by equity-accounted joint ventures, obligations relating to businesses sold, 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 $1,135 in 2006, $503 in 2007, $363 in 2008, $286 in 2009, $256 in 2010 and $2,281 thereafter. Total payments to these entities, excluding capital expenditures, were $529 in 2005, $519 in 2004 and $171 in 2003.  Some of the commitment contracts include a variable component for indexation to oil and coal prices.

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.  The 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 $93 in 2006, $75 in 2007, $44 in 2008, $32 in 2009, $22 in 2010 and $69 thereafter. Total rental expenses amounted to $180 in 2005, $150 in 2004 and $91 in 2003.

Alcan, in the course of its operations, is subject to environmental and other claims, lawsuits and contingencies. The Company is involved in proceedings arising out of laws regulating the discharge of materials into the environment or laws seeking to protect the environment, for which it has made accruals, in respect of 24 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.

The Company has transferred to Novelis certain environmental contingencies.

Alcan has agreed to indemnify Novelis and each of its directors, officers and employees against liabilities relating to:

• liabilities of the Company other than those of an entity forming part of Novelis or otherwise assumed by Novelis pursuant to its separation agreement with Novelis;

• any liability of the Company or its subsidiaries, other than Novelis, retained by Alcan under the separation agreement; and

• any breach by the Company of its separation agreement with Novelis or any of its ancillary agreements with Novelis.

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.

In addition, see reference to agreements between Alcan and Novelis in note 7, income taxes in note 11, asset retirement obligations in note 22, debt repayments in note 24, and financial instruments and commodity contracts in note 31.

54

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

30.          CURRENCY GAINS AND LOSSES

The following are the amounts recognized in the financial statements:

	2005	2004	2003
Currency gains (losses) recorded in income
Realized and unrealized losses on currency derivatives	19	(66)	(14)
Realized deferred translation adjustments*	10	-	4
Gains (Losses) on translation of monetary assets and liabilities	(10)	(62)	(79)
	19	(128)	(89)
Deferred translation adjustments** - beginning of year	1,063	609	205
Effect of exchange rate changes	(847)	616	425
Gains realized*	(18)	(32)	(10)
Deferred translation adjustments reclassified due to the spin-off of Novelis	(105)	-	-
Losses on forward exchange contracts, net of tax, or translation of debt
designated as an equity hedge of foreign subsidiaries	167	(123)	(28)
Gains (Losses) on translation of a convertible loan to a subsidiary forming
part of the net investment	4	(7)	17
Deferred translation adjustments - end of year	264	1,063	609

* The gain of $18 realized in 2005 includes $10 recorded in Income from continuing operations, relating principally to the sale of Alcan Packaging Sutton Ltd., Alcan Print Finishers Ltd., and the Italian Laffon plant, and $8 recorded in Income (Loss) from discontinued operations. 

 The gain of $32 realized in 2004 relates to the sale of the Boxal Group and Suner Cartons and is recorded in Income (Loss) from discontinued operations. 

The gain of $10 realized in 2003 includes $4 recorded in Income from continuing operations, related principally to a gain of $15 on the sale of the remaining portion of the Company's investment in Nippon Light Metal Company, Ltd., and a loss of $11 on the sale of Alcan Nikkei Siam Limited, and $6 recorded in Income (Loss) from discontinued operations, related to a gain of $11 on the sale of Fibrenyle in the U.K., and a loss of $5 on the sale of the Company's extrusions operation in Milan, Italy.

**   Deferred translation adjustments are included in Accumulated other comprehensive income (loss). 

31.          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.  The Company is the counterparty to a number of such contracts with the businesses spun-off to Novelis.  In 2004, these contracts represented intercompany balances and transactions and were eliminated in the consolidated financial statements.  Subsequent to the spin-off of Novelis, these contracts represent third-party balances and transactions and they have been included in the relevant disclosure below.  Also, the Company's interest rate swaps and electricity derivatives outstanding as at December 31, 2004 were transferred to Novelis at the time of the spin-off.

55

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

31.          FINANCIAL INSTRUMENTS AND COMMODITY CONTRACTS (cont'd)

Derivatives - Currency

OUTSTANDING AT DECEMBER 31		2005	2004	2003
FINANCIAL INSTRUMENT	HEDGE	FAIR VALUE	FAIR VALUE	FAIR VALUE
Forward exchange contracts	Future firm net operating cash flows	10	(62)	33
Forward exchange contracts	To swap intercompany foreign currency denominated loans to US$, € and CHF	(6)	(5)	(6)
Forward exchange contracts	To hedge € net investments in foreign operations(1)	-	(167)	(44)
Forward exchange contracts	Anticipated transactions (2)	(2)	5	-
Forward exchange contracts	To swap CAN$ commercial paper borrowings to US$	3	31	13
Currency options	Future firm operating cost commitments(3)	-	-	16
Currency options	Future US$ sales against € and £	-	15	51
Cross currency interest swap and forward exchange contracts	To swap US$ third-party borrowings to KRW	-	(8)	2
Cross currency interest swap	To swap € 21 million medium term notes to  £14 million	1	2	1
Embedded derivatives		1	-	3

(1)   An exchange loss of nil was recorded in Other expense (income) - net (2004: nil; 2003: $14) and an exchange gain (loss) of $167 recorded in Deferred translation adjustments (2004: ($123); 2003: ($30)).

(2)   Mainly anticipated transactions denominated in Australian dollars for the expansion of the Gove alumina refinery in Australia and Brazilian real for the expansion of the Alumar project.

(3)   Currency options used to hedge future firm operating cost commitments matured in 2003.

56

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

31.          FINANCIAL INSTRUMENTS AND COMMODITY CONTRACTS (cont'd)

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	2005	2004	2003
	FAIR VALUE	FAIR VALUE	FAIR VALUE
Financial Instrument
Rate swap - floating to fixed
- in LIBOR floating to EURIBOR fixed	1	-	-
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.

Other than forward fixed price sales agreements, the Company is currently not entering into additional forward sales of aluminum.

