10-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

[ Ö ]	Annual Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the fiscal year ended 31 December 2006
	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
47/8% 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  Ö      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  Ö 

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  Ö      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.   Ö 

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   Ö  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  Ö 

The aggregate market value of the voting stock held by non-affiliates:	USD 17,606 million, as at 30 June 2006.
Common Stock of Registrant outstanding:	367,434,803 Common Shares, as at 26 February 2007.
Documents incorporated by reference:	Portions of the Proxy Circular for the Annual Meeting to be held on 26 April 2007 are incorporated by reference in Part III of this Form 10-K.

INDEX TO ALCAN INC.
2006 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	9
		Bauxite and Alumina	9
		Primary Metal	12
		Engineered Products	19
		Packaging	23
		Information by Geographic Areas	26
		Research and Development	27
		Environment, Health and Safety/Alcan Integrated Management System	27
		Employees	28
		Patents, Licenses and Trademarks	28
		Competition and Government Regulations	29
	Item 1A	Risk Factors	29
	Item 1B	Unresolved Staff Comments	33
	Item 2	Properties	33
	Item 3	Legal Proceedings	33
		Environmental Matters	34
	Item 4	Submission of Matters to a Vote of Security Holders	37
PART II
	Item 5	Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	37
	Item 6	Selected Financial Data	39
	Item 7	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
		— Overview	41
		— Market Review	41
		— Results of Operations	44
		— Liquidity and Capital Resources	53
		— Operating Segment Review	59
		— Bauxite and Alumina	60
		— Primary Metal	62
		— Engineered Products	65
		— Packaging	69
		— Risks and Uncertainties	73
		— Critical Accounting Policies and Estimates	74
	Item 7A	Quantitative and Qualitative Disclosures about Market Risk	76

			Page
	Item 8	Financial Statements and Supplementary Data	81
		— Management’s Report on Internal Control over Financial Reporting	81
		— Report of Independent Registered Public Accounting Firm	83
		— Consolidated Statement of Income	85
		— Consolidated Balance Sheet	86
		— Consolidated Statement of Cash Flows	88
		— Consolidated Statement of Shareholders’ Equity	89
		— Notes to Consolidated Financial Statements	92
		— Supplementary Data	165
		— Quarterly Financial Data (unaudited)	165
		— Eleven Year Summary	168
		— Selected Alcan France SAS Unaudited Consolidated Financial Information	170
	Item 9	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	171
	Item 9A	Controls and Procedures	171
	Item 9B	Other Information	171
PART III
	Item 10	Directors and Executive Officers of the Registrant	171
	Item 11	Executive Compensation	173
	Item 12	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	174
	Item 13	Certain Relationships and Related Transactions	176
	Item 14	Principal Accountant Fees and Services	176
PART IV
	Item 15	Exhibits and Financial Statement Schedules	176
Signatures			180

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,

“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 US 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 2006, included hereafter under Item 8 “Financial Statements and Supplementary Data”,

“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 2006, included hereafter under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”,

“MW” means megawatts; “MWh” means megawatthours; and “kWh” means kilowatthours,

“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 certain aluminum rolled products businesses 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 26 April 2007, and any adjournment thereof, filed herewith under exhibit 99.1,

“Pechiney” means Pechiney, a Subsidiary of the Company following its acquisition in 2003, now know as Alcan France SAS,

“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” or “Common 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; “kt” means kilotonne; “Mt” means millions of tonnes; “kt/y” means kilotonne per year; and “Mt/y” means millions of tonnes per year, and

“US GAAP” means US 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 Proxy Circular, which is filed herewith as exhibit 99.1 to this report. Such information is specifically identified herein, including by the reference “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.

For a listing of certain factors that could, among others, cause actual results or outcomes to differ materially from the results expressed or implied by forward-looking statements, please refer to Item 1A of this Form 10-K.

Additional information concerning factors that could cause actual results to differ materially from those in forward-looking statements include, but are not necessarily limited to, those discussed under the heading “Risks and Uncertainties” in Management’s Discussion and Analysis in Item 7 of this Form 10-K.

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, nor does Alcan undertake any obligation to update on an interim basis the risk factors that could cause actual results to differ materially from those in forward-looking statements.

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 public reference room. The SEC maintains a website at www.sec.gov that contains our annual, quarterly and current reports, proxy and information statements, and other information Alcan files electronically with the SEC. 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 12 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 2006, Alcan employed approximately 64,700 people in 61 countries and regions, excluding 3,300 people employed in Joint Ventures.

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 alumina, 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, smelter cathode blocks 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, 12 power facilities in four countries and 12 technology and equipment sales centres and engineering operations in ten 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 55 plants located in 12 countries. Also part of this Business Group are 33 service centres in 11 countries and 32 sales offices in 27 countries and regions; 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 130 plants in 30 countries and regions. This Business Group produces packaging from a number of different materials, including plastics, aluminum, paper, paperboard and glass.

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, Canada. 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. In 2005, the majority of the Company’s rolled products businesses were spun-off into a new independent company, Novelis.

6

1.   Alcan’s Recent Developments

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

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

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

On 27 February 2006, the Company announced that it had reached an agreement to sell selected assets of its North American plastic bottle packaging business to Ball Corporation for $180 million. The sale included operations in Batavia (Illinois), Bellevue (Ohio), Newark (California, US) and Brampton (Ontario, Canada).

On 6 March 2006, the Company announced that it had reached an agreement in principle for the sale of its Chambéry (France) Rollbond panel manufacturing operation to Compagnia Generale Alluminio SpA.

On 13 March 2006, the Company announced that Richard B. Evans had been appointed the Company’s President and Chief Executive Officer (CEO) replacing Travis Engen, who had retired.

On 4 April 2006, the Company announced that it had sold its German automotive casting activity to AluCast GmbH, a company controlled by Parter Capital, a private equity company based in Frankfurt (Germany).

On 9 May 2006, the Company announced the reorganization of its global specialty alumina business, entailing the gradual shut-down of the Company’s specialty-calcined alumina plant in Jonquière (Quebec, Canada).

On 11 May 2006, the Company announced that it had secured 40% of the energy required for a potential expansion of its ISAL smelter in Iceland. The agreement with Reykjavik Energy, which calls for the purchase of 200 MW of geothermal power beginning in 2010, would supply an expanded smelting facility with potential future total capacity of 460 kt per year.

On 22 June 2006, the Company announced that it had entered into a Memorandum of Understanding with the Republic of Ghana for the creation of a joint venture between Alcan and Ghana to explore the feasibility of developing a bauxite mine and alumina refinery, with an initial capacity of 1.5 to 2.0 Mt/y. The joint venture will be 51% owned by Alcan. Alcan and Ghana are to undertake a preliminary concept study that is expected to be completed by early 2007, which, if successful, could then lead to feasibility studies.

On 22 June 2006, the Company announced that it had successfully launched its new advanced aerospace plate installation and equipment at its Issoire (France) Aerospace, Transportation and Industry facility.

On 30 June 2006, the Company announced that its Quebec employees represented by the Canadian Auto Workers union had ratified a new collective labour agreement. The agreement covers an initial five-year period with an additional four-year term available.

On 4 July 2006, the Company announced the opening of its AUD 20 million Stelvin^® aluminum wine closure facility in Adelaide (Australia).

On 12 July 2006, the Company announced that it had begun consultations with union and employee representatives for a proposed sale of selected assets at the Company’s Affimet aluminum recycling plant in Compiègne (France).

On 12 July 2006, the Company announced that it would close two UK sites: the Workington Aerospace, Transportation and Industry hard alloy extrusion plant and the Midsomer Norton food packaging plant.

On 21 July 2006, the Company announced the opening of the Packaging Group’s $33 million labels plant in Edgewood (New York, US).

On 24 July 2006, the Company’s Packaging Business Group announced that it had signed an agreement to sell its Cebal Aerosol business to its current management team and to Natexis Investissement Partners.

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On 2 August 2006, the Company announced that it was raising its quarterly dividend from $0.15 to $0.20 per Common Share.

On 14 August 2006, the Company announced its intention to modernize its Kitimat (British Columbia, Canada) smelter through an approximate $1.8 billion investment subject to final Board approval and to the condition of obtaining a new labour agreement, environmental permits and regulatory approval of the British Columbia Utilities Commission (BCUC) of the amended and restated Long-Term Energy Purchase Agreement between Alcan and BC Hydro. On 22 January 2007, the Company announced that it had filed leave to appeal the BCUC’s decision of 29 December 2006 to reject the amended and restated Long-Term Electricity Purchase Agreement.

On 24 August 2006, the Company officially opened its new $42.6 million packaging facility in Reidsville Industrial Park (North Carolina, US) which produces printed packaging, including folding cartons and labels, for key customers in Alcan Packaging’s global tobacco business.

On 14 September 2006, the Company announced that the Queensland government had given approval for the commencement of mining operations on Alcan’s Ely bauxite deposit near Weipa, on Australia’s Western Cape York Peninsula. The deposit has a reserve of close to 50 Mt which is expected to be mined over a period of approximately 25 years.

On 29 September 2006, the Company announced that it will build a $180 million aluminum spent pot lining recycling plant in Quebec’s Saguenay — Lac-Saint-Jean region. The plant is expected to begin pot lining treatment operations in the second quarter of 2008.

On 3 October 2006, the Company announced that its Board of Directors had authorized a share repurchase program of up to 5% of the Company’s total outstanding Common Shares.

On 23 October 2006, the Company announced that its Pechiney Nederland NV Subsidiary will conduct a strategic review of alternatives, including the potential sale of the aluminum smelter in Vlissingen (Netherlands), in which it holds an 85% interest.

On 30 October 2006, the Company announced the appointments of Michel Jacques, 54, as President, Alcan Primary Metal Group and Christel Bories, 42, as President, Alcan Engineered Products, a post that was previously occupied by Mr. Jacques. Mr. Jacques replaced Cynthia Carroll who announced her resignation on 24 October 2006.

On 6 November 2006, the Company announced the appointment of Ilene Gordon, 53, as a Senior Vice President of Alcan Inc. and President, Alcan Packaging. Ms. Gordon, who was previously President of Alcan’s Food Packaging Americas business unit, succeeds Christel Bories.

On 9 November 2006, the Company announced that it had signed a Memorandum of Understanding with Access Madagascar Sarl, a Malagasy company holding exploration rights in Madagascar’s south eastern Manantenina District, to jointly study the development of a bauxite mine and alumina refinery, which would have an initial capacity of 1 to 1.5 Mt/y of alumina.

On 9 November 2006, the Company announced that it had entered into an agreement to sell its Wheaton Science products business in New Jersey (US) to River Associates Investments, LLC, a private equity group.

On 24 November 2006, the Company announced that it had secured a long-term supply agreement with South African energy firm, ESKOM Holdings Limited, for the purchase of up to 1,340 MW of electricity for its proposed 720 kt greenfield Coega aluminum smelter project, which will have a total estimated cost of $2.7 billion.

On 29 November 2006, the Company announced that it will invest $27.5 million for an expansion project in its Pharma Center in Shelbyville (Kentucky, US).

On 6 December 2006, the Company announced that it had completed the acquisition of the remaining 70% stake of Carbone Savoie that it did not already own, and certain related technology and equipment, from GrafTech International Ltd. for $135 million less certain price adjustments.

On 14 December 2006, the Company announced plans to build a $550 million pilot plant at its Complexe Jonquière site in Canada to develop the Company’s proprietary AP50 smelting technology. The pilot plant, which is

8

expected to produce 60 kt of aluminum annually, is the first step in a planned $1.8 billion investment program in Quebec’s Saguenay — Lac-Saint-Jean region. On the same date, the Company also announced the launch of a research and development initiative centred at its R&D centre in Voreppe (France), and focused on the AP series aluminum smelting technology.

On 27 December 2006, the Company announced that it had signed a collective labour agreement with the United Steelworkers union representing the Alma primary aluminum smelter in Quebec. The agreement covers an initial five year term.

On 22 January 2007, the Company revised its cost estimate for the expansion of the Gove alumina refinery in Australia’s Northern Territory to $2.3 billion and indicated that the start-up date would be in the second quarter of 2007, reflecting limited availability of labour and materials in the Australian construction market, the appreciation of the Australian dollar, additional construction requirements and weather-related delays. On 22 September 2006, the Company announced that it expected a 20 to 25% increase over the original $1.5 billion cost. Expanded production is expected to start progressively during the second quarter of 2007 and continue through the first quarter of 2008, at which time the refinery is expected to attain its full expanded capacity of 3.8 Mt.

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 alumina plants.

  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. Once extracted, bauxite is sent to 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 2006, Alcan used 11.4 Mt of bauxite to produce 4.9 Mt of smelter-grade alumina, which were either transferred to its current smelting operations through direct intersegment sales, or sold to third parties directly or through swap agreements. The balance of the smelter requirements, 1.7 Mt of alumina, was purchased from third parties. Alcan also produced and sold 600 kt of specialty aluminas to third parties.

In 2006, the Bauxite and Alumina Business Group had third party sales and operating revenues of approximately $1.8 billion, representing approximately 7.8% of Alcan’s 2006 sales and operating revenues.

For further information concerning the Bauxite and Alumina Business Group’s sales, business group profit, and total assets, see note 33 — Information by Operating Segments to the Financial Statements, prepared in accordance with US GAAP, as well as Management’s Discussion and Analysis — Operating Segment Review — Bauxite and Alumina.

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  1.2   Alumina Plants

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

Smelter-Grade Alumina Refineries

		% of
		Ownership		Annual Capacity			2006 Production
Locations		by Alcan		(in kt)			(in kt)
Australia	Gladstone, Queensland (QAL)		41.4		1,640	*		1,601	*
	Gove, Northern Territory		100		2,000			1,615
Brazil	São Luis (Alumar)		10		145	*		144	*
Canada	Jonquière, Quebec		100		1,300			1,305
France	Gardanne		100		200			191
Total Smelter-Grade Alumina					5,285			4,856

*  Represents Alcan’s share.

Specialty Alumina Plants

		% of
		Ownership		Annual Capacity			2006 Production
Locations		by Alcan		(in kt)			(in kt)
Canada	Brockville, Ontario		100		20			16
	Jonquière, Quebec*		100		80	**		169
France	Gardanne		100		435			445
	Beyrède		100		28			25
	La Bâthie		100		31			27
Germany	Teutschenthal		100		28			24
Total Specialty Alumina					622			706

*	Decision taken in 2006 to shut down part of production capacity.
**	Capacity is at 31 December 2006.

  1.3   Source Materials

     1.3.1   Bauxite Mines / Deposits

Alcan produces bauxite through its Subsidiaries, Joint Ventures and consortium companies. The Company also obtains bauxite from third party suppliers. In 2006, the Company produced 13.9 Mt of bauxite, while consuming 12.8 Mt to produce smelter-grade alumina and specialty alumina. 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.

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Bauxite Mines / Deposits

		% of
		Ownership		Annual Capacity			2006 Production
Locations		by Alcan		(in kt)			(in kt)
Australia	Gove, Northern Territory		100		6,000			4,767
	Ely, Queensland		100		0	**		0	**
Brazil	Porto Trombetas (MRN)		12.5		2,100	*		2,130	*
Ghana	Awaso		80		1,000	*		793	*
Guinea	Conakry (CBG)		22.9		6,200	*†		6,205	*
India	Orissa (UTKAL)		45		N/A	***		0	***
Total Bauxite					15,300			13,895

*	Represents Alcan’s Share.
**	Operations commenced in January 2007.
***	Bauxite extraction not yet in operation.

† Approximately 6.2 Mt of the bauxite produced at Conakry are reserved for Alcan’s needs.

Bauxite processed into alumina at the Gove refinery is shipped to the QTX and Kitimat smelters. Bauxite from CBG is processed at the Gardanne and Vaudreuil refineries. Gardanne supplies alumina to the European smelters. MRN bauxite is processed at the Alumar refinery and at Vaudreuil. Bauxite from Ghana is also processed at Vaudreuil, which in turn supplies alumina to the Quebec smelters. Bauxite from Ely is processed at the QAL refinery, which supplies alumina to the QTX, Kitimat and Tomago smelters. The Company purchases both bauxite and alumina from third parties, sells bauxite from CBG and Ghana and sells alumina from all refineries.

     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.

     1.3.3  Services

Alcan generates additional revenues through sale, to both internal and external customers, of technology and engineering services associated with bauxite and alumina processing. With an overarching focus on innovation, process sustainability and excellence in environment, health and safety, the Company’s services range from modernization and optimization of existing refineries to comprehensive design of new ones.

  1.4   Recent Developments

Australia:  In September 2006, the Queensland government gave approval for the commencement of mining at Alcan’s Ely bauxite mine in Cape York, Queensland, which has a reserve of close to 50 Mt and is expected to be mined over a period of approximately 25 years.

On 22 January 2007, the Company revised its cost estimate for the expansion of the Gove alumina refinery in Australia’s Northern Territory to $2.3 billion and indicated that the start-up date would be in the second quarter of 2007, reflecting limited availability of labour and materials in the Australian construction market, the appreciation of the Australian dollar, additional construction requirements and weather-related delays. On 22 September 2006, the Company announced that it expected a 20 to 25% increase over the original cost of $1.5 billion. Expanded production is expected to start progressively during the second quarter of 2007 and continue through the first quarter of 2008, at which time the refinery is expected to attain its full expanded capacity of 3.8 Mt.

Brazil:  Construction is currently under way on an expansion that should increase the annual capacity of the Alumar alumina refinery by 2.1 Mt. The Company’s throughput is expected to come on stream in the second half of

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2009. Alcan owns a 10% interest in Consorcio de Alumínio do Maranhão, the legal entity operating the Alumar alumina refinery in São Luis.

Canada:  On 9 May 2006, the Company announced the reorganization of its global specialty alumina business, entailing the gradual shut-down of the Company’s specialty-calcined alumina plant in Jonquière (Quebec, Canada).

Guinea:  On 10 January 2007, a country-wide general strike was initiated, consequently disrupting mining operations at Compagnie des Bauxites de Guinée (CBG) in which the Company has an indirect 22.9% interest. The strike brought a stop to bauxite mining, drying, rail transportation and ship loading operations for a period of 18 days in January and for another four days in February. On 16 February, CBG bauxite mine operations resumed on a limited basis. The political unrest is yet to be resolved as negotiations are underway between union leaders and government officials.

Ghana:  On 22 June 2006, the Company entered into a Memorandum of Understanding with the Republic of Ghana for the creation of a joint venture between Alcan and Ghana to explore the feasibility of developing a bauxite mine and alumina refinery, with an initial annual capacity of 1.5 to 2 Mt. The joint venture would be 51% owned by Alcan.

Madagascar:  On 9 November 2006, the Company signed a Memorandum of Understanding with Access Madagascar Sarl, a Malagasy company holding exploration rights in Madagascar’s south eastern Manantenina District, to jointly study the development of a bauxite mine and alumina refinery, which would have an initial capacity of 1 to 1.5 Mt/y of alumina.

  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 MWh of electric energy to separate the aluminum from the oxygen in alumina. Alcan produces electricity at its own generating plants in Canada, the UK and Norway. The Company also has an interest in a power plant in 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/or 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 25% 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 25% of the primary aluminum produced in 2006 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 $2,618 per tonne in 2006, compared to $2,036 per tonne in 2005, and $1,876 per tonne in 2004.

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.

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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 AP18-22 and the AP3X families of smelter technologies, and the newly-announced AP50 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 major 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, China and India; and

—  Engineering Services:  Alcan Alesa Engineering (Alesa) 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 aluminum fluoride, which are used in the production and recycling of aluminum, as well as the refining of high-purity aluminum.

In 2006, the Primary Metal Business Group recorded intersegment sales and operating revenues of approximately $2.5 billion and third party sales and operating revenues of approximately $8.7 billion, the latter representing 36.7% of Alcan’s 2006 sales and operating revenues. For specifics on the percentage of the Business Group’s sales and operating revenues attributable to Novelis, please see note 33 — Information by Operating Segments to the Financial Statements. For a percentage of the Company’s revenues by principal product type, please see the table “Revenues by Market” in Management’s Discussion and Analysis.

For further information concerning the Primary Metal Business Group’s sales, business group profit and total assets, see note 33 — Information by Operating Segments to the Financial Statements, prepared in accordance with US GAAP, as well as Management’s Discussion and Analysis — Operating Segments Review — Primary Metal.

  2.2   Production Facilities and Sales Centres

2.2.1 Smelter Operations:  As at 31 December 2006, Alcan operated and/or had interests in 22 primary aluminum smelters with a nominal rated capacity of 3,468 Mt/y (where ownership is shared, this number represents Alcan’s share only).

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Primary Metal Smelter Locations

		% of
		Ownership		Annual Capacity			2006 Production
Locations		by Alcan		(in kt)			(in kt)
Australia	Tomago, New South Wales		51.5		268	(1)		268	(1)
Cameroon	Edea (Alucam)(2)		46.7		47	(1)		42	(1)
Canada	Alma, Quebec		100		415			410
	Sept-Iles, Quebec (Alouette)		40		229	(1)		228	(1)
	Beauharnois, Quebec		100		52			52
	Bécancour, Quebec		25		101	(1)		101	(1)
	Kitimat, British Columbia		100		277			238
	Grande-Baie, Quebec		100		207			206
	Laterrière, Quebec		100		228			227
	Shawinigan, Quebec		100		99			98
	Arvida, Quebec		100		166			165
China	Qingtongxia		50		76	(1)		77	(1)
France	Dunkerque		100		259			259
	Lannemezan(3)		100		50			47
	Saint-Jean-de-Maurienne		100		135			134
Iceland	Reykjavik (ISAL)		100		179			168
Netherlands	Vlissingen(4)		85		181	(1)		179	(5)
Norway	Husnes (SORAL)		50		82	(1)		82	(1)
Oman	Sohar		20		N/A	(6)		0	(6)
Switzerland	Steg(7)		100		N/A	(7)		12
United Kingdom	Lynemouth		100		178			173
	Lochaber		100		43			43
United States	Sebree, Kentucky		100		196			194
Total Smelting Operations					3,468			3,403

(1)	Represents Alcan’s share.
(2)	Alcan’s direct ownership in Edea is 46.7%; however, the Company obtains 70 to 80% of the production of the plant as the major industrial shareholder.
(3)	In the process of being closed.
(4)	Strategic review underway — See sub-heading 2.4 “Recent Developments” hereunder.
(5)	Represents 100% of the Vlissingen smelter’s production.
(6)	Smelter not yet in operation; Alcan’s 20% proportionate share of the smelter’s expected capacity of 350 kt/y would be 70 kt/y.
(7)	Closed during the course of 2006.

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2.2.2 Technology Sales, Equipment Sales Centres (ECL) and Engineering Services:

Technology and Equipment Sales Centres and Engineering Services

Country	Location	Business
Australia	Eagle Farm, Queensland	ECL
Bahrain	Bahrain	ECL
Canada	Quebec City, Quebec Montreal, Quebec	ECL Engineering Services
China	Shanghai	ECL
France	Ronchin Voreppe	ECL Technology Sales
India	Bhubaneshwar	ECL
Mozambique	Matola	ECL
Netherlands	Ritthem	ECL
South Africa	Richards Bay	ECL
Switzerland	Zurich	Engineering Services

2.2.3  Other Production Facilities:

Other Production Facilities

			% of
			Ownership
Locations		Output/Type of Facility	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	Compiègne*	Recycling		100
	Carbone Savoie	Cathodes		100
Netherlands	Rotterdam	Anode facility		58.5
Norway	Vigelands	High purity metal refinery		50
Sweden	Helsingborg	Fluoride plant		50

*  In the process of being closed.

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

The following items, in addition to alumina, are the major source materials for the production of aluminum. The Company does not believe that the availability of the foregoing materials will be materially constrained in the foreseeable future.

2.3.1 Electrical Power:  In Canada, Alcan’s plants have an aggregate installed generating capacity of 3,583 MW, of which about 2,830 MW 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 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. On 13 December 2006, the Company and the Quebec Government amended

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the Peribonka lease to specify that the terms and conditions of the lease extension would be the same as those applicable for the lease’s initial term. Moreover, the lease amendment states that the electricity generated by the power plant subject to the lease would be used to supply Alcan’s industrial needs in Quebec or sold to Hydro-Quebec (a provincially-owned electric utility) at a price to be approved by the Quebec Government. In Quebec, royalties are payable to the Quebec 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 the Kitimat smelter. For electricity sold to third parties, Alcan pays provincial water rentals at rates that are fixed by the British Columbia Government, similar to those paid by BC Hydro (a 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 Canada, in addition to electricity generated at its own plants, as described above, Alcan is a party to a long-term agreement with Hydro-Quebec for the annual supply to Alcan of up to three billion KWh of electrical energy beginning in 2001. On 13 December 2006, the Company and Hydro-Quebec agreed to enter into an additional long-term electricity agreement for the supply of two billion KWh per year, effective in 2010. The Alouette smelter, which is 40% owned by Alcan, purchases its electricity from Hydro-Quebec pursuant to two long-term supply contracts. The Aluminerie de Bécancour smelter, which is 25% owned by Alcan, also purchases its electricity from Hydro-Quebec.

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 US purchases electricity under a long-term contract 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 two smelters in France (Dunkerque and Saint-Jean-de-Maurienne) are supplied with power under long-term contracts. 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 51.5% 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 43.5% owned by the Qingtongxia Joint Venture in which Alcan has a 50% participation. In regards to the smelter under construction in Oman, in which Alcan owns a 20% interest, a new gas-fired power plant will provide a dedicated long-term supply of power.

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Power Generation

		% of
		Ownership		Installed Capacity
Locations		by Alcan		(MW)
Canada	Quebec Power Stations		100		2,687
	Isle-Maligne
	Chute-à-Caron
	Shipshaw
	Chute du Diable
	Chute à la Savane
	Chute-des-Passes
	Kemano, British Columbia		100		896
China	Daba power plant (coal-fired)		21.8		261	*
Norway	Vigelands		100		26
United Kingdom	Lynemouth (coal-fired)		100		420
	Highlands Power Stations		100		80
	Lochaber
	Kinlochleven
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 BV, located in the Netherlands (Aluchemie). Alcan directly holds 53% of Aluchemie while Sor-Norge Aluminium AS (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 AS. 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 ISAL (Iceland) 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 Cathodes:  Cathode blocks are one of the main components of the cell-lining materials used in the aluminum smelting process. The cathode blocks are used as a refractory container for molten aluminum and electrolyte and as an electricity conductor in the smelting process. The cathode blocks are made from a mix of carbon aggregates and pitch binder. At Alcan, the cathode materials are produced in Arvida (Canada) and at Carbone Savoie’s stand-alone facilities in Notre-Dame-de-Briançon and Vénissieux (France). As of 1 December 2006, Alcan acquired the remaining 70% stake in Carbone Savoie and all related technology and equipment required for the production of a full range of cathode products. Carbone Savoie is a major producer of cathode materials (graphitized, semi-graphitic cathode blocks, as well as sidewall blocks and ramming paste) required by the aluminum industry. Approximately 25% of the production from Carbone Savoie is dedicated to Alcan’s plants and 75% is sold to third parties.

2.3.4 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.

  2.4  Recent Developments

Canada:  On 14 August 2006, the Company announced its intention to modernize its Kitimat smelter through an approximate $1.8 billion investment. The modernization would increase Kitimat’s current annual production levels by more than 60% to approximately 400 kt, thereby increasing Alcan’s global primary aluminum production

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by more than 4% and making Kitimat one of the three largest smelters in North America. The modernized facility would use the latest smelting technology within the AP35 series. The investment is subject to final Board approval and is conditional upon obtaining a new labour agreement, environmental permits and regulatory approval of acceptable terms for the sale of power to BC Hydro. On 29 December 2006 the British Columbia Utilities Commission’s (BCUC) decided to reject the amended and restated Long-Term Energy Purchase Agreement between Alcan and BC Hydro. The Company announced on 22 January 2007 that it had filed leave to appeal this decision.

On 29 September 2006, the Company announced that it will build a $180 million aluminum spent pot lining recycling plant in Quebec’s Saguenay — Lac-Saint-Jean region. The plant is expected to begin pot lining treatment operations in the second quarter of 2008.

On 14 December 2006, the Company announced plans to build a $550 million pilot plant smelter at its Complexe Jonquière site to develop the Company’s proprietary AP50 smelting technology. The pilot plant is expected to produce 60 kt of aluminum annually. Engineering for the pilot plant is ongoing and construction is expected to begin in 2008.

The AP50 pilot plant is the first step in a planned ten-year $1.8 billion investment program in Quebec’s Saguenay — Lac-Saint-Jean region, involving up to an additional 390 kt of new smelting capacity by 2015, developed by Alcan with the support of the Quebec Government. The Government in an agreement has provided financial support by means of research and development tax incentives and loans, and has made available up to two billion KWh per year of additional power to support the investment program. Support from the Government of Canada is expected to be provided through existing research and development incentive programs. The agreement with the Quebec Government also reinforces Alcan’s electrical power position through the long-term extension of hydraulic leases and new power contracts which, taken together with Alcan’s proprietary generation system, provide a secure supply of approximately 2,600 MWh of low-cost power through the year 2045.

In connection with the above-mentioned agreement with the Company, the Quebec Government has retained various rights which allow it to cancel some or all of the new entitlements and benefits relating to water and power, including the financial support contemplated thereby, should there be either an acquisition of control of Alcan or a change in the location of its headquarters which has a negative impact on its commitment to or presence in Quebec. The Board of Directors has, however, a significant role in the management of any process relating to the determination of any such negative impact.

France:  On 6 December 2006, the Company announced that it had completed the acquisition of the remaining 70% stake of Carbone Savoie that it did not already own, and certain related technology and equipment, from GrafTech International Ltd. for $135 million less certain price adjustments.

Also on 14 December 2006, the Company announced the launch of a research and development initiative based at its R&D centre in Voreppe (France), and focused on the AP series aluminum smelting technology with a target of developing a 20% more energy efficient and environmentally friendly cell through the accelerated introduction of new innovative technologies.

Iceland:  On 11 May 2006, the Company announced that it had secured 40% of the energy required for a potential expansion of its ISAL smelter in Iceland. The agreement with Reykjavik Energy, which calls for the purchase of 200 MW of geothermal power beginning in 2010, would supply an expanded smelting facility with potential future total capacity of 460 kt/y.

Netherlands:  On 23 October 2006, the Company announced that its Pechiney Nederland NV Subsidiary will conduct a strategic review of alternatives, including the potential sale of the aluminum smelter in Vlissingen, in which it holds an 85% interest.

South Africa:  On 24 November 2006, the Company secured a long-term supply agreement with South African firm ESKOM Holdings Limited, for the purchase of up to 1,340 MW of electricity for the Company’s proposed 720 kt greenfield Coega aluminum smelter project, which is expected to have a total cost of $2.7 billion. Should this project proceed, Alcan currently plans to retain between 25 to 40% of the equity. The definitive position

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of the Company on the size of any retained interest, which may be greater, will necessarily depend on its final assessment of the various opportunities offered by the project.

  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. 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 32 sales offices in 27 countries and regions 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, Transportation & Industry (ATI):  ATI supplies high value-added plate, sheet, extruded and precision cast products for customers in the aerospace, marine, automotive and mass transportation markets and engineering industry. 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. ATI is also a key supplier of new alloy solutions, such as Aluminum-Lithium. ATI includes Alcan Rolled Products — Ravenswood.

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, paper and balsa wood. An example is a sandwich panel made of two aluminum faces and a plastic core material. Principal applications for composites include building facades, transportation, displays for visual communication, 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, design and surface 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. The 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 Engineered and Automotive Solutions (EAS):  This business unit serves major automotive and transportation manufacturers with advanced technology and produces engineered shaped products including aluminum crash management systems, cockpit carriers, suspension parts, and other structural components. EAS serves customers in Europe and North America with innovative and cost-effective solutions based on aluminum extrusion, forging or casting and reinforced composites.

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.

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3.1.7 Alcan International Network (AIN):  This sales organization comprises 32 offices in 27 countries and regions selling and sourcing specialty products and materials for industrial applications in 65 countries and regions. 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 Specialty Sheet:  This business unit provides coils and sheet to customers for beverage and closures, automotive, customized industrial sheet solutions, and high-quality bright surface products markets. It includes world-class rolling and recycling operations, as well as dedicated research and development capabilities.

In 2006, the Engineered Products Business Group had third party sales and operating revenues of approximately $7.1 billion, representing approximately 30.2% of Alcan’s sales and operating revenues for the year.

The Engineered Products Business Group has relationships with certain major customers in the aerospace and beverage can industries, the loss of any of which could have a material impact on the operations of the Business Group.

For further information concerning the Engineered Products Business Group’s sales, business group profit and total assets, see note 33 — Information by Operating Segments to the Financial Statements, prepared in accordance with US GAAP, as well as Management’s Discussion and Analysis — Operating Segment Review — Engineered Products.

  3.2   Production and Services Facilities

Alcan’s Engineered Products Business Group consists of 120 sites, including 55 production facilities, 33 service centres and 32 AIN commercial offices around the world.

Engineered Products Locations

Locations		Products / Business Units
Austria	Hallein	Service Centres
	St. Johann im Pongau	Service Centres
	Vienna	Alcan International Network; Service Centres
Belgium	Brussels	Alcan International Network; Service Centres
	Gent	Alcan International Network
Brazil	Camaçari	Composites
	São Paulo	Alcan International Network
Canada	Concord, Ontario	Cable
	Lapointe, Quebec	Cable
	Saguenay, Quebec	Engineered and Automotive Solutions
	Shawinigan, Quebec	Cable
China	Beijing	Alcan International Network
	Hong Kong	Alcan International Network
	Shanghai	Alcan International Network; Composites
	Taipei	Alcan International Network
Czech Republic	Dečin	Extruded Products
	Prague	Alcan International Network
	Strojmetal	Engineered and Automotive Solutions (Partnership)
Ecuador	Guayaquil	Composites
	Quevedo	Composites
	Santo Domingo de los Rios	Composites
	Manta	Composites
	Plantations Raw Materials	Composites

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Locations		Products / Business Units
Engineered Products Locations (Cont’d)
Egypt	Cairo	Alcan International Network
France	Carquefou	Aerospace, Transportation & Industry
	Chassieu	Service Centres
	Ham	Extruded Products
	Issoire	Aerospace, Transportation & Industry
	Montreuil-Juigne	Aerospace, Transportation & Industry
	Nantes	Service Centres
	Neuf-Brisach	Specialty Sheet
	Nuits-Saint-Georges	Extruded Products
	Ozoir-la-Ferrière	Service Centres
	Paris	Alcan International Network
	Sabart	Aerospace, Transportation & Industry
	Saint-Florentin	Extruded Products
	Satma/Goncelin	Other
	Ussel	Aerospace, Transportation & Industry
Germany	Bad Salzungen	Service Centres
	Burg	Extruded Products
	Crailsheim	Extruded Products
	Dahenfeld	Engineered and Automotive Solutions
	Düsseldorf	Alcan International Network; Service Centres
	Fellbach	Service Centres
	Frankfurt	Service Centres
	Gera	Service Centres
	Gottmadingen	Engineered and Automotive Solutions
	Hamburg	Service Centres
	Hannover	Service Centres
	Hebsack	Service Centres
	Hohenacker	Service Centres
	Immendingen	Service Centres
	Landau	Extruded Products
	Köln	Service Centres
	Mannheim	Service Centres
	Munich	Service Centres
	Nürnberg	Service Centres
	Osnabrück	Composites
	Singen*	Composites; Extruded Products; Specialty Sheet;   Engineered and Automotive Solutions
Greece	Athens	Alcan International Network
Hungary	Budapest	Alcan International Network; Service Centres
Italy	Bologna	Service Centres
	Florence	Service Centres
	Milan	Alcan International Network
	Padova	Service Centres
	Treviglio	Service Centres
Japan	Tokyo	Alcan International Network
Mexico	Mexico City	Alcan International Network
	Monterrey	Alcan International Network
Netherlands	Amsterdam	Alcan International Network
	Breda	Service Centres
Portugal	Lisbon	Alcan International Network
Romania	Bucharest	Alcan International Network
	Bihor	Service Centres

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Locations		Products / Business Units
Engineered Products Locations (Cont’d)
Russia	Moscow	Alcan International Network
Singapore	Singapore	Alcan International Network
Slovakia	Levice**	Extruded Products
Slovenia	Koper	Engineered and Automotive Solutions
		(Joint Venture)
	Ljubljana	Service Centres
South Africa	Johannesburg (Sandton)	Alcan International Network
South Korea	Seoul	Alcan International Network
Spain	Barcelona	Alcan International Network; Service Centres
	Madrid	Alcan International Network; Service Centres
Switzerland	Altenrhein	Engineered and Automotive Solutions
	Dagmersellen	Service Centres
	Niederglatt	Service Centres
	Sierre***	Extruded Products; Aerospace, Transportation &   Industry
	Sins	Composites
Sweden	Goteborg	Alcan International Network
Thailand	Bangkok	Alcan International Network
United Arab Emirates	Dubai	Alcan International Network
United Kingdom	Chelmsford	Composites
	Slough-Berkshire	Alcan International Network
	Workington****	Aerospace, Transportation & Industry
United States	Benton, Kentucky	Composites
	Chatsworth, California	Cable
	Glasgow, Kentucky	Composites
	Mt. Juliet, Tennessee	Composites
	Northvale, New Jersey	Composites
	Novi, Michigan	Engineered and Automotive Solutions
	Ravenswood, West Virginia	Aerospace, Transportation & Industry; Alcan   Rolled Products — Ravenswood
	Roseburg, Oregon	Cable
	Sedalia, Missouri	Cable
	St. Louis, Missouri	Composites
	Stamford, Connecticut	Alcan International Network
	Statesville, North Carolina	Composites
	Vernon, California****	Aerospace, Transportation & Industry
	Williamsport, Pennsylvania	Cable

*	Shared site with the Packaging Business Group.
**	Facility not yet in operation.
***	Shared site with Novelis.
****	Facility to be closed.

  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. The Company does not believe that any source material constraints will have a material impact on the Business Group’s results.

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  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.

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 benefits from dedicated flexible food packaging research and development centres in North America and Europe. This allows Alcan Packaging to provide 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.

4.1.2 Global Pharmaceutical 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 and plastic bottles.

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 and beauty promotional items.

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 $6.0 billion in 2006. The Packaging Business Group’s sales and operating revenues represented approximately 25.2% of Alcan’s 2006 sales and operating revenues.

For further information concerning the Packaging Business Group’s sales to third parties, business group profit and total assets, see note 33 — Information by Operating Segments to the Financial Statements, prepared in accordance with US GAAP, as well as Management’s Discussion and Analysis — Operating Segment Review — Packaging.

  4.2  Production Facilities

Alcan has 130 packaging plants in 30 countries and regions.

Eight plants are shared between the Global Pharmaceutical and Medical Packaging and the Food Packaging business sectors: one in each of France, Germany, Italy, Spain, Switzerland, the US and two in China.

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Packaging Plants

Locations		Packaging Sector
Argentina	Chivilcoy	Food Americas
Australia	Adelaide, South Australia	Food Europe
Belgium	Grace-Hollogne (Veramic)	Pharmaceutical and Medical
Brazil	Diadema, São Paulo	Pharmaceutical and Medical
	Maua, São Paulo	Food Americas
	Mogi das Cruzes, São Paulo	Beauty and Personal Care
	São Paulo, São Paulo	Beauty and Personal Care
	Suape, Pernambuco	Beauty and Personal Care
Canada	Baie d’Urfe, Quebec	Pharmaceutical and Medical
	Brampton, Ontario	Beauty and Personal Care
	Lachine, Quebec	Tobacco
	Saint-Cesaire, Quebec	Food Europe
	Weston, Ontario	Food Americas
	Woodbridge, Ontario	Pharmaceutical and Medical
Chile	Santiago de Chile	Food Europe
China	Beijing	Food Asia
	Chengdu	Food Asia
	Foshan	Beauty and Personal Care
	Huizhou	Food Asia; Pharmaceutical and Medical
	Jiangyin	Food Asia; Pharmaceutical and Medical
	Suzhou	Beauty and Personal Care
	Zhongshan	Beauty and Personal Care
Czech Republic	Skrivany	Food Europe
France	Albertville	Beauty and Personal Care
	Arras	Food Europe
	Aumale	Pharmaceutical and Medical
	Authon-du-Perche (2 plants)	Pharmaceutical and Medical
	Bernaville	Beauty and Personal Care
	Challes	Beauty and Personal Care
	Chalon-sur-Saone	Food Europe
	Dax	Food Europe
	Dijon	Food Europe
	Froges	Food Europe
	Lucenay-les-Aix	Pharmaceutical and Medical
	Mareuil-sur-Ay	Food Europe
	Montreuil-Bellay	Pharmaceutical and Medical
	Moreuil	Food Europe
	Plouhinec	Beauty and Personal Care
	Sainte-Menehoud (2 plants)	Beauty and Personal Care
	Saint-Maur	Pharmaceutical and Medical
	Saint-Seurin-sur-l’Isle	Food Europe
	Sarrebourg	Food Europe
	Sélestat	Food Europe; Pharmaceutical and Medical
	Uchaux	Food Americas
	Vandieres	Beauty and Personal Care
	Vienne-le-Chateau	Beauty and Personal Care
Germany	Neumunster	Tobacco
	Schesslitz	Beauty and Personal Care
	Singen	Food Europe; Pharmaceutical and Medical
	Teningen	Food Europe
Indonesia	Demak	Beauty and Personal Care
	Tangerang	Food Asia

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Locations		Packaging Sector
Packaging Plants (Cont’d)
Ireland	Dublin	Food Europe
Italy	Arenzano	Food Europe
	Lainate	Food Europe
	Lugo di Vicenza	Food Europe; Pharmaceutical and Medical
	Tortona	Beauty and Personal Care
	Verderio Superiore	Beauty and Personal Care
Kazakhstan	Almatinskaya Oblast	Tobacco
Malaysia	Rawang	Tobacco
Mexico	Matamoros, Tamaulipas	Beauty and Personal Care
	Mexico City	Beauty and Personal Care
	Monterrey, Nuevo Leon	Food Americas
	Reynosa, Tamaulipas	Beauty and Personal Care
	Tlaquepaque, Jalisco	Food Americas
	Zacapu, Michoacan de Ocampo	Food Americas
Morocco	Mohammedia	Food Europe
Netherlands	Brabant (Bergen Op Zoom)	Tobacco
	Zutphen	Food Europe
New Zealand	Wellington	Food Asia
Philippines	Cainta	Tobacco
Poland	Lodz	Beauty and Personal Care
	Zlotow	Food Europe
Portugal	Carvalhos	Food Europe
Puerto Rico	Cayey	Pharmaceutical and Medical
Russia	Moscow*	Food Europe
	St. Petersburg*	Tobacco
Spain	Alzira	Food Europe; Pharmaceutical and Medical
	Barcelona	Beauty and Personal Care
Switzerland	Kreuzlingen	Food Europe; Pharmaceutical and Medical
	Rorschach	Food Europe
Thailand	Bangplee	Food Asia
	Phetchaburi	Food Asia
	Sriracha	Food Asia
Turkey	Istanbul	Food Europe
	Izmir	Tobacco
United Kingdom	Bristol	Tobacco
	Cramlington	Pharmaceutical and Medical
	Midsommer Norton**	Food Europe
	Workington (Cumbria)	Food Europe

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Locations		Packaging Sector
Packaging Plants (Cont’d)
United States	Akron, Ohio	Food Americas
	American Canyon, California	Food Europe
	Asheville, North Carolina	Pharmaceutical and Medical
	Atlanta, Georgia	Tobacco
	Batavia, Illinois	Food Americas
	Bellwood, Illinois	Food Americas
	Bethlehem, Pennsylvania	Pharmaceutical and Medical
	Boscobel, Wisconsin (2 plants)	Food Americas
	Chase City, Virginia	Pharmaceutical and Medical
	Commerce, California	Pharmaceutical and Medical
	Des Moines, Iowa	Food Americas
	Des Plaines, Illinois	Pharmaceutical and Medical
	Edgewood, New York	Food Americas
	Joplin, Missouri	Food Americas
	Lincoln Park, New Jersey**	Beauty and Personal Care
	Marshall, North Carolina	Pharmaceutical and Medical
	Menasha, Wisconsin	Food Americas
	Millville, New Jersey (4 plants)	Pharmaceutical and Medical
	Milwaukee, Wisconsin	Pharmaceutical and Medical
	Minneapolis, Minnesota	Food Americas
	Morristown, Tennessee	Beauty and Personal Care
	Neenah, Wisconsin	Food Americas
	Newark, California	Food Americas
	New Hyde Park, New York	Food Americas
	Reidsville Industrial Park,	Tobacco
	North Carolina
	Richmond, Virginia	Tobacco
	Russellville, Arkansas	Food Americas
	Shelbyville, Kentucky	Food Americas; Pharmaceutical and Medical
	Shelbyville, Tennessee	Beauty and Personal Care
	St. Louis Park, Minnesota***	Food Americas
	Syracuse, Nebraska	Pharmaceutical and Medical
	Tulsa, Oklahoma	Food Americas
	Washington, New Jersey	Beauty and Personal Care
	Westport, Indiana	Pharmaceutical and Medical
	Youngsville, North Carolina	Pharmaceutical and Medical

*	Greenfield facility.
**	To be closed.
***	Counted as part of the Minneapolis facility.

  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. The Company does not believe that the availability of source materials will be materially constrained in the foreseeable future.

D.   INFORMATION BY GEOGRAPHIC AREAS

See note 32 — Information by Geographic Areas to the Financial Statements for financial information by geographic area.

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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 $220 million, $227 million and $239 million in R&D in 2006, 2005 and 2004, respectively.

With the acquisition of Pechiney in 2003, 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 performing work for the Bauxite and Alumina Business Group are located in Gardanne (France), Saguenay (Quebec, Canada) and Brisbane (Australia).

1.2 Research laboratories performing work for the Primary Metal Business Group are located in Saguenay (Quebec, Canada), Voreppe and Saint-Jean-de-Maurienne (France). To support the new $550 million AP50 pilot plant announced by the Company on 14 December 2006 (see section C.2.4), the Arvida Research and Development Centre in Saguenay will lead the ongoing R&D related to the industrialization of the Company’s proprietary AP50 smelting technology. Since its acquisition of Pechiney, Alcan has continued to develop this technology at its Saint-Jean-de-Maurienne R&D facility. The Company intends to move its AP50 technology from the research phase to industrial development. The Company’s R&D centre in Voreppe will continue to focus on the AP series with a target of developing more energy-efficient and environmentally-friendly aluminum smelting technology.

1.3 Research laboratories performing work for the Engineered Products Business Group are located in Neuhausen (Switzerland) and Voreppe (France). Applied engineering centres specialized in the automotive industry are located in Detroit (Michigan, US) and Singen (Germany). A technical centre dedicated to aluminum cable is located in Williamsport (Pennsylvania, US). These applied engineering and technical centres, which support Alcan’s research activities, focus on product applications and provide technical development support to customers. The centres draw extensively on the resources and specific competencies of the central laboratories.

1.4 Research laboratories performing work for the Packaging Business Group are located in Neenah (Wisconsin, US), 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.

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.

Alcan competes against other producers who may not be subject to the same environmental laws and regulations or who may not have the same high environmental standards and practices.

In 2003, Alcan implemented the Alcan Integrated Management System built on four key components, namely Value-Based Management, Continuous Improvement, EHS FIRST and People Advantage, intended to ensure that

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the same focus on value, improvement, environment, health and safety, and employees 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 2006, 100% of the sites were ISO 14001 and 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 2006 were $145 million and are projected to be $267 million and $116 million in 2007 and 2008, respectively. Expenditures charged against income for environmental protection were $193 million in 2006, and are expected to be $189 million and $187 million in 2007 and 2008, respectively.

In addition to the certification requirements mentioned above, EHS FIRST provides a diverse platform of tools which form the basis for performance and risk management. Over the past six years, Alcan has seen a reduction of 77% in its Recordable Case Rate, which includes a reduction of 79% in the rate of lost time injuries. Serious injuries have been reduced by 15% in the last year. Health promotion and environmental management are also key aspects of EHS FIRST against which Alcan sets standards and measures performance.

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 23,000 employees in North America, 29,500 in Europe, 2,700 in South America, 7,200 in Asia/Pacific, 1,600 in Australia and 700 in Africa and the Middle East. A majority of the shop-floor employees are represented by labour unions.

There are 26 collective labour agreements in effect in Canada. Labour agreements for unionized employees at Alcan facilities in Quebec were renewed in 2006 and are set to expire in December 2011, with a possible extension until December 2015. In British Columbia, the collective labour agreement at Kitimat was renewed in 2005 and is now set to expire in 2008.

Following the acquisition of Pechiney in 2003, 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 US, 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.

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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 particular, the primary aluminum business is concentrated in the hands of a small number of first-tier producers, including the Company. 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.

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 an important 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 US 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 US 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.

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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.

Alcan participates in highly competitive markets.

Alcan is a participant in the market for packaging materials. The acquisition of Pechiney 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 rate 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 US, the UK, 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

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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 US. 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, expropriation 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.

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.

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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 with respect to its own production capacity, and participates in the development of large capital projects with third parties. Recent activity involving large capital expenditure commitments includes the expansion of the Gove alumina refinery in Australia, the announced planned investments in Jonquière and Kitimat in Canada, and in Guinea, Cameroon, Iceland and South Africa, and the smelter project in Oman. 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 metal supply agreements and other arrangements with Novelis, an important customer whose operations encompass most of Alcan’s former rolled products businesses that Alcan spun off to its shareholders in January 2005. Should Novelis’ business be 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 ongoing commercial relationship with it or with third parties.

Alcan must compete with other market participants for continued business from Novelis. In addition, Novelis, and any acquirer of Novelis’ business operations, could become a competitor to Alcan.

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.

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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 1.2 and 1.3 (Bauxite and Alumina), 2.2 and 2.3 (Primary Metal), 3.2 (Engineered Products) and 4.2 (Packaging).

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.

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A.   ENVIRONMENTAL MATTERS

1.   Cases

Omega Chemical Site.  In February 1996, the Company’s UK 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 US 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, US). Large waste generators are cleaning up the site. Luxfer is a small contributor. 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” below). Both British Alcan and Howmet agreed to be parties to the Second Amendment to the Consent Decree.

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, US) 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, which are now covered by a Title V Air Permit.

Shulton, Mays Landing Landfill.  Shulton, an adjacent manufacturing neighbour to AGPP’s coated products operation in Mays Landing (New Jersey, US), 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. Monitoring costs are not projected to be high.

Williams Landfill.  Wheaton Industries, now AGPP, was sued in 1990 by the NJDEP involving a Superfund Site in Cape May County (New Jersey, US). The matter was resolved through a Consent Decree in 1999 which specifically excluded liability for natural resource damages. In June 2006, the New Jersey Attorney General’s office contacted AGPP by telephone to inform the Company that NJDEP was planning on pursuing Natural Resource Damages. AGPP is waiting for a formal demand in this regard.

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, US) plant, in compliance with a NJDEP permit. 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 by 2012.

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. The site was remeditated and sold in 2006.

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 Ontario 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

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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. Alcan continues remediation efforts at the site.

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.

Dover, New Jersey Site.  In 1997, Howmet notified Pechiney of high PCB readings at Dover (New Jersey, US). 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. Pechiney submitted a Remedial Selection Report and met with the State of New Jersey in October 2006.

Combe Fill South Landfill.  In 1998, the US 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 US District Court for the District of New Jersey. Howmet submitted its position paper on allocation in January 2004. There are hundreds of parties involved in the suit; allocations are not yet final. The parties met in December 2006 to discuss settlement scenarios.

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 US 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 US 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 US 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 US 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). Negotiations with the various agencies concerning the ROD and the consent decree were held during 2003. The EPA 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 spent. The parties have complied with a request by the EPA to supply $25 million in financial assurance. In 2005, the EPA decided that treatment for cobalt was not required. The parties negotiated regarding additional work in 2006 but did not reach an agreement.

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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, US). 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. In August 2006, the State of North Carolina offered the parties an Administrative Agreement for State-directed remedial action. Howmet provided the State-suggested revisions to the Agreement in September 2006. The Agreement has not been finalized to date.

Pohatcong Valley Site.  The US 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, US) 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. 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 and cost substantially less. The EPA issued a Record of Decision on groundwater contamination in July 2006. In October 2006, PPPI representatives met with EPA representatives to continue negotiations for a PPPI-designed remedy.

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, US). Negotiations continue between the parties and the NJDEP with respect to PPPI’s share of remediation costs. Since 2001, the NJDEP has reduced PPPI’s required funding share on several occasions. In 2006, the NJDEP approved a Work Plan for the new refuse area.

Spill at Port Installations.  Alcan received two fine notices on 27 October 2006 from the Quebec Solicitor General regarding a caustic soda spill in the Saguenay River which occurred on 20 and 21 March 2006 during the unloading of cargo at Alcan’s port facilities in La Baie (Quebec, Canada). Alcan pleaded not guilty and obtained disclosure of the evidence from the Province.

Guelph, Ontario.  The Company maintained outdoor salt cake storage from 1985 to 1996 on a site it had purchased in 1979. In December 1996, Alcan sold the facility to Philip Enterprises, contractually retaining liability, which then sold the facility to Wabash Alloy in 1998. Alcan performed soil removal activities in 1998 and 1999 and established monitoring wells. In June 2006, the Ontario Ministry of the Environment agreed to Alcan’s work plan to manage the sodium and chloride impacts on groundwater. The work plan includes installation of additional monitoring wells.

Muzin River.  In September 2003, two agents of the local fishing council reported white traces of aluminum hydroxide on the Muzin River to the prosecuting attorney of Dijon (France). A hearing took place in December 2006, during which the prosecuting attorney sought to fine the Softal plant manager EUR 1,000. The plant manager has until early 2007 to accept the offer or face criminal proceedings. Pechiney Softal, a Subsidiary of the Company, may then be prosecuted. It is believed that the amount of aluminum hydroxide measured in the river is unlikely to have had any negative impact on the environment.

Centralia.  In December 2006, AGPP received a letter form the Illinois Attorney General’s office, threatening to file suit on 20 December 2006 to recover costs incurred in addressing the continued presence of hazardous substances at former Prior 1.2.3.4, Prior/Blackwell, and CESi Landfills located near Centralia (Illinois, US). AGPP is a relatively small contributor to the landfill sites.

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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 2006.

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 in March, June, September and December to Shareholders of record in February, May, August and November, respectively.

The number of holders of record of Common Shares on 26 February 2007 was approximately 16,100.

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.

On 2 August 2006, the Company announced that it was raising its quarterly dividend from $0.15 to $0.20 per Common Share.

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 US, the treaty-reduced rate is currently 15%.

All dividends received by shareholders of Alcan (including Common Shareholders and holders of preference shares) in 2006 and later are eligible dividends as defined in amendments to section 89 of the Canada Income Tax Act and, accordingly, entitle an individual Alcan shareholder resident in Canada to a higher dividend gross-up and dividend tax credit.

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	Dividend ($)	New York Stock Exchange* ($)								Toronto Stock Exchange** (CAN$)
		High		Low		Close		Avg. Daily Volume		High		Low		Close		Avg. Daily Volume
2006 Quarter
First	0.150		51.55		40.64		45.73		1,567,674		59.25		47.05		53.43		1,534,425
Second	0.150		59.20		41.55		46.94		2,900,325		64.99		46.05		52.29		1,804,657
Third	0.200		48.50		37.48		39.87		975,374		54.95		41.78		44.55		1,335,986
Fourth	0.200		51.31		38.32		48.74		1,220,320		58.95		43.25		56.78		1,264,882
Year	0.700

		High		Low		Close		Avg. Daily Volume		High		Low		Close		Avg. Daily Volume
2005 Quarter
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

*	As reported by the New York Stock Exchange — Consolidated Trading.
**	As reported by the Toronto Stock Exchange.

Performance Graph

The information required is incorporated by reference to the Proxy Circular in the section entitled “Performance Graphs” on page 27.

Purchases of Equity Securities

Alcan established a share repurchase program that commenced on 2 November 2006 and will terminate at the latest on 1 November 2007. Under the program, the Company may purchase up to 18,800,000 Common Shares, representing approximately 5% of the outstanding Common Shares at 27 October 2006. Purchases may be made on the Toronto Stock Exchange and the New York Stock Exchange. The Common Shares purchased under the program will be cancelled.

The Company intends that the program comply with Rule 10b-18 under the US Securities Exchange Act of 1934 and the Normal Course Issuer Bid rules of the Toronto Stock Exchange. A copy of the notice to the public of the plan, announced on 3 October 2006, is available at www.sedar.com or may be obtained by contacting the Corporate Secretary’s Office.

The following table provides information on purchases of equity securities.

					Total Number of		Maximum Number of
					Shares Purchased as		Shares that May Yet
	Total Number of		Average Price Paid		Part of Publicly		Be Purchased Under
2006 Period	Shares Purchased		per Share		Announced Program		the Program
1 Oct. – 31 Oct.		0		—		0		18,800,000
1 Nov. – 30 Nov.		9,781,200		47.42		9,781,200		9,018,800
1 Dec. – 31 Dec.		50,000		47.92		50,000		8,968,800
Total		9,831,200		47.42		9,831,200		—

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Sales of Unregistered Securities

In 2006, the Company issued 12,852 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 US Securities Act of 1933, as amended in reliance on Regulation S. The dates of sale and amounts of Common Shares in the fourth quarter of 2006 are set forth below:

	Number
Dates	of Shares
23 October 2006		2,596
8 November 2006		682
9 November 2006		723
20 November 2006		1,638
1 December 2006		405
12 December 2006		4,828
18 December 2006		1,980

The Pechiney options are described at page 30 of the Proxy Circular.

ITEM 6  SELECTED FINANCIAL DATA

SELECTED HISTORICAL FINANCIAL DATA

(In millions of dollars, except for per share amounts)

	Years Ended December 31
	2006			2005			2004		2003			2002
US GAAP
Sales and operating revenues		23,641			20,320			24,948		13,850			12,483
Income (Loss) from continuing operations		1,786			155			243		262			421
Income (Loss) from discontinued operations		4			(26	)		15		(159	)		(21	)
Cumulative effect of accounting changes		(4	)		—			—		(39	)		(748	)
Net income (Loss)		1,786			129			258		64			(348	)
Earnings (Loss) per share:
Basic:
Income (Loss) from continuing operations		4.75			0.40			0.64		0.79			1.29
Income (Loss) from discontinued operations		0.01			(0.07	)		0.05		(0.49	)		(0.07	)
Cumulative effect of accounting changes		(0.01	)		—			—		(0.12	)		(2.32	)
Net income (Loss) per share		4.75			0.33			0.69		0.18			(1.10	)
Diluted:
Income (Loss) from continuing operations		4.74			0.40			0.64		0.79			1.29
Income (Loss) from discontinued operations		0.01			(0.07	)		0.05		(0.49	)		(0.07	)
Cumulative effect of accounting changes		(0.01	)		—			—		(0.12	)		(2.32	)
Net income (Loss) per share		4.74			0.33			0.69		0.18			(1.10	)
Cash dividends per share		0.70			0.60			0.60		0.60			0.60
Total assets		28,939			26,638			33,341		31,948			17,761
Long-term debt (including current portion)		5,512			6,067			6,914		7,778			3,369

On 1 January 2004, the Company adopted US GAAP as its primary reporting standard for presentation of its consolidated financial statements. Historical consolidated financial statements were restated in accordance with US GAAP.

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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 statement of income and as at 31 December 2004 for the balance sheet is presented in note 6 — Spin-off of Rolled Products Businesses of the Financial Statements included under Item 8, “Financial Statements and Supplementary Data” in this Form 10-K.

The accounting policies adopted by the Company during the years 2004 to 2006 are described in note 3 — Accounting Changes of the Financial Statements.

In 2004, the Company retroactively adopted the fair value recognition provisions of Statement of Financial Accounting (SFAS) No. 123, Accounting for Stock-Based Compensation. Beginning 1 January 1999, all periods have been restated to reflect compensation cost as if the fair value method had been applied for awards issued after 1 January 1995.

In 2003, the Company retroactively adopted 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 US 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.

The data presented above should also be read in conjunction with Management’s Discussion and Analysis, included under Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K.

Please also refer to the Financial Statements and the Notes to the Financial Statements, included under Item 8 “Financial Statements and Supplementary Data” in this Form 10-K.

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

INTRODUCTION

This Management’s Discussion and Analysis (MD&A) provides management’s perspective on the Company’s operations, core businesses, performance and financial condition. The MD&A includes Alcan’s operating and financial results for 2006, 2005 and 2004 and should be read in conjunction with the Financial Statements for the year ended 31 December 2006, which are prepared in accordance with US GAAP. Unless otherwise indicated, all amounts are in US dollars. Certain prior year data has been reclassified to conform with the current year’s presentation.

In addition to the information contained in this MD&A, a brief description of the business can be found on page 6 as well as detailed descriptions of the Business Groups on pages 9 to 26 of this Form 10-K.

The aluminum market overview contained in this MD&A 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 at 28 February 2007.

Accounting Estimates and Assumptions

The Company believes 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. The Company’s significant accounting policies are presented in note 2 — Summary of Significant Accounting Policies to the Financial Statements. The critical accounting policies and estimates described on page 74 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 the Audit Committee, in

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consultation with management, as part of their review and approval of our significant accounting policies and estimates.

OVERVIEW

For Alcan, 2006 represented a landmark year in many respects. Driven by increased strength in aluminum fundamentals and a sharpened focus following several years of major portfolio transformation, the Company achieved record financial results and made significant advances in key strategic growth initiatives. All-time records were set as net income reached $1,786 million ($4.75 per Common Share), while cash from operating activities topped the $3-billion mark. The Company’s long-term corporate financial targets, based on currency and metal forward rates as at September 2005, were all exceeded, in many cases by a healthy margin. In addition, the Company raised its quarterly dividend by a third and initiated a share repurchase program for up to 5% of its outstanding Common Shares.

Strategically, Alcan took several key steps toward securing a balanced alumina position and leveraging its technology and wholly-owned power advantages to ensure sustainable, low-cost growth in aluminum production. The 1.8-million tonne per year (Mt/y) expansion of the Gove alumina refinery in Australia continued at a strong pace, albeit in the face of substantial cost pressures due mainly to the overheated Australian construction sector. Meanwhile, as construction on the Company’s smelting Joint Venture in Oman continued on schedule and on budget, announcements were made throughout the second half of the year concerning key smelting projects in British Columbia, South Africa and Quebec, which together with the Oman project represent a potential total capacity increase of close to 1 Mt/y, or around 30% of the Company’s current capacity. In addition, the Quebec project incorporates the world’s first industrial scale pilot smelter based on Alcan’s proprietary AP50 technology, which is expected to generate incremental cost savings and superior environmental performance over the existing industry leading AP35 configuration.

At the macro-economic level, the first half of 2006 reflected very strong growth in most of the world’s economies, including the four largest: the US, Japan, Germany and China. However, declining auto sales and production and a sharp downturn in the housing market combined to restrain the US economy as the year progressed. By the fourth quarter of 2006, softening conditions had become evident around the world, partly caused by reduced exports to the US. Even in China, industrial production growth slipped from over 17% in the first half of 2006 to under 15% in the fourth quarter of 2006, reflecting monetary restraints.

Boosted by the strong economic growth through much of 2006, global primary aluminum demand grew by almost 7%. World primary production grew at just over 6% due both to a limited number of expansions and to closures caused by high power prices in late 2005 and extremely high spot alumina prices in the first half of 2006. As a result, the market went from being balanced in 2005 to a 162-thousand tonne per year (kt/y) estimated deficit in 2006. In terms of weeks of Western World* shipments, unwrought inventories fell from an already low 5.8 weeks at the beginning of 2006 to a record low of 4.7 weeks late in the year. This, coupled with even greater price increases for other base metals, caused aluminum prices to soar. The benchmark 3-month price on the London Metal Exchange (LME) reached an all-time high of $3,310 per tonne in May 2006 and averaged a record $2,594 for the calendar year in nominal terms.

MARKET REVIEW

World Primary Aluminum Balance

Supply and Demand

World primary aluminum demand grew by about 6.9% in 2006 to 34.1 Mt/y; a much stronger pace than the 4.6% growth experienced in 2005. The highest growth rate of about 20% came from China, the largest consumer and producer of aluminum. Growth in Western World primary aluminum demand was under 1.5%.

* Defined as the world excluding the Commonwealth of Independent States (CIS), Eastern Europe and China.

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World primary aluminum production growth eased slightly to 6.4% in 2006, reaching about 33.9 Mt/y. In the Western World, production grew only 1.7% as modest expansions in Brazil, Dubai, Iceland and India were partially offset by closures in Europe and the US in late 2005 and early 2006. In sharp contrast, Chinese production grew by over 20% to about 9.3 Mt/y. Plummeting spot alumina prices in the second half of 2006 led to major restarts of idled capacity and, by year-end, China was producing at a rate of over 10.5 Mt/y or about 30% of global output. Production in the CIS during 2006 was up about 2.5% over the prior year.

World Primary Aluminum Supply and Demand

Balance and Prices

After the balanced market in 2005, primary aluminum demand grew slightly faster than supply during 2006. As a result, unwrought inventories on the LME, New York Mercantile Commodities Exchange (COMEX) and held by aluminum producers declined by 162 kt/y during 2006 to reach 2.34 Mt/y or about five weeks of Western World supply. Including producer wrought stocks, total inventories fell 232 kt/y to 3.66 Mt/y. This along with higher production costs led to a record high nominal average price for the benchmark LME 3-months aluminum contract of $2,594 per tonne, up 37% from 2005. The benchmark LME contract also hit a record intra-day high of $3,310 on 11 May 2006. Prices of some other base metals rose even more, with zinc up 133%, copper 91% and nickel 59% in 2006.

Total Aluminum Inventories and Ingot Prices

* International Aluminium Institute

Outlook

After a year in which growth in consumption exceeded that for production, the situation is expected to reverse in 2007. Low prices for alumina, improved power availability in many parts of the world, and continuing high aluminum prices are encouraging smelter expansions and restarts. New smelter capacity in China, Russia, Iceland,

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Dubai, and South America, along with restarts in the US and Western Europe are expected to boost primary production by almost 8%. Balancing this against an expected primary consumption growth rate only slightly less than the 2006 figure of 6.9%, mainly due to a slower US economy, should give rise to a primary surplus of approximately 200 kt, although inventories, especially in terms of weeks of shipments, will remain relatively low.

Total Aluminum Consumption

Total global aluminum consumption (including semi-fabricated aluminum, castings, forgings and the like) grew by an estimated 6.4% in 2006 to 45.5 Mt/y. Of this, about 34 Mt/y was sourced from primary aluminum with the other 11.5 Mt/y coming from secondary/recycled metal.