OUTSTANDING AT DECEMBER 31	2005	2004	2003
Financial Instrument
Forward contracts principally forward sales contracts and physical trading contracts(1)
Maturing principally in years	2006 to 2007	2005 to 2006	2004 to 2005
Fair value	(236)	(104)	(18)
Forward fixed price sales agreements
Maturing principally in years	2006	-	-
Fair value	(80)	-	-
Call options purchased
Maturing principally in years	2006	2005	2004
Fair value	29	36	1
Call options sold
Maturing principally in years	2006	2005	2004
Fair value	(29)	(10)	(21)
Put options purchased
Maturing principally in years	-	-	2004
Fair value	-	-	1
Embedded derivatives
Maturing principally in years	-	2005	2005
Fair value	-	(10)	(49)

⁽¹⁾ There was a loss of $18 due to hedge ineffectiveness in 2005 (2004 and 2003: nil) on forward contracts, for which the Company applies hedge accounting under SFAS No. 133.  As at December 31, 2005, the Company estimates that it will reclassify into earnings in 2006 pre-tax losses of $188 from Accumulated other comprehensive income (loss) regarding forward contracts for which the Company applies hedge accounting under SFAS No. 133 and the remaining balance during the period ending in 2010.   

57

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

31.          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	2005	2004	2003
Financial Instrument
Forward contracts (principally forward sales contracts)
Maturing principally in years	N/A	2005	2004
Fair value	N/A	(2)	(53)

Derivatives - Oil

As a hedge of future oil purchases, the Company has outstanding as at December 31:

	2005	2004	2003
Financial Instrument
Futures, swaps and options
Maturing at various times in years	2006	2005 to 2006	2004 to 2006
Fair value	-	-	2

Derivatives - Natural Gas

As a hedge of future natural gas purchases, the Company has outstanding as at December 31:

	2005	2004	2003
Financial Instrument
Swaps, options and fixed price contracts
Maturing at various times throughout	2006	2005	2004
Fair value	-	(1)	1
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:

	2005	2004	2003
Financial Instrument
Fixed price contracts
Maturing at various times in years	2012	2016	2016
Fair value	22	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.  To minimize the concentration of credit risk, the Company enters into derivative transactions with a portfolio of financial institutions having a credit rating of "A" or better.  The Company has master netting agreements with the financial institutions that are counterparties to the derivative instruments.  These agreements allow for the net settlement of assets and liabilities arising from different transactions with the same counterparty.  The Company also monitors counterparty exposures and reviews counterparty credit ratings regularly.  Based on these factors, the Company is satisfied that the risk of non-performance is remote.

58

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

31.          FINANCIAL INSTRUMENTS AND COMMODITY CONTRACTS (cont'd) 

Financial Instruments - Fair Value

On December 31, 2005, the fair value of the Company's long-term debt totalling $6,067 (2004: $6,914; 2003: $7,778) was $6,141 (2004: $7,158; 2003: $7,953), based on market prices for the Company's fixed rate securities and the book value of variable rate debt.

At December 31, 2005, the fair value of the Company's preference shares having a book value of $160 (2004 and 2003: $160) was $196 (2004: $185; 2003: $173).

The fair values of all other financial assets and liabilities are approximately equal to their carrying values.

32.          SUPPLEMENTARY INFORMATION 

	2005	2004	2003
Income statement
Interest on long-term debt	339	316	187
Capitalized interest	(29)	(11)	(5)
Balance sheet
Payables and accrued liabilities include the following:
Trade payables	1,855	2,816	2,319
Other accrued liabilities	1,520	1,805	1,413
Derivatives	508	263	118
Income and other taxes	116	343	377
Accrued employment costs	609	616	631
At December 31, 2005, the weighted average interest rate on short-term borrowings for continuing operations was 4.9% (2004: 2.6%; 2003: 2.5%).
Statement of cash flows
Interest paid
─ continuing operations	376	413	218
─ discontinued operations	7	3	1
Income taxes paid
─ continuing operations	74	546	230
─ discontinued operations	-	6	2

33.      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 U.K. and the U.S. (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 U.S., 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.                                                          

59

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

33.          POST-RETIREMENT BENEFITS (cont'd)

The allocation at December 31, 2005, includes all major plans.

CATEGORY OF ASSET	TARGET ALLOCATION	ALLOCATION IN AGGREGATE AT DECEMBER 31
		2005	2004	2003
Equity	40% to 65%	55%	54%	52%
Debt securities	30% to 55%	34%	35%	37%
Real estate		5%	6%	6%

The following table presents the funded status and the amounts recognized in the consolidated balance sheet:

	PENSION BENEFITS			OTHER BENEFITS
	2005	2004	2003	2005	2004	2003
Change in benefit obligation
Benefit obligation at January 1	11,384	9,829	7,134	1,050	942	233
Service cost	173	181	137	14	13	6
Interest cost	544	549	442	53	56	16
Members' contributions	48	44	39	-	-	-
Benefits paid	(550)	(553)	(391)	(60)	(65)	(16)
Amendments	65	8	4	33	(3)	-
Acquisition of Pechiney	-	(17)	1,037	-	35	661
Other acquisitions	10	118	174	-	29	2
Spin-off of Novelis	(550)	-	-	(115)	-	-
Curtailments/divestitures	(12)	(38)	1	5	-	-
Actuarial losses	903	823	822	96	42	39
Currency (gains) losses	(626)	440	430	-	1	1
Benefit obligation measured at December 31	11,389	11,384	9,829	1,076	1,050	942
Benefit obligation of funded pension plans	10,331	10,117	8,729	N/A	N/A	N/A
Benefit obligation of unfunded pension plans	1,058	1,267	1,100	N/A	N/A	N/A
Benefit obligation measured at December 31	11,389	11,384	9,829	1,076	1,050	942
Change in market value of plan assets
Assets at January 1	8,468	7,537	5,760	2	2	3
Actual return on assets	1,192	848	1,298	-	-	-
Members' contributions	48	44	39	-	-	-
Benefits paid from funded plans	(480)	(459)	(360)	(2)	(2)	(1)
Company contributions	212	188	124	2	2	-
Acquisition of Pechiney	-	(15)	260	-	-	-
Other acquisitions	4	83	92	-	-	-
Spin-off of Novelis	(290)	-	-	-	-	-
Curtailments/divestitures	(9)	(39)	-	-	-	-
Currency gains (losses)	(419)	281	324	-	-	-
Assets at December 31	8,726	8,468	7,537	2	2	2
Assets less than benefit obligation of funded
pension plans	(1,605)	(1,649)	(1,192)	N/A	N/A	N/A
Benefit obligation of unfunded pension plans	(1,058)	(1,267)	(1,100)	N/A	N/A	N/A