Total aluminum consumption growth continued to be strongest in China and the CIS at around 17% to 18% in 2006. China is the largest consumer at roughly 11.2 Mt/y or 25% of the world. For the Western World, consumption growth increased to 2.8% (from 2% in 2005) led by Asia and Latin America at over 5%. Total consumption increased by 3.2% in Western Europe, while North American consumption remained flat compared to 2005 due to declines in housing starts and automobile production, and has still not returned to the levels of 1999-2000.

Aluminum consumption was up in every end-use market. At between 6.3% and 9.4% year-over-year growth, the strongest sectors were packaging (mainly foil), machinery and equipment, transportation (heavy trucks, aerospace, buses, trains and ships) and electrical. In the two largest markets, building and construction, and automobiles, growth in 2006 was 5.5% to 6.0%, held back by the weak US market. Consumer durables were up about 4% and beverage cans 2%. The latter is a mature market with gains from substitution for tin-plated steel but losses to polyethylene terephalate (PET) bottles.

Total Global Consumption by End-Use Market

	2006		2005		2004
Containers and Packaging		15%		16%		16%
Building and Construction		20%		20%		18%
Electrical		10%		10%		8%
Transportation		27%		27%		31%
Consumer Durables		7%		7%		6%
Machinery and Equipment		8%		8%		8%
Other		13%		12%		13%
Total		100%		100%		100%

Total Global Consumption by Geographic Market

	2006		2005		2004
North America		23%		24%		25%
Western Europe		21%		22%		22%
Asia (excl. China)		20%		21%		21%
Latin America		5%		5%		5%
Africa and Oceania		2%		2%		2%
Western World		71%		74%		75%
China		25%		22%		21%
Eastern Europe		2%		2%		2%
CIS		2%		2%		2%
Total		100%		100%		100%

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Alcan’s Revenues by Geographic Market*

	2006		2005		2004
North America		37%		36%		35%
Europe		45%		47%		45%
Asia/Pacific/Africa		17%		16%		16%
South America		1%		1%		4%
Total		100%		100%		100%

* Point of destination

RESULTS OF OPERATIONS

Presentation of Financial Information

Novelis Spin-Off

Information for the year 2004 presented in this MD&A includes the results of operations for businesses transferred to Novelis on 6 January 2005.

Earnings Summary

Income from Continuing Operations

*  Other Specified Items (OSIs) include, for example: 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 Alcan’s view, do not typify normal operating activities.

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Net Income

	For the Year Ended
	2006			2005			2004
	(In millions of US$)
Included in income from continuing operations are:
Foreign currency balance sheet translation		(12	)		(86	)		(153	)
Other Specified Items:
Synergy costs		—			(57	)		(44	)
Restructuring charges		(115	)		(162	)		(41	)
Asset impairments		(51	)		(314	)		(66	)
Goodwill impairment		—			(122	)		(154	)
Gains (losses) from non-routine sales of assets, businesses and investments, net		(23	)		36			54
Tax adjustments		79			(37	)		13
Novelis costs		—			(21	)		(31	)
Legal and environmental provisions		—			—			(7	)
Pechiney financing-related losses		—			—			(2	)
Purchase accounting and related adjustments		—			—			(122	)
Other		12			7			(4	)
Total Other Specified Items		(98	)		(670	)		(404	)
Income from continuing operations		1,786			155			243
Income (Loss) from discontinued operations		4			(26	)		15
Cumulative effect of accounting change		(4	)		—			—
Net Income		1,786			129			258

2006 vs. 2005

In 2006, income from continuing operations was $1,786 million, an increase of $1,631 million compared to 2005. The significant increase in income reflected improved results across most business segments, most notably Primary Metal due to higher aluminum prices (LME aluminum prices were up on average 37% compared to 2005 reflecting extremely strong industry fundamentals), as well as reduced charges for OSIs of $572 million and foreign currency balance sheet translation of $74 million, offset in part by increased costs for key inputs across all businesses and the negative effects of the weaker US dollar on operating costs. In 2006, the Company benefited not just from higher aluminum prices, but also from improved sales mix and pricing as well as increased volumes in the downstream businesses. As in 2005, cost pressures were most significant in the Packaging business where prices for raw materials, most notably aluminum, experienced a sharp increase. This effect continued to be mitigated by increases in selling prices and operational improvements in the Packaging business.

Included in income from continuing operations for 2006 were foreign currency balance sheet translation losses of $12 million, a decrease of $74 million compared to 2005. Foreign currency balance sheet translation effects arise from translating monetary items (principally deferred income taxes and long-term liabilities) denominated in Canadian and Australian dollars into US dollars for reporting purposes. Although balance sheet translation effects are primarily non-cash in nature, they can have a significant impact on the Company’s net income. At 31 December 2006, the closing value of the US dollar against the Canadian dollar was approximately the same compared to the value at 31 December 2005. At 31 December 2006, the closing value of the US dollar was 8% higher against the Australian dollar than the value at 31 December 2005.

Income from continuing operations for 2006 included a net after-tax charge of $98 million for OSIs, a decrease of $572 million compared to 2005. In 2006, OSIs included after-tax charges of $115 million mainly related to restructuring initiatives across all Business Groups, asset impairment charges of $51 million mainly related to the Affimet aluminum recycling plant in Compiègne (France) and the Gove alumina refinery in Australia, a net loss on

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business divestments of $23 million principally in relation to the sale of the Packaging bottles business, partially offset by favourable tax adjustments of $79 million, principally related to a deferred tax benefit arising from a reduction in the Canadian federal tax rates enacted in June 2006 and a gain of $41 million arising on the sale of bankruptcy claims against Enron.

After including the results of discontinued operations and the cumulative effect of an accounting change, the Company’s net income was $1,786 million in 2006, an increase of $1,657 million compared to 2005.

2005 vs. 2004

In 2005, income from continuing operations was $155 million, a decrease of $88 million compared to 2004. Lower results for 2005 reflected increased charges for OSIs of $266 million, offset in part by a positive year-over-year change in foreign currency balance sheet translation of $67 million. 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 aluminum 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 US dollar on operating costs and the loss of contribution from the rolled products businesses spun-off into Novelis on 6 January 2005. Cost pressures were especially severe in the Packaging business where prices for raw materials, most notably resins and films, experienced a sharp increase since mid-2004. The Packaging Business Group was largely successful in mitigating the resulting pressure on margins through selling price increases and operational improvements.

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. While lower than in the previous year, the translation losses in 2005 reflected the continued weakening of the US dollar against the Canadian dollar, partially offset by the appreciation of the US dollar against the Australian dollar. At 31 December 2005, the closing value of the US dollar was 3% lower against the Canadian dollar than the value at 31 December 2004. At 31 December 2005, the closing value of the US dollar was 7% higher against the Australian dollar than the value at 31 December 2004.

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. 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, US) cast plate facility. Also included in OSIs was a goodwill impairment charge of $122 million. As required under US GAAP, the Company annually tests for goodwill impairment. Due to an increasingly competitive environment for Global Beauty Packaging, the Company concluded that part of the goodwill associated with this business should be written down. OSIs also reflected costs of $57 million incurred in connection with the capture of Pechiney acquisition synergies.

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 $66 million related to two rolling mills in Italy; restructuring charges of $41 million mainly related to the closures of two rolled products facilities in the UK 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 Novelis Spin-off.

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, a decrease of $129 million compared to 2004.

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Sales and Operating Revenues

Revenues and Aluminum Volumes

*  Includes ingot shipments (primary, secondary and scrap) and, in respect of 2004, rolled products shipments.

Sales Price Realizations

2006 vs. 2005

Sales and operating revenues were $23.6 billion in 2006, an increase of $3.3 billion, or 16%, compared to 2005. The increase principally reflected higher aluminum prices, improved sales mix and pricing as well as higher downstream volumes. LME aluminum prices were up on average 37% compared to 2005 reflecting extremely strong industry fundamentals. Improved sales mix and pricing were mainly attributable to price increases in the downstream businesses to recover raw material price escalation, most notably in respect of aluminum. Increased volumes across most Engineered Products businesses and the Food Americas and Tobacco Packaging businesses also contributed to higher revenues.

2005 vs. 2004

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 6 — Spin-Off of Rolled Products Businesses to the 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.

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Revenues by Market

	2006		2005		2004
Packaging		27%		30%		37%
Aluminum Ingot		33%		30%		17%
Beverage Cans		3%		3%		10%
Building and Construction		3%		3%		6%
Electrical		3%		3%		3%
Transportation		7%		8%		8%
Other		24%		23%		19%
Total		100%		100%		100%

Costs and Expenses

Over the last three years, Alcan’s costs have increased due to escalating prices for energy, freight and key raw materials such as coke, pitch, plastics and resins as well as from the impact of the weaker US dollar. Alcan has been able to partially offset the cost penalty through higher selling prices for end products, productivity improvements and more efficient use of raw materials. While the depreciation of the US dollar was not as pronounced in 2006 compared to prior years, it nonetheless had an unfavourable impact on costs incurred in other currencies, which are translated into US dollars for reporting purposes. The economic impact of the depreciation in the US 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 US dollar revenues. This has resulted in escalating costs in US dollar terms without any offsetting increase in revenues in US dollar terms, inflating overall costs as a percentage of sales.

Continuous Improvement (CI) remains 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 over $250 million to Business Group Profit (BGP) since the introduction of CI in 2003. Refer to the Operating Segment Review on page 59 for a definition of BGP. Alcan now has about 3,000 trained CI experts, known as Black Belts and Green Belts, throughout the Company.

Costs and Expenses

	For the Year Ended
			% of					% of				% of
	2006		Sales		2005			Sales		2004		Sales
	(In millions of US$, except where indicated)
Cost of sales and operating expenses		17,990		76.1		16,135			79.4		20,270		81.2
Depreciation and amortization		1,043		4.4		1,080			5.3		1,337		5.4
Selling, administrative and general expenses		1,475		6.2		1,402			6.9		1,615		6.5
Research and development expenses		220		0.9		227			1.1		239		1.0
Interest		284		1.2		350			1.7		346		1.4
Restructuring charges — net		179		0.8		685			3.4		87		0.3
Other expenses (income) — net		77		0.3		(4	)		—		321		1.3

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Total Aluminum Volume and Purchases

*  Includes ingot shipments (primary, secondary and scrap) and, in respect of 2004, rolled products shipments.

2006 vs. 2005

In 2006, cost of sales and operating expenses were 76.1% of sales and operating revenues compared to 79.4% in 2005. The improvement mainly reflected higher realized prices for aluminum and products sold through downstream businesses together with increased volumes in the downstream businesses, which more than offset increased energy and raw material costs and the negative impact of the weaker US dollar. Both the Packaging and Engineered Products businesses were successful in increasing selling prices to offset most of the increase in aluminum input prices.

Depreciation and amortization expense was $1,043 million in 2006, a decrease of $37 million compared to 2005. The slight decrease primarily reflecting the reduced asset base in the Packaging business due to business disposals and asset impairments related to the restructuring program announced in 2005.

In 2006, selling, administration & general expenses (SA&G) were $1,475 million, $73 million higher than in 2005. The increase in 2006 was mainly attributable to higher share-based compensation and a weaker US dollar, partially offset by the impact of Novelis Spin-off costs included in the prior-year expenses. SA&G as a percentage of sales and operating revenues was 6.2% in 2006 compared to 6.9% in 2005. The Company believes that it can reduce expenses as a percentage of sales to approximately 6% by the end of 2007 and that SA&G will be around $1,400 million in 2007.

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 as illustrated by the announcement in December 2006 of a refocusing of the Primary Metal Business Group’s R&D efforts around key centres in France and Quebec. In addition, downstream businesses are focused on 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 $220 million in 2006, comparable with prior-year spending of $227 million.

2005 vs. 2004

In 2005, cost of sales and operating expenses were 79.4% of sales and operating revenues compared to 81.2% in 2004. 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 US 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.

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.

Following the acquisition of Pechiney at the end of 2003, 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. The increase in large part reflects the changing composition of Alcan’s structure and in particular the greater relative weight of the

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downstream businesses. 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.

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.

Interest

Interest

2006 vs. 2005

Interest expense was $284 million in 2006, compared to $350 million in 2005. The decrease is largely attributable to a lower level of debt outstanding throughout the year as well as a larger amount of capitalized interest, which more than offset the impact of a higher cost of debt.

Alcan’s effective average interest rate on debt was 5.8% in 2006 compared to 5.6% in 2005. The increase in the rate in 2006 compared to 2005 mainly reflected higher short-term borrowing rates on commercial paper. 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 31 December 2004 was adjusted on a pro-forma basis for the debt settlement related to the Novelis Spin-off.

2005 vs. 2004

Interest expense was $350 million in 2005, compared to $346 million in 2004. 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.

Alcan’s effective average interest rate on debt was 5.6% in 2005 compared to 3.7% in 2004. 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.

Restructuring Charges — Net

2006

In 2006, the Company recorded restructuring charges of $179 million. The most significant items included charges of $46 million in connection with the restructuring plan announced in the Packaging business in 2005; charges of $38 million related to the proposed sale of selected assets at the Company’s Affimet aluminum recycling plant in Compiègne (France); charges of $23 million in relation to the Midsomer Norton Packaging plant closure in

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the UK; charges of $13 million related to the closure of the Engineered Products’ Workington plant in the UK; charges of $12 million related to the closure of the aluminum smelter in Lannemezan (France); and charges of $12 million related to the reorganization of the Company’s global specialty aluminas business, including the closure of the specialty-calcined alumina plant in Jonquière (Quebec, Canada).

2005

In 2005, the Company recorded restructuring charges of $685 million. The most significant items included charges of $485 million in connection with 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.

2004

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 US and France; charges of $19 million related to the consolidation of UK aluminum sheet rolling activities in Rogerstone (UK); charges of $14 million related to the permanent shutdown of Söderberg capacity at a primary aluminum facility in Saguenay (Quebec, Canada); and charges of $7 million related to the closure of two corporate offices in the UK and Germany.

Other Expenses (Income) — Net

2006

In 2006, the Company recorded other expenses (net of other income) of $77 million. The most significant items included: asset impairment charges not related to restructuring plans of $40 million related principally to the Gove alumina refinery in Australia and certain Primary Metal and Engineered Products assets in Canada; foreign exchange losses of $31 million; losses of $27 million related to the marking-to-market of derivatives; $13 million of costs related to the sale of receivables program; and environmental provisions of $34 million principally for asset retirement obligation adjustments related to closed sites, partly offset by recoveries of $62 million for the sale of claims related to the Enron bankruptcy and interest revenue of $40 million.

2005

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 not related to restructuring plans 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 $115 million related to the marking-to-market of derivatives; and foreign exchange gains of $56 million.

2004

In 2004, the Company recorded other expenses (net of other income) of $321 million. The most significant items included: asset impairment charges not related to restructuring plans of $70 million principally related to certain rolling assets in Italy; 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.

Income Taxes

2006

Income tax expense of $665 million for 2006 represented an effective tax rate of 28%. This compares to a composite of the applicable statutory corporate income tax rate in Canada of 33%. In 2006, the difference between

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the effective and composite tax rates was due principally to a reduction in the Canadian Federal tax rates, as well as investment and other allowances arising mainly from tax credits on R&D expenditures.

A full reconciliation between the Canadian composite statutory tax rate and the effective tax rate is presented in note 9 — Income Taxes to the Financial Statements.

2005

Income tax expense of $257 million for 2005 represented an effective tax rate of 80%. This compares to a composite of the applicable statutory corporate income tax rate in Canada of 32%. 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.

2004

Income tax expense of $375 million for 2004 represented an effective tax rate of 65%. This compares to a composite of the applicable statutory corporate income tax rate in Canada of 32%. 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.

Goodwill

2006 vs. 2005

At the end of 2006, Alcan had $4,599 million of goodwill on its balance sheet, compared to $4,713 million at the end of 2005. The decrease in goodwill in 2006 mainly reflected adjustments associated with a decrease in the valuation allowance related to future income tax assets acquired in the Pechiney acquisition as well as a reduction due to the disposition of various businesses throughout the year, partially offset by foreign exchange adjustments.

2005 vs. 2004

At the end of 2005, Alcan had $4,713 million of goodwill on its balance sheet, compared to $5,496 million at the end of 2004. The decrease in goodwill in 2005 reflected amounts transferred to Novelis, foreign currency translation effects and an impairment charge. As required under US 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 Business Group, mainly in Europe.

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LIQUIDITY AND CAPITAL RESOURCES

Operating Activities

Cash Flow from Operating Activities and Free Cash Flow from Continuing Operations

Free Cash Flow from Continuing Operations — Reconciliation with Cash Flow from Operating Activities^*

	For the Year Ended
	2006			2005			2004
	(In millions of US$)
Cash flow from operating activities in continuing operations		3,040			1,535			1,739
Dividends
Alcan shareholders (including preference)		(267	)		(224	)		(223	)
Minority interests		(2	)		(2	)		(13	)
Capital expenditures in continuing operations		(2,081	)		(1,742	)		(1,269	)
Free Cash Flow from Continuing Operations		690			(433	)		234

^* Certain prior period amounts have been reclassified to conform with the current period presentation.

2006 vs. 2005

Up to the beginning of 2006, the Company had demonstrated several consecutive years of strong financial discipline and improving working capital management, giving rise to strong cash flows from operating activities in continuing operations. During 2006, sharply higher earnings driven primarily by increased strength in aluminum fundamentals combined with the Company’s continued financial discipline to produce a record cash flow from operating activities in continuing operations of $3,040 million. Aluminum prices on the benchmark LME averaged 37% higher than in the prior year. Operating working capital increased by $568 million in 2006 mainly reflecting increases in receivables and inventories of $443 million and $263 million, respectively, partially offset by an increase in payables of $138 million. The higher level of receivables and inventories at the end of 2006 mainly reflected the impact of rising metal prices.

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. US 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 US GAAP is cash flow from operating activities in continuing operations, as shown above.

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Free cash flow from continuing operations was $690 million in 2006 compared to negative $433 million in 2005. The significant improvement in 2006 was due to much higher earnings driven by increased aluminum prices as outlined above. In August 2006, the Company announced its decision to increase the quarterly dividend from $0.15 to $0.20, an increase of 33%. Capital expenditures are further discussed under “Investment Activities”.

2005 vs. 2004

In 2005, cash flow from operating activities in continuing operations was $1,535 million, down $204 million from 2004 but a strong performance given 2004 cash flows included contributions of approximately $224 million from the Company’s former rolled products businesses spun off as Novelis on 6 January 2005. In 2005, cash flow benefited from higher prices and volumes for aluminum ingot and fabricated products. Operating working capital increased by $388 million in 2005 mainly reflecting an increase in receivables of $331 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 $1,739 million. Operating working capital increased by $199 million in 2004 mainly reflecting an increase in receivables of $437 million, partially offset by an increase in payables of $214 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.

Free cash flow from continuing operations was negative $433 million in 2005 compared to positive $234 million in 2004. 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. Capital expenditures are further discussed under “Investment Activities”.

Financing Activities

Total Borrowings and Equity

*	Includes borrowings of operations held for sale
**	Includes minority interests and preference shares
***	Definition on page 55

2006 vs. 2005

Cash used for financing activities in continuing operations was $1,111 million in 2006, mainly reflecting debt repayments and the repurchase of Common Shares. The Company’s strong cash flows enabled the repayment of approximately half a billion dollars of debt. In October 2006, Alcan announced a share repurchase program of up to 5% of the Company’s 376,000,000 total Common Shares outstanding, reflecting the Company’s positive cash-flow outlook, disciplined approach to capital allocation and commitment to shareholder value. As at 31 December 2006

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the Company had repurchased a total of 9,831,200 Common Shares for a total cost of $466 million, representing some 52% of the total number of Common Shares approved for repurchase.

Effective 16 June 2006 the Company replaced its $3-billion, multi-currency, five-year, committed global credit facility, in place since April 2004, with a new two-tranche multi-currency, committed global credit facility with a syndicate of international banks. This new facility is comprised of a $2-billion, five-year tranche, and a $1-billion, 364-day tranche that may be extended by two years at the Company’s option. This facility is available for general corporate purposes and is primarily used to support the commercial paper programs.

On 2 May 2006 the Company repaid its € 600 million 5.5% million Euro note maturing on the same day. The repayment was financed through the issuance of commercial paper.

2005 vs. 2004

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 addition to its existing $3-billion commercial paper program in Canada, the Company reinstated in 2005 two new commercial paper programs, one in France of € 1 billion and another in the US of $2 billion. The Company guarantees the commercial paper issued under the two new programs. Starting April 2005, Alcan Pechiney Finance SA replaced Pechiney as the commercial paper issuer in Europe. In October 2005, a new commercial paper program in the US 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 Novelis Spin-off. 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 was replaced in June 2006. 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 then 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.

Liquidity

As at 28 February 2007, Alcan has $0.8 billion of commercial paper outstanding. Based on the Company’s forecasts, the Company believes that 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 provides any additional liquidity that may be required to meet unforeseen events. Alcan’s long-term debt rating remains unchanged at BBB+ / Baa1 with short-term debt rated A2 / P2 by S&P’s and Moody’s respectively. Credit rating agencies apply their own criteria and may change the ratings at any time.

Debt as a Percentage of Capital

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 on page 56 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

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widely used by the investment community and credit rating agencies to assess the relative amounts of capital put at risk by debtholders and equity investors.

Debt as a percentage of invested capital was 35% at the end of 2006, down from 40% in 2005 and 46% in 2004. The decrease in debt in 2006 compared to 2005 was due to the repayment of $540 million of debt enabled by record cash flows from operating activities. The drop in the debt balance in 2005 compared to 2004 reflected the impact of the Novelis Spin-off.

In line with its objective to maintain a solid investment grade credit rating, Alcan has a target debt to invested capital ratio of 35%. With record cash flows in 2006, the Company was able to achieve its target ratio as at the end of 2006, despite the impact of the share repurchase program and the adoption of a new accounting standard for pension and other post-retirement benefits.

Debt as a Percentage of Invested Capital

	As at 31 December
	2006		2005		2004
	(In millions of US$)
Debt
Short-term borrowings		467		348		2,486
Debt maturing within one year		36		802		569
Debt not maturing within one year		5,476		5,265		6,345
Debt of operations held for sale		—		—		5
Total debt		5,979		6,415		9,405
Equity
Minority interests		71		67		236
Shareholders’ equity
Redeemable non-retractable preference shares		160		160		160
Common shareholders’ equity		10,934		9,484		10,566
Total equity (including minority interests)		11,165		9,711		10,962
Invested capital		17,144		16,126		20,367
Debt as a Percentage of Invested Capital (%)		35		40		46

Investment Activities

2006 vs. 2005

In 2006, cash used for investment activities in continuing operations was $1,909 million, mainly reflecting capital expenditures of $2,081 million. Capital expenditures increased year over year due mainly to the expansion of the Gove alumina refinery in Australia. Spending on the Gove expansion was $993 million in 2006 compared to $769 million in 2005.

2005 vs. 2004

In 2005, cash flow from investment activities in continuing operations was $947 million. This reflected the receipt of about $2.6 billion in settlement of amounts due from Novelis, partially offset by $1,742 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 in continuing operations was $1,708 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.

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Capital Expenditures and Depreciation in Continuing Operations

Capital Expenditures

2006 vs. 2005

Capital expenditures for 2006 were $2,081 million, up $339 million from 2005 mainly reflecting an increase in spending on the Gove expansion. In 2006, the Company spent $993 million on the Gove expansion compared to $769 million in 2005. The total cost of the project is expected to be approximately $2.3 billion, exceeding the original budget as a result of Australian construction market conditions, additional tie-in integration requirements and weather-related costs as well as the strengthening Australian dollar since the project investment decision was made in the fall of 2004. Production start-up of the expansion is expected to commence in the second quarter of 2007.

Excluding capital expenditures on the Gove expansion and other major projects, capital spending was in line with the level of depreciation and amortization expense for the last three years, a reflection of the Company’s continuing emphasis on financial discipline. In 2007, Alcan’s capital spending excluding equity-accounted Joint Ventures is expected to be approximately $1.9 billion, including about $400 million of spending to complete the Gove expansion and $100 million for the potential Kitimat smelter modernization in Canada. The Company plans to fund these requirements using internally generated cash flow. Excluding major projects, the remaining capital expenditures are expected to be in line with depreciation.

2005 vs. 2004

Capital expenditures for 2005 were $1,742 million, up $473 million from 2004 mainly reflecting a full year of spending on the Gove alumina refinery expansion. In 2005, the Company spent $769 million on the Gove expansion compared to $100 million in 2004. 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.

Acquisitions and Divestments of Businesses and Investments

Alcan continues to take important strategic steps to significantly transform its portfolio towards higher growth and higher value-added businesses. Most notable among these steps was the acquisition of the remaining 70% stake in Carbone Savoie (a leading producer of cathode blocks) and certain related technology and equipment in December 2006, and the Novelis Spin-off in January 2005.

Acquisitions/Investments

Cash used for acquisitions was $201 million in 2006 compared to $112 million in 2005 and $466 million in 2004.

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On 6 December 2006 Alcan acquired the remaining 70% stake of Carbone Savoie and certain related technology, and equipment from Graftech International Ltd. for $131 million. Aside from securing Alcan’s supply of such products for current and future operations, the acquisition is a key component of Alcan’s technology platform and will assist in Company efforts to develop potential breakthrough technologies.

During 2006 and 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 Business Groups. For further details refer to the Operating Segment Review on pages 59 to 72 and note 19 — Sales and Acquisitions of Businesses and Investments to the Financial Statements.

On 24 November 2006 the Company announced that a long-term energy supply contract had been secured with South African utility ESKOM Holdings Limited, in respect of a proposed 720-kt/y smelter to be constructed at Coega (South Africa) at an estimated cost of $2.7 billion. Should this project proceed, Alcan currently plans to retain between 25% and 40% of the equity. The definitive position of the Company on the size of any retained interest, including something substantially greater, will necessarily depend on its final assessment of the various opportunities offered by the project.

During 2006, the Company, together with Oman Oil Company S.A.O.C. and the Abu Dhabi Water and Electricity Authority, commenced construction of a $1.7-billion primary aluminum smelter in Sohar (Oman). Alcan has 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 a 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.

Divestments

Proceeds from the disposal of businesses, investments and other assets totalled $307 million in 2006 compared to $266 million in 2005 and $35 million in 2004.

During 2006, a number of divestments were completed as part of ongoing efforts to optimize the portfolio of businesses in both the Engineered Products and Packaging Business Groups. The most significant sales included selected assets of the North American Food Packaging plastic bottle business to Ball Corporation for $182 million, the Wheaton Science Products business in the US for $35 million, and the Cebal Aerosol business for proceeds of $16 million. For further details refer to the Operating Segment Review on page 59 and note 19 — Sales and Acquisitions of Businesses and Investments to the Financial Statements.

Assets and businesses disposed of in 2005 included the Company’s controlling interest in Aluminium de Grèce S.A. and Pechiney Électrométallurgie, a portfolio holding in Impress Metal for $60 million, plate operations in the UK for $51 million and a print finishing business in the UK for $29 million. Proceeds were included in cash flow from investment activities in discontinued operations.

Assets and businesses disposed of in 2004 included the packaging operations of the Boxal Group and Suner Cartons and certain assets of the ores and concentrates trading operations, including the lead and zinc trading business. Proceeds were included in cash flow from investment activities in discontinued operations.

Novelis Spin-Off

On 6 January 2005, Alcan completed the Novelis Spin-off to its shareholders. Novelis consists of substantially all of the aluminum rolled products businesses held by Alcan prior to its 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 agreements giving effect to the Novelis Spin-off provided for the resolution of outstanding matters and various post-transaction adjustments, most of which were carried out by the parties in 2006.

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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 was reduced by $2.5 billion during 2005. For further details, refer to note 6 — Spin-Off of Rolled Products Businesses and note 27 — Commitments and Contingencies to the 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 31 December 2006. There are no material off-balance sheet arrangements.

Contractual Obligations

	Payments Due by Period
									2012 and
As at 31 December 2006	Total		2007		2008-2009		2010-2011		Thereafter
	(In million of US$)
Long-term debt(1)		5,512		36		537		1,270		3,669
Interest payments(1)		3,768		306		586		522		2,354
Capital lease obligations(2)		29		6		6		2		15
Operating leases(2)		442		74		125		86		157
Purchase obligations(2)		6,252		1,272		1,050		976		2,954
Unfunded pension plans(3)		2,455		64		137		138		2,116
Other post-employment benefits(3)		2,777		65		144		158		2,410
Funded pension plans(3)(4)		(4)		289		590		608		(4)
Guarantees(2)		279		16		191		1		71
Total				2,128		3,366		3,761

(1)	Interest payments are calculated using the interest rate in effect, including the impact of interest rate swap agreements on $600 million of fixed rate long-term debt and the outstanding debt balance as at 31 December 2006. All commercial paper borrowings and interest payments thereon have been included in 2011 when the long-term credit facility matures. Refer to note 22 — Debt Not Maturing Within One Year to the Financial Statements.
(2)	Refer to note 27 — Commitments and Contingencies to the Financial Statements.
(3)	Refer to note 31 — Post-Retirement Benefits to the Financial Statements.
(4)	Pension funding generally includes the contribution required to finance the annual service cost, except where the plan is largely overfunded, and amortization of unfunded liabilities over periods of 15 years, with larger payments made over the initial period where required by pension legislation. Contributions depend on actual returns on pension assets and on deviations from other economic and demographic actuarial assumptions. Based on management’s long-term expected return on assets, annual contributions for years after 2011 are projected to be in the same range as in prior years and to grow in relation with payroll.

OPERATING SEGMENT REVIEW

Throughout 2006, 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. A reconciliation of the

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Company’s BGP to income from continuing operations is presented in note 33 — Information by Operating Segments to the Financial Statements.

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 US 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 Novelis Spin-off in January 2005, 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 (Switzerland), and Ravenswood (West Virginia, US); all of which are part of the Engineered Products Business Group. The Singen facility in Germany is shared between the Engineered Products and Packaging Business Groups. The Sierre facility in Switzerland is shared between the Engineered Products Business Group and Novelis.

Financial and operating information for businesses transferred to Novelis in January 2005 are included in Alcan’s financial statements and MD&A for 2004. For details regarding the 2004 results of entities transferred to Novelis on 6 January 2005, please refer to the 2005 Annual Report on page 55.

Additional operating segment information is presented in note 33 — Information by Operating Segments to the Financial Statements. The information that follows is reported by operating segment on a stand-alone basis. Transactions between Business 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 Engineered Products and Packaging operations. Earnings from the downstream operations represent only the value-added portion of the profit from their sales.

Bauxite and Alumina

Business Description:  The Bauxite and Alumina (B&A) Business Group is comprised of 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. B&A also purchases bauxite and alumina from third parties. At the end of 2006, the group’s smelter-grade alumina production capacity stood at 5.3 Mt/y, while its specialty aluminas production capacity stood at 0.6 Mt/y.

Business Group Target:  The Business Group aims to position its production base around low-cost bauxite and alumina assets. The Business Group target is framed by reference to relative position on the industry cost curve. Accordingly, the target is to maintain 75% of production at cost levels better than world average by 2009. This target was set based on the expectation that the Gove refinery in Australia would be converted to natural gas by 2009. By the end of 2006, it had become clear that the natural gas project upon which this target timetable depended had been effectively abandoned by its proponents, making any delivery of natural gas to Gove in the immediate future unlikely. In 2006, none of the Business Group’s refining capacity was in the first quartile while 33% of production was at costs that were lower than the world average. In 2005, close to 33% of the Business Group’s refining capacity was in the first quartile of the industry cash cost curve, while 36% of the production was at costs that were lower than the world average.

Recent Business Developments:  As part of its reorganization of its global speciality aluminas business, Alcan announced in May 2006 that it would close its specialty-calcined alumina plant in Jonquière, Quebec, and redirect operations towards smelter-grade alumina production while also transferring a portion of the specialty alumina production to its Gardanne facility in France.

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In June 2006, Alcan announced the signing of a Memorandum of Understanding with the Republic of Ghana for the creation of a Joint Venture between Alcan (51%) and Ghana (49%) to explore the feasibility of developing a bauxite mine and alumina refinery, with an initial capacity of 1.5 Mt/y to 2 Mt/y.

In September 2006, Alcan announced that the Queensland Department of Natural Resources, Mines and Water had given approval for mining to commence on its Ely bauxite deposit near Weipa, on Queensland’s Western Cape York Peninsula. The Ely deposit has a reserve of close to 50 Mt/y be mined over a period of approximately 25 years.

In November 2006, Alcan signed a Memorandum of Understanding with Access Madagascar Sarl, a Malagasy Company holding exploration rights in Madagascar’s south eastern Manantenina District, to jointly study the development of a bauxite mine and alumina refinery, which would have an initial capacity of 1.0 Mt/y to 1.5 Mt/y of alumina.

The Alumar expansion project in Brazil, in which the Company holds a 10% interest, is progressing well and had reached a completion level of 40% by year-end. The expansion should increase Alumar’s production to 2.1 Mt/y. The Company’s throughput is expected to come on stream in the second half of 2009.

The 1.8-Mt/y expansion of the Gove alumina refinery in Australia, which began in late 2004, has continued at a rapid pace with production expected to ramp-up progressively beginning in the second quarter of 2007 and continuing through to the first quarter of 2008. When fully operational in 2008, the expanded facility is expected to have the capacity to produce 3.8 Mt/y of smelter grade alumina and will achieve significant efficiency and environmental performance gains. The total cost estimate of the project has been revised to $2.3 billion to account for tight market conditions in Australia for labour and materials, additional construction requirements, weather-related delays, and a stronger Australian dollar.