60

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

33.          POST-RETIREMENT BENEFITS (cont'd)

	PENSION BENEFITS			OTHER BENEFITS
	2005	2004	2003	2005	2004	2003
Assets less than total benefit obligation	(2,663)	(2,916)	(2,292)	(1,074)	(1,048)	(940)
Unamortized
─ actuarial losses	1,095	1,124	594	144	82	30
─ prior service cost	547	560	624	31	(2)	1
Minimum pension liability	(979)	(1,036)	(722)	-	-	-
Intangible assets	329	253	223	-	-	-
Net liability in balance sheet	(1,671)	(2,015)	(1,573)	(899)	(968)	(909)
Net liability in balance sheet for funded pension
plans	(680)	(853)	(533)	N/A	N/A	N/A
Net liability in balance sheet for unfunded pension
plans	(991)	(1,162)	(1,040)	N/A	N/A	N/A
Net liability in balance sheet	(1,671)	(2,015)	(1,573)	(899)	(968)	(909)
Deferred charges and other assets	176	197	210	-	-	-
Intangible assets	329	253	223	-	-	-
Payables and accrued liabilities	(29)	44	5	(9)	(12)	-
Post-retirement benefits	(2,147)	(2,509)	(2,011)	(890)	(956)	(909)
Net liability in balance sheet	(1,671)	(2,015)	(1,573)	(899)	(968)	(909)

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 $11,125 (2004: $10,292; 2003: $6,926), the accumulated benefit obligation (ABO) is $10,426 (2004: $9,623; 2003: $6,510) while the market value of the assets is $8,426 (2004: $7,341; 2003: $4,544).

The total ABO is $10,673 (2004: $10,594; 2003: $9,155). 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 $9,053 (2004: $6,697; 2003: $5,791), the ABO is $8,531 (2004: $6,318; 2003: $5,483) while the market value of the assets is $6,400 (2004: $3,845; 2003: $3,493).

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 $246 in aggregate to its Funded Pension Plans in 2006. 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
2006	486	65	67
2007	499	60	72
2008	513	60	77
2009	527	62	81
2010	543	60	85
2011-2015	2,981	342	464

61

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

33.          POST-RETIREMENT BENEFITS (cont'd)

	PENSION BENEFITS			OTHER BENEFITS
	2005	2004	2003	2005	2004	2003
Components of net periodic benefit cost
Service cost	173	181	137	14	13	6
Interest cost	544	549	442	53	56	16
Expected return on assets	(548)	(520)	(434)	-	-	-
Amortization
─ actuarial (gains) losses	88	66	81	5	(1)	-
─ prior service cost	63	72	69	-	-	-
Curtailment/settlement (gains) losses	10	(13)	8	9	-	-
Net periodic benefit cost	330	335	303	81	68	22
Weighted average assumptions used to determine benefit obligations at December 31
Discount rate	4.9%	5.3%	5.6%	5.6%	5.8%	6.2%
Average compensation growth	3.4%	3.4%	3.3%	3.7%	3.7%	3.7%
Weighted average assumptions used to determine net periodic benefit cost
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%
Expected return on plan assets	7.0%	7.0%	7.1%	8.3%	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.

The assumed health care cost trend used for measurement purposes is 10.7% for 2006, decreasing gradually to 4.5% in 2012 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	(6)
Effect on benefit obligation	76	(70)

The Company also sponsors savings plans in Canada and the U.S. as well as defined contribution pension plans in various countries. The cost of the Company contribution was $30 in 2005 (2004: $26; 2003: $21).

In 2005, pursuant to the notice provisions provided for in the Separation Agreement, Novelis Inc. gave notice to Alcan of its election to transfer to Novelis pension plans, the assets and liabilities pertaining to the benefits accrued for employees transferred to Novelis, as follows:

a)    In the U.S., Novelis employees previously participating in the Alcan plan continued to do so in 2005.  A share of pension assets and liabilities for past service for all active employees on December 31, 2005, will be transferred to the Novelis pension plan in 2006.  The projected benefit obligation (at 5.75%) and the market value of plan assets to be transferred are estimated at $236 and $182, respectively.

b)    In the U.K., Novelis employees previously participating in the Alcan plan continued to do so in 2005.  They will be offered in 2006 the option to transfer their accrued benefits as at December 31, 2005 to the Novelis plan, and a related share of pension assets and liabilities will be transferred to the Novelis pension plan.

c)    In Canada, Novelis employees will be offered in 2006 the option to transfer their accrued benefits as of December 31, 2004 to the Novelis plan, and a related share of pension assets and liabilities will be transferred to the Novelis pension plan.

62

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

33.          POST-RETIREMENT BENEFITS (cont'd)

The transfer of accrued benefits and pension assets between plans is subject to the terms of the Separation Agreement and to approval by pension authorities.

In Switzerland, employees who transferred from Alcan to Novelis continue to participate in the Alcan retirement schemes in 2005 and 2006, and the contribution required to fund their additional service is being paid by Novelis.

34.      INFORMATION BY GEOGRAPHIC AREAS

	LOCATION	2005	2004	2003
Sales and operating revenues -  third	Canada	1,438	1,117	821
parties (by destination)	United States	5,944	7,620	4,535
	Brazil	221	527	414
	France	2,244	2,260	569
	United Kingdom	1,641	2,099	1,049
	Germany	1,989	2,267	1,591
	Switzerland	300	235	212
	Other Europe	3,333	4,453	2,377
	Australia	420	429	106
	Asia and Other Pacific	1,926	3,051	1,788
	All Other	864	890	388
	Total	20,320	24,948	13,850
Sales and operating revenues -	Canada	1,600	3,394	2,577
intercompany (by origin)	United States	181	945	581
	Brazil	7	76	57
	France	870	2,504	18
	United Kingdom	67	578	445
	Germany	274	546	326
	Switzerland	1,289	1,250	772
	Other Europe	1,044	1,045	529
	Australia	508	926	279
	Asia and Other Pacific	24	56	19
	All Other	227	415	37
	Sub-total	6,091	11,735	5,640
	Consolidation eliminations	(6,091)	(11,735)	(5,640)
	Total	-	-	-

Sales to subsidiary companies are made at fair market prices recognizing volume, continuity of supply and other factors.

	LOCATION	2005	2004	2003
Sales and operating revenues - third	Canada	3,007	1,504	1,390
parties (by origin)	United States	4,748	7,648	4,345
	Brazil	176	587	440
	France	3,993	4,468	418
	United Kingdom	1,152	1,025	814
	Germany	1,620	3,203	2,395
	Switzerland	2,176	1,831	1,440
	Other Europe	1,544	1,914	1,068
	Australia	731	384	188
	Asia and Other Pacific	687	1,925	1,245
	All Other	486	459	107
	Total	20,320	24,948	13,850

63

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

34.        INFORMATION BY GEOGRAPHIC AREAS (cont'd)

	LOCATION	2005	2004	2003
Income from continuing	Canada	(197)	(43)	(81)
operations	United States	53	129	66
	Brazil	6	62	13
	France	(39)	(209)	(34)
	United Kingdom	(13)	(33)	8
	Germany	(5)	21	4
	Switzerland	(3)	67	20
	Other Europe	91	59	66
	Australia	229	227	147
	Asia and Other Pacific	(14)	1	22
	All Other	41	21	30
	Consolidation eliminations	6	(59)	1
	Total	155	243	262

In 2005, income from continuing operations included after-tax charges relating to Other Specified Items* of $76 in Canada, $98 for the United States, $9 for Brazil, $310 for France, $18 for the United Kingdom, $49 for Germany, $25 for Switzerland, $46 for Other Europe, $9 for Australia, $21 for Asia and Other Pacific, and $9 for All Other.

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, $228 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.

*   Other Specified Items included in Income (Loss) from continuing operations is comprised of restructuring and synergy charges; asset impairment charges; gains and losses on non-routine sales of assets, businesses or investments; unusual gains and losses from legal claims and environmental matters; gains and losses on the redemption of debt; income tax reassessments related to prior years and the effects of changes in income tax rates; and other items that, in the Company's view, do not typify normal operating activities.  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.

64

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

34.        INFORMATION BY GEOGRAPHIC AREAS (cont'd)

	LOCATION	2005	2004	2003
Property, plant and equipment,	Canada	4,691	4,735	4,605
Intangible assets and Goodwill at	United States	2,198	2,796	3,152
December 31 **	Brazil	101	648	695
	France	2,240	3,047	3,566
	United Kingdom	593	983	1,002
	Germany	782	1,229	1,170
	Switzerland	744	839	637
	Other Europe	1,630	2,205	2,118
	Australia	3,263	2,402	1,901
	Asia and Other Pacific	208	865	812
	All Other	309	271	348
	Total	16,759	20,020	20,006
Cash paid for capital expenditures	Canada	237	377	286
and business acquisitions	United States	154	230	928
	Brazil	11	36	68
	France	215	355	1,610
	United Kingdom	35	65	134
	Germany	88	106	178
	Switzerland	40	51	30
	Other Europe	114	163	650
	Australia	972	210	414
	Asia and Other Pacific	54	112	181
	All Other	27	50	178
	Total	1,947	1,755	4,657
Average number of employees	Canada	11	11	11
excluding Pechiney in 2003	United States	8	14	8
(in thousands - unaudited)	Brazil	1	4	3
	France	15	17	2
	United Kingdom	3	4	4
	Germany	5	8	7
	Switzerland	3	3	3
	Other Europe	6	9	5
	Australia	2	2	1
	Asia and Other Pacific	5	7	2
	All Other	4	3	1
	Total	63	82	47

**          In 2005, Property, plant and equipment, Intangible assets, and Goodwill reflect goodwill impairment charges of $4 in Canada, $39 in the United States, $29 in France, $1 in the United Kingdom, $15 in Germany, $16 in Other Europe, $6 in Asia and Other Pacific, and $12 in All Other.

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.

65

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

35.        INFORMATION BY OPERATING SEGMENTS

The following presents selected information by operating segment, viewed on a stand-alone basis.  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 the U.S., which are part of Engineered Products, and Singen in Germany, which is a shared facility between 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 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 Bauxite and Alumina as well as from the Primary Metal groups represent mainly 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 Engineered Products and Packaging groups represent only the fabricating profit on their respective products.

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) and certain other equity-accounted investments as they are managed within each operating segment, with the adjustments for these investments 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 six bauxite mines and deposits in five countries, five smelter-grade alumina plants in four countries and six specialty alumina plants in three countries.  This group also comprises the sales of technology and technical assistance and a bauxite and alumina trading business.

Primary Metal

Also headquartered in Montreal, this group comprises smelting operations, power generation, production of primary value-added ingot, manufacturing of smelter anodes and cathodes, as well as aluminum fluoride, smelter technology and equipment sales, engineering services and trading operations for aluminum, operating or having interests in 22 smelters in 11 countries.  The Company has relocated the operational headquarters of its European primary aluminum business to Voreppe, France.  

66

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

35.          INFORMATION BY OPERATING SEGMENTS (cont'd)

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 52 plants located in 11 countries.    One of these facilities is excluded from the operating segment information as it has been reclassified to discontinued operations and assets held for sale.  Also included in Engineered Products are 33 service centres in 11 countries offering technical assistance, cutting, shaping, machining and assembling for smaller customers, and 33 offices in 29 countries that sell and source specialty products and materials for industrial applications in 65 countries.

Packaging

Also headquartered in Paris, this group consists of the Company's worldwide food, pharmaceutical and medical, beauty and personal care and tobacco packaging businesses, operating 150 plants in 30 countries. This group produces packaging from a number of different materials, including plastic, aluminum, paper, paper board, glass and steel.

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
	2005	2004	2003	2005	2004	2003
Bauxite and Alumina	1,515	1,575	853	1,478	1,487	528
Primary Metal	1,898	3,741	2,217	6,877	4,586	2,596
Engineered Products	202	725	156	6,015	5,525	2,140
Packaging	5	69	59	6,004	6,024	2,787
Entities transferred to Novelis	-	535	340	-	7,321	5,745
Adjustments for equity-accounted joint ventures and certain investments	-	-	-	(101)	(40)	18
Other	(3,620)	(6,645)	(3,625)	47	45	36
	-	-	-	20,320	24,948	13,850

Business Group Profit (BGP)	2005	2004	2003
Bauxite and Alumina	435	460	187
Primary Metal	1,751	1,462	780
Engineered Products	403	379	190
Packaging	595	656	352
Entities transferred to Novelis	-	654	521
Adjustments for equity-accounted joint ventures and certain investments	(270)	(242)	(147)
Adjustments for mark-to-market of derivatives	(41)	(29)	107
Depreciation and amortization	(1,080)	(1,337)	(862)
Goodwill impairment	(122)	(154)	(28)
Intersegment, corporate offices and other	(998)	(924)	(390)
Equity income	88	54	38
Interest	(350)	(346)	(212)
Income taxes	(257)	(375)	(258)
Minority interests	1	(15)	(16)
Income from continuing operations	155	243	262

 67

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

35.        INFORMATION BY OPERATING SEGMENTS (cont'd)                                                                                                                                                                               

Included in 2005 Intersegment, corporate offices and other are asset impairments of $428, synergy costs of $80, restructuring charges of $128, and a $42 gain on the sale of an investment.