On 10 January 2007, a country-wide general strike was initiated in Guinea, consequently disrupting mining operations at Compagnie des Bauxites de Guinée (CBG), in which Alcan holds an interest. The strike brought a stop to bauxite mining, drying, rail transportation and ship loading operations for a period of 18 days in January and for another four days in February. On 16 February 2007, the CBG bauxite mine operations resumed on a limited basis. The political unrest is yet to be resolved as negotiations are under way between union leaders and government officials. The Company currently estimates a negative pre-tax BGP impact of approximately $30 million as a result of the strike.

Financial Results

	For the Year Ended						% Increase (Decrease)
	2006		2005		2004*		2006			2005
Third-party sales and operating revenues (US$M)		1,844		1,478		1,487		25			(1	)
Intersegment sales and operating revenues (US$M)		2,001		1,515		1,575		32			(4	)
Third-party shipments (kt)		3,602		3,463		3,838		4			(10	)
Intersegment shipments (kt)		6,054		5,879		4,967		3			18
Hydrate production (kt)		5,477		5,665		5,630		(3	)		1
BGP (US$M)		609		435		460		40			(5	)

* Data has been restated to exclude entities transferred to Novelis.

2006 vs. 2005

Revenues:  In 2006, Business Group revenues increased 28% compared to 2005 as a result of higher alumina prices, partially offset by lower volumes. Alumina prices, which are largely linked to the LME price for aluminum, benefited from the 37% increase in the average 3-month LME aluminum price year over year. In addition, strong demand for alumina, largely driven by continued strength in the Chinese economy, caused the alumina market during the first half of the year to be extremely tight. Unprecedented Chinese alumina production growth in the second half 2006 alleviated the situation, causing spot prices in the later part of the year to return to more normal levels.

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Production:  In 2006, three of the Company’s five refineries achieved record production levels. The Jonquière plant exceeded its nameplate capacity by 94 kt. Gove production was negatively impacted by a cyclone in April 2006, accelerated maintenance on precipitators in the first half of 2006, and commissioning activities related to the expansion in the second half of 2006. Total production was lower by 188 kt/y year over year. In 2006, record bauxite production levels were established at Mineração Rio do Norte S.A. (MRN) in Brazil and in Ghana.

BGP:  The Business Group’s record level BGP of $609 million reflected higher LME-linked contract prices for alumina, partially offset by higher input and operating costs, the impact of unfavourable currency movements particularly in relation to the Australian dollar. Average production costs were 20% higher over the prior year due to unfavourable volume effects, largely non-recurring additional maintenance and labour costs at Gove and the commissioning of some components of the Gove expansion. Average alumina production costs were also impacted to some degree by higher energy and caustic soda costs. The Business Group’s higher energy costs reflected its relative dependence on crude oil, the price of which increased around 20% year over year.

In 2006, six refineries produced specialty aluminas for a wide range of applications, including solid surface products, refractory bricks, ceramics, catalysts, absorbents and public water treatment. In 2006, BGP for B&A from the specialty alumina business was $27 million, an increase of 13% year over year, despite recognizing $3 million of closure costs related to the Jonquière plant in Quebec.

2005 vs. 2004

Revenues:  In 2005, revenues were approximately the same compared to 2004 as higher alumina prices were offset by lower volumes and an unfavourable mix resulting from lower spot sales in 2005. Alumina prices benefited from the 10% increase in the average 3-month LME aluminum price year over year. In addition, strong demand for alumina, largely driven by the strength of the Chinese economy, caused the alumina supply to be extremely tight, which kept prices on the spot market at very high levels.

Production:  In 2005, total production exceeded the prior year’s 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 Business Group’s bauxite production also established a 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 US 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 Business Group’s cost reduction efforts and the implementation of best practices across the Business Group helped to mitigate some of the increase.

BGP:  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 US 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 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 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

Business description:  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 Business Group comprises smelting operations, power generation, production of primary value-added ingot, manufacturing of smelter anodes, smelter cathode blocks 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 (including the Sohar smelter currently under construction in Oman), 12 power facilities in four countries and 12 technology and equipment sales centres and engineering operations in 10 countries. The Business Group operates at a current capacity of 3.5 Mt/y. In addition to LME grade ingot, the Primary Metal Group produces value-added aluminum in the form of sheet ingot,

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extrusion, billet, rod and foundry ingot for other Alcan plants and third-party customers serving the transportation, building and construction, consumer goods and industrial products sectors. Alcan’s competitive strength in smelting is underpinned by its excellent position in energy, a key input in the production of aluminum. Approximately 50% of the Business Group’s energy requirements for smelting are met by self-generated, environmentally sustainable power, compared with an industry average of about 28%. A further 45% of Alcan’s power requirements are secured under competitive long-term contracts. With a focus on cost reduction, productivity improvement, operational excellence and technology development, Alcan continuously seeks to reinforce its low-cost primary metal position.

Business Group Target:  Consistent with Alcan’s strategy of leveraging the Company’s technology and power positions to minimize cash operating costs, the Primary Metal Business Group targets are framed by reference to relative position on the industry cost curve. Accordingly, the target is to maintain at least 80% of smelter production at cost levels better than world average by 2009. In 2006, 51% of the Business Group’s smelter capacity was in the first quartile while 87% of production was at costs that were lower than the world average. In 2005, close to 50% of the Business Group’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.

Recent Business Developments:  In January 2006, Alcan announced that it would begin the closure process of the 44-kt/y Steg smelter as well as the cessation of anode production in Sierre, both located in Switzerland. The closures were completed by the end of April 2006. The Business Group’s BGP for 2005 included $11 million of this amount.

As announced in October 2005, the Company commenced in June 2006 the definitive and progressive closure process of the 50-kt/y Lannemezan smelter in France. The closure is expected to be completed at the latest during the course of 2008, depending on economic and operational conditions.

In May 2006, the Company secured 40% of the energy required for a potential 280-kt/y expansion of its ISAL smelter in Straumsvik (Iceland). In an agreement signed with Reykjavik Energy, Alcan would purchase 200 MW of geothermal power beginning in 2010 for a period of 25 years.

In June 2006, the Company announced that its Quebec employees represented by the Canadian Auto Workers union had ratified a new collective labour agreement. The agreement covers an initial five-year period with an additional four-year term available.

In July 2006, Alcan announced that it had begun consultations with union and employee representatives for a proposed sale of selected assets at the Company’s Affimet aluminum recycling plant in Compiègne (France). Related closure costs as well as environmental provisions totalling $38 million were recorded. The divestiture is expected to be completed in the first quarter of 2007.

In July 2006, the Company decided to cease the aluminum metal trading activities carried out by Alcan Trading Ltd. in Zurich (ATL). The third-party metal trading business was exited and the metal sales and purchase activities of ATL reverted back to the relevant Business Groups.

In August 2006, the Company announced its intention to modernize its Kitimat smelter in British Columbia (Canada), through an approximate $1.8-billion investment subject to final Board approval and to the conditions of obtaining a new labour agreement, environmental permits and regulatory approval of a new power sales agreement. On 22 January 2007, Alcan filed leave to appeal the British Columbia Utilities Commission’s 29 December 2006 decision to reject the amended and restated Long-Term Energy Purchase Agreement between Alcan and BC Hydro.

In September 2006, the Company announced that it will build a $180-million aluminum spent pot lining recycling plant in Quebec’s Saguenay — Lac-Saint-Jean region. The plant is expected to begin pot lining treatment operations in the second quarter of 2008.

In October 2006, the Company announced that its Pechiney Nederland NV subsidiary will conduct a strategic review of alternatives, including the potential sale of the aluminum smelter in Vlissingen (Netherlands), in which it holds an 85% interest.

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In November 2006, the Company announced that it had secured a long-term supply agreement with South African energy firm, ESKOM Holdings Limited, for the purchase of up to 1,340 MW of electricity for its proposed 720-kt/y greenfield Coega aluminum smelter project, which will have a total estimated cost of $2.7 billion. The agreement provides for a 25-year supply, set to begin in 2010. Alcan’s current intention is to retain between 25% and 40% of the equity of the project and seek partners for the balance. Project financing is expected to account for approximately 60% of the total investment required.

In December 2006, the Company announced that it had completed the acquisition of the remaining 70% stake of Carbone Savoie that it did not already own, and certain related technology and equipment, from GrafTech International Ltd for $131 million.

In December 2006, the Company announced plans to build a $550-million pilot plant at its Complexe Jonquière site in Canada to develop the Company’s proprietary AP50 smelting technology. The pilot plant, which is expected to produce 60 kt/y of aluminum annually, is the first step in a planned $1.8-billion investment program in Quebec’s Saguenay — Lac-Saint-Jean region, which is expected to ultimately lead to a total of 450 kt/y of new, sustainable capacity. The announcement also included the reinforcement of Alcan’s power position in Quebec through the long-term extension of hydraulic leases and new power contracts which, taken together with Alcan’s proprietary system, provide a secure supply of approximately 2,600 MW of low cost power through to 2045.

In December 2006, the Company announced the launch of a R&D initiative centered at its centre in Voreppe (France), and focused on the AP series aluminum smelting technology.

In December 2006, a new long-term collective labour agreement was signed with the United Steelworkers union representing the Alma primary aluminum smelter in Quebec. The new contract covers an initial five-year term.

The construction of the $1.7-billion, 350-kt/y primary aluminum smelter in Sohar, Oman, which was announced in December 2005, and in which Alcan has a 20% stake, is progressing well and is on schedule and on budget. First smelter production is expected 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 will have the right to acquire up to 60% of a planned second potline of similar capacity.

Financial Results

	For the Year Ended						% Increase (Decrease)
	2006		2005		2004*		2006		2005
Third-party sales and operating revenues (US$M)		8,661		6,877		4,586		26		50
Intersegment sales and operating revenues (US$M)		2,486		1,898		3,741		31		(49	)
Aluminum production (kt)		3,406		3,420		3,273		—		4
Third-party shipments (kt)		4,333		4,339		6,296		—		(31	)
BGP (US$M)		2,962		1,751		1,462		69		20
Average realized price (US$/t)		2,618		2,036		1,876		29		9

* Data has been restated to exclude entities transferred to Novelis

2006 vs. 2005

Revenues:  In 2006, total sales and operating revenues reached an all time record of $11.1 billion, reflecting increased ingot realizations of 29% due to higher LME prices, product mix and premia, partially offset by lower market premia. Results included increased revenues from higher power generation and improved technology and smelting equipment sales at Electrification Charpente Levage (ECL) in France. The Business Group achieved new record sales of value-added products for sheet ingot, extrusion billet, small form foundry and rod, as well as for remelt ingot.

Production:  Primary aluminum production at 3,406 kt/y decreased by 14 kt/y compared to the prior year, due to the April closure of the Steg smelter in Switzerland, a lower operating rate from the smelter in the

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Netherlands, as well as decreased production from the ISAL smelter in Iceland due to a transformer failure in June 2006. This was partially offset by higher production from the 40%-owned Alouette and 25%-owned Aluminerie Bécancour (ABI) smelters in Quebec (Canada), as well as improved operating efficiencies across the Business Group. In 2006, 11 smelters out of 21 set new annual production records. In addition, the Company’s power facilities in Quebec (Canada) achieved a new production record of 2,257 MW; the previous record was set in 2004 at 2,213 MW. Average metal closing inventories decreased by 45 kt/y, or 24%, as compared to the prior year.

BGP:  BGP, at $2,962 million in 2006, was a record for the Business Group and represented a 69% increase over the previous year. The improvement reflected higher realized selling prices for ingot, improved product mix and premia, favourable power generation positions in the UK and Quebec (Canada), and higher technology and ECL equipment sales, as well as favourable balance sheet translation effects. These favourable factors were partially offset by increased alumina, purchased energy and fuel-related raw materials costs, the adverse effect of the weaker US dollar on operating costs, lower volumes and higher metal operating costs. The latter included an unfavourable adjustment of $30 million related to the re-evaluation of asset retirement obligations. Metal shipments decreased reflecting the closure of the Steg smelter in April 2006, a lower operating rate in the Vlissingen smelter in the Netherlands, and decreased production at the ISAL smelter in Iceland due to a power failure. The results included OSI charges of $24 million, mainly related to the restructuring of the Affimet aluminum recycling plant in Compiègne, France.

2005 vs. 2004

Revenues:  In 2005, Business Group revenues reached $8.8 billion, an increase of 5% over the prior year; reflecting increased LME prices and improved product premiums and mix. The significant year-over-year increase in third-party ingot product shipments principally reflected third-party sales of ingot to Novelis that were previously classified as intercompany sales.

Production:  In 2005, Alcan’s production of primary aluminum increased by 147 kt/y compared to 2004, 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 Alouette smelter and the restart in December 2004 of the idled production resulting from a strike at the ABI smelter in Quebec. Also contributing to the increase were benefits from production improvements at smelters in the UK, Australia and Canada. At the time, a number of records were set by the Company; half of the Business Group’s smelters set new annual production records in 2005; record sales levels were achieved globally for both remelt ingot and value-added products; the Business Group successfully reduced inventories to record low levels in all regions, and record power generation was achieved by the Company’s hydroelectric facilities in Kitimat (British Columbia, Canada).

BGP:  BGP, at $1,751 million in 2005, was a record for the Business Group at the time 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 ABI smelter and a full year of production at the smelter in China. These favourable factors were partially offset by the impact of the weaker US 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, Pechiney synergies benefits surpassed targets mainly reflecting increased procurement savings.

Engineered Products

Business description:  The Engineered Products (EP) Business Group is an inter-connected network of businesses that provide innovative, high value-added product solutions for a wide range of applications in aerospace, automotive, mass transportation, marine, electrical, beverage container, display and architectural and building markets. Organized into eight business units, the EP Business Group is focused on maximizing value and improving its BGP margin through the use of continuous improvement tools to achieve operational excellence and the active management of its product offering and portfolio. The group manufactures a wide range of 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,

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fibre reinforced plastic and foam-plastic. The group operates 55 facilities in 12 countries, two R&D centres, a global sales organization with offices in 27 countries and regions, and network service centres in 11 European countries specializing in value-added services and distribution support.

Business Group Target:  EP’s current target is to achieve a BGP margin from operations of 10% by 2009. In 2006, the Business Group made further progress toward its BGP margin target, reaching a BGP margin from operations of 8.0% up from 7.5% in the prior year. Although EP’s Business Group target is set by reference to BGP margin, the underlying aim is to improve return on capital employed (ROCE). EP’s ROCE was 11.9% in 2006 compared to 7.8% in 2005. ROCE does not have a uniform definition. At Alcan, ROCE is calculated by dividing operating earnings by average capital employed. Operating earnings is equal to income from continuing operations, excluding OSIs and foreign currency balance sheet translation effects, and before minority interests and after-tax interest expense. Capital employed is equal to the sum of borrowings, deferred income taxes, minority interests and shareholders’ equity.

The year-over-year improvement in BGP margin was especially noteworthy in light of the higher level of prices for aluminum and other key inputs that prevailed during 2006. The 10% margin target was set in the second half of 2005 based on the forward prices for aluminum at that time. As EP’s fabricating businesses pass through the higher cost of inputs, especially aluminum, resulting in higher revenues, the achievement of the margin target is expected to become increasingly challenging.

Financial Results

	For the Year Ended						% Increase (Decrease)
	2006		2005		2004*		2006			2005
Third-party sales and operating revenues (US$M)		7,146		6,015		5,525		19			9
Intersegment sales and operating revenues (US$M)		194		202		725		(4	)		NM
BGP (US$M)		567		403		379		41			6
BGP margin(%)**		7.7		6.4		6.1		20			5
BGP margin from operations(%)***		8.0		7.5		6.1		7			23

*	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 and foreign currency balance sheet translation
NM	Not meaningful

2006 vs. 2005

Revenues:  In 2006, third-party sales and operating revenues were $7.1 billion, up $1.1 billion from the prior year. Approximately two-thirds of the increase reflected the impact of passing through higher prices for aluminum in selling prices. The balance of the increase reflected a combination of volume and margin growth, of which the cable and composites businesses were the most significant contributors. The exit of certain non-core businesses during 2006 resulted in a year-over-year reduction in sales of approximately $50 million.

BGP:  BGP reached a record high $567 million in 2006, up $164 million, or 41%, over the prior year. Included in BGP for 2006 were OSI charges of $8 million, principally for restructuring and other provisions, and foreign currency balance translation losses totalling $12 million, compared to $61 million and nil, respectively, in 2005. Excluding OSIs and translation effects, BGP improved $123 million, or 27%, reflecting solid operating performances across all businesses, robust conditions in key end-markets in Europe and North America and the positive impact of metal inventory timing effects. These more than offset the higher cost of inputs, such as for resins and energy. Inventory timing effects occur during periods of rapid and sharp changes in LME aluminum prices, as was seen when prices rose in the latter stages of 2005 and early 2006. In such an environment, selling prices tend to respond more quickly to aluminum price increases than does the underlying cost of metal reflected in inventory and cost of goods sold, which is accounted for using moving average methodology. Even though commercial margins may be unaffected, accounting margins improve. The opposite effect occurs in a period of sharply declining prices.

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2005 vs. 2004

Revenues:  In 2005, third-party sales and operating revenues were $6 billion, up $490 million from the prior year, due to strong growth in 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:  BGP was $403 million in 2005, up $24 million, or 6%, over the prior year. Included in BGP were OSI charges of $61 million, principally related to 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, US) and the downsizing of the mass transportation systems business, compared to $4 million in 2004. 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.

Engineered Products Group — Revenues by Business Unit

	2006		2005
Aerospace Transportation & Industry (ATI)*		22%		23%
Composites		10%		10%
Cable		11%		10%
Extruded Products		13%		12%
Engineered and Automotive Solutions (EAS)		4%		3%
Alcan Service Centres (ASC)		7%		7%
Alcan International Network (AIN)		11%		14%
Specialty Sheet		21%		19%
Ventures		1%		2%
Total		100%		100%

* Includes Alcan Rolled Products — Ravenswood (West Virginia, US)

Engineered Products Business Units

The Aerospace, Transportation and Industry (ATI) business unit supplies high value-added plate, sheet, extruded and precision cast products for customers in the aerospace, marine, automotive and road transportation markets and engineering industry. 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. ATI is also a key supplier of new alloy solutions, such as aluminum-lithium. Comprising eight facilities in four countries, the unit is the No. 1 aluminum supplier to the aerospace industry in Europe and the second largest worldwide, as well as Europe’s leading supplier of large profile extrusions for the transportation market. During 2006, the Company reinforced its leading position in the growing market for aerospace plate products by increasing capacity in Europe and North America by 20%. In June, additional capacity came on stream following a $28-million investment at the Issoire facility in France, while the $29-million expansion of the Ravenswood (West Virginia, US) facility was near completion at year end. Plate capacity for industrial applications was also expanded at the Sierre facility in Switzerland. In July 2006, the Company announced that the Workington (UK) stringers and bars extrusion facility would cease operations by mid-2007, and production would be consolidated in other facilities. Demand and pricing for aerospace products was strong throughout 2006, which led ATI third-party sales and operating revenues to a record high of $1.6 billion, a year-over-year increase of 11%. Despite announcements by Airbus of delays in its A380 program, ATI was little affected due to continued supply to other Airbus programs (A320, A330) and the development of new business with other aerospace manufacturers. During the year, multi-year supply agreements were signed with Boeing, Bombardier Aerospace and with Transtar Metals, a supplier to the F-35 Joint Strike Fighter program. Alcan believes that the aerospace market will be a significant source of future profits, and that the Company is well positioned as a supplier of advanced lightweight aerospace products due to its global reach, proprietary alloys and unique

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equipment capabilities. For purposes of this discussion, ATI includes Alcan Rolled Products — Ravenswood (West Virginia, US).

The Composites business unit, which operates 13 facilities in eight countries in Europe, the Americas and Asia, manufactures and sells lightweight multi-material composites that are made using a combination of technologies and materials, such as aluminum, plastic, foam board, paper and balsa wood. Principal applications for composites produced by the unit include building facades, transportation, displays for visual communication, 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, design and surface variety. Total third-party sales and operating revenues in 2006 were $707 million, up 16% over the prior year driven by healthy demand and pricing across all segments. Demand for display products showed good year-over-year growth in Europe and North America, while structural core materials benefited from the continuing growth of the wind power market. Demand for architectural products increased substantially in the Middle East and Asia/Pacific regions. During 2006, the composites business was largely successful in passing through the higher cost of key raw materials, such as aluminum and resins. In April 2006, a paint-line was acquired in Changzhou, China, which will allow the architecture business to better participate in the rapidly growing Chinese building and construction market. In December 2006, the acquisition of a US-based structural urethane manufacturer, Penske Composites, was completed, further strengthening the portfolio of products offered by the core materials business.

The Cable business unit, which operates six plants in North America, is a fully integrated manufacturer of aluminum wire and cable, modular wiring systems, and rod and strip products for a variety of electrical and mechanical applications. Demand and pricing continued to be strong in 2006 and the business achieved record third-party sales and operating revenues of $806 million driven by sharply rising raw material costs that were recovered through price increases, compared to $618 million in 2005. The business also benefited from the high spread between copper and aluminum prices that prevailed during the year, which spurred increased demand for aluminum building wire in North America. In September 2006, the business launched its Modex^tm brand of modular wiring systems for the commercial construction market. Building on its acquisition of Prewired Systems in 2005, the business now offers a wide range of pre-fabricated wiring solutions.

The Extruded Products business unit, which operates nine plants in four European countries, is a leading producer of hard and soft alloy extrusions, including technically advanced products, for the automotive, electrical and building industries, as well as for manufacturers of mass transport vehicles and shipbuilders. In 2006, third-party sales and operating revenues reached $946 million, up 28% over 2005 mainly due to the impact of higher aluminum prices. Demand for extruded products was strong across all markets during 2006, but most notably for commercial transportation and construction applications. However, robust end-use demand led to tight supply and increasing premiums for extrusion billet, the feeder stock for the business, and product pricing could not fully recoup increases in aluminum prices, billet premiums and other input costs. During the year, a restructuring of the Sierre (Switzerland) and Singen (Germany) extrusion facilities was completed. In July 2006, construction started on a $35-million extrusion plant in Slovakia that will produce soft alloy products for the growing East European market.

In order to provide a stronger platform for profitable growth in the automotive and transportation sectors, in September 2006, EP reorganized certain of its transportation-related activities into a new business unit named Engineered and Automotive Solutions (EAS). This new business provides a wide array of sophisticated components and shapes for aluminum crash management systems, cockpit carriers, suspension parts, and other structural components. Using aluminum extrusions, forgings, castings and reinforced components, EAS leverages its superior engineering capabilities to provide innovative and cost effective solutions to customers in North America and Europe. The unit operates directly or with partners seven plants in six countries. Revenues in 2006 were $283 million, up 29% from pro forma 2005 revenues mainly due to higher LME aluminum prices and volumes.

Alcan Service Centres (ASC) business unit is a specialist distribution and value-added service network comprising 33 service centres in 11 countries. The unit provides customers in the aerospace, building and facade, road transport and shipbuilding industries with wide range of products, as well as light fabrication tailored to their requirements. In 2006, ASC had third-party sales and operating revenues of $512 million, up 24% over 2005. The

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increase reflected the pass through of higher costs for purchased materials, the generally stronger economic environment and a shift by the business towards value-added machining services. Demand was strong for aerospace plate, as well as for products used in industrial, transportation and building applications.

Alcan International Network (AIN) business unit, with 32 offices in 27 countries and regions, is engaged in selling and sourcing specialty products and materials for both Alcan and third-party 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. In 2006, AIN had third-party operating revenues of $814 million, 5% lower than in 2005. While sales were lower, results improved substantially due to the strong performance of the chemicals business and healthy demand for metal products in Japan, China and Europe.

The Specialty Sheet business unit manufactures coils and sheet for customers in the beverage and closures, automotive, customized industrial sheet, and high-quality bright surface products markets. It includes world-class rolling and recycling operations, as well as dedicated R&D capabilities. 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 $1.5 billion in 2006, up 33% from the prior year. While the increase largely reflected the impact of higher LME aluminum prices and the strengthening euro, the business was also successful in achieving volume, mix and margin improvements. Demand for sheet products in Europe grew at a somewhat faster pace than the general economy, driven by good growth in the beverage can and building sectors. During 2006, the Company announced several capital projects for the Neuf Brisach facility including a $10-million upgrade of annealing and quenching equipment for automotive applications, a $15-million expansion of finishing capacity for beverage can sheet and a $7-million investment to increase used beverage cans (UBC) recycling capabilities. In October 2006, a multi-year agreement was signed with Valeo (France), a leading auto parts manufacturer, for the supply of sheet for automotive heat exchangers.

Business exits

As part of its continuing focus on portfolio enhancement, EP exited a number of businesses in 2006 that offered limited value creation potential for the Business Group. Towards year-end, the Ventures business unit was disbanded following a reorganization of certain business activities. This unit had comprised operations that were under review by Business Group management in order to assess their strategic fit within the broader EP portfolio. These were typically smaller operations, which produced aluminum products for electronics and other industrial applications. The Ventures unit had third-party sales and operating revenues of $55 million in 2006. The portfolio review under way for the last two years is now largely completed and has led to the exit of the following activities:

•  General distribution (France)

•  Air freight containers (Germany)

•  Automotive castings (Germany)

•  Roll-bond (France)

•  High-purity smelting & rolling (France)

•  Mass transport systems (Switzerland)

•  Cast plate (US)

Packaging

Business description:  The Packaging Business Group consists of Alcan’s worldwide food, pharmaceutical and medical, beauty and personal care, and tobacco packaging businesses operating 130 plants in 30 countries and regions. This Business Group produces packaging from a number of different materials, including plastics, aluminum, paper, paperboard and glass.

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Business Group Target:  The Packaging Business Group’s current target is to achieve a BGP margin from operations of 15% by 2009. The operating BGP margin achieved for the year 2006 was 10%, down slightly from the level achieved in 2005 in an environment where competitors experienced margin erosion due to strong input cost pressures. Although Packaging’s Business Group target is set by reference to BGP margin, the underlying aim is to improve return on capital employed (ROCE). Portfolio restructuring, disciplined capital management and improved working capital performance helped ROCE increase from 3.9% in 2005 to 4.8% in 2006. It should be noted that these ROCE figures include the effect of purchase price accounting allocations made upon completion of the Pechiney acquisition.

Recent Business Developments:  During 2006, the Packaging Business Group continued to optimize the business. As well as the divestiture of five businesses that did not fit within the Business Group’s strategic plans (representing $325 million in cumulative sales across 13 sites), ongoing scrutiny was applied to certain other businesses, including Global Beauty Packaging and Food Packaging Europe, while focus continued to be applied to extending the Business Group’s presence in growing segments and geographies. The result is a better balanced footprint with 37 sites in emerging countries totalling 18% of sales and a manufacturing system comprised of fewer, larger, more specialized plants, better able to serve existing and future customers and intended to move the Business Group toward its targets. Implementation of this strategy in 2006 resulted in restructuring charges totalling $72 million, of which $39 million were reflected in the Business Group’s BGP.

For the Packaging Business Group the 2006 year was characterized by high raw material and energy prices as well as a weak European market. Within this context, the Business Group was successful in maintaining margins as volume grew due to an uncompromising pass through policy and significant cost reductions were achieved, in excess of inflation, through manufacturing and fixed cost reductions as well as procurement efficiencies. Capital spending was focused mainly on growth projects in order to extend the Business Group’s geographic footprint into emerging markets and gain market share in attractive segments.

Financial Results

	For the Year Ended						% Increase (Decrease)
	2006		2005		2004		2006			2005
Third-party sales and operating revenues (US$M)		5,960		6,004		6,024		(1	)		—
Intersegment sales and operating revenues (US$M)		4		5		69		NM			NM
BGP (US$M)		550		595		653		(8	)		(9	)
BGP margin (%)*		9.2		9.9		10.7		(7	)		(7	)
BGP margin from operations (%)**		10.0		10.4		10.9		(4	)		(5	)

*	BGP as a percentage of total third-party and intercompany sales and operating revenues
**	BGP margin excluding OSIs and foreign currency balance sheet translation
NM	Not meaningful

2006 vs. 2005

Revenues:  Third-party sales and operating revenues for 2006 were $6 billion, marginally below the previous year. Benefits from volume growth, price increases and the favourable impact of currency movements were offset by the loss of sales due to the divestment of several non-core businesses. A year-on-year comparison of the businesses retained within the Business Group shows sales revenue growth of 4.7%, of which 1.4% was attributable to currency translation gains. Notable success in sales growth was achieved in the Food and Tobacco businesses.

BGP:  Strong progress in volume growth and cost reduction in 2006 did not fully offset the negative impact of higher input costs, in particular from aluminum and energy, loss of contribution from divested businesses and higher restructuring costs. As a consequence BGP at $550 million was 8% lower than the prior year.

Excluding OSIs, foreign currency balance sheet translation impacts and lost contribution from divested businesses, operating BGP increased $7 million year on year. Significant progress in lowering costs was achieved as a result of the ongoing rationalization of the Business Group’s manufacturing base, continuous improvement

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projects and procurement savings which more than offset the adverse year-on-year impacts of timing differences in passing through input cost and inflationary increases. The impact of input cost increases were contained through disciplined pass-through actions, even sometimes at the expense of volumes.

Included in BGP for 2006 were OSI charges of $39 million principally related to restructuring provisions for the Midsomer Norton Packaging plant closure in the UK, compared to $29 million a year ago and foreign currency balance sheet translation losses of $8 million, compared to a gain of $1 million in 2005. The year-on-year impact of lost contribution from the disposal of several non-core businesses during 2006 was $33 million.

Operating margins, which exclude OSIs and balance sheet translation impacts, declined marginally from 10.4% to 10.0%, reflecting the dilution effect of higher revenues as input cost increases were passed through.

2005 vs. 2004

Revenues:  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.

BGP:  Two major phenomena impacted the packaging business in 2005; rising raw material costs and a 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 of 2005, the Business 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 US resulted in renewed upward pressure on costs towards year-end. Due to normal time lags in adjusting product prices, as of year-end, the Business Group had not been able to fully pass through all 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 $29 million mainly related to plans to restructure certain Packaging businesses, notably Global Beauty Packaging and Food Packaging Europe, compared to $3 million in 2004.

Packaging Revenues by Market

	2006		2005		2004
Food		64%		63%		61%
Pharmaceutical		16%		16%		13%
Beauty		12%		14%		18%
Tobacco		8%		7%		8%
Total		100%		100%		100%

Packaging Revenues by Region

	2006		2005		2004
Europe		53%		49%		57%
North America		34%		38%		37%
South America		8%		6%		2%
Asia/Pacific/Africa		5%		7%		4%
Total		100%		100%		100%

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Packaging Business Sectors

The packaging Business Group comprises six business sectors: Food Packaging Europe, Food Packaging Americas, Food Packaging Asia, Global Beauty and Personal Care, Global Pharmaceutical and Medical, and Global Tobacco Packaging.

The Food Packaging Europe sector had third-party sales and operating revenues of $2.0 billion in 2006 unchanged from the prior year. Demand continued to be weak during the year due in part to changing snack/confectionery habits and the continued move to private label packaging in dairy products. Price increases implemented in order to recover higher material costs, particularly in respect of aluminum and energy, further contributed to volume weakness. Significant restructuring, including plant closures, continued through 2006, aimed at addressing these issues and returning the business to profitable growth. Growth initiatives were focused on emerging markets and expansion of the plant acquired in 2005 in Zlotow (Poland). In early July 2006, a new site for the production of screw wine caps was inaugurated in Adelaide (Australia). A new food flexible plant, currently being constructed in Moscow (Russia) is expected to commence production during 2007.

Food Packaging Americas’ third-party sales and operating revenues rose by 11% year on year, from $1.3 billion to $1.5 billion. Food Packaging America benefited from strong volume gains in the US for meat and dairy, labels and 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 operations. Significant investment programs have been launched to support expansion in Mexico, capitalize on key product positions and to create centers of excellence for major conversion technologies. For instance, the center of excellence dedicated to roll-fed bottle labels began commercial operation at Edgewood (New York, US) at the end of July 2006.

Food Packaging Asia enjoyed another year of strong growth in 2006, with third-party sales of $248 million, up 20% compared to 2005. This growth was driven mainly by increasing demand from China and Thailand. In Thailand, the acquisition of a leading supplier of foil and plastic lidding for food packaging represented a key element of the regional growth strategy. In order to increase profitability, the sector focused efforts on passing through higher raw material costs and improving product mix with value-added products.

Global Pharmaceutical and Medical’s sales grew from $900 million in 2005 to $935 million in 2006. This performance was driven primarily by strong volume in the pharma flexibles unit. Profit growth, particularly in North America, was constrained by significantly increased energy and raw material costs, notably aluminum, partially mitigated by productivity improvement. In its continuing drive to focus the portfolio on value-added segments, the sector divested the science products business, while investing in state-of-the-art dedicated pharma flexible centres in North America and Europe.

The Global Beauty and Personal Care business continues to face severe structural challenges associated with dynamic market conditions and is addressing the issue by reshaping its portfolio around value-added segments and expanding in emerging countries in order to establish a low-cost manufacturing system. Pursuant to this strategy, during 2006 the sector exited several non-strategic segments: selling the aerosols business and a plant specialized in the production of deodorant sticks. The business had sales of $0.9 billion in 2006 compared to $1 billion in the prior year.