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 $165 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, ($24) for entities transferred to Novelis, $1 for Engineered Products, ($1) for Packaging and $2 for Intersegment and Other.

TOTAL ASSETS AT DECEMBER 31	2005	2004	2003
Bauxite and Alumina	4,638	3,496	2,368
Primary Metal	10,889	10,342	8,587
Engineered Products	4,106	4,601	3,367
Packaging	6,858	8,255	6,571
Entities transferred to Novelis	-	5,434	5,191
Adjustments for equity-accounted joint ventures and certain investments	(505)	(313)	(339)
Other	518	573	4,767
Assets held for sale:
Bauxite and Alumina	-	63	127
Primary Metal	118	823	1,054
Engineered Products	9	63	149
Packaging	7	4	106
Total assets held for sale	134	953	1,436
	26,638	33,341	31,948

	DEPRECIATION AND AMORTIZATION			CASH PAID FOR CAPITAL EXPENDITURES AND BUSINESS ACQUISITIONS
	2005	2004	2003	2005	2004	2003
Bauxite and Alumina	154	136	91	1,042	201	185
Primary Metal	505	488	312	363	621	1,268
Engineered Products	189	201	104	160	212	543
Packaging	314	342	176	435	434	1,340
Entities transferred to Novelis	-	267	245	-	207	433
Adjustments for equity-accounted joint ventures and certain investments	(101)	(118)	(74)	(83)	(35)	(45)
Other	19	21	8	30	115	933
	1,080	1,337	862	1,947	1,755	4,657

Risk Concentration

The Company's consolidated sales and operating revenues for the year ended December 31, 2005, include $2,062 arising from transactions with Novelis.  These sales and operating revenues represent 10% of the consolidated sales and operating revenues for the year ended December 31, 2005.

The following table includes sales and operating revenues to Novelis by business group:

	2005
Bauxite and Alumina	46
Primary Metal	1,918
Engineered Products	79
Packaging	19
Total	2,062

68

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

36.          DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP)

Significant differences between United States and Canadian GAAP are described below.  As mentioned in note 2 - change in Reporting Generally Accepted Accounting Principles, the Company will cease to prepare a reconciliation to Canadian GAAP subsequent to 2005, as permitted by the CSA.

(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 is not applicable until January 1, 2007.  These investments are currently 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) 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, 2003.

69

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

36.          DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (cont'd)

(F) 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.

(G) 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.

(H) 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.

(I) 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 unreleased 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.  Under Canadian GAAP, the concept of comprehensive income is not applicable until January 1, 2007.

(J) 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.

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.

70

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

36.          DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (cont'd)

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. 

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.

71

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

36.          DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (cont'd)

Reconciliation of U.S. and Canadian GAAP

Year ended December 31	2005				2004				2003
	AS REPORTED	REF.	AMOUNT	CANADIAN GAAP	AS REPORTED	REF.	AMOUNT	CANADIAN GAAP	AS REPORTED	REF.	AMOUNT	CANADIAN GAAP
Income Statement
Sales and operating revenues	20,320	(h)	106	20,426	24,948	(h)	16	24,964	13,850	(h)	(18)	13,832
Costs and expenses
Cost of sales and operating	16,135	(a)	12	16,009	20,270	(a)	(16)	20,052	11,171	(a)	(64)	10,947
expenses excluding depreciation		(h)	(138)			(h)	(202)			(h)	(160)
and amortization noted below
Depreciation and amortization	1,080	(g)	3	1,178	1,337	(g)	3	1,459	862	(h)	74	936
		(h)	95			(h)	119
Selling, administrative and
general expenses	1,402	(h)	4	1,406	1,615	(h)	6	1,621	758	(h)	1	759
Research and development
expenses	227	(h)	1	228	239	(h)	2	241	190	(g)	(50)	140
Interest	350	(h)	17	367	346	(h)	11	357	212	(h)	6	218
Goodwill impairment	122		-	122	154		-	154	28		-	28
Restructuring charges - net	685		-	685	87		-	87	26		-	26
Other expenses (income) - net	(4)	(a)	6	(14)	321	(a)	21	330	105	(a)	31	132
		(h)	(16)			(h)	(12)			(b)	1
										(h)	(5)
	19,997		(16)	19,981	24,369		(68)	24,301	13,352		(166)	13,186
Income from continuing
operations before income
taxes and other items	323		122	445	579		84	663	498		148	646
Income taxes	257	(a)	(6)	315	375	(a)	(5)	413	258	(a)	12	319
		(g)	(1)			(g)	(1)			(g)	18
		(h)	65			(h)	44			(h)	31
Income from continuing
operations before other items	66		64	130	204		46	250	240		87	327

72

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

36.          DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (cont'd)

Reconciliation of U.S. and Canadian GAAP

	2005				2004				2003
	AS REPORTED	REF.	AMOUNT	CANADIAN GAAP	AS REPORTED	REF.	AMOUNT	CANADIAN GAAP	AS REPORTED	REF.	AMOUNT	CANADIAN GAAP
Equity income	88	(h)	(78)	10	54	(a)	1	7	38	(h)	(35)	3
						(h)	(48)
Minority interests	1		-	1	(15)	(a)	(1)	(16)	(16)		-	(16)
Income from
continuing operations	155		(14)	141	243		(2)	241	262		52	314
Income (Loss) from
discontinued operations	(26)		-	(26)	15		-	15	(159)		-	(159)
Income before cumulative
effect of accounting changes	129		(14)	115	258		(2)	256	103		52	155
Cumulative effect of accounting
change	-		-	-	-		-	-	(39)	(e)	39	-
Net income (Loss)	129		(14)	115	258		(2)	256	64		91	155
Dividends on preference shares	7		-	7	6		-	6	7		-	7
Net income (Loss) attributable
to common shareholders	122		(14)	108	252		(2)	250	57		91	148

a)       Derivatives

b)       Currency translation

c)       Investments

d)       Minimum pension liability

e)       Asset retirement obligations

f)        Deferred translation adjustments

g)       Acquired in-process research and development

h)       Joint ventures

73

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

36.      DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (cont'd)

Earnings Per Share ─ Canadian GAAP 

	2005	2004	2003
Earnings (Loss) per share
Basic and Diluted:
Income from continuing operations	0.36	0.63	0.95
Income (Loss) from discontinued operations	(0.07)	0.05	(0.49)
Net income per common share - basic and diluted	0.29	0.68	0.46

Consolidated Statement of Retained Earnings ─ Canadian GAAP 

	2005	2004	2003
Retained earnings - beginning of year	3,379	3,350	3,395
Net income	115	256	155
Spin-off of Novelis	(207)	-	-
Dividends
Common	(222)	(221)	(193)
Preference	(7)	(6)	(7)
Retained earnings - end of year	3,058	3,379	3,350

74

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

36.           DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (cont'd)

Reconciliation of U.S. and Canadian GAAP

December 31	2005				2004				2003
	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	181	(h)	67	248	184	(h)	53	237	686	(h)	26	712
Trade receivables	2,308	(h)	44	2,352	3,247	(h)	(133)	3,114	2,948	(h)	(31)	2,917
Other receivables	946	(a)	18	1,025	936	(a)	103	1,113	686	(a)	(49)	690
		(h)	61			(h)	74			(h)	53
Deferred income taxes	150	(a)	(65)	85	214	(a)	(34)	180	49		-	49
Inventories	2,734	(h)	110	2,844	4,040	(h)	153	4,193	3,682	(a)	2	3,802
										(h)	118
Current assets held for sale	119		-	119	791		-	791	1,063		-	1,063
Total current assets	6,438		235	6,673	9,412		216	9,628	9,114		119	9,233
Deferred charges and other	1,052	(a)	20	1,068	1,130	(a)	21	1,172	755	(a)	5	804
assets		(h)	(4)			(h)	21			(h)	44
Investments	1,511	(c)	(4)	153	1,747	(c)	(8)	100	808	(c)	(6)	94
		(h)	(1,354)			(h)	(1,639)			(h)	(708)
Deferred income taxes	863		-	863	870	(h)	3	873	892		-	892
Property, plant and equipment
Cost (excluding Construction
work in progress)	16,990	(h)	1,438	18,428	21,595	(h)	2,343	23,938	21,727	(h)	1,711	23,438
Construction work in progress	1,604	(h)	52	1,656	1,177	(h)	16	1,193	972	(h)	26	998
Accumulated depreciation	(7,561)	(h)	(649)	(8,210)	(9,478)	(h)	(1,180)	(10,658)	(8,539)	(h)	(906)	(9,445)
	11,033		841	11,874	13,294		1,179	14,473	14,160		831	14,991
Intangible assets, net of
accumulated amortization	1,013	(a)	4	812	1,230	(a)	4	1,105	1,160	(d)	(224)	1,000
		(d)	(329)			(d)	(253)			(g)	50
		(g)	43			(g)	46			(h)	14
		(h)	81			(h)	78
Goodwill	4,713	(h)	650	5,363	5,496	(h)	837	6,333	4,686	(h)	174	4,860
Long-term assets held for sale	15		-	15	162		-	162	373		-	373
Total assets	26,638		183	26,821	33,341		505	33,846	31,948		299	32,247

75

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

36.         DIFFERENCES BETWEEN UNITED STATES AND CANADIAN GENERALLY ACCEPTED ACCOUNTING PRINCIPLES (GAAP) (cont'd)

Reconciliation of U.S. and Canadian GAAP

December 31	2005				2004				2003
	AS REPORTED	REF.	AMOUNT	CANADIAN GAAP	AS REPORTED	REF.	AMOUNT	CANADIAN GAAP	AS REPORTED	REF.	AMOUNT	CANADIAN GAAP
Current liabilities
Payables and accrued liabilities	4,608	(a)	(186)	4,464	5,843	(a)	(11)	5,896	4,858	(a)	(111)	4,880
		(h)	42			(h)	64			(h)	133
Short-term borrowings	348	(h)	(10)	338	2,486		-	2,486	1,764	(h)	41	1,805
Debt maturing within one year	802	(h)	100	902	569	(h)	81	650	341	(h)	16	357
Deferred income taxes	25	(h)	3	28	23	(a)	(2)	27	81		-	81
						(h)	6
Current liabilities of operations
held for sale	62		-	62	335		-	335	547		-	547
Total current liabilities	5,845		(51)	5,794	9,256		138	9,394	7,591		79	7,670
Debt not maturing within one
year	5,265	(h)	129	5,394	6,345	(h)	198	6,543	7,437	(h)	168	7,605
Deferred credits and other	1,608	(a)	(108)	1,516	1,521	(a)	21	1,565	1,391	(a)	17	1,423
liabilities		(h)	16			(h)	23			(h)	15
Post-retirement benefits	3,037	(d)	(981)	2,065	3,465	(d)	(1,036)	2,479	2,920	(d)	(730)	2,239
		(h)	9			(h)	50			(h)	49
Deferred income taxes	1,172	(a)	61	1,656	1,543	(a)	9	2,005	1,696	(a)	27	1,996
		(d)	202			(d)	233			(d)	156
		(g)	14			(g)	16			(g)	18
		(h)	207			(h)	204			(h)	99
Long-term liabilities of
operations held for sale	-		-	-	249		-	249	233		-	233
Minority interests	67	(a)	1	68	236		-	236	403		-	403
Shareholders' equity
Redeemable non-retractable
preference shares	160		-	160	160		-	160	160		-	160
Common shareholders' equity
Common shares	6,181		-	6,181	6,670		-	6,670	6,461		-	6,461
Additional paid-in capital	683		-	683	112		-	112	128		-	128
Retained earnings	3,048	(a)	23	3,058	3,362	(a)	42	3,379	3,331	(a)	42	3,350
		(b)	(42)			(b)	(55)			(b)	(55)
		(g)	29			(g)	30			(g)	32
Common shares held by a
subsidiary	(31)		-	(31)	(35)		-	(35)	(56)		-	(56)
Deferred translation	-	(a)	(29)	277	-	(a)	(29)	1,089	-	(a)	(29)	635
adjustments		(b)	42			(b)	55			(b)	55
		(f)	264			(f)	1,063			(f)	609
Accumulated other	(397)	(a)	215	-	457	(a)	64	-	253	(a)	12	-
comprehensive income		(c)	(4)			(c)	(8)			(c)	(6)
(loss)		(d)	450			(d)	550			(d)	350
		(f)	(264)			(f)	(1,063)			(f)	(609)
	9,484		684	10,168	10,566		649	11,215	10,117		401	10,518
	9,644		684	10,328	10,726		649	11,375	10,277		401	10,678
Total liabilities and share-
holders' equity	26,638		183	26,821	33,341		505	33,846	31,948		299	32,247

76

Alcan Inc.   