The expansion of Global Tobacco Packaging continued in 2006 with sales increasing by 21% to $476 million. This reflected the successful implementation of a strategy based on operational excellence and selective growth. During the year a new facility at Reidsville (North Carolina, US) for tobacco cartons began commercial operation in July 2006, while state-of-the-art printing equipment is progressively being installed throughout the plant network to meet anticipated requirements for pictorial health warnings on tobacco packaging. In Europe, the closure of one plant in the Netherlands was necessary to consolidate production in the face of chronic overcapacity as customers migrate to low cost countries such as those in which the sector already operates, in Kazakhstan, Malaysia and Turkey. Construction also commenced on a new plant in St. Petersburg (Russia), which is expected to commence production during the first half of 2007.

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RISKS AND UNCERTAINTIES

For further details, refer to note 27 — Commitments and Contingencies, note 28 - Currency Gains and Losses and note 29 — Financial Instruments and Commodity Contracts to the 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 Treasury 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 regular basis with the Company’s Risk Management Committee and the Audit Committee. 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 to the 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 kt, and for a small foreign exchange trading portfolio not exceeding $50 million.

Sensitivities

The following table provides Alcan’s estimates of the annualized after-tax impact of currency and LME price movements on income from continuing operations, net of hedging and forward sales. The sensitivities have been updated for 2007 to reflect current exposures.

	Increase in		In millions			US$ per
	Rate / Price		of US $			Common Share
Economic impact of changes in period-average exchange rates
Canadian dollar	+ US$	0.10	$	(150	)	$	(0.42	)
European currencies	+ US$	0.10	$	(50	)	$	(0.14	)
Australian dollar	+ US$	0.10	$	(70	)	$	(0.19	)
Balance sheet translation impact of changes in period-end
exchange rates
Canadian dollar	+ US$	0.10	$	(230	)	$	(0.63	)
Australian dollar	+ US$	0.10	$	(25	)	$	(0.07	)
Economic impact of changes in period-average LME prices*
Aluminum	+ US$	100/t	$	190		$	0.51

* Realized prices generally lag LME price changes by one month. Changes in local and regional premia 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 US dollar, have an impact on Alcan’s costs and therefore its net results. Because the Company has significant operating costs denominated in

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Canadian dollars while its functional currency is the US 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 US 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. Alcan does not currently enter into new contracts for the hedging of metal prices through derivatives traded on established markets such as the LME although such contracts previously entered into will continue to unwind through to the end of 2007. A certain proportion of Alcan’s aluminum sales contain pricing arrangements which result in effective hedging of the underlying metal to some extent.

Critical Accounting Policies and Estimates

The Company’s significant accounting policies are presented in note 2 — Summary of Significant Accounting Policies to the 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 to income 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 net periodic cost of post-retirements benefits 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 US and on published long-term high-quality corporate bond indices with durations equivalent to average durations of pension plan liabilities 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 31 December 2006, compared to 4.9% for 2005 and 5.3% for 2004. 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 $829 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 $900 million in the pension and other post-retirement obligations and in an increase of $80 million in the net periodic benefit cost.

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The calculation of the estimate of the expected return on assets is described in note 31 — Post-Retirement Benefits to the Financial Statements. The weighted-average expected return on assets was 6.9% for 2006, 7.0% for 2005 and 2004. 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 31 December 2006, the average actual return on assets exceeded the expected return by 1.9% per year. A variation in the expected return on assets by 0.5% will result in a variation of approximately $47 million in the net periodic benefit cost.

Environmental Liabilities

Environmental expenses that are not legal asset retirement obligations are accrued when it is probable that a liability for past events exists, on an undiscounted basis. 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 2006 equated to a discount rate of 8.5%, 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 Financial Statements, the Company reviewed specific PP&E for impairment in 2006 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 US GAAP. Actual results could differ significantly from those estimates. The Company cannot predict whether an event that triggers an impairment of PP&E will occur or when it will occur, nor can it estimate what effect it will have on the carrying values of these assets. However, the effect could be material.

Goodwill

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. A discount rate of 8.5%, which is the Company’s estimated weighted-average cost of capital for 2006, 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

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recorded, and actual results could differ significantly from those estimates. No impairment was recorded in 2006. 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 Business Group, mainly in Europe, was recognized.

Income Taxes

The provision for income taxes is calculated based on the expected tax treatment of transactions recorded in the Company’s 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 that 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 15 December 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.

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 and on the fixed rate debt outstanding that has been converted to variable rate debt through interest rate swaps at 31 December 2006 and 31 December 2005, net of its invested surplus cash and time deposits at 31 December 2006 and 31 December 2005, would be to reduce net income by $7 million and $4 million, respectively for the variable rate debt and would be to reduce net income by $2 million and nil, respectively for the fixed rate debt converted to variable rate debt through interest rate swaps. 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 2 — Summary of Significant Accounting Policies to the Financial Statements, prepared in accordance with US GAAP.

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Currency Legend:
BRL	Brazilian Real
CAD	Canadian Dollar
CHF	Swiss Franc
CZK	Czech Koruna
DKK	Denmark Kroner
EUR	Euros
GBP	UK Pound
ISK	Iceland Kronur
JPY	Japanese Yen
MXN	Mexican Peso
PLN	Polish Zloty
USD	US Dollar

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 contracts) outstanding as at 31 December 2006.

						2009 to 2012			Total Nominal
		2007		2008		and Thereafter			Amount		Fair Value
		(In US$ millions, except average contract rates)
FORWARD CONTRACTS
To buy USD against the foreign currency
CHF	Nominal amount		7		—		1	*		8		—
	Average contract rate		1.221		—		1.166	*
CAD	Nominal amount		2		—		—			2		—
	Average contract rate		1.156		—		—
JPY	Nominal amount		11		—		—			11		—
	Average contract rate		113.4		—		—
MXN	Nominal amount		9		1		—			10		—
	Average contract rate		10.90		11.29		—
DKK	Nominal amount		1		—		—			1		—
	Average contract rate		5.788		—		—
ISK	Nominal amount		1		—		—			1		—
	Average contract rate		69.52		—		—
NZD	Nominal amount		2		—		—			2		—
	Average contract rate		1.538		—		—

									2012 and
			2009		2010		2011		Thereafter
*	To buy USD against the foreign currency
	CHF	Nominal amount		1		—		—		—
		Average contract rate		1.166		—		—		—

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						2009 to 2012			Total Nominal
		2007		2008		and Thereafter			Amount		Fair Value
		(In US$ millions, except average contract rates)
FORWARD CONTRACTS (Cont’d)
To sell USD against the foreign currency
GBP	Nominal amount		2		—		—			2		—
	Average contract rate		0.511		—		—
BRL	Nominal amount		46		—		—			46		8
	Average contract rate		2.669		—		—
CHF	Nominal amount		20		—		—			20		—
	Average contract rate		1.214		—		—
ISK	Nominal amount		4		—		—			4		—
	Average contract rate		69.32		—		—
CAD	Nominal amount		4		—		—			4		—
	Average contract rate		1.155		—		—
To buy EUR against the foreign currency
USD	Nominal amount		63		—		—			63		4
	Average contract rate		1.248		—		—
GBP	Nominal amount		7		—		—			7		—
	Average contract rate		0.678		—		—
JPY	Nominal amount		12		—		—			12		1
	Average contract rate		148.5		—		—
CAD	Nominal amount		2		—		—			2		—
	Average contract rate		1.525		—		—
PLN	Nominal amount		4		—		—			4		—
	Average contract rate		3.958		—		—
To sell EUR against the foreign currency
USD	Nominal amount		276		13		5	*		294		(5	)
	Average contract rate		1.308		1.113		1.358	*
GBP	Nominal amount		3		—		—			3		—
	Average contract rate		0.674		—		—
CHF	Nominal amount		22		4		—			26		(1	)
	Average contract rate		1.561		1.506		—
CZK	Nominal amount		12		—		—			12		—
	Average contract rate		28.24		—		—
To buy GBP against the foreign currency
JPY	Nominal amount		2		—		—			2		—
	Average contract rate		206.7		—		—
To sell GBP against the foreign currency
CHF	Nominal amount		11		—		—			11		—
	Average contract rate		2.381		—		—

									2012 and
			2009		2010		2011		Thereafter
To sell EUR against the foreign currency
*	USD	Nominal amount		1		1		1		2
		Average contract rate		1.333		1.349		1.360		1.381

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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.

						2008 to 2011		Total Nominal
		2006		2007		and Thereafter		Amount		Fair Value
		(In US$ millions, except average contract rates)
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 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		—

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						2008 to 2011			Total Nominal
		2006		2007		and Thereafter			Amount		Fair Value
FORWARD CONTRACTS (Cont’d)
To sell EUR against the foreign currency
USD	Nominal amount		607		24		15	*		646		2
	Average contract rate		1.207		1.223		1.179	*
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		—
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		—

									2011 and
			2008		2009		2010		Thereafter
To sell EUR against the foreign currency
*	USD	Nominal amount		11		1		1		2
		Average contract rate		1.113		1.333		1.349		1.374
**	CHF	Nominal amount		4		—		—		—
		Average contract rate		1.506		—		—		—

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 2 — Summary of Significant Accounting Changes to the Financial Statements, prepared in accordance with US 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 2006 would be to increase net income over the period ending 31 December 2008 by approximately $86 million ($85 million in 2007 and $1 million in 2008). The $86 million increase reflects a 10% reduction from the 31 December 2006, three-month LME aluminum closing price of $2,803 per tonne and assumes an equal 10% drop has occurred throughout the aluminum forward price curve existing as at 31 December

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2006. As of 31 December 2005, such sensitivity would have increased net income over the period ending 31 December 2007 by $106 million ($64 million in 2006 and $42 million in 2007). The Company’s aluminum forward contract positions, producing the above results, are entered into to hedge anticipated future sales of metal. 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.

ITEM 8  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

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. 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 the policy above 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 pages 83 and 84.

((Signature))

Richard B. Evans,

President and Chief Executive Officer

((Signature))

Michael Hanley,

Executive Vice-President and Chief Financial Officer

1 March 2007

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

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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 31 December 2006, 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 31 December 2006 was effective.

Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of 31 December 2006 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing on pages 83 and 84.

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.

82

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders of Alcan Inc.

We have audited the accompanying consolidated balance sheets of Alcan Inc. (the Company) as at 31 December 2006, 2005 and 2004 and the related consolidated statements of income, shareholders’ equity and cash flows for each of the years in the three-year period ended 31 December 2006. We have also audited the effectiveness of the Company’s internal control over financial reporting as at 31 December 2006, 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 2006, 2005 and 2004 consolidated Financial Statements, an opinion on management’s assessment as at 31 December 2006 and an opinion on the effectiveness of the Company’s internal control over financial reporting as at 31 December 2006 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 31 December 2006, 2005 and 2004 and the results of its operations and its cash flows for each of the years in the three year period ended 31 December 2006 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 31 December 2006, 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 31 December 2006 based on criteria established in Internal Control — Integrated Framework issued by the COSO.

As discussed in Note 3 to the consolidated Financial Statements, the Company changed the manner in which it accounts for its benefit plans and stock-based compensation in 2006.

83

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM — (Continued)

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

1 March 2007

84

CONSOLIDATED STATEMENT OF INCOME

	Year Ended December 31
	2006			2005			2004
	(In millions of US$, except
	per share amounts)
Sales and operating revenues		23,641			20,320			24,948
Costs and expenses
Cost of sales and operating expenses, excluding depreciation and amortization noted below		17,990			16,135			20,270
Depreciation and amortization (NOTE 7)		1,043			1,080			1,337
Selling, administrative and general expenses		1,475			1,402			1,615
Research and development expenses		220			227			239
Interest		284			350			346
Restructuring charges — net (NOTE 8)		179			685			87
Goodwill impairment (NOTE 7)		—			122			154
Other expenses (income) — net (NOTE 14)		77			(4	)		321
		21,268			19,997			24,369
Income from continuing operations before income taxes and other items		2,373			323			579
Income taxes (NOTE 9)		665			257			375
Income from continuing operations before other items		1,708			66			204
Equity income (NOTE 10)		85			88			54
Minority interests		(7	)		1			(15	)
Income from continuing operations		1,786			155			243
Income (Loss) from discontinued operations (NOTE 4)		4			(26	)		15
Income before cumulative effect of accounting change		1,790			129			258
Cumulative effect of accounting change, net of income taxes of $2 (nil in 2005 and 2004) (NOTE 3)		(4	)		—			—
Net income		1,786			129			258
Dividends on preference shares		11			7			6
Net income attributable to Common Shareholders		1,775			122			252
Earnings (Loss) per Share (NOTE 5)
Basic
Income from continuing operations		4.75			0.40			0.64
Income (Loss) from discontinued operations		0.01			(0.07	)		0.05
Cumulative effect of accounting change		(0.01	)		—			—
Net income per Common Share — basic		4.75			0.33			0.69
Diluted
Income from continuing operations		4.74			0.40			0.64
Income (Loss) from discontinued operations		0.01			(0.07	)		0.05
Cumulative effect of accounting change		(0.01	)		—			—
Net income per Common Share — diluted		4.74			0.33			0.69
Dividends per Common Share		0.70			0.60			0.60

The accompanying notes are an integral part of the consolidated Financial Statements.

85

CONSOLIDATED BALANCE SHEET

	As at December 31
	2006			2005			2004
	(In millions of US$, except
	where indicated)
ASSETS
Current assets
Cash and time deposits		229			181			184
Trade receivables (net of allowances of $58 in 2006, $56 in 2005 and $99 in 2004) (NOTES 12 and 13)		2,910			2,308			3,247
Other receivables		1,195			946			936
Deferred income taxes (NOTE 9)		152			150			214
Inventories (NOTE 15)		3,186			2,734			4,040
Current assets held for sale (NOTE 4)		5			119			791
Total current assets		7,677			6,438			9,412
Deferred charges and other assets (NOTE 16)		1,087			1,052			1,130
Investments (NOTE 17)		1,509			1,511			1,747
Deferred income taxes (NOTE 9)		989			863			870
Property, plant and equipment (NOTE 18)
Cost (excluding construction work in progress)		18,698			16,990			21,595
Construction work in progress		2,294			1,604			1,177
Accumulated depreciation		(8,592	)		(7,561	)		(9,478	)
		12,400			11,033			13,294
Intangible assets, net of accumulated amortization of $346 in 2006, $233 in 2005 and $172 in 2004 (NOTE 7)		676			1,013			1,230
Goodwill (NOTE 7)		4,599			4,713			5,496
Long-term assets held for sale (NOTE 4)		2			15			162
Total assets		28,939			26,638			33,341

The accompanying notes are an integral part of the consolidated Financial Statements.

86

CONSOLIDATED BALANCE SHEET — (Continued)

	As at December 31
	2006			2005			2004
	(In millions of US$, except
	where indicated)
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities
Payables and accrued liabilities		5,430			4,608			5,843
Short-term borrowings		467			348			2,486
Debt maturing within one year (NOTE 22)		36			802			569
Deferred income taxes (NOTE 9)		46			25			23
Current liabilities of operations held for sale (NOTE 4)		—			62			335
Total current liabilities		5,979			5,845			9,256
Debt not maturing within one year (NOTES 22 and 29)		5,476			5,265			6,345
Deferred credits and other liabilities (NOTE 21)		1,787			1,608			1,521
Post-retirement benefits (NOTE 31)		3,381			3,037			3,465
Deferred income taxes (NOTE 9)		1,151			1,172			1,543
Long-term liabilities of operations held for sale (NOTE 4)		—			—			249
Minority interests		71			67			236
Shareholders’ equity
Redeemable non-retractable preference shares, issuable in series; unlimited number of shares authorized (NOTE 23):
Series C: stated value $106, number of shares authorized 5,700,000; outstanding 5,699,900 in 2006; 5,699,900 in 2005 and 5,700,000 in 2004		106			106			106
Series E: stated value $54, number of shares authorized 3,000,000; outstanding 2,999,000 in 2006; 2,999,000 in 2005 and 3,000,000 in 2004		54			54			54
Common Shareholders’ equity
Common Shares, unlimited number of shares authorized, outstanding (in thousands) 366,728 in 2006; 371,921 in 2005 and 369,930 in 2004 (NOTE 24)		6,235			6,181			6,670
Additional paid-in capital (NOTE 25)		672			683			112
Retained earnings (NOTE 26)		4,281			3,048			3,362
Common Shares held by a Subsidiary (NOTE 24)		(31	)		(31	)		(35	)
Accumulated other comprehensive income (loss)		(223	)		(397	)		457
		10,934			9,484			10,566
		11,094			9,644			10,726
Commitments and contingencies (NOTE 27)
Total liabilities and shareholders’ equity		28,939			26,638			33,341

Approved by the Board:

((Signature))

Richard B. Evans,
Director

((Signature))

L. Denis Desautels,
Director

The accompanying notes are an integral part of the consolidated Financial Statements.

87

CONSOLIDATED STATEMENT OF CASH FLOWS

	Year Ended December 31
	2006			2005			2004
	(In millions of US$)
OPERATING ACTIVITIES
Net income		1,786			129			258
Cumulative effect of accounting change		4			—			—
Loss (Income) from discontinued operations		(4	)		26			(15	)
Income from continuing operations		1,786			155			243
Adjustments to determine cash from operating activities:
Depreciation and amortization		1,043			1,080			1,337
Deferred income taxes		367			123			45
Equity income, net of dividends		15			(33	)		(16	)
Asset impairment charges		84			428			100
Goodwill impairment		—			122			154
Stock option expense		40			19			11
Gain on disposals of businesses and investments — net		(6	)		(32	)		(47	)
Change in operating working capital
Change in receivables		(443	)		(331	)		(437	)
Change in inventories		(263	)		(6	)		24
Change in payables and accrued liabilities		138			(51	)		214
Change in deferred charges, other assets, deferred credits and other liabilities, and post-retirement benefits — net		377			81			36
Other — net		(98	)		(20	)		75
Cash from operating activities in continuing operations		3,040			1,535			1,739
Cash from operating activities in discontinued operations		9			27			113
Cash from operating activities		3,049			1,562			1,852
FINANCING ACTIVITIES
Proceeds from issuance of new debt — net of issuance costs		479			1,272			1,768
Debt repayments		(1,096	)		(1,695	)		(1,615	)
Short-term borrowings — net		77			(2,056	)		(540	)
Common Shares issued		162			62			96
Common Shares purchased for cancellation		(466	)		—			—
Dividends
— Alcan shareholders (including preference)		(267	)		(224	)		(223	)
— Minority interests		(2	)		(2	)		(13	)
Other		2			(4	)		(11	)
Cash used for financing activities in continuing operations		(1,111	)		(2,647	)		(538	)
Cash used for financing activities in discontinued operations		—			(55	)		(38	)
Cash used for financing activities		(1,111	)		(2,702	)		(576	)
INVESTMENT ACTIVITIES
Purchase of property, plant and equipment		(2,081	)		(1,742	)		(1,269	)
Business acquisitions and purchase of investments, net of cash and time deposits acquired (NOTE 19)		(201	)		(112	)		(466	)
Net proceeds from disposal of businesses, investments and other assets		307			266			35
Settlement of amounts due from Novelis (NOTE 6)		—			2,535			—
Other		66			—			(8	)
Cash from (used for) investment activities in continuing operations		(1,909	)		947			(1,708	)
Cash from (used for) investment activities in discontinued operations		5			60			(22	)
Cash from (used for) investment activities		(1,904	)		1,007			(1,730	)
Effect of exchange rate changes on cash and time deposits		14			(26	)		16
Increase (Decrease) in cash and time deposits		48			(159	)		(438	)
Cash and time deposits — beginning of year		181			340			778
Cash and time deposits — end of year in continuing operations		229			181			184
Cash and time deposits — end of year in current assets held for sale (NOTE 4)		—			—			156
Cash and time deposits — end of year		229			181			340

The accompanying notes are an integral part of the consolidated Financial Statements.

88

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

	Year Ended December 31
				Preference										Common			Accumulated
				Shares –				Additional						Shares Held			Other		Total
	Comprehen-			Series C		Common		Paid-In			Retained			by a			Comprehensive		Shareholders’
	sive Income			and E		Shares		Capital			Earnings			Subsidiary			Income (Loss)		Equity
	(In millions of US$)
Balance at end of 2003					160		6,461		128			3,331			(56	)		253		10,277
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
Share purchase plan							24													24
Liquidity Agreement							12													12
Common Shares issued under the dividend reinvestment plan							4													4
Common Shares issued in exchange for tendered Pechiney securities							82													82
Balance at end of 2004					160		6,670		112			3,362			(35	)		457a		10,726

The accompanying notes are an integral part of the consolidated Financial Statements.

89

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY — (Continued)

	Year Ended December 31
				Preference											Common			Accumulated
				Shares –					Additional						Shares Held			Other			Total
	Comprehen-			Series C		Common			Paid-In			Retained			by a			Comprehensive			Shareholders’
	sive Income			and E		Shares			Capital			Earnings			Subsidiary			Income (Loss)			Equity
	(In millions of US$)
Spin-off of Novelis (NOTE 6)							(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
Share purchase plan							12															12
Liquidity Agreement							4															4
Common Shares issued under the dividend reinvestment plan							5															5
Balance at end of 2005					160		6,181			683			3,048			(31	)		(397	)b		9,644

The accompanying notes are an integral part of the consolidated Financial Statements.

90

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY — (Continued)

	Year Ended December 31
				Preference											Common			Accumulated
				Shares –					Additional						Shares Held			Other			Total
	Comprehen-			Series C		Common			Paid-In			Retained			by a			Comprehensive			Shareholders’
	sive Income			and E		Shares			Capital			Earnings			Subsidiary			Income (Loss)			Equity
	(In millions of US$)
Novelis Spin-off (NOTE 24)													21						7			28
Net income — 2006		1,786											1,786									1,786
Other comprehensive income:
Net change in deferred translation adjustments		746
Net change in excess of market value over book value of “available-for-sale” securities		1
Reclassification to net income		—
Net change in minimum pension liability — net of taxes of $16		51
Net change in unreleased gains and losses on derivatives — net of taxes of $1:
Net change from periodic revaluations		(195	)
Net amount reclassified to income		198
Comprehensive income		2,587																	801			801
Unfunded status of pension and other postretirement plans (NOTE 31)																			(634	)		(634	)
Dividends:
Preference													(11	)								(11	)
Common													(261	)								(261	)
Stock option expense										40												40
Exercise of stock options							51			(51	)											—
Common Shares issued for cash:
Executive Share option plan							104															104
Share purchase plan							25															25
Liquidity Agreement							33															33
Common Shares issued under the dividend reinvestment plan							5															5
Common Shares purchased for cancellation (NOTE 24)							(164	)					(302	)								(466	)
Balance at end of 2006					160		6,235			672			4,281			(31	)		(223	)c		11,094

a.	Comprised of deferred translation adjustments of $1,063, unrealized gain on “available-for-sale” securities of $8, minimum pension liability of ($550) (net of tax of $238) and unreleased loss on derivatives of ($64) (net of tax of $30).
b.	Comprised of deferred translation adjustments of $264, unrealized gain on “available-for-sale” securities of $4, minimum pension liability of ($450) (net of tax of $202) and unreleased loss on derivatives of ($215) (net of tax of $109).
c.	Comprised of deferred translation adjustments of $1,017, unrealized gain on “available-for-sale” securities of $5, unfunded status of pensions and other postretirement plans of ($1,033) (net of tax of $467) and unreleased loss on derivatives of ($212) (net of tax of $110).

The accompanying notes are an integral part of the consolidated Financial Statements.

91

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 and medical, beauty and personal care, and tobacco 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 31 December 2006, 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 12 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.

Spin-off of Rolled Products Businesses — Basis of Presentation

On 6 January 2005, Alcan completed the Novelis Inc. (Novelis) Spin-off, as described in note 6 — 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 year ended 31 December 2004 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 in 2004. Alcan’s consolidated Financial Statements as at and for the year ended 31 December 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 1 to 5 January 2005, were insignificant, except as described in note 6 — Spin-off of Rolled Products Businesses. See note 6 — Spin-off of Rolled Products Businesses for Alcan’s unaudited pro forma condensed consolidated financial information, giving effect to the Novelis Spin-off.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

The preparation of Financial Statements in conformity with US 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 and Other Investments

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

92

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

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 US dollar (located principally in Europe and Asia), are translated into US 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 US dollar as the functional currency. For these operations, monetary items denominated in currencies other than the functional currency of the operation are remeasured at period-end exchange rates and gains and losses are included in income. Non-monetary items are remeasured 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.

Prior to December 2005, the Company had entered into forward exchange contracts to hedge its ownership interest in certain subsidiaries denominated in foreign currencies. All such contracts were 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. In December 2005, the Company discontinued this hedging relationship. See note 29 — Financial Instruments and Commodity Contracts.

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.

93

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

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. For the year ended 31 December 2006, this accounting treatment reduced Sales and operating revenues by $521 (2005: $1,740; 2004: $1,193), Cost of sales and operating expenses by $521 (2005: $1,749; 2004: $1,182), and increased (reduced) Other expenses (income) — net by nil (2005: $9; 2004: ($11)).

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.

Any oil, natural gas and electricity futures contracts, swaps and options 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.

94

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

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 recorded at fair value in the Financial Statements and all changes in fair value are recorded in Other expenses (income) — net.

For interest rate derivatives designated as fair value hedges of the underlying debt, the fair values of the derivatives and the adjustment to the fair value of the underlying debt are reported in Deferred charges and other assets or Deferred credits and other liabilities and in Debt not maturing within one year. Changes in the fair values of these derivatives and underlying debt generally offset and are recorded in Other expenses (income) — net. The adjustment to interest expense for the difference between the fixed and floating interest rate is recorded in Interest.

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 constitutes 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; 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.

95

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

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. Prior to 2006, intangible assets also include prior service costs related to the minimum pension liability. In 2006, these costs are excluded due to the adoption of Statement of Financial Accounting Standards (SFAS) No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans. See note 3 — Accounting Changes.

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 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, the disposal of certain of its spent potlining associated with smelter facilities and certain closed sites.

Environmental Costs and Liabilities

Environmental costs that are not legal asset retirement obligations are expensed or capitalized, as appropriate, generally 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.

96

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

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 and, beginning 31 December 2006, SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment to FASB Statements No. 87, 88, 106, and 132(R) (SFAS No. 158). Other post-retirement benefits are accounted for in accordance with SFAS No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions and, beginning 31 December 2006, SFAS No. 158. 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(R), Share-Based Payment. Under the fair value method, stock-option expense is recognized in the statement of income over the requisite service period. Compensation expense is recognized immediately for options that vest within the reporting 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. Effective 1 January 2006, other stock-based compensation arrangements, which can be settled in cash, are considered liability-classified awards, and are measured at fair value on the grant date and remeasured at each reporting period until the award is settled. Compensation cost is adjusted each reporting period for changes in fair value pro-rated for the portion of the requisite service period rendered. Once vested, compensation expense or income is immediately recognized for any change in fair value. The majority of stock-based compensation expense is recorded in Selling, administrative and general expenses.

Income Taxes

The Company uses the asset and liability approach for accounting for income taxes. Under this approach, 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 approach also requires the recognition of deferred tax assets for operating loss carryforwards and tax credit carryforwards.

The effect on deferred tax assets and liabilities of a change in tax rates and laws 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 the deferred tax liabilities or assets are expected to be recovered or settled. 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

97

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

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 31 December 2002. Under FIN 45, guarantees issued after 31 December 2002, are recorded as a liability equal to the fair value of the obligation at the inception of the guarantee. See note 27 — Commitments and Contingencies.

Recently Issued Accounting Standards

FIN 48 — Accounting for Uncertainty in Income Taxes

In June 2006, the FASB issued Interpretation No. 48, Accounting for Uncertainty in Income Taxes — an interpretation of FASB Statement No. 109 (FIN 48). This interpretation prescribes a more likely than not recognition threshold and a measurement attribute for the Financial Statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

FIN 48 also provides guidance on derecognition of a tax position, classification of a liability for unrecognized tax benefits, accounting for interest and penalties, accounting in interim periods, and expanded income tax disclosures. FIN 48 is effective for fiscal years beginning after 15 December 2006. The Company is currently evaluating the impact of this interpretation on its Financial Statements.

SFAS No. 157 — Fair Value Measurements

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, to increase consistency and comparability in fair value measurements and to expand their disclosures. The new standard includes a definition of fair value as well as a framework for measuring fair value. The standard is effective for fiscal periods beginning after 15 November 2007 and should be applied prospectively, except for certain financial instruments where it must be applied retrospectively as a cumulative-effect adjustment to the balance of opening retained earnings in the year of adoption. The Company is currently evaluating the impact of this standard on its Financial Statements.

SFAS No. 159 — The Fair Value Option for Financial Assets and Financial Liabilities

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities, including an amendment of FASB Statement No. 115 (SFAS No. 159). This statement permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value and establishes presentation and disclosure requirements designed to facilitate

98

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES — (Continued)

comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. SFAS No. 159 is effective on 1 January 2008. The Company is currently evaluating the impact of this standard on its Financial Statements.

SFAS No. 156 — Accounting for Servicing of Financial Assets

In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets. The new standard, which is an amendment to SFAS No. 140, requires that all separately recognized servicing assets and servicing liabilities be initially measured at fair value, if practicable and permits, but does not require, the subsequent measurement of separately recognized servicing assets and servicing liabilities at fair value. If an entity uses derivative instruments to mitigate the risks inherent in servicing assets and servicing liabilities, it can simplify its accounting since SFAS No. 156 permits income statement recognition of the potential offsetting changes in fair value of those servicing assets and servicing liabilities and derivative instruments in the same accounting period. SFAS No. 156 is effective for all separately recognized servicing assets and liabilities acquired or issued after the beginning of an entity’s fiscal year that begins after 15 September 2006. The Company does not expect its Financial Statements to be significantly affected by this statement.

3.  ACCOUNTING CHANGES

SFAS No. 158 — Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans

Effective 31 December 2006, the Company adopted the provisions of SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans, an amendment to FASB Statements No. 87, 88, 106, and 132(R). The standard requires an employer to recognize the overfunded or underfunded status of a defined benefit postretirement plan (other than a multiemployer plan) as an asset or liability in its balance sheet with an offsetting amount in accumulated other comprehensive income and to recognize changes in that funded status in the year in which the changes occur. SFAS No. 158 also expands the required annual disclosures. Prior years have not been restated and are not comparable. This standard does not impact the consolidated statement of income. See note 31 — Post-Retirement Benefits for the incremental effect on the Company’s consolidated balance sheet of applying SFAS No. 158.

SFAS No. 123(R) — Share-Based Payment

On 1 January 2006, the Company adopted SFAS No. 123(R), Share-Based Payment, which is a revision to SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123(R) requires all share-based payments to employees to be recognized in the Financial Statements based on their fair values. The fair value of options granted after 1 January 2006 is determined using the Monte Carlo simulation model, whereas the fair value of options granted prior to that date was determined using the Black-Scholes valuation model. The Company had previously adopted the fair-value based method of accounting for stock options under SFAS No. 123 using the retroactive restatement method described in SFAS No. 148, Accounting for Stock-Based Compensation — Transition and Disclosure, effective 1 January 2004. This method is accepted under SFAS No. 123(R). The effect of applying the original provisions of SFAS No. 123 is a decrease in pre-tax compensation expense of $10 in 2006.

On 1 January 2006, the Company recorded an after-tax charge of $4, using the modified prospective application method, in Cumulative effect of accounting change, to record all outstanding liability awards, previously measured at their intrinsic value, at their fair value. See note 25 — Stock Options and Other Stock-Based Compensation.

99

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

3.  ACCOUNTING CHANGES — (Continued)

SFAS No. 151 — Inventory Costs

On 1 January 2006, the Company adopted the provisions of SFAS No. 151, Inventory Costs, on a prospective basis. 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. The adoption of this standard did not impact the Company’s Financial Statements.

SAB 108 — Guidance for Quantifying Financial Statement Misstatements

Effective 31 December 2006, the Company adopted the provisions of Staff Accounting Bulletin No. 108 (SAB 108), Guidance for Quantifying Financial Statement Misstatements. In SAB 108, the SEC staff establishes an approach that requires quantification of Financial Statement errors based on the effects of the error on each of the Company’s Financial Statements and the related Financial Statement disclosures. This model is commonly referred to as a “dual approach” because it essentially requires quantification of errors under both the “iron-curtain” and the “roll-over” methods. The iron curtain method focuses primarily on the effect of correcting the period-end balance sheet with less emphasis on the reversing effects of prior year errors on the income statement in the period of correction. The roll-over method focuses primarily on the impact of a misstatement on the income statement, including the reversing effect of prior year misstatements, but can lead to the accumulation of misstatements in the balance sheet. The adoption of this bulletin did not impact the Company’s Financial Statements.

SFAS No. 154 — Accounting Changes and Error Corrections

On 1 January 2006, the Company adopted the provisions of 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. The adoption of this standard did not impact the Company’s Financial Statements.

FIN 47 — Conditional Asset Retirement Obligations

Effective 31 December 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.

100

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

3.  ACCOUNTING CHANGES — (Continued)

SFAS No. 153 — Exchanges of Nonmonetary Assets

On 1 July 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.

EITF 03-13 — 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 6 January 2005, as described in note 6 — 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.