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(in millions of US$, except where indicated)

37.          PRIOR YEAR AMOUNTS 

Certain prior year amounts have been reclassified to conform with the 2005 presentation.

Quarterly Financial Data (unaudited)

(In millions of US$, except per share data)	FIRST	SECOND	THIRD	FOURTH	YEAR
2005
Revenues	5,178	5,206	4,887	5,049	20,320
Cost of sales and operating expenses	4,090	4,130	3,921	3,994	16,135
Depreciation and amortization	272	268	266	274	1,080
Income taxes	98	70	101	(12)	257
Other items	510	530	527	1,126	2,693
Income (Loss) from continuing operations(1)	208	208	72	(333)	155
Income (Loss) from discontinued operations	10	(17)	9	(28)	(26)
Net income (Loss)	218	191	81	(361)	129
Dividends on preference shares	2	1	2	2	7
Net income (Loss) attributable to common
shareholders	216	190	79	(363)	122
Net income (Loss) per share common share - basic
and diluted
Income (Loss) from continuing operations	0.56	0.56	0.19	(0.91)	0.40
Income (Loss) from discontinued operations	0.02	(0.04)	0.02	(0.07)	(0.07)
Net income (Loss) per common share - basic
and diluted (2)	0.58	0.52	0.21	(0.98)	0.33
Net income (Loss) under Canadian GAAP(3)	215	188	82	(370)	115
2004
Revenues	6,020	6,208	6,184	6,536	24,948
Cost of sales and operating expenses	4,972	4,918	4,997	5,383	20,270
Depreciation and amortization	336	324	322	355	1,337
Income taxes	41	125	134	75	375
Other items	537	556	560	1,070	2,723
Income (Loss) from continuing operations(1)	134	285	171	(347)	243
Income (Loss) from discontinued operations	(28)	46	(4)	1	15
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	(0.95)	0.64
Income (Loss) from discontinued operations	(0.07)	0.12	(0.01)	0.01	0.05
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	(0.95)	0.64
Income (Loss) from discontinued operations	(0.07)	0.12	(0.01)	0.01	0.05
Net income (Loss) per common share -
diluted (2)	0.28	0.89	0.45	(0.94)	0.69
Net income (Loss) under Canadian GAAP(3)	113	336	137	(330)	256

77

Alcan Inc.   

Quarterly Financial Data (unaudited) (cont'd)

(In millions of US$, except per share data)	FIRST	SECOND	THIRD	FOURTH	YEAR
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)	1	(101)	64	191	155

(1)   The first quarter of 2005 included unfavourable deferred tax adjustments of $27 and expenses of $24 related to the spin-off of Novelis, synergy costs of $7, partially offset by an insurance recovery of $8. The second quarter of 2005 included a charge of $28 mainly related to the restructuring of certain Engineered Products facilities, principally in Europe, synergy costs of $24, asset impairment charges of $16 mainly related to Packaging assets in the U.S. and Bauxite and Alumina assets in Australia, and losses on sales of European packaging operations of $16 partially offset by gains on sales of assets of $8 primarily in the U.K. The third quarter of 2005 included restructuring charges of $9 related to the closure of the Sogerem fluorspar mining operations in France, synergy costs of $15, a loss of $10 on the sale of a packaging facility in the U.K., partially offset by gains of $26 on the sales of certain packaging assets in Europe. The fourth quarter of 2005 included restructuring and asset impairment charges of $115 and $294, respectively, principally for the restructuring of certain packaging business, mainly Global Beauty Packaging and Food Flexible Packaging Europe, the closure of the Steg and Lannemezan smelters in Europe and the rationalization of certain Engineered Products operations, and a goodwill impairment charge of $122.

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 $55, expenses of $31 related to the spin-off of Novelis, synergy costs of $32, 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.

78

Alcan Inc.   

Quarterly Financial Data (unaudited) (cont'd)

(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 36 - Differences between United States and Canadian Generally Accepted Accounting Principles (GAAP) for explanation of differences between U.S. and Canadian GAAP.

79

Alcan Inc.   