4.   DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE

Bauxite and Alumina and Primary Metal

On 29 December 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 15 March 2005 at a value of $104. Under the terms of this agreement, Mytilineos Holdings S.A. and certain affiliated companies acquired from the Company a 53% equity position in AdG. On 31 March 2006, the balance of the Company’s interest in AdG of 7.2% was sold by the Company to Mytilineos Holdings S.A. for net proceeds of $13.

Primary Metal

On 1 June 2005, the Company completed the sale of Pechiney Électrométallurgie 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 the first quarter of 2004, the Company committed to a plan to sell certain non-strategic assets that were not part of its core operations. The assets were used to supply castings and components to the automotive industry. On 31 March 2006, the Company sold these assets to AluCast GmbH for net proceeds of approximately nil.

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

101

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

4.  DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE — (Continued)

operations. On 20 April 2005, the Company completed the sale of these service centres for net proceeds of $4 to Amari Metal France Ltd.

Packaging

In the second quarter of 2004, the Company recorded the sale of the Boxal Group and Suner Cartons, which were classified as held for sale and included in discontinued operations in the second quarter of 2003, 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.

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 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 nil for the year ended 31 December 2006 (2005: $24; 2004: $5), 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
	2006			2005			2004
Sales		55			339			1,419
Income (Loss) from operations		(2	)		5			26
Gain (Loss) on disposal — net		(2	)		(2	)		27
Asset impairment charges		—			(24	)		(5	)
Pre-tax income (loss)		(4	)		(21	)		48
Income taxes recovered (expense)		8			(5	)		(33	)
Income (Loss) from discontinued operations		4			(26	)		15

102

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

4.  DISCONTINUED OPERATIONS AND ASSETS HELD FOR SALE — (Continued)

The major classes of Assets held for sale and Liabilities of operations held for sale are as follows:

	2006		2005		2004
Current assets held for sale:
Cash and time deposits		—		—		156
Trade receivables		1		30		308
Other receivables		4		51		40
Deferred income taxes		—		2		2
Inventories		—		36		285
		5		119		791
Long-term assets held for sale:
Deferred charges and other assets		—		13		21
Deferred income taxes		—		—		6
Property, plant and equipment, net		2		2		85
Intangible assets, net		—		—		50
Goodwill		—		—		—
		2		15		162
Current liabilities of operations held for sale:
Payables and accrued liabilities		—		62		330
Short-term borrowings		—		—		5
		—		62		335
Long-term liabilities of operations held for sale:
Deferred credits and other liabilities		—		—		101
Deferred income taxes		—		—		7
Minority interests		—		—		141
		—		—		249

103

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

5.  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.

	2006			2005			2004
Numerator:
Income from continuing operations		1,786			155			243
Less: dividends on preference shares		(11	)		(7	)		(6	)
Income from continuing operations attributable to Common Shareholders		1,775			148			237
Denominator (number of Common Shares in millions):
Weighted average of outstanding Shares		374			370			368
Effect of dilutive stock options		1			1			2
Adjusted weighted average of outstanding Shares		375			371			370
Earnings per Common Share — basic (in US$)		4.75			0.40			0.64
Earnings per Common Share — diluted (in US$)		4.74			0.40			0.64

Options to purchase 402,561 Common Shares (2005: 5,057,698; 2004: 3,656,500) at a weighted average grant price of CAN$56.34 per Share (2005: CAN$49.66; 2004: CAN$58.94) 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 31 December 2006, there are 366,728,418 Common Shares outstanding (2005: 371,921,195; 2004: 369,930,252).

6.   SPIN-OFF OF ROLLED PRODUCTS BUSINESSES

On 6 January 2005, Alcan completed the Novelis Spin-off 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 18 May 2004. Additionally, the Novelis Spin-off satisfied certain regulatory requirements associated with the 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 3 — Accounting Changes — Discontinued Operations.

104

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

6.  SPIN-OFF OF ROLLED PRODUCTS BUSINESSES — (Continued)

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	2,739
Current liabilities	(3,117	)
Non-current liabilities	(2,258	)
Accumulated other comprehensive income	(64	)
Total	224
Derivatives(2)	(31	)
Total amount recorded in retained earnings	193

(1)

The agreements giving effect to the Novelis Spin-off provided for the resolution of outstanding matters and various post-transaction adjustments, most of which were carried out by the parties in 2006. See note 31 — 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 1 to 5 January 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 1 January 2005 to the spin-off date of 6 January 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 Novelis Spin-off reduced total Shareholders’ equity by $257 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 $193, a reduction in Common Shares held by a Subsidiary of $4 and a reduction in Accumulated other comprehensive income of $64. 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 $2.5 billion from Novelis to settle third-party debt of Alcan, as described in note 22 — 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.

The following tables set forth the unaudited pro forma condensed consolidated information of the Company as at, and for the year ended, 31 December 2004, giving effect to the Novelis Spin-off as at 1 January 2004 for the statement of income and as at 31 December 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

105

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

6.  SPIN-OFF OF ROLLED PRODUCTS BUSINESSES — (Continued)

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 31 December 2004
			Removal of			Pro Forma				Alcan
	Alcan		Novelis			Adjustments				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

106

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

	As at 31 December 2004
				Removal of			Pro Forma				Alcan
	Alcan			Novelis			Adjustments				Pro Forma
6.  SPIN-OFF OF ROLLED PRODUCTS BUSINESSES — (Continued)
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
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

107

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

6.  SPIN-OFF OF ROLLED PRODUCTS BUSINESSES — (Continued)

Unaudited Pro Forma Condensed Consolidated Statement of Income

	For the Year Ended 31 December 2004
				Removal of			Pro Forma				Alcan
	Alcan			Novelis			Adjustments				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

108

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

	For the Year Ended 31 December 2004
			Removal of			Pro Forma		Alcan
	Alcan		Novelis			Adjustments		Pro Forma
6.  SPIN-OFF OF ROLLED PRODUCTS BUSINESSES — (Continued)
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

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.

109

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

6.  SPIN-OFF OF ROLLED PRODUCTS BUSINESSES — (Continued)

(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 31 December 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 Novelis Spin-off the amount of the net investment in those foreign subsidiaries is less than the notional amount of the derivative instrument, until 15 December 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 18 December 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 31 December 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.
(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%.

7.  GOODWILL AND INTANGIBLE ASSETS

Goodwill

The changes in the carrying amount of goodwill for the year ended 31 December 2006, are as follows:

	Balance															Balance
	as at								Foreign							as at
	1 January								Exchange					Impairment		31 December
	2006		Divestments			Additions			Adjustments		Adjustments			Losses		2006
Bauxite and Alumina		1,076		—			—			—		(49	)		—		1,027
Primary Metal		1,374		—			40			53		(83	)		—		1,384
Engineered Products		354		—			3			29		(21	)		—		365
Packaging		2,574		(109	)		1			146		(156	)		—		2,456
		5,378		(109	)		44			228		(309	)		—		5,232
Goodwill included in equity- accounted entities		665		—			(1	)		16		(47	)		—		633	*
Goodwill excluding amount included in equity-accounted entities		4,713		(109	)		45			212		(262	)		—		4,599

*  Includes goodwill of $314 for Bauxite and Alumina and $319 for Primary Metal.

110

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

7.  GOODWILL AND INTANGIBLE ASSETS — (Continued)

The changes in the carrying amount of goodwill for the year ended 31 December 2005 are as follows:

	Balance																Balance
	as at							Foreign									as at
	1 January							Exchange						Impairment			31 December
	2005		Divestments			Additions		Adjustments			Adjustments			Losses			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	)		—		—			—			—			—
		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

*  Includes goodwill of $347 for Bauxite and Alumina and $318 for Primary Metal.

The changes in the carrying amount of goodwill for the year ended 31 December 2004 are as follows:

	Balance																Balance
	as at							Foreign									as at
	1 January							Exchange						Impairment			31 December
	2004		Divestments			Additions		Adjustments			Adjustments*			Losses			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.
**	Includes goodwill of $489 for Bauxite and Alumina, $347 for Primary Metal, and $1 for Packaging.

111

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

7.  GOODWILL AND INTANGIBLE ASSETS — (Continued)

In 2006, adjustments were made to reduce goodwill by $262. Included in this amount is $187 principally relating to a decrease in the valuation allowance related to future income tax assets acquired in the Pechiney acquisition, 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 2006 adjustments is an amount of $19, relating to a reduction in restructuring provisions, and an amount of $14 related to a transfer pricing tax settlement related to events prior to the Pechiney acquisition.

In 2005, adjustments were made to reduce goodwill by $97. Included in this amount is $5 (2004: $12) 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.

As a result of the annual test, conducted as at 31 October 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. The impairment loss was attributed 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 31 December 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 31 October 2004. The fair value of all reporting units was determined using discounted future cash flows.

112

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

7.  GOODWILL AND INTANGIBLE ASSETS — (Continued)

Intangible Assets with Finite Lives

	Gross Carrying		Accumulated
	Amount		Amortization		Net Book Value
31 December 2006
Trademarks		183		73		110
Patented and non-patented technology		472		149		323
Purchase contracts		313		118		195
Customer contracts		45		6		39
Other		9		—		9
		1,022		346		676
31 December 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 (NOTE 31)		329		—		329
		1,246		233		1,013
31 December 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 (NOTE 31)		253		—		253
		1,402		172		1,230

The aggregate amortization expense for the year ended 31 December 2006, was $88 (2005: $85; 2004: $79). The estimated amortization expense for the five succeeding fiscal years is approximately $93 per year. In 2006, the Company acquired intangible assets of $38 (2005: $3; 2004: nil) comprised of customer contracts and technology. In 2004, the intangible assets were increased by $71 relating to the finalization of the Pechiney purchase price allocation.

8.   RESTRUCTURING PROGRAMS

2006 Restructuring Activities

In 2006, the Company incurred charges of $5 relating to early retirement incentives accepted by employees at a research facility in France (Engineered Products). These charges are included in severance costs.

In 2006, the Company incurred severance charges of $2 due to the restructuring of a trading operation in Switzerland (Primary Metal). No further charges are expected to be incurred as a result of this activity.

On 9 May 2006, the Company announced the reorganization of its global specialty aluminas business (Bauxite and Alumina), entailing the gradual, yet permanent shut-down of the Company’s Specialty-Calcined Alumina plant (UPCA) in Jonquière (Quebec), by year end. In relation to this activity, the Company recorded restructuring charges of $12 comprising $1 of severance costs and $11 of asset impairment charges in 2006. No further charges are expected to be incurred as a result of this activity.

113

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

8.  RESTRUCTURING PROGRAMS — (Continued)

On 30 June 2006, the Company announced that it had signed a new collective labour agreement with its Quebec employees represented by the Canadian Auto Workers (C.A.W.) union. The agreement applies to C.A.W. employees at the Arvida, Beauharnois, Laterrière, Shawinigan and Vaudreuil Works sites, as well as those at Power Operations, Port Facilities, Alma Railway Operations and the Arvida Research and Development Centre (Bauxite and Alumina and Primary Metal). As part of this agreement, the Company has offered early retirement incentives to employees and has recorded severance charges of $3 in 2006 for employees who have accepted. The Company expects to incur additional severance charges of $7 as a result of this offer.

On 12 July 2006, the Company announced that it has begun consultations with unions and employee representatives for a proposed sale of selected assets at the Company’s Affimet aluminum recycling plant in Compiègne (France) (Primary Metal). In relation to this activity, the Company recorded restructuring charges of $38 comprising $11 of severance costs, $4 of other costs and $23 of asset impairment charges in 2006. The divestiture is expected to be completed in the first quarter of 2007.

Also on 12 July 2006, the Company announced that it has begun consultations with unions and employee representatives for a proposed closure of two UK sites. The proposed reorganization would result in the closure of the Workington hard alloy extrusion plant (Engineered Products) and the closure of the Midsomer Norton food flexibles packaging plant (Packaging).

In relation to the Workington closure, the Company recorded restructuring charges of $13 comprised entirely of severance costs in 2006. Production from Workington will be consolidated at Alcan’s facilities in Issoire and Montreuil-Juigné (France). Workington is expected to cease production by the end of 2007. The Company expects to incur additional charges of $5 in 2007 related to this activity.

In relation to the Midsomer Norton closure, the Company recorded restructuring charges of $23 comprising $20 of severance costs, $1 of asset impairment charges and $2 of other costs in 2006. The plant has been adversely affected by a declining demand in the UK market and high raw material costs. The site is expected to close during the second quarter of 2007. The Company expects to incur additional charges of $1 related to this activity.

In addition, the Company also recorded severance costs of $3 in 2006 related to the closure of Alcan Packaging Mohammedia’s cookware activity (Morocco). The Company expects to incur additional charges of $1 related to this activity.

2005 Restructuring Activities

During the first quarter of 2006, the Company closed its Vernon (California), aluminum cast plate facility (Engineered Products) as a result of competitive pressures in a challenging economic environment. In 2006, the Company incurred additional other restructuring charges of $2 related to this activity. No further charges are expected to be incurred in connection with the Vernon closure. 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 in the fourth quarter of 2005.

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. In 2006, the Company incurred an additional $46 of restructuring charges.

114

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

8.  RESTRUCTURING PROGRAMS — (Continued)

This charge is comprised of severance costs of $18, asset impairment charges of $9 and other charges of $19. The Company expects to incur an additional $8 of charges related to the activities initiated and approved as of 31 December 2005, and these restructurings should be completed during the first half of 2007.

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 began in June 2006 and is expected to be completed, at the latest, during the course of 2008. The closure of Steg was completed in April 2006. These charges were comprised of severance costs of $43, asset impairment charges of $61, and other charges of $11. In 2006, the Company incurred an additional $12 of restructuring charges related to the smelter in Lannemezan, comprising severance costs of $11 and other costs of $1. The Company expects to incur an additional $9 of restructuring charges related to the closure of the smelter in Lannemezan.

On 14 September 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. Production at its fluorspar mining operations came to a close 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 was recorded, as a result of this activity, in Cost of sales and operating expenses. In 2006, the Company incurred additional other restructuring charges of $2. No further charges are expected to be incurred.

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. In 2005, the Company incurred $30 of severance charges. In 2006, the Company reversed $4 of severance charges in Singen (Germany) as certain affected employees were transferred to other businesses, and certain employees took advantage of voluntary severance and early retirement programs. This restructuring is expected to be completed in the short term.

In 2005, the Company incurred $5, mostly related to severance costs, in connection with the exit from the Mercus and Froges high-purity-metal processing operations in France (Engineered Products), which occurred during the first quarter of 2006. The Company incurred additional charges of $1 in 2006 related to 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. In 2006, the Company incurred additional severance charges of $11 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. These costs relate principally to severance costs of $121 related to the involuntary termination of Pechiney employees in France

115

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

8.  RESTRUCTURING PROGRAMS — (Continued)

(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 (Czech Republic) (Packaging). A restructuring provision of $21 related to the plant closure in Flemalle was transferred to Novelis in 2005 following the spin-off. In 2006, the Company incurred additional restructuring charges under this program comprising severance costs of $6 and other restructuring charges of $2 (Other).

Other 2004 restructuring activities

In the third quarter of 2004, the Company incurred restructuring charges of $19 relating to the consolidation of its UK 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 were transferred to Novelis in 2005 following the spin-off.

In 2004, the Company incurred restructuring charges of $7 relating to the closure of two corporate offices in the UK 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 severance and exit costs of $2 in relation to the closure of its corporate office in the UK. The restructuring provision of $3 related to the closure of the corporate office in Germany was 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 the fourth quarter of 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 US, 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 exit costs incurred in connection with certain non-strategic packaging facilities located in the US 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.

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 UK (Bauxite and Alumina) and the closure of cable operations in Canada and the US

116

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

8.  RESTRUCTURING PROGRAMS — (Continued)

(Engineered Products), and recorded recoveries of $14 relating principally to the sale of assets related to the closure of facilities in Glasgow (UK) (Entities transferred to Novelis) and other recoveries related to the closure of facilities in the UK (Bauxite and Alumina). Following the spin-off, $16 of the restructuring provision has been transferred to Novelis.

The schedule provided below shows details of the provision balances and related cash payments for the significant restructuring activities:

	As at 31 December 2006
				Asset
	Severance			Impairment
	Costs			Charges*			Other			Total
Provision balance as at 31 December 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 31 December 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 31 December 2005		243			—			57			300
2006:
Charges recorded in the statement of income		101			44			34			179
Cash payments — net		(160	)		—			(39	)		(199	)
Non-cash items		15			(44	)		9			(20	)
Provision balance as at 31 December 2006		199			—			61			260

* Fair value of assets was determined using discounted future cash flows.

117

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

8.  RESTRUCTURING PROGRAMS — (Continued)

The schedule provided below shows details of the charges by operating segment:

Charges (recoveries) recorded in the statement of income

	Year Ended 31 December 2006
			Asset
	Severance		Impairment
	Costs		Charges		Other		Total
Bauxite and Alumina		2		11		2		15
Primary Metal		37		23		6		66
Engineered Products		15		—		3		18
Packaging		41		10		21		72
Other		6		—		2		8
Total		101		44		34		179

	Year Ended 31 December 2005
			Asset
	Severance		Impairment
	Costs		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

	Year Ended 31 December 2004
			Asset
	Severance		Impairment
	Costs		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

For the year ended 31 December 2006, $112 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 (2005: $588; 2004: $55). See note 33 — Information by Operating Segments.

118

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

8.  RESTRUCTURING PROGRAMS — (Continued)

Charges forming part of the allocation of the Pechiney purchase price in 2004

	Year Ended 31 December 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

9.  INCOME TAXES

	2006			2005			2004
Income (Loss) from continuing operations before income taxes and other items
Canada		387			198			(144	)
Other countries		1,986			125			723
		2,373			323			579
Current income taxes
Canada		(48	)		(29	)		9
Other countries		346			163			321
		298			134			330
Deferred income taxes
Canada		94			133			89
Other countries		273			(10	)		(44	)
		367			123			45
Income tax provision		665			257			375

The composite of the applicable statutory corporate income tax rates in Canada is 33% (2005 and 2004: 32%).

119

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

9.  INCOME TAXES — (Continued)

The following is a reconciliation of income taxes calculated at the above composite statutory rates with the income tax provision:

	2006			2005			2004
Income taxes at the composite statutory rate		772			104			185
Differences attributable to:
Effect of a change in tax laws or enacted tax rates		(57	)		42			(32	)
Exchange translation items		(3	)		69			89
Exchange revaluation of deferred income taxes		(8	)		19			44
Unrecorded tax benefits — net		19			65			85
Investment and other allowances		(45	)		(25	)		(22	)
Goodwill impairment		—			39			50
Withholding taxes		13			8			34
Reduced rate, tax exempt income and non-deductible expenses		19			(13	)		(25	)
Foreign tax rate differences		(30	)		(31	)		(40	)
Prior years’ tax adjustments		(25	)		(26	)		(23	)
Other — net		10			6			30
Income tax provision		665			257			375

At December 31 the principal items included in Deferred income taxes are:

	2006			2005			2004
Liabilities
Property, plant, equipment and intangibles		1,381			1,376			1,765
Inventory		16			25			75
Other — net		216			140			113
		1,613			1,541			1,953
Assets
Tax benefit carryovers		1,259			1,468			1,505
Accounting provisions not currently deductible for tax		1,651			1,348			1,496
		2,910			2,816			3,001
Valuation allowance		1,353			1,459			1,530
		1,557			1,357			1,471
Net deferred income tax liability		56			184			482
Amounts recognized in the consolidated balance sheet consist of:
Deferred income tax asset — current		(152	)		(150	)		(214	)
Deferred income tax asset — non-current		(989	)		(863	)		(870	)
Deferred income tax liability — current		46			25			23
Deferred income tax liability — non-current		1,151			1,172			1,543
Net deferred income tax liability		56			184			482

120

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

9.  INCOME TAXES — (Continued)

At 31 December 2006, the Company had tax benefit carryovers of $1,209 relating to operating losses, $28 relating to capital losses and $22 relating to tax credits. Approximately $1,056 of these tax benefits have no expiry date, $29 expire in 2007 and $174 expire at various dates between 2008 and 2026.

The valuation allowance of $1,353 (2005: $1,459; 2004: $1,530) mainly relates to deferred tax assets of French subsidiaries for which the realization is not more likely than not. The current year’s decrease in the valuation allowance is primarily due to recognition of a portion of the tax benefits on previously unrecognized deferred tax assets of French subsidiaries as a result of improved operating results, partially offset by the effect of fluctuations in exchange rates. In 2006, $248 (2005: $5; 2004: $12) of the reversal of the valuation allowance was applied to reduce goodwill. If the valuation allowance is subsequently reversed, approximately $1,035 would be allocated to reduce goodwill as it relates to tax benefits from acquired companies.

10.  INVESTMENT IN UNCONSOLIDATED AFFILIATES

At 31 December 2006, 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 (41.39%); Alcan Propack Chengdu Co. Ltd. (40%); Mineração Rio Do Norte S.A. (12.50%); 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%).

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.

A summary of the combined financial information for these equity-accounted companies is set forth below.

Summary of Combined Financial Position

	2006		2005		2004
Current assets		1,093		951		1,091
Non-current assets		3,575		3,112		3,628
Total assets		4,668		4,063		4,719
Current liabilities		955		870		1,122
Non-current liabilities		1,311		813		1,052
Total liabilities		2,266		1,683		2,174
Net assets		2,402		2,380		2,545
Alcan’s equity in net assets		1,472		1,470		1,690

121

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

10.  INVESTMENT IN UNCONSOLIDATED AFFILIATES — (Continued)

Summary of Combined Operations

	2006		2005		2004
Revenues		2,592		2,308		1,954
Costs and expenses		2,131		1,829		1,648
Income taxes		168		172		114
Net income		293		307		192
Alcan’s share of net income as reported in equity income		85		88		54

11.  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 investments are set out in note 10 — Investments in Unconsolidated Affiliates. These transactions are reflected in the consolidated Financial Statements as follows:

	2006			2005			2004
Year ended December 31:
Sales and operating revenues		315			158			95
Cost of sales and operating expenses		708			613			528
Other expenses (income) — net		(2	)		(5	)		(1	)
As at December 31:
Trade receivables		82			39			198
Other receivables		55			—			—
Deferred charges and other assets		72			61			56
Payables and accrued liabilities		104			87			136
Short-term borrowings		56			79			34

12.  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 uncollectible accounts, historical experience, and other currently available evidence. Activity in the allowance for doubtful accounts is as follows:

						Additions
	Balance at		Transfers			Charged to													Foreign			Balance
	Beginning		to			Costs &													Exchange			at End of
Year	of Year		Novelis			Expenses		Acquisitions		Recoveries			Write-Offs			Divestments			Adjustments			Year
2006		56		—			19		1		(15	)		(4	)		(2	)		3			58
2005		99		(33	)		17		—		(6	)		(15	)		(1	)		(5	)		56
2004		92		—			27		—		(7	)		(17	)		—			4			99

13.  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. The program has since been twice amended to increase the maximum cash proceeds to $215 in December 2005 and $400 in November 2006. 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

122

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

13.  SALES OF RECEIVABLES — (Continued)

31 December 2006, the Company sold trade receivables of $465 (2005: $249) under this program, with $65 (2005: $34) held in reserve by the third party. This program replaces a $300 program that was discontinued in January 2005 due to the Novelis Spin-off. Under this previous program, the Company had sold trade receivables of $345 as at 31 December 2004 with $45 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 $125 (€ 95 million) (2005: $112 (€95 million); 2004: $129 (€ 95 million)) of selected receivables without recourse. As at 31 December 2006, the Company sold trade receivables of $125 (€ 95 million) (2005: $112 (€ 95 million); 2004: $129 (€ 95 million)) under this program, with $9 (€ 7 million) (2005: $8 (€ 7 million); 2004: $10 (€ 7 million)) held in reserve by third parties. Under another program, which was terminated on 2 November 2006, the Company had entered into an agreement to sell certain trade receivables of $50 (2005 and 2004: $60). As at 31 December 2005, the Company had sold trade receivables under this program of $60 (2004: $59) with $6 (2004: $6) held in reserve by a third party.

14.  OTHER EXPENSES (INCOME) — NET

Other expenses (income) — net comprise the following elements:

	2006			2005			2004
Asset impairment charges not included in restructuring programs		40			28			70
Gain on disposal of businesses and investments — net (NOTE 19)		(6	)		(32	)		(35	)
Provisions for (Recoveries of) legal claims (NOTE 27)		(52	)		20			8
Environmental provisions		34			6			20
Interest revenue		(40	)		(73	)		—
Pechiney integration		—			3			38
Exchange losses (gains) — net		31			(56	)		61
Derivatives losses — net		27			115			36
Other		43			(15	)		123
		77			(4	)		321

The 2006 asset impairment charges consist principally of $17 relating to the Gove alumina refinery in Australia, $5 related to the impairment of certain Primary Metal assets in Canada, and $4 related to the impairment of certain Engineered Products assets in Canada.

In 2006, the Company sold claims related to the Enron bankruptcy to a financial institution for combined proceeds of $62, recorded in Provisions for (Recoveries of) legal claims.

Included in the 2006 environmental provisions is $24 related to asset retirement obligation adjustments relating to closed sites.

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.

123

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

14.  OTHER EXPENSES (INCOME) — NET (Continued)

Included in the 2004 other expenses is $34 related to severance and other exit costs not included in note 8 — Restructuring Programs as they were not part of major restructuring plans.

15.  INVENTORIES

	2006		2005		2004
Aluminum operating segments
Aluminum		1,060		912		1,881
Raw materials		835		704		733
Other supplies		495		365		576
		2,390		1,981		3,190
Packaging operating segment
Raw materials and other supplies		311		297		347
Work in progress		155		133		147
Finished goods		330		323		356
		796		753		850
		3,186		2,734		4,040

16.  DEFERRED CHARGES AND OTHER ASSETS

Deferred charges and other assets comprise the following elements:

	2006		2005		2004
Prepaid pension costs (NOTE 31)		42		176		197
Available-for-sale securities		77		76		52
Prepaid mining expenses		45		47		49
Debt financing costs		46		52		43
Reserve for receivables sold (NOTE 13)		74		42		10
Amount receivable on currency swap of debt		—		—		62
Long-term notes and other receivables		720		594		585
Other		83		65		132
		1,087		1,052		1,130

17.  INVESTMENTS

Investments comprise the following elements:

	2006		2005		2004
Companies accounted for under the equity method (NOTE 10)		1,472		1,470		1,690
Investments accounted for under the cost method		37		41		57
		1,509		1,511		1,747

124

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

18.  PROPERTY, PLANT AND EQUIPMENT

	2006		2005		2004
Cost (excluding Construction work in progress)
Land and property rights		579		550		686
Buildings		3,303		3,011		3,909
Machinery and equipment		14,816		13,429		17,000
		18,698		16,990		21,595

Accumulated depreciation relates primarily to Buildings, and Machinery and equipment.

19.  SALES AND ACQUISITIONS OF BUSINESSES AND INVESTMENTS

2006

Acquisitions

France

On 1 December 2006, Alcan acquired the remaining 70% stake of Carbone Savoie and certain related technology and equipment from GrafTech International Ltd. for $131 (net of cash acquired). Carbone Savoie is a producer of cathode blocks. The Company believes that this investment will strengthen its AP Series smelting technology platform and help to accelerate the development of potential breakthrough technologies. It will also secure its supply of cathode products for its current operations and extensive new project pipeline. As the transaction was completed at the end of 2006, a tentative purchase price allocation was performed on 1 December 2006 and, as permitted by accounting standards, the final valuation will be completed in early 2007. The results of operations of Carbone Savoie are included in the consolidated statement of income as of 1 December 2006. The purchase cost of $131 was allocated based on the preliminary fair values of the assets acquired and liabilities assumed as follows:

	2006
Trade receivables		16
Inventories		28
Property, plant and equipment		73
Intangible assets(1)		35
Goodwill(2)		41
		193
Payables and accrued liabilities		21
Short-term borrowings		6
Deferred income taxes — current		2
Deferred credits and other liabilities		1
Post-retirement benefits		5
Deferred income taxes — long-term		27
Fair value of net assets acquired at date of acquisition (net of cash acquired of $2)		131

(1)	The intangible assets are amortized over a period of 15 years.
(2)	See note 7 — Goodwill and Intangible Assets. The goodwill is not deductible for tax purposes.

125

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

19.  SALES AND ACQUISITIONS OF BUSINESSES AND INVESTMENTS — (Continued)

In 2006, the Company made the following other five acquisitions for a total cost of $57:

United States

The business and assets of Penske Composites, LLC, a leading manufacturer of reinforced structural urethane core material products for the marine and industrial markets.

Asia and Other Pacific

The operating assets of Daifu Industries Co. Ltd, a supplier of foil and plastic lidding for food packaging in Thailand.

All Other

The packaging assets and business of Recubrimientos y Laminaciones de Papel, S.A. de C.V. (Relapasa), of Monterrey (Mexico).

An increase in ownership of Alcan Packaging Mohammedia to 97.4% by purchasing an additional 34.4% for $8. Alcan Packaging Mohammedia, located in Morocco, is specialized in dairy packaging.

Other Europe

The shares of VTS Clima Ltd., a food flexible packaging company located in Russia.

Sales

In 2006, the Company sold the following businesses and investments. All gains and losses on disposals and asset impairment charges reported below are recorded in Other expenses (income) — net.

France

The Froges rolling mill to Industrie Laminazione Alluminio S.p.A. based in Sardinia, Italy for net proceeds of ($5), resulting in a gain on disposal of $2.

The high-purity activity at the Mercus processing mill to Praxair Inc. for net proceeds of $2, resulting in a gain on disposal of $2.

The Chambéry operation to Compagnia Generale Alluminio S.p.A. for net proceeds of $8, resulting in no gain or loss on disposal. During the first quarter of 2006, the Company had recorded an impairment charge of $2 based on the expected divestiture.

The Lir France beauty packaging facility for net proceeds of ($3), resulting in no gain or loss on disposal. A provision of $9 was recorded in the fourth quarter of 2005 based on the expected loss on disposal.

The Cebal Aerosol business to its current management team and to Natexis Investissement Partners, for net proceeds of $16, resulting in a loss on disposal of $3. An impairment charge of $20 was recorded in the fourth quarter of 2005 as a result of the expected divestiture.

United States

Selected assets of the North American Food Packaging Plastic Bottle business to Ball Corporation for net proceeds of $182, resulting in a loss on disposal of $4.

The Wheaton Science Products business in New Jersey (US) to River Associates Investments, LLC, for net proceeds of $35, resulting in a gain on disposal of $4.

126

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

19.  SALES AND ACQUISITIONS OF BUSINESSES AND INVESTMENTS — (Continued)

Asia and Other Pacific

The 51% ownership in the Joint Venture Baotou Pechiney and Baolu High Purity Aluminium Company Limited, located in China, for net proceeds of $3, resulting in a gain on disposal of $4.

Other Europe

The food packaging plant in Zaragoza (Spain), to Kostova System, S.L., for net proceeds of $7, resulting in a gain on disposal of $1. During the fourth quarter of 2005, the Company had recorded an impairment charge of $4 as a result of the expected divestiture.

Investments

In 2006, the Company acquired investments accounted for under the cost method for a total cost of $13, and disposed of investments accounted for under the cost method for total proceeds of $13, resulting in a net gain on disposal of $6.

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.

127

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

19.  SALES AND ACQUISITIONS OF BUSINESSES AND INVESTMENTS — (Continued)

Sales

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. 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, 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.

Pet Plas Packaging Ltd., a food plastic bottles company to Esterform Packaging Limited, based in the UK, for net proceeds of $19 and recorded a loss on disposal of $7.

Alcan Print Finishers Ltd., the UK 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 UK 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 10 March 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.

128

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

19.  SALES AND ACQUISITIONS OF BUSINESSES AND INVESTMENTS — (Continued)

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

Subsequent to a Memorandum of Understanding signed in June 2004, on 23 February 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 12 December 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 aluminum smelter in Sohar (Oman), in which the Company will hold a 20% equity interest. The Company licensed its AP35 smelter technology for use in the newly constructed smelter and is providing 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 Company has the option of acquiring up to 60% of a planned second potline for an additional 350 kt/y of aluminum.

20.  ASSET RETIREMENT OBLIGATIONS

These liabilities consist primarily of environmental remediation costs, resulting from normal operations, associated with certain bauxite residue disposal sites at its alumina refineries, the disposal of certain of its spent potlining associated with smelter facilities and certain closed sites.

The following is a reconciliation of the aggregate carrying amount of liabilities for asset retirement obligations (AROs).

	2006			2005			2004
Balance — beginning of year		659			624			563
Acquisition of Pechiney		—			—			8
Liabilities incurred		53			82			20
Liabilities settled		(21	)		(15	)		(36	)
Accretion expense		35			27			26
Foreign exchange adjustments		18			(5	)		40
Revisions in estimated cash flows		39			(54	)		3
Balance — end of year		783			659			624

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 plants have indeterminate economic lives.