Eleven-Year Summary

	2005	2004	2003	2002	2001	2000	1999*	1998*	1997*	1996*	1995*
	U.S. GAAP	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
CONSOLIDATED INCOME STATEMENT ITEMS (in millions of US$)
Sales and operating revenues	20,320	24,948	13,850	12,483	12,545	9,237	7,324	7,789	7,777	7,614	9,287
Cost of sales and operating expenses	16,135	20,270	11,171	10,032	10,108	7,342	5,695	6,076	6,005	5,919	7,247
Depreciation and amortization	1,080	1,337	862	772	809	496	477	462	436	431	447
Selling, administrative and general expenses	1,402	1,615	758	580	567	426	388	448	444	422	484
Research and development expenses	227	239	190	115	134	80	67	70	72	71	76
Interest	350	346	212	198	242	67	76	92	101	125	204
Goodwill impairment	122	154	28	-	-	-	-	-	-	-	-
Restructuring charges and Other expenses (income) - net	681	408	131	119	818	32	(40)	(12)	(34)	13	(39)
Income taxes	257	375	258	287	(15)	232	211	210	248	212	326
Equity income (loss)	88	54	38	44	44	35	(1)	(48)	(33)	(10)	(3)
Minority interests	1	(15)	(16)	(3)	14	1	(14)	4	(4)	(1)	4
Income (Loss) from continuing operations before amortization of goodwill and extraordinary item	155	243	262	421	(60)	598	435	399	468	410	543
Amortization of goodwill	-	-	-	-	-	16	-	-	-	-	-
Income (loss) from  continuing operations before extraordinary item	155	243	262	421	(60)	582	435	399	468	410	543
Extraordinary gain (loss)	-	-	-	-	-	-	-	-	17	-	(280)
Income (Loss) from continuing operations	155	243	262	421	(60)	582	435	399	485	410	263
Income (Loss) from discontinued operations	(26)	15	(159)	(21)	(6)	-	-	-	-	-	-
Income (Loss) before cumulative effect of accounting change	129	258	103	400	(66)	582	435	399	485	410	263
Cumulative effect of accounting change, net of income tax	-	-	(39)	(748)	(12)	-	-	-	-	-	-
Net Income (Loss)	129	258	64	(348)	(78)	582	435	399	485	410	263
Net income (Loss) attributable to common shareholders	122	252	57	(353)	(86)	572	426	389	475	394	239
CONSOLIDATED BALANCE SHEET ITEMS (in millions of US$)
Operating working capital ***	1,380	2,380	2,458	1,445	1,237	2,354	1,307	1,682	1,483	1,461	1,731
Capital assets and goodwill - net***	16,759	20,020	20,006	12,023	12,054	12,118	6,434	5,897	5,458	5,470	5,672
Total assets	26,638	33,341	31,948	17,761	17,551	17,846	9,839	9,901	9,374	9,228	9,736
Total debt***	6,415	9,400	9,542	3,747	3,990	4,572	1,489	1,789	1,515	1,516	1,985
Deferred income taxes - net***	184	482	836	821	751	1,144	781	747	969	996	979
Minority interests***	67	236	403	150	132	244	207	110	43	73	28
Preference shares	160	160	160	160	160	160	160	160	203	203	353
Common shareholders' equity	9,484	10,566	10,117	8,132	8,410	8,580	5,358	5,359	4,871	4,661	4,482
PER COMMON SHARE (in US$)
Net income (Loss) before amortization of goodwill and extraordinary item	0.33	0.69	0.18	(1.10)	(0.27)	2.37	1.95	1.71	2.02	1.74	2.30
Net income (Loss) before extraordinary item	0.33	0.69	0.18	(1.10)	(0.27)	2.37	1.95	1.71	2.02	1.74	2.30
Net income (Loss)	0.33	0.69	0.18	(1.10)	(0.27)	2.31	1.95	1.71	2.09	1.74	1.06
Dividends paid	0.60	0.60	0.60	0.60	0.60	0.60	0.60	0.60	0.60	0.60	0.45
Common shareholders' equity	25.50	28.56	27.70	25.30	26.21	26.99	24.47	23.71	21.43	20.57	19.84
Market price - NYSE close	40.95	49.04	46.95	29.52	35.93	34.19	41.38	27.06	27.63	33.63	31.13

80

Alcan Inc.  

2005	2004	2003	2002	2001	2000	1999*	1998*	1997*	1996*	1995*
U.S. GAAP	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

OPERATING DATA (in thousands of tonnes except for LME price)
Consolidated aluminum shipments****
Ingot products (includes primary and secondary ingot, trading and scrap)	3,070	2,012	1,387	1,429	1,419	974	859	829	858	810	801
Entities transferred to Novelis	-	2,815	2,559	-	-	-	-	-	-	-	-
Rolled products	-	-	-	2,058	1,937	1,855	1,609	1,603	-	-	-
Aluminum used in engineered products and packaging	1,269	1,469	562	546	536	352	302	220	-	-	-
Total fabricated products	1,269	4,284	3,121	2,604	2,473	2,207	1,911	1,823	1,694	1,539	1,733
Conversion of customer-owned metal	-	-	-	391	344	328	315	289	276	258	225
Total aluminum volume	4,339	6,296	4,508	4,424	4,236	3,509	3,085	2,941	2,828	2,607	2,759
Consolidated primary aluminum production	3,420	3,382	2,354	2,238	2,042	1,562	1,518	1,481	1,429	1,407	1,278
Consolidated aluminum purchases	843	2,172	1,843	1,855	1,865	1,679	1,297	1,227	1,254	1,003	1,365
Consolidated aluminum inventories (end of year)	341	831	513	534	528	576	477	469	451	408	449
Primary aluminum capacity
Consolidated subsidiaries and joint ventures	3,483	3,435	4,076	2,365	2,252	1,899	1,583	1,706	1,558	1,561	1,561
Total consolidated subsidiaries and related companies	3,483	3,435	4,076	2,365	2,252	1,899	1,583	1,706	1,695	1,698	1,712
Average three-month LME price (US$ per tonne)	1,900	1,721	1,428	1,365	1,454	1,567	1,388	1,379	1,620	1,536	1,830
OTHER STATISTICS
Cash from operating activities from continuing operations (in millions of US$)	1,628	1,759	1,801	1,519	1,614	1,059	1,182	739	719	981	1,044
Cash from (used for) financing activities from continuing operations (in millions of US$)	(2,647)	(538)	3,453	(673)	(538)	781	(629)	(95)	(46)	(700)	(744)
Cash from (used for) investment activities from continuing operations (in millions of US$)	854	(1,728)	(4,594)	(860)	(1,182)	(2,074)	(838)	(656)	(587)	178	(273)
Cash used for capital expenditures  (in millions of US$)	1,835	1,289	838	627	1,017	1,482	1,169	805	641	482	390
Cash used for business acquisitions (in millions of US$)	112	466	3,819	346	404	244	129	72	-	-	51
Debt as a percentage of invested capital (%)	40	46	47	31	31	34	21	24	23	23	29
Average number of employees (in thousands)	67	82	47	47	48	35	38	36	33	34	39
Common shareholders - registered (in thousands at end of year)	17	18	18	18	18	19	20	20	21	22	23
Common shares outstanding (in millions at end of year)	372	370	365	321	321	318	218	226	227	227	226
Registered in Canada (%) **	82	82	82	80	79	76	61	60	61	61	61
Registered in the United States (%)	18	18	18	20	21	24	39	39	39	39	38
Registered in other countries (%)	-	-	-	-	-	-	-	1	-	-	1
Return on average common shareholders' equity (%)	1	2	1	(4)	(1)	8	8	7	10	9	5

*              Amounts during this period were prepared under Canadian GAAP, which may not be comparable to those prepared under U.S. GAAP.

**             Shares held by former algroup and Pechiney shareholders are registered in Canada.

***           Excludes assets and liabilities of operations held for sale.

****          Consolidated aluminum shipments were reclassified for 2004 and 2003 to reflect the spin-off of Novelis.

See note 36 - Differences between United States and Canadian Generally Accepted Accounting Principles (GAAP) for Canadian GAAP information.

81