129

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

21.  DEFERRED CREDITS AND OTHER LIABILITIES

Deferred credits and other liabilities comprise the following elements:

	2006		2005		2004
Asset retirement obligations (long-term portion)		718		610		582
Environmental liabilities		175		183		237
Restructuring liabilities		90		76		13
Claims		110		130		155
Fair value of derivatives		343		321		235
Other		351		288		299
		1,787		1,608		1,521

22.  DEBT NOT MATURING WITHIN ONE YEAR

	2006		2005		2004
Alcan Inc.
Commercial paper — CAN $(CAN$605 million)(A)		519		428		703
Commercial paper — US$(A)		299		238		116
5.5% Euro note		—		710		813
6.25% Debentures, due 2008		200		200		200
6.45% Debentures, due 2011		400		400		400
4.875% Global notes, due 2012(B)		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(B)		506		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		300		—
Bank loans		—		—		29
Bank loan(D)		—		—		500
Other debt, due 2017 and 2033 (CAN$14 million)		13		12		11
Alcan France S.A.S. (formerly Pechiney S.A.)
Bank loan, due 2008 (€138 million)(C)		183		163		187
Bank loan, due 2008 (€45 million)(C)(E)		59		53		61
3.45% Bank loan		—		48		54
Commercial paper — Euro(A)		—		—		160
5.10% Debentures		—		—		313
2.15% Equity link bonds		—		—		83
Bank loans, due 2007/2010 (€11 million)(F)		15		13		—
Other debt, due 2007/2013 (€7 million)(C)		10		17		15
Aluminium Pechiney SPV
Bank loan, due 2007/2013(C)		75		88		89
Aluminium Dunkerque
Credit facility, due 2016 (€33 million)		43		30		63
Bank loan		—		—		27

130

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

	2006			2005			2004
22.  DEBT NOT MATURING WITHIN ONE YEAR — (Continued)
Alcan Finance Jersey Limited
Euro Medium Term Note Program (EMTN)
EMTN, due 2008 (€13 million)(C)(G)		17			15			18
EMTN, due 2008 (€8 million)(C)(G)		11			10			11
Alcan Corporation
Commercial paper — US$(A)		20			—			—
Teckpack Asia
Bank loans, due 2007/2010(C)		17			22			26
Alcan Holdings France
Bank loans(F)		—			—			18
Alcan Taihan Aluminium Limited(H)
4.55% Bank loan		—			—			70
4.80% Bank loan		—			—			39
4.55% Bank loan		—			—			24
Other bank loans		—			—			2
ALA (Nevada) Inc.
Bank loan		—			—			60
Other
Bank loans, due 2007/2015(C)		19			30			28
Other debt, due 2007/2033(C)		56			40			44
		5,512			6,067			6,914
Debt maturing within one year included in current liabilities		(36	)		(802	)		(569	)
		5,476			5,265			6,345

(A)  Effective 16 June 2006, the Company replaced its $3,000 multi-currency, five-year, committed global credit facility that was in place since April 2004, with a new two-tranche multi-currency, committed global credit facility with a syndicate of international banks. This new facility is comprised of a $2,000 5-year tranche, maturing in June 2011, and a $1,000 364-day tranche which may be extended by two years at the Company’s option. This facility is available for general corporate purposes and is primarily used to support the commercial paper programs.

In addition to its existing commercial paper program in Canada ($3,000), the Company had reinstated in 2005, two commercial paper programs, one in France (€ 1 billion) and another in the US ($2,000). The Company guarantees the commercial paper under these two programs. Starting April 2005, Alcan Pechiney Finance S.A. replaced Alcan France S.A.S. as the commercial paper issuer in Europe. In October 2005, a new commercial paper program in the US 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 Novelis Spin-off. At any point in time, the total combined issuance limit for all three programs cannot exceed $3,000.

In 2006, CAN$ denominated commercial paper borrowings of CAN$605 million (2005: CAN$498 million; 2004: CAN$2,433 million) were swapped through the use of forward exchange contracts for $530 (2005: $425; 2004: $1,995).

The pre-swap interest rates on the CAN$ denominated commercial paper ranged from 4.15% to 4.35% in 2006 (2005: 2.69% to 3.51%; 2004: 2.23% to 2.78%). The interest rates on the US$ denominated commercial paper of Alcan Inc. ranged from 5.21% to 5.49% in 2006 (2005: 4.05% to 4.46%; 2004: 1.75% to 2.53%). The

131

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

22.  DEBT NOT MATURING WITHIN ONE YEAR — (Continued)

interest rate on the US$ denominated commercial paper of Alcan Corporation was 5.35% in 2006. In 2004, interest rates on the Euro-denominated commercial paper ranged from 2.16% to 2.67%.

As at 31 December 2006, 2005 and 2004, 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 $1,500 ($1,324 of CAN$ denominated commercial paper (CAN$1,589 million) and $176 of US$ denominated commercial paper), which was classified as Short-term borrowings as at 31 December 2004, as these borrowings were repaid during the first quarter of 2005.

Following the Novelis Spin-off, Alcan settled amounts due from Novelis and received net proceeds of approximately $2.5 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 31 December 2004.

(B)

In 2006, the Company entered into interest rate derivatives to swap interest payments on $600 of its long-term debt from fixed to floating ($500 relating to the 5.00% Global notes due in 2015 and $100 to the 4.875% Global notes due in 2012). The fair market value of these derivatives is $5 as at 31 December 2006. These derivatives have been designated as fair value hedges of the underlying fixed rate debt and both the debt and the derivatives are recorded at fair value in the Financial Statements.

(C)

Interest rates fluctuate principally with the lender’s prime commercial rate, the commercial bank bill rate, or are tied to LIBOR/EURIBOR/SIBOR rates.

(D)  In August 2004, Alcan Aluminium 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)  On 14 November 2005, Alcan France S.A.S. exercised an option to convert the interest rate on this loan from fixed (4.80%) to floating.

(F)  In 2005, the debt of Alcan Holdings France was transferred to Alcan France S.A.S.

(G)

The EMTNs of principal amounts of € 13 million and € 8 million were swapped for £9 million and £5 million, respectively.

(H)

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% and the Company had swapped interest rates to 2007 on $63 of its floating rate debt to fixed. ATA is an entity included in the Novelis Spin-off. Accordingly, these borrowings, and associated interest rate derivatives, were transferred to Novelis upon completion of the spin-off on 6 January 2005.

Based on rates of exchange at year-end, debt repayment requirements over the next five years amount to $36 in 2007, $511 in 2008, $26 in 2009, $17 in 2010 and $1,253 in 2011. All commercial paper debt repayments are included in 2011 when the multi-currency, five year, committed global credit facility matures.

23.  PREFERENCE SHARES

Authorized

An unlimited number of preference shares issuable in series. All shares are without nominal or par value.

132

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

23.  PREFERENCE SHARES — (Continued)

Authorized and Outstanding

In 2006, 2005, and 2004, 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 31 December 2006 and 2005 (2004: 5,700,000 series C and 3,000,000 series E shares), with stated values of $106 and $54, respectively.

Preference shares, series C and E, are eligible for quarterly dividends based on an amount related to the average of the Canadian prime interest rates quoted by two major Canadian banks for stated periods. The dividends on series C and E preference shares are cumulative.

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.

24.  COMMON SHARES

The authorized Common Share capital is an unlimited number of Common Shares without nominal or par value. On 26 February 2007, there were 367,434,802 Common Shares outstanding. Changes in outstanding Common Shares are summarized below:

	Number							Stated Value
	2006			2005		2004		2006			2005			2004
	(In thousands)
Outstanding — beginning of year		371,921			369,930		365,181		6,181			6,670			6,461
Net impact of Novelis Spin-off		—			—		—		—			(576	)		—
Issued for cash:
Executive share option plan (NOTE 25)		3,007			1,354		1,760		104			46			60
Liquidity Agreement (NOTE 25)		934			118		276		33			4			12
Share purchase plan		581			382		540		25			12			24
Issued under dividend reinvestment plan		116			137		91		5			5			4
Issued in exchange for tendered Pechiney shares*		—			—		2,082		—			—			82
Transfer of additional paid-in capital upon exercise of stock options		—			—		—		51			20			27
Purchased for cancellation		(9,831	)		—		—		(164	)		—			—
Outstanding — end of year		366,728			371,921		369,930		6,235			6,181			6,670

* As at 31 December 2006, 872 of these Shares (2005 and 2004: 872 Shares) with a stated value of $31 (2005: $31; 2004: $35) are held by a Subsidiary as a result of the Pechiney acquisition. 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

133

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

24.  COMMON SHARES — (Continued)

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.

Share Repurchase Program

The Company established a Share repurchase program that commenced on 2 November 2006 and will terminate at the latest on 1 November 2007. The Company may purchase up to 18,800,000 Common Shares, representing approximately 5% of the outstanding Common Shares at 27 October 2006, i.e. 376,407,558 Common Shares, under a normal course issuer bid.

Purchases may be made on the Toronto Stock Exchange and the New York Stock Exchange. The Common Shares purchased under the program will be cancelled. As at 31 December 2006, the Company had repurchased a total of 9,831,200 Common Shares for a total cost of $466. A charge of $302 was recorded in Retained earnings for the excess of the purchase price over the stated value of the Common Shares.

25.  STOCK OPTIONS AND OTHER STOCK-BASED COMPENSATION

Alcan Executive Share Option Plan

Under the Alcan 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. These Common Shares are issued from treasury. Options granted beginning in 1998 vest (not less than three months after the grant 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 increased by 40%, and the entire amount of the grant when the market value of the Share has increased by 60%. The market value must exceed these thresholds for at least 21 consecutive trading days. All options that do not attain the thresholds above vest nine years after the grant date. All options expire ten years after the grant date. In the event of death or retirement, any remainder of this ten-year period in excess of five years is reduced to five years, and the said thresholds are waived. 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 ten years. Upon consummation of the combination with Alusuisse Group Ltd. on 17 October 2000, all options granted prior to the consummation were vested. In respect of certain options granted to certain senior executives in 1996, 1997 and 1998, the Company granted further options which became 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.

134

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

25.  STOCK OPTIONS AND OTHER STOCK-BASED COMPENSATION — (Continued)

On 6 January 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 Novelis Spin-off, Alcan Executive Share Options held prior to the Novelis Spin-off were 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 amounted 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. All other terms remained the same as before the spin-off.

Changes in the number of Shares under options as well as the average exercise price are summarized below:

	Number of Shares Under Options									Weighted Average Exercise Price
	2006			2005			2004			2006		2005		2004
	(In thousands)									(Can$)
Outstanding — beginning of year		11,295			10,410			9,566			43.40		50.96		47.49
Net impact of Novelis Spin-off		—			(100	)		—			—		N/A		—
Granted		167			2,866			2,679			49.59		38.26		58.13
Exercised (NOTE 24)		(3,007	)		(1,354	)		(1,760	)		39.30		39.84		43.25
Forfeited/expired		(315	)		(527	)		(75	)		44.59		45.11		45.95
Outstanding — end of year		8,140			11,295			10,410			44.99		43.40		50.96
Exercisable — end of year		3,329			3,411			4,285			40.89		40.59		45.98

Shares under Options Outstanding at 31 December 2006

						Weighted Average
		Range of Exercise		Weighted Average		Remaining
Number of Shares Under Options		Price		Exercise Price		Contractual Life
(In thousands)		(Can$)		(Can$)		(Years)
	488		30.43-35.00		33.83		4.79
	2,250		35.01-40.00		38.35		8.16
	877		40.01-45.00		40.91		3.59
	1,383		45.01-50.00		46.64		6.69
	3,142		50.01-56.34		51.90		6.39
	8,140		30.43-56.34		44.99		6.53

Shares under Options Exercisable and Fully Vested at 31 December 2006

						Weighted Average
		Range of Exercise		Weighted Average		Remaining
Number of Shares Under Options		Price		Exercise Price		Contractual Life
(In thousands)		(Can$)		(Can$)		(Years)
	488		30.43-35.00		33.83		4.79
	1,379		35.01-40.00		38.42		7.84
	598		40.01-45.00		40.97		3.25
	462		45.01-50.00		46.35		5.71
	402		50.01-56.34		51.57		3.93
	3,329		30.43-56.34		40.89		5.80

135

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

25.  STOCK OPTIONS AND OTHER STOCK-BASED COMPENSATION — (Continued)

At 31 December 2006, the Company had 4,810,965 Alcan Executive Share Options that are expected to vest in future periods. These options have a weighted average exercise price of CAN$47.83 and a weighted average remaining contractual life of 7.04 years.

At 31 December 2006, the Company had 20,588,365 Shares reserved for issue under the Alcan Executive Share Option Plan.

The total intrinsic value of the Alcan Executive Share Options exercised in 2006 was $46 (2005: $8; 2004: $24). For the year ended 31 December 2006, the Company received $104 from the exercise of Alcan Executive Share Options (2005: $46; 2004: $60).

The total intrinsic value of Alcan Executive Share Options fully vested at 31 December 2006, is $45 (2005: $21; 2004: $46).

The fair value of options vested in 2006 is $32 (2005: $3; 2004: $2).

The fair value of each option grant is estimated on the date of grant. However, as a result of the Novelis Spin-off on 6 January 2005, the fair value of stock options outstanding subsequent to the spin-off was modified.

For all Alcan Executive Share Options granted subsequent to 31 December 2005, the fair value is estimated using a Monte Carlo simulation model. As the Alcan Executive Share Options contain a market condition, which should be reflected in the grant date fair value of the options, the Company prospectively changed its valuation technique based on further clarification provided in SFAS No. 123(R). The Monte Carlo simulation model explicitly considers market conditions and in doing so, provides a better estimate of fair value than the Black-Scholes option pricing model used in prior years. The Monte Carlo simulation model utilizes multiple input variables that determine the probability of satisfying each market condition stipulated in the award. Assumptions used by the valuation models are:

	2006*		2005**		2004**
Dividend yield(%)		1.66		1.76		1.71
Expected volatility(%)		31.78		27.97		25.16
Risk-free interest rate(%)		4.89		4.05		3.88
Expected life (years)		N/A		6		6
Original term of awards (years)		10		N/A		N/A

*	Monte Carlo simulation model
**	Black-Scholes valuation model

Volatility is based on historical volatility. The risk-free interest rate is based on the yield of 7-year Treasury bonds. Dividend yield is based on the average yield.

Stock options are granted at an exercise price equal to the market price on the grant date. The weighted average grant date fair value for Alcan Executive Share Options issued in 2006 is $13.94 (2005: $8.71; 2004: $9.23). The weighted average fair value of stock options granted in 2004 was revised due to the modification of stock options outstanding subsequent to the Novelis Spin-off on 6 January 2005.

Derived Service Period

For options granted during the year ended 31 December 2006, the requisite service period is derived for the three vesting tranches described above using the same Monte Carlo simulation. The fair values of the options for each of the first, second and third tranches are recognized as compensation expense over a requisite service period of one, two and three years, respectively. The Company changed its method of calculating the requisite service

136

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

25.  STOCK OPTIONS AND OTHER STOCK-BASED COMPENSATION — (Continued)

period for these options based on further clarification provided in SFAS No. 123(R), as the Alcan Executive Share Options contain a market condition.

For options granted prior to 1 January 2006, compensation expense is recognized over a requisite service period of no longer than nine years.

In 2006, the Company reviewed its long-term incentive compensation. As a result of this review, beginning in the third quarter of 2006, the practice of granting options under the Alcan Executive Share Option Plan has been suspended in favour of Restricted Share Units in accordance with the Restricted Share Unit Plan.

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. These options were last granted in April 2003.

As a result of the Pechiney acquisition, 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 Autorité des marchés financiers of Alcan’s initial public offer for Pechiney securities on 16 July 2003, the Pechiney options became fully vested. The Alcan Common Shares are issued from treasury.

Changes in the number of Alcan Shares under Pechiney options as well as the average exercise price are summarized below:

										Weighted Average
	Number of Shares Under Pechiney Options									Exercise Price
	2006			2005			2004			2006		2005		2004
	(In thousands)									(€)
Outstanding — beginning of year		3,670			3,327			3,889			31.63		35.92		34.71
Impact of Novelis Spin-off(1)		—			461			—			—		N/A		—
Exercised (NOTE 24)		(936	)		(118	)		(276	)		29.22		27.44		27.03
Exercised for Pechiney shares(2)		—			—			(152	)		—		—		24.11
Forfeited/expired		(36	)		—			(134	)		29.94		—		32.43
Outstanding and exercisable — end of year		2,698			3,670			3,327			32.48		31.63		35.92

(1)	As a result of the Novelis Spin-off, 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 23 January to 5 February 2004. On 6 February 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.

137

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

25.  STOCK OPTIONS AND OTHER STOCK-BASED COMPENSATION — (Continued)

Shares under Pechiney Options Outstanding and Exercisable at 31 December 2006

		Range of		Weighted Average		Weighted Average
		Exercise		Exercise Price		Remaining
Number of Shares Under Options		Price				Contractual Life
(In thousands)		(€)		(€)		(Years)
	349		16.73-19.92		19.79		6.09
	44		23.50-23.92		23.67		1.73
	902		29.07-31.36		29.95		3.55
	1,403		37.53-37.67		37.54		5.18
	2,698		16.73-37.67		32.48		4.70

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, 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 52.50%, a market risk-free interest rate of 3.99% and an expected life of seven years.

The total intrinsic value of Pechiney options exercised in 2006 was $13 (2005: $1; 2004: $5). In 2006, the Company received $33 from the exercise of Pechiney options (2005: $4; 2004: $12).

The total intrinsic value of Pechiney options exercisable at 31 December 2006 was $16 (2005: $13; 2004: nil).

Other Stock-Based Compensation Plans

Stock Price Appreciation Unit Plan

A small number of employees were entitled to receive Stock Price Appreciation Units (SPAU) instead of Alcan Executive Share Options due to certain local considerations in their countries of residence, whereby they were 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. SPAUs vest in the same manner as the Alcan Executive Share Options granted beginning in 1998.

On 6 January 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. All other terms remained the same as before the spin-off.

As described in note 3 — Accounting Changes — Share-Based Payment, the Company began recording all outstanding liability awards, previously recorded at intrinsic value, at fair value on 1 January 2006. Accordingly, the Company recorded an after-tax charge of $4 using the modified prospective application method in Cumulative effect of accounting change to record all outstanding SPAUs, previously measured at their intrinsic value, at their fair value. Prior periods have not been restated. The fair value of all outstanding SPAUs is estimated using the Monte Carlo simulation model described under the Alcan Executive Share Option Plan.

As of 1 January 2006, the SPAUs are accounted for as liability-classified awards under the provisions of SFAS No. 123(R), as they are settled in cash. These awards are measured at their fair value at grant date, and remeasured at each reporting period, until the SPAUs are settled. The fair value of the awards, which are estimated using the Monte Carlo simulation model, are amortized over the requisite service period of no longer than nine years.

138

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

25.  STOCK OPTIONS AND OTHER STOCK-BASED COMPENSATION — (Continued)

In 2006, the Company reviewed its long-term incentive compensation. As a result of this review, beginning in the third quarter of 2006, the practice of granting SPAUs under the Stock Price Appreciation Unit Plan has been suspended in favour of Restricted Share Units in accordance with the Restricted Share Unit Plan.

The valuation model used the following assumptions at 31 December 2006:

Dividend yield(%)	1.5
Expected volatility(%)	32.8
Risk-free interest rate(%)	4.64

Volatility is based on historical volatility. The risk-free interest rate is based on the yield of 7-year Treasury bonds. Dividend yield is based on the average yield.

The change in SPAUs is as follows:

										Weighted Average
	Number of SPAU’s									Exercise Price
	2006			2005			2004			2006		2005		2004
	(In thousands)									(Can$)
Outstanding — beginning of year		1,019			924			720			42.09		50.23		46.41
Net impact of Novelis Spin-off		—			(111	)		—			—		N/A		—
Granted		—			222			275			—		38.57		58.15
Exercised		(299	)		(6	)		(59	)		39.44		34.42		40.17
Forfeited/expired		(19	)		(10	)		(12	)		48.86		47.74		52.58
Outstanding — end of year		701			1,019			924			43.04		42.09		50.23
Exercisable — end of year		340			359			320			39.98		39.77		45.10

SPAUs Outstanding at 31 December 2006

						Weighted Average
		Range of		Weighted Average		Remaining
Number of SPAUs		Exercise Price		Exercise Price		Contractual Life
(In thousands)		(Can$)		(Can$)		(Years)
	82		34.04-35.00		34.04		3.91
	157		35.01-40.00		38.26		8.70
	132		40.01-45.00		40.86		4.15
	176		45.01-50.00		46.16		5.35
	154		50.01-50.99		50.99		7.68
	701		34.04-50.99		43.04		6.22

139

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

25.  STOCK OPTIONS AND OTHER STOCK-BASED COMPENSATION — (Continued)

SPAUs Exercisable at 31 December 2006

						Weighted Average
		Range of		Weighted Average		Remaining
Number of SPAUs		Exercise Price		Exercise Price		Contractual Life
(In thousands)		(Can$)		(Can$)		(Years)
	82		34.04-35.00		34.04		3.91
	87		35.01-40.00		38.26		8.68
	81		40.01-45.00		40.86		3.79
	88		45.01-50.00		46.16		3.97
	2		50.01-50.99		50.99		4.58
	340		34.04-50.99		39.98		5.11

At 31 December 2006, the Company had 360,462 SPAUs that are expected to vest in future periods. These SPAUs have a weighted average exercise price of CAN$45.92 and a weighted average remaining contractual life of 7.26 years.

The total intrinsic value for SPAUs redeemed, which is equal to the amount the Company paid, in 2006 was $4 (2005: nil; 2004: $1).

The total intrinsic value of SPAUs fully vested at 31 December 2006 was $5 (2005: $2; 2004: $4).

The fair value of the SPAUs vested in 2006 was $5.

Total Shareholder Return Performance Plan

A number of employees are entitled to receive cash awards under the Total Shareholder Return (TSR) Performance Plan (TSR 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 compared to other companies included in the Standard & Poor’s Industrials Index measured over three-year periods commencing on 1 October 2005, 2004 and 2003. Generally, participants are only eligible for payment of cash awards under the TSR Plan if they are employed by the Company over the entire three-year period. If the performance results for the Company’s Common Shares ranks below the 30th percentile compared to all companies in the Standard & Poor’s Industrials 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.

At various times in 2006, the TSR Plan was amended, including as follows: the comparator group of companies was changed from the Standard & Poor’s Industrials Index to the Standard & Poor’s Materials Index; and the maximum payout amount has been modified. At or above the 75th percentile rank, the employee will earn the maximum award, which is equal to 250% (rather than 300%) of the target. The actual amount of the award (if any) will be prorated between the percentile rankings.

As described below, under the Executive Deferred Share Unit Plan (ESDUP), eligible executives with fiscal residence in Canada may elect to receive Executive Deferred Share Units (EDSUs) for their total TSR award for that three-year period, instead of a cash payment. Subject to a pending ruling from the Canadian tax authorities, these executives, who make this election, will also receive from the Company an additional 20% of EDSUs for their TSR payout exchanged to encourage these executives to commit to a long-term investment in the Company. For the year

140

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

25.  STOCK OPTIONS AND OTHER STOCK-BASED COMPENSATION — (Continued)

ended 31 December 2006, 6,044 units (2005: 7,118 units), were granted to eligible executives. At 31 December 2006, 13,162 units were outstanding (2005: 7,118 units).

As described in note 3 — Accounting Changes — Share-Based Payment, the Company began recording all outstanding liability awards at fair value on 1 January 2006. Accordingly, on this date, the Company began recording all outstanding awards under the TSR Plan at fair value. The fair value of all outstanding TSR awards was estimated by using a Monte Carlo simulation model to simulate the total shareholder return for each of the peer companies over the term of the three-year period and to evaluate the Company’s percentile rank among the peer companies in order to determine the payout. The adoption of the fair value method did not have a material impact on the outstanding TSR awards on 1 January 2006. Prior to this date, the TSR awards were measured at their intrinsic value and the changes in market value recorded as an increase (or decrease) in compensation expense.

As of 1 January 2006, the TSR awards are accounted for as liability-classified awards under the provisions of SFAS No. 123(R), as the majority are settled in cash. These awards are measured at their fair value at grant date, and remeasured at each reporting period, until the TSR awards are settled. The fair value of the awards, which are estimated using the Monte Carlo simulation model, are amortized over the three-year periods.

The valuation model used the following assumptions at 31 December 2006:

Alcan expected volatility(%)	31.01
Alcan expected correlation with market	0.47
Risk-free interest rate(%)	4.72
Expected market volatility (S&P 500)(%)	10.46

Volatility for all peers is based on historical volatility. The risk-free interest rate is based on the yield of 3-year Treasury bonds.

The peer company expected volatility and correlation with the market at 31 December 2006, is summarized as follows:

2004 and 2005 Grants	Volatility			Correlation with Market
Peer company average		26.89	%		0.44
Peer company high		118.18	%		0.68
Peer company low		12.56	%		0.10

2006 Grant	Volatility			Correlation with Market
Peer company average		25.62	%		0.54
Peer company high		52.19	%		0.68
Peer company low		16.87	%		0.33

In 2006, a total target cash award of $16 (2005: $18; 2004: $17) was granted, reduced by $1 (2005 and 2004: $1) due to forfeitures. The maximum payout for the target award issued on 1 October 2006 is $36 (2005: $49; 2004: $48).

The three-year period of the TSR Plan that commenced on 1 October 2003 was completed on 30 September 2006. The final rank for this three-year period was a combination of the percentile rankings for the periods before and after the Novelis Spin-off. The employees participating during this three-year period earned a payout of 41.74% of the target. In 2006, $4 was paid to these employees (2005: $18).

141

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

25.  STOCK OPTIONS AND OTHER STOCK-BASED COMPENSATION — (Continued)

On 6 January 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.

Restricted Share Unit Plan

The Alcan Restricted Share Unit Plan (RSU Plan) is a new long-term incentive plan that was introduced in the third quarter of 2006.

The RSU Plan provides for the granting of Restricted Share Units (RSUs) to eligible participants. The RSUs have a vesting period of no longer than three years. The participants are credited additional RSUs corresponding to dividends declared on Common Shares. The RSUs are redeemed in cash, or an equivalent number of Common Shares purchased on the open market for fiscal residents in France (see below), at the end of the vesting period based on the fair market value (defined as the average of the closing prices of the Company’s Common Shares on the New York Stock Exchange (NYSE) over the previous 21 trading days on that date multiplied by the number of RSUs held by the participant).

In December 2006, a subplan to the RSU Plan that is applicable to fiscal residents in France (French RSU Plan) was adopted. The adoption of the French RSU Plan was necessary to accommodate the French fiscal regime. The RSUs granted under the French RSU Plan have a two-year vesting period. At the end of the two-year vesting period, the French participants will receive the same number of Common Shares in exchange of their RSUs. Any dividend declared during the two-year vesting period will be paid in cash. The French participants are not entitled to dispose of the Common Shares for two years after the end of the vesting period. Prior to the end of the two-year vesting period, a French participant may elect to hold the Common Shares until termination of employment (retirement, resignation or death). If such election is made, the French participant will be entitled to receive an additional 20% of RSUs that will also be subject to another two-year vesting period and two-year holding period.

Subject to a pending ruling from the Canadian tax authorities and as described below, under the EDSUP, eligible executives with fiscal residence in Canada may elect to receive EDSUs in exchange for their RSU award earned under the RSU Plan for that three-year vesting period, instead of a cash payment. These eligible executives, who make this election, will also receive from the Company an additional 20% of EDSUs for the RSUs exchanged to encourage the eligible executive to commit to a long-term investment in the Company.

The RSUs are accounted for as liability-classified awards under the provisions of SFAS No. 123(R), as the majority will be settled in cash. These awards are measured at their fair value at grant date, and remeasured at each reporting period, until the RSUs are settled. The fair value of the award, which is equal to the closing price of an Alcan Common share on the NYSE, is amortized over the requisite service period of no longer than three years.

In 2006, 1,103,157 units (including 211,600 for the French RSU Plan) were granted and 35,305 units (nil for the French RSU Plan) were cancelled. At 31 December 2006, 1,067,852 units were outstanding.

Executive Deferred Share Unit Plan

Under the EDSUP, eligible executives with fiscal residence in Canada may elect, prior to the beginning of any particular year, to receive EDSUs for their Executive Performance Award (EPA) in respect of that year, instead of a cash payment. These executives may also elect to receive EDSUs for their TSR payout under the TSR Plan for the three-year period then ending and for their RSU award under the RSU Plan for the three-year period ending, instead of a cash payment in each case, subject to a pending ruling from Canadian taxation authorities. These eligible executives, who make this election, will also receive from the Company an additional 20% of EDSUs for their TSR payout and RSUs exchanged to encourage these executives to commit to a long-term investment in the Company.

142

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

25.  STOCK OPTIONS AND OTHER STOCK-BASED COMPENSATION — (Continued)

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 vesting period for the EDSUs related to the TSR Plan. The number of EDSUs for the RSU Plan will equal the number of RSUs at the end of the three-year vesting period. 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 of Directors. On 6 January 2005, EDSUs held prior to the Novelis Spin-off were converted in the same manner as described under the Alcan Executive Share Option Plan.

The EDSUs are accounted for as liability-classified awards under the provisions of SFAS No. 123(R), as they will be settled in cash. These awards are measured at their fair value on the date of issuance, and remeasured at each reporting period, until settlement.

In 2006, 11,776 units (2005: 8,988 units; 2004: 31,307 units) were granted, 6,044 units were issued in lieu of TSR cash awards (2005: 7,118 units; 2004: nil), 19,203 units were converted from Other Restricted Share Units (2005 and 2004: nil) and 11,439 units (2005: 18,878 units; 2004: 167,865 units) were redeemed. At 31 December 2006, 123,654 units (2005: 98,070 units; 2004: 88,414 units) were outstanding. In 2006, the Company paid nil for the redemption of units (2005: $1; 2004: $8).

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 6 January 2005, DDSUs held prior to the Novelis Spin-off were converted in the same manner as described under the Alcan Executive Share Option Plan.

The DDSUs are accounted for as liability-classified awards under the provisions of SFAS No. 123(R), as they will be settled in cash. These awards are measured at their fair value on the date of issuance, and remeasured at each reporting period, until settlement.

In 2006, 44,477 units were granted (2005: 47,914 units; 2004: 35,306 units) and 16,216 units were redeemed (2005: 15,378 units; 2004: 7,547 units). At 31 December 2006, 161,124 units (2005: 132,863; 2004: 87,240 units) were outstanding. In 2006, the Company paid $1 for the redemption of units (2005: $1; 2004: nil).

Other Restricted Share Units

Prior to September 2006, a small number of employees were granted other Restricted Share Units (Other RSUs). Additional Other RSUs are credited to each holder thereof corresponding to dividends declared on Common Shares. Other RSUs usually vest three years after the grant date. Each Other 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

143

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

25.  STOCK OPTIONS AND OTHER STOCK-BASED COMPENSATION — (Continued)

days ending on the vesting date. As a result of the spin-off, Other RSUs held prior to the Novelis Spin-off were converted in the same manner as described under the Alcan Executive Share Option Plan.

In 2006, 15,825 units were granted (2005: 13,511 units; 2004: 627 units), 22,525 units were redeemed, 19,203 were converted into EDSUs and 1,131 units were cancelled (2005: 10,214 units redeemed and 1,581 units cancelled; 2004: no units redeemed and 963 units cancelled). At 31 December 2006, 24,753 units were outstanding (2005: 51,787 units; 2004: 45,164 units). In 2006, the Company paid $1 for the redemption of units (2005 and 2004: nil).

The Other RSUs are accounted for as liability-classified awards under the provisions of SFAS No. 123(R), as the majority will be settled in cash. These awards are measured at their fair value at grant date, and remeasured at each reporting period, until settlement. The fair value of the award is amortized over the requisite service period of three years.

Retirement Eligible Employees

Prior to the adoption of SFAS No. 123(R) on 1 January 2006, the Company accounted for awards issued to retirement eligible employees using the nominal vesting period approach. Under this approach, compensation costs were recognized over the vesting period and, if the employee retired before the end of the vesting period, any unrecognized compensation cost was recognized at the date of retirement. Upon adoption of SFAS No. 123(R), the Company adopted the non-substantive vesting approach for all awards granted to retirement eligible employees subsequent to 1 January 2006. Under this approach, an award is vested when the employee’s retention of the award is no longer contingent on providing subsequent service. Therefore, any unvested and unrecognized compensation cost related to awards granted to employees who are retirement eligible is recognized immediately. If the Company would have applied the non-substantive vesting approach to all awards, instead of the nominal vesting period approach, compensation expense would have increased (decreased) by ($15) in 2006 (2005: $11; 2004: ($12)).

Total Stock-Based Compensation Cost

Total stock-based compensation costs in 2006 are $82 (2005: $25; 2004: $27). These costs include stock-option expense of $40 for 2006 (2005: $19; 2004: $11) and other stock-based compensation expense of $42 for 2006 (2005: $6; 2004: $16). The total recognized tax benefit related thereto is $12 for the year ended 31 December 2006 (2005: $2; 2004: $5). The fair value of all compensation costs not yet recognized is $87 as at 31 December 2006. The weighted average period over which these costs are expected to be recognized is 2.32 years.

26.  RETAINED EARNINGS

At 31 December 2006, consolidated retained earnings include $3,589 (2005: $2,094; 2004: $2,929) of undistributed earnings of foreign Subsidiaries and foreign corporate Joint Ventures, some part of which may be subject to certain taxes. Generally, no provision is made for such taxes as it is management’s intention to permanently reinvest these earnings 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. Consolidated retained earnings at 31 December 2006 include $216 (2005: $242; 2004: $175) of undistributed earnings of investments accounted for using the equity method.

27.  COMMITMENTS AND CONTINGENCIES

On 14 December 2006, the Company announced plans to build a $550 pilot plant smelter at its Complexe Jonquière site to develop the Company’s proprietary AP50 smelting technology. The pilot plant is expected to produce 60,000 tonnes of aluminum annually. Engineering for the pilot plant has begun and construction is expected

144

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

27.  COMMITMENTS AND CONTINGENCIES — (Continued)

to begin in 2008. The AP50 pilot plant is the first step in a planned ten-year $1.8 billion investment program in Quebec’s Saguenay-Lac-Saint-Jean (SLSJ) region, involving up to an additional 390,000 tonnes of new smelting capacity by 2015, developed by the Company with the support of the government of Quebec, as well as the creation of 740 highly skilled jobs. As part of the investment program, the government of Quebec has agreed to provide financial support by means of loans and research and development tax incentives which are conditional on the completion of this investment program. Moreover, the government of Quebec has made available to the Company a new block of 225 MW of electrical power. The agreement between the Company and the government of Quebec contains specific obligations on the part of the company to fulfill (1) certain job creation commitments; (2) its commitment to operate certain production facilities for a certain period of time; and (3) its commitment to support SLSJ suppliers of specific goods and equipment.

In connection with the above-mentioned agreement with the Company, the Quebec government has retained various rights which allow it to cancel some or all of the new entitlements and benefits relating to water and power, including the financial support contemplated thereby, should there be either an acquisition of control of Alcan or a change in the location of its headquarters which has a negative impact on its commitment to or presence in Quebec. The Company’s Board of Directors has, however, a significant role in the management of any process relating to the determination of any such negative impact.

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 2 December 2001, EPMI and Enron filed for protection under Chapter 11 of the US Bankruptcy Code and Powerex alleged that the Company owed it a termination payment of more than $100. On 17 January 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 17 January 2003 arbitral award. On 7 October 2004, the Company and Powerex agreed to terminate all legal proceedings and, on 23 December 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 15 December 2005, the United States Bankruptcy Court approved the stipulated agreement (the 10-day appeal period has since lapsed). On 19 January 2006, the Company sold the claims to a financial institution for combined proceeds of $62. These proceeds were recorded in the first quarter of 2006. See note 14 — Other expenses (income) — net.

On 22 January 2007, Alcan filed its leave to appeal application with the British Columbia (B.C.) Court of Appeal regarding the B.C. Utilities Commission 29 December 2006 decision to reject the amended and restated Long-Term Energy Purchase Agreement between Alcan and BC Hydro. The Company’s move follows BC Hydro’s similar filing on 22 January 2007 to the same court.

The Company has guaranteed the repayment of indebtedness by third parties or the indemnification of third parties for a total amount of approximately $279. Alcan believes that none of these guarantees is likely to be invoked. These guarantees relate primarily to debt held by equity-accounted Joint Ventures, employee housing loans, obligations relating to businesses sold and potential environmental remediation at former Alcan sites. Commitments with third parties and certain Related Companies for supplies of goods and services, including capital

145

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

27.  COMMITMENTS AND CONTINGENCIES — (Continued)

expenditures and environmental protection costs, are estimated at $1,272 in 2007, $531 in 2008, $519 in 2009, $506 in 2010, $470 in 2011 and $2,954 thereafter. Total payments to these entities, excluding capital expenditures, were $799 in 2006, $705 in 2005 and $593 in 2004. Some of the commitment contracts include a variable component for indexation to oil and coal prices that is not reflected in the associated commitments disclosed above.

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 $80 in 2007, $71 in 2008, $60 in 2009, $46 in 2010, $42 in 2011 and $172 thereafter. Total rental expenses amounted to $199 in 2006, $180 in 2005 and $150 in 2004.

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 21 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 6, income taxes in note 9, asset retirement obligations in note 20, debt repayments in note 22 and financial instruments and commodity contracts in note 29.

146

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

28.  CURRENCY GAINS AND LOSSES

The following are the amounts recognized in the Financial Statements:

	2006			2005			2004
Currency gains (losses) recorded in Income from continuing operations
Realized and unrealized gains (losses) on currency derivatives		24			(47	)		(66	)
Realized deferred translation adjustments*		(2	)		10			—
Gains (Losses) on translation of monetary assets and liabilities		(31	)		56			(62	)
		(9	)		19			(128	)
Deferred translation adjustments** — beginning of year		264			1,063			609
Effect of exchange rate changes		759			(847	)		616
Gains realized*		(13	)		(18	)		(32	)
Deferred translation adjustments reclassified due to the Novelis Spin-off		7			(105	)		—
Gains (Losses) on forward exchange contracts, net of tax, or translation of debt designated as an equity hedge of foreign subsidiaries		—			167			(123	)
Gains (Losses) on translation of a convertible loan to a Subsidiary forming part of the net investment		—			4			(7	)
Deferred translation adjustments — end of year		1,017			264			1,063

*	The gain of $13 realized in 2006 includes ($2) related principally to the sale of the Cebal Aerosol business, and $15 recorded in Income (Loss) from discontinued operations related to the sale of certain non-strategic assets in the Engineered Products group.
	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.
**	Deferred translation adjustments are included in Accumulated other comprehensive income (loss).

29.  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 Novelis Spin-off, 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 31 December 2004 were transferred to Novelis at the time of the spin-off.

147

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

29.  FINANCIAL INSTRUMENTS AND COMMODITY CONTRACTS — (Continued)

Derivatives — Currency

Outstanding at December 31		2006			2005			2004
Assets (Liabilities)		Fair			Fair			Fair
Financial Instrument	Hedge	Value			Value			Value
Forward exchange contracts	Future firm net operating cash flows		(1	)		10			(62	)
Forward exchange contracts	To swap intercompany foreign currency denominated loans to US$, € and CHF		—			(6	)		(5	)
Forward exchange contracts	To hedge € net investments in foreign operations(1)		—			—			(167	)
Forward exchange contracts	Anticipated transactions(2)		8			(2	)		5
Forward exchange contracts	To swap CAN$ commercial paper borrowings to US$		(11	)		3			31
Currency options	Future US$ sales against € and £		—			—			15
Cross currency interest swap and forward exchange contracts	To swap US$ third-party borrowings to KRW		—			—			(8	)
Cross currency interest swap	To swap € 21 million medium term notes to £14 million		—			1			2
Embedded derivatives			1			1			—

(1)

An exchange gain (loss) of nil was recorded in Deferred translation adjustments (2005: $167; 2004: ($123)).

(2)

In 2006, mainly anticipated transactions denominated in Brazilian real for the expansion of the Alumar alumina refinery in Brazil. In 2005, mainly anticipated transactions denominated in Australian dollars for the expansion of the Gove alumina refinery in Australia and Brazilian real for the Alumar expansion project. In 2004, mainly anticipated transactions denominated in Australian dollars for the Gove expansion project.

Derivatives — Interest Rate

The Company sometimes enters into interest rate swaps to manage funding costs as well as the volatility of interest rates.

	2006		2005		2004
Outstanding at December 31	Fair		Fair		Fair
Assets (Liabilities)	Value		Value		Value
Financial Instrument
Rate swap — floating to fixed
— in LIBOR floating to EURIBOR fixed		—		1		—
Rate swap — fixed to floating(1)
— in USD Fixed to USD LIBOR		5		—		—
Rate swap — floating to fixed
— in KRW floating to KRW fixed		—		—		(1	)

(1) These derivatives, which are designated as fair value hedges, convert the interest rate from fixed to floating on $500 of debt through 2015 and on $100 of debt through 2012.

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

148

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

29.  FINANCIAL INSTRUMENTS AND COMMODITY CONTRACTS — (Continued)

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
Assets (Liabilities)	2006			2005			2004
Financial Instrument
Forward contracts principally forward sales contracts and physical trading contracts(1)
Maturing principally in years		2007			2006 to 2007			2005 to 2006
Fair value		(287	)		(236	)		(104	)
Forward fixed price sales agreements
Maturing principally in years		2007			2006			—
Fair value		(56	)		(80	)		—
Call options purchased
Maturing principally in years		2007			2006			2005
Fair value		28			29			36
Call options sold
Maturing principally in years		2007			2006			2005
Fair value		(28	)		(29	)		(10	)
Embedded derivatives
Maturing principally in years		—			—			2005
Fair value		—			—			(10	)

(1) There was a loss of $33 due to hedge ineffectiveness in 2006 (2005: $18 and 2004: nil) on forward contracts, for which the Company applies cash flow hedge accounting under SFAS No. 133. As at 31 December 2006, the Company estimates that it will reclassify into earnings in 2007 pre-tax derivative losses of $302 from Accumulated other comprehensive income (loss) and the remaining balance will be reclassified into earnings during the period ending January 2010.

Derivatives — Electricity

As a hedge of future electricity purchases, the Company has outstanding as at December 31:

	2006		2005		2004
Financial Instrument
Fixed price contracts
Maturing at various times in years		N/A		N/A		2016
Fair value		N/A		N/A		18

Counterparty risk

As exchange rates, interest rates, and prices for metal 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

149

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

29.  FINANCIAL INSTRUMENTS AND COMMODITY CONTRACTS — (Continued)

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.

Financial Instruments — Fair Value

On 31 December 2006, the fair value of the Company’s long-term debt totaling $5,512 (2005: $6,067; 2004: $6,914) was $5,487 (2005: $6,141; 2004: $7,158), based on market prices for the Company’s fixed rate securities and the book value of variable rate debt.

At 31 December 2006, the fair value of the Company’s preference shares having a book value of $160 (2005 and 2004: $160) was $195 (2005: $196; 2004: $185).

The fair values of all other financial assets and liabilities are approximately equal to their carrying values.

30.  SUPPLEMENTARY INFORMATION

	2006			2005			2004
Income statement
Interest on long-term debt		329			339			316
Capitalized interest		(73	)		(29	)		(11	)
Balance sheet
Payables and accrued liabilities include the following:
Trade payables		2,163			1,855			2,816
Other accrued liabilities		1,700			1,520			1,805
Derivatives		740			508			263
Income and other taxes		119			116			343
Accrued employment costs		708			609			616

At 31 December 2006, the weighted average interest rate on short-term borrowings for continuing operations was 5.4% (2005: 4.9%; 2004: 2.6 %).

	2006		2005		2004
Statement of cash flows
Interest paid
— continuing operations		386		376		413
— discontinued operations		—		7		3
Income taxes paid
— continuing operations		292		74		546
— discontinued operations		—		—		6

150

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

31.  POST-RETIREMENT BENEFITS

Alcan and its subsidiaries have established retirement benefit plans in the principal countries where they operate.

Funded Pension Plans

The pension obligation relates mostly to funded defined benefit pension plans in Canada, United Kingdom, United States, Switzerland, the Netherlands and Australia (“Funded Pension Plans”). Pension benefits are generally based on the employee’s service and highest average eligible compensation before retirement. They are periodically adjusted for cost of living increases, either by collective agreement such as in Canada, statutory requirement such as in UK, or Company practice when there are surpluses determined on a funding basis, such as in Canada, Switzerland and the Netherlands.

Most Funded Pension Plans are administered by a Pension Committee or Board of Trustees composed of plan members designated by the Company and employees. Each Committee or Board adopts its own investment policy which generally favours 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.

The allocation at 31 December 2006 includes all major plans.

			Allocation in Aggregate at 31 December
Category of Asset	Target Allocation		2006			2005			2004
Equity		40% to 65%		58	%		55	%		54	%
Debt securities		30% to 55%		32	%		34	%		35	%
Real estate				6	%		5	%		6	%

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 $289 in aggregate to its Funded Pension Plans in 2007.

Expected benefit payments from Funded Pension Plans are:
2007	549
2008	556
2009	571
2010	584
2011	600
2012 – 2016	3,240

151

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

31.  POST-RETIREMENT BENEFITS — (Continued)

The following table presents the projected benefit obligation and assets of the Funded Pension Plans:

	2006			2005			2004
Change in projected benefit obligation
Projected benefit obligation at January 1		10,331			10,117			8,729
Current service cost		187			155			157
Interest cost		509			496			488
Members’ contributions		62			48			44
Benefits paid		(557	)		(480	)		(459	)
Amendments		3			65			8
Acquisitions/curtailments/divestitures — net		7			(5	)		78
Novelis Spin-off		(225	)		(407	)		—
Actuarial losses		7			823			744
Currency (gains) losses		526			(481	)		328
Projected benefit obligation at December 31		10,850			10,331			10,117

	2006			2005			2004
Change in fair value of plan assets
Assets as January 1		8,726			8,468			7,537
Actual return on assets		893			1,192			848
Members’ contribution		62			48			44
Benefits paid		(557	)		(480	)		(459	)
Company contribution		273			212			188
Acquisitions/curtailments/divestitures — net		4			(5	)		29
Novelis Spin-off		(194	)		(290	)		—
Currency gains (losses)		444			(419	)		281
Assets at December 31		9,651			8,726			8,468

The funded status is recognized in the Balance Sheet as follows:

	2006			2005			2004
Deferred charges and other assets		42			N/A			N/A
Payables and accrued liabilities		—			N/A			N/A
Postretirement benefits		(1,241	)		N/A			N/A
Total funded status		(1,199	)		(1,605	)		(1,649	)

For certain Funded Pension Plans, the projected benefit obligation exceeds the fair value of the assets. For these plans, the projected benefit obligation is $7,737 (2005: $10,067; 2004: $9,025), the accumulated benefit obligation (ABO) is $7,297 (2005: $9,433; 2004: $8,458) while the fair value of the assets is $6,496 (2005: $8,426; 2004: $7,341).

The total ABO of Funded Pension Plans is $10,145 (2005: $9,680; 2004: $9,429). For certain Funded Pension Plans, the ABO exceeds the fair value of the assets. For these plans the projected benefit obligation is $5,587 (2005: $7,995; 2004: $5,431), the ABO is $5,259 (2005: $7,538; 2004: $5,153) while the fair value of the assets is $4,398 (2005: $6,400; 2004: $3,845).

152

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

31.  POST-RETIREMENT BENEFITS — (Continued)

The components of the net periodic benefit cost of Funded Pension Plans are:

	2006			2005			2004
Current service cost		187			155			157
Interest cost		509			496			488
Expected return on assets		(609	)		(548	)		(520	)
Amortization
Actuarial losses		106			90			69
Prior service cost		72			63			70
Curtailment/settlement (gains) losses		2			4			(18	)
Net periodic benefit cost		267			260			246

Unfunded Retirement Benefits and Other Post-Retirement Benefits

Alcan also sponsors unfunded retirement benefit plans and other post-retirement benefit plans. Retirement benefits are either in the form of defined benefit pension plans, mainly in Germany and France for certain employees, or lump sum retirement indemnities in France (“Unfunded Retirement Benefits”). The practice in these countries is to have unfunded plans. They provide pensions based on the employee’s service and highest average eligible compensation before retirement and are periodically adjusted for cost of living increases in accordance with statutory requirements. Lump sum retirement indemnities are based on earnings prior to retirement and on company service.

Other post-retirement benefits are health care and life insurance benefits (“Other Benefits”), provided mostly to retired employees in Canada and the United States. Benefits are mostly unfunded.

The following table presents the projected benefit obligation of Unfunded Retirement Benefits and of Other Benefits:

	Unfunded Retirement Benefits									Other Benefits
	2006			2005			2004			2006			2005			2004
Change in projected benefit obligation
Projected benefit obligation at January 1		1,058			1,267			1,100			1,074			1,048			940
Current service cost		18			18			24			16			14			13
Interest cost		47			48			61			59			53			56
Benefits paid		(81	)		(70	)		(94	)		(56	)		(60	)		(65	)
Amendments		—			—			—			(4	)		33			(3	)
Acquisitions/curtailments/divestitures — net		16			3			(15	)		—			5			64
Novelis Spin-off		(9	)		(143	)		—			—			(115	)		—
Actuarial (gains) losses		(26	)		80			79			40			96			42
Currency (gains) losses		116			(145	)		112			1			—			1
Projected benefit obligation at December 31		1,139			1,058			1,267			1,130			1,074			1,048

The Accumulated Benefit Obligation of Unfunded Retirement Benefits is $1,069 (2005: $993; 2004: $1,165).

153

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

31.  POST-RETIREMENT BENEFITS — (Continued)

The projected benefit obligation is recognized in the Balance Sheet as follows:

	Unfunded Retirement Benefits						Other Benefits
	2006		2005		2004		2006		2005		2004
Payables and accrued liabilities		64		N/A		N/A		65		N/A		N/A
Postretirement benefits		1,075		N/A		N/A		1,065		N/A		N/A
Projected benefit obligation		1,139		1,058		1,267		1,130		1,074		1,048

The components of the net periodic benefit cost of Unfunded Retirement Benefits and of Other Benefits are:

	Unfunded Retirement Benefits									Other Benefits
	2006			2005			2004			2006			2005		2004
Current service cost		18			18			24			16			14		13
Interest cost		47			48			61			59			53		56
Amortization
Actuarial (gains) losses		(2	)		(2	)		(3	)		12			5		(1	)
Prior service cost		—			—			2			3			—		—
Curtailment/settlement (gains) losses		4			6			5			(1	)		9		—
Net periodic benefit cost		67			70			89			89			81		68

	Unfunded
	Retirement		Other
Expected benefit payments are:	Benefits		Benefits
2007		64		65
2008		68		70
2009		69		74
2010		67		77
2011		71		81
2012-2016		392		457

Information on Other Comprehensive Income

The incremental effect of applying SFAS No. 158 is:

2006	Before		Adjustments			After
Assets
Deferred charges and other assets		1,365		(278	)(A)		1,087
Investments		1,529		(20	)(B)		1,509
Deferred income taxes — long-term		713		276	(C)		989
Intangible assets — net		775		(99	)(D)		676
Total Assets		29,060		(121	)		28,939
Liabilities
Payables and accrued liabilities		5,339		91	(E)		5,430
Postretirement benefits		2,959		422	(F)		3,381
Accumulated other comprehensive income (loss)		411		(634	)		(223	)
Total liabilities and shareholders’ equity		29,060		(121	)		28,939

154

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

31.  POST-RETIREMENT BENEFITS — (Continued)

Adjustments relate to:

(A)	Reduction in prepaid pension assets to reflect the funded status of the Funded Pension Plans.
(B)	Recognition of the funded status of post-retirement benefit plans for companies accounted for under the equity method.
(C)	Tax impact of adopting SFAS No. 158.
(D)	Elimination of the prior service costs relating to the minimum pension liability.
(E)	Classification of the amount by which the expected benefit payments in the following year exceed the plan assets as a current liability.
(F)	Recognition of the funded status of post-retirement benefit plans.

Obligations recognized in accumulated other comprehensive income consist of:

	Pension Plans		Other Benefits
	2006		2006
Net actuarial loss		834		165
Prior service cost		477		24
		1,311		189

The estimated net actuarial loss and prior service cost for the Pension Plans (Funded Pension Plans and Unfunded Retirement Benefits) that will be amortized from Accumulated other comprehensive income (loss) into net periodic benefit cost in 2007 are $83 and $69, respectively. The estimated net actuarial loss and prior service cost for the Other Benefits that will be amortized from Accumulated other comprehensive income (loss) into net periodic benefit cost in 2007 are $15 and $3, respectively.

	Pension Plans									Other Benefits
Assumptions	2006			2005			2004			2006			2005			2004
Weighted average assumptions used to determine projected benefit obligation at December 31
Discount rate		4.9	%		4.9	%		5.3	%		5.6	%		5.6	%		5.8	%
Average compensation growth		3.4	%		3.4	%		3.4	%		3.6	%		3.7	%		3.7	%
Weighted average assumptions used to determine net periodic benefit cost
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	%
Expected return on plan assets		6.9	%		7.0	%		7.0	%		8.3	%		8.3	%		8.5	%

In estimating the expected return on assets of a Funded 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.

155

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

31.  POST-RETIREMENT BENEFITS — (Continued)

The assumed health care cost trend used for measurement purposes is 10.6% for 2007, decreasing gradually to 4.5% in 2013 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 current service and interest costs		7		(6	)
Effect on projected benefit obligation		80		(74	)

Defined Contribution Plans

The Company also sponsors savings plans in Canada and the US as well as defined contribution pension plans in various countries. The cost of the Company contribution was $32 in 2006 (2005: $30; 2004: $26).

Spin-off of Rolled Products Businesses

Pursuant to a notice provision provided for in the Separation Agreement, Novelis Inc. gave notice in 2005 to Alcan of its election to transfer to Novelis pension plans, the assets and liabilities pertaining to the Alcan’s pension plans for employees transferred to Novelis. As at the end of 2006, the situation stood as follows:

a) In the US, a share of pension assets and liabilities for past service for all active employees as at 31 December 2005, was transferred from the Alcan plan to the Novelis pension plan in November 2006. The projected benefit obligation (at 5.75%) and the market value of plan assets transferred were $225 and $194, respectively. An unfunded pension liability in respect of employees entitled to benefits in excess of those payable from the qualified plan was also transferred to Novelis Inc. in November 2006 (projected benefit obligation of $9).

b) In the UK, Novelis employees previously participating in the Alcan plan were offered in 2006 the option to transfer their benefits as at 31 December 2005 to the Novelis plan. The estimated related share of pension assets and projected benefit obligation expected to be transferred to the Novelis pension plan in 2007 is $20 and $26, respectively.

c) In Canada, Novelis employees were offered in 2006 the option to transfer their benefits as at 31 December 2004 to the Novelis plan. The estimated related share of pension assets and projected benefit obligation expected to be transferred to the Novelis pension plan in 2007 is $37 and $40, respectively.

The transfer of 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, and the contribution required to fund their additional service is being paid by Novelis.

156

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

32.  INFORMATION BY GEOGRAPHIC AREAS

	Location	2006			2005			2004
Sales and operating revenues — third parties (by destination)	Canada		1,690			1,438			1,117
	United States		6,898			5,944			7,620
	Brazil		255			221			527
	France		2,436			2,244			2,260
	United Kingdom		1,787			1,641			2,099
	Germany		2,316			1,989			2,267
	Switzerland		383			300			235
	Other Europe		3,560			3,220			4,306
	Australia		890			420			429
	Asia and Other Pacific		2,439			2,126			3,294
	All Other		987			777			794
	Total		23,641			20,320			24,948
Sales and operating revenues — intercompany (by origin)	Canada		2,220			1,557			3,394
	United States		258			224			945
	Brazil		13			7			76
	France		959			870			2,504
	United Kingdom		16			66			578
	Germany		435			274			546
	Switzerland		1,539			1,289			1,250
	Other Europe		1,761			1,046			1,046
	Australia		651			508			926
	Asia and Other Pacific		54			25			56
	All Other		278			225			414
	Sub-total		8,184			6,091			11,735
	Consolidation eliminations		(8,184	)		(6,091	)		(11,735	)
	Total		—			—			—

157

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

32.  INFORMATION BY GEOGRAPHIC AREAS — (Continued)

Sales to Subsidiary companies are made at fair market prices recognizing volume, continuity of supply and other factors.

	Location	2006			2005			2004
Sales and operating revenues — third parties (by origin)	Canada		3,231			3,007			1,504
	United States		5,767			4,748			7,648
	Brazil		203			176			587
	France		4,899			3,993			4,468
	United Kingdom		1,252			1,152			1,025
	Germany		1,763			1,620			3,203
	Switzerland		2,043			2,176			1,831
	Other Europe		1,866			1,376			1,754
	Australia		1,021			731			384
	Asia and Other Pacific		1,031			855			2,085
	All Other		565			486			459
	Total		23,641			20,320			24,948
Income (Loss) from continuing operations	Canada		371			(197	)		(43	)
	United States		267			53			129
	Brazil		17			6			62
	France		414			(39	)		(209	)
	United Kingdom		88			(14	)		(33	)
	Germany		(8	)		(5	)		21
	Switzerland		95			(3	)		70
	Other Europe		196			86			46
	Australia		294			229			227
	Asia and Other Pacific		39			(8	)		11
	All Other		55			41			21
	Consolidation eliminations		(42	)		6			(59	)
	Total		1,786			155			243

In 2006, Income from continuing operations included after-tax charges (income) relating to Other Specified Items*  of ($71) for Canada, $40 for the United States, $8 for Brazil, $10 for France, $21 for the United Kingdom, $27 for Germany, $2 for Switzerland, $45 for Other Europe, $12 for Australia, ($2) for Asia and Other Pacific and $6 for All Other.

In 2005, income from continuing operations included after-tax charges relating to Other Specified Items of $76 for Canada, $98 for the United States, $9 for Brazil, $310 for France, $18 for the United Kingdom, $49 for Germany, $25 for Switzerland, $44 for Other Europe, $9 for Australia, $23 for Asia and Other Pacific and $9 for All Other.

*  Other Specified Items included in Income (Loss) from continuing operations are 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.

158

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

32.  INFORMATION BY GEOGRAPHIC AREAS — (Continued)

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, $36 for Other Europe, ($23) for Australia and $15 for All Other.

	Location	2006		2005		2004
Property, plant and equipment, Intangible assets and Goodwill at December 31**	Canada		4,228		4,691		4,735
	United States		2,034		2,198		2,796
	Brazil		117		101		648
	France		2,652		2,240		3,047
	United Kingdom		643		593		983
	Germany		809		782		1,229
	Switzerland		715		744		839
	Other Europe		1,605		1,531		2,093
	Australia		4,225		3,263		2,402
	Asia and Other Pacific		330		309		979
	All Other		317		307		269
	Total		17,675		16,759		20,020
Cash paid for capital expenditures, business acquisitions and purchase of investments	Canada		232		237		377
	United States		222		154		230
	Brazil		29		11		36
	France		299		215		355
	United Kingdom		41		35		65
	Germany		56		88		106
	Switzerland		32		40		51
	Other Europe		105		110		159
	Australia		1,173		879		190
	Asia and Other Pacific		50		58		116
	All Other		43		27		50
	Total		2,282		1,854		1,735

159

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

	Location	2006		2005		2004
32.  INFORMATION BY GEOGRAPHIC AREAS — (Continued)
Average number of employees (in thousands — unaudited)	Canada		11		11		11
	United States		10		8		14
	Brazil		1		1		4
	France		15		15		17
	United Kingdom		2		3		4
	Germany		5		5		8
	Switzerland		2		3		3
	Other Europe		6		5		8
	Australia		1		2		2
	Asia and Other Pacific		7		6		8
	All Other		5		4		3
	Total		65		63		82

**	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.

33.  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 or Business Groups: Bauxite and Alumina; Primary Metal; Engineered Products and Packaging. The rolled products facilities retained by Alcan are Neuf-Brisach and Issoire (France), Sierre (Switzerland), and Ravenswood (US), which are part of Engineered Products, and Singen (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, pension actuarial gains, losses and other adjustments, and unrealized gains and losses on derivatives, 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 unrealized change in fair market value of derivatives is excluded 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.

160

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

33.  INFORMATION BY OPERATING SEGMENTS — (Continued)

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 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.

Primary Metal

Also headquartered in Montreal, this Business Group comprises smelting operations, power generation, production of primary value-added ingot, manufacturing of smelter anodes, smelter cathode blocks 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, 12 power facilities in four countries and 12 technology and equipment sales centres and engineering operations in ten countries.

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 55 plants located in 12 countries. Also part of this Business Group are 33 service centres in 11 countries and 32 sales offices in 27 countries and regions.

Packaging

Also headquartered in Paris, this Business Group consists of the Company’s worldwide food, pharmaceutical and medical, beauty and personal care and tobacco packaging businesses, operating 130 plants in 30 countries. This Business Group produces packaging from a number of different materials, including plastic, aluminum, paper, paper board and glass.

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.

161

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

33.  INFORMATION BY OPERATING SEGMENTS — (Continued)

	Intersegment									Third Parties
Sales and Operating Revenues	2006			2005			2004			2006			2005			2004
Bauxite and Alumina		2,001			1,515			1,575			1,844			1,478			1,487
Primary Metal		2,486			1,898			3,741			8,661			6,877			4,586
Engineered Products		194			202			725			7,146			6,015			5,525
Packaging		4			5			69			5,960			6,004			6,024
Entities transferred to Novelis		—			—			535			—			—			7,321
Adjustments for equity-accounted Joint Ventures and certain investments		—			—			—			(15	)		(101	)		(40	)
Other		(4,685	)		(3,620	)		(6,645	)		45			47			45
		—			—			—			23,641			20,320			24,948

Business Group Profit (BGP)	2006			2005			2004
Bauxite and Alumina		609			435			460
Primary Metal		2,962			1,751			1,462
Engineered Products		567			403			379
Packaging		550			595			653
Entities transferred to Novelis		—			—			654
Adjustments for equity-accounted Joint Ventures and certain investments		(263	)		(270	)		(242	)
Adjustments for mark-to-market of derivatives		(45	)		(41	)		(29	)
Depreciation and amortization		(1,043	)		(1,080	)		(1,337	)
Goodwill impairment		—			(122	)		(154	)
Intersegment, corporate offices and other		(680	)		(998	)		(921	)
Equity income		85			88			54
Interest		(284	)		(350	)		(346	)
Income taxes		(665	)		(257	)		(375	)
Minority interests		(7	)		1			(15	)
Income from continuing operations		1,786			155			243

Included in 2006 Intersegment, corporate offices and other are asset impairments of $84, legal and environmental provisions of $22, restructuring charges of $68 and a $62 gain on claims sold related to the Enron bankruptcy.

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 $100, 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.

162

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

33.  INFORMATION BY OPERATING SEGMENTS — (Continued)

Total Assets at December 31	2006			2005			2004
Bauxite and Alumina		5,865			4,638			3,496
Primary Metal		12,026			10,889			10,342
Engineered Products		4,727			4,106			4,601
Packaging		6,868			6,847			8,242
Entities transferred to Novelis		—			—			5,434
Adjustments for equity-accounted Joint Ventures and certain investments		(558	)		(505	)		(313	)
Other		4			529			586
Assets held for sale:
Bauxite and Alumina		—			—			63
Primary Metal		—			118			823
Engineered Products		—			9			63
Packaging		7			7			4
Total assets held for sale		7			134			953
		28,939			26,638			33,341

	Depreciation and Amortization									Cash Paid For Capital Expenditures, Business Acquisitions and Investments
	2006			2005			2004			2006			2005			2004
Bauxite and Alumina		154			154			136			1,262			949			181
Primary Metal		520			505			488			582			363			621
Engineered Products		188			189			201			215			160			212
Packaging		256			314			342			383			435			434
Entities transferred to Novelis		—			—			267			—			—			207
Adjustments for equity-accounted Joint Ventures and certain investments		(96	)		(101	)		(118	)		(186	)		(83	)		(35	)
Other		21			19			21			26			30			115
		1,043			1,080			1,337			2,282			1,854			1,735

Risk Concentration

The Company’s consolidated sales and operating revenues for the year ended 31 December 2006, include $2,631 (2005: $2,062) arising from transactions with Novelis. These sales and operating revenues represent 11% (2005: 10%) of the consolidated sales and operating revenues for the year ended 31 December 2006.

The following table includes sales and operating revenues to Novelis by Business Group:

	2006		2005
Bauxite and Alumina		73		46
Primary Metal		2,510		1,918
Engineered Products		40		79
Packaging		8		19
Total		2,631		2,062

163

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

(in millions of US$, except where indicated)

34.  PRIOR YEAR AMOUNTS

Certain prior year amounts have been reclassified to conform with the 2006 presentation.

164

SUPPLEMENTARY DATA

QUARTERLY FINANCIAL DATA (unaudited)

	First			Second			Third			Fourth			Year
	(In millions of US$, except per share data)
2006
Revenues		5,550			6,103			5,769			6,219			23,641
Cost of sales and operating expenses		4,128			4,646			4,454			4,762			17,990
Depreciation and amortization		251			258			273			261			1,043
Income taxes		269			195			146			55			665
Other items		448			550			436			723			2,157
Income from continuing operations(1)		454			454			460			418			1,786
Income (Loss) from discontinued operations		3			1			(4	)		4			4
Income before cumulative effect of accounting change		457			455			456			422			1,790
Cumulative effect of accounting change		(4	)		—			—			—			(4	)
Net income		453			455			456			422			1,786
Dividends on preference shares		2			3			3			3			11
Net income attributable to Common Shareholders		451			452			453			419			1,775
Net income per Common Share — basic
Income from continuing operations		1.21			1.21			1.21			1.12			4.75
Income (Loss) from discontinued operations		0.01			—			(0.01	)		0.01			0.01
Cumulative effect of accounting change		(0.01	)		—			—			—			(0.01	)
Net income per Common Share — basic(2)		1.21			1.21			1.20			1.13			4.75
Net income per Common Share — diluted
Income from continuing operations		1.20			1.20			1.21			1.12			4.74
Income (Loss) from discontinued operations		0.01			—			(0.01	)		0.01			0.01
Cumulative effect of accounting change		(0.01	)		—			—			—			(0.01	)
Net income per Common Share — diluted(2)		1.20			1.20			1.20			1.13			4.74
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 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

165

SUPPLEMENTARY DATA — (Continued)

	First			Second		Third			Fourth			Year
	(In millions of US$, except per share data)
QUARTERLY FINANCIAL DATA (unaudited) — (Continued)
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 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 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

(1) The first quarter of 2006 included losses of $29 on business and asset disposals, charges of $18 mainly related to restructuring of the packaging business, as well as asset impairment charges of $6 mainly related to the sale of the bottles business, partially offset by a gain of $41 arising on the sale of bankruptcy claims against Enron. The second quarter of 2006 included charges of $66 related to restructuring initiatives across all Business Groups largely offset by a favourable tax adjustment of $63 mainly related to a deferred tax benefit arising from a reduction in the Canadian federal tax rates enacted in June 2006. The third quarter of 2006 included restructuring charges of $17 mainly related to the Packaging and Primary Metal groups and asset impairment charges of $7 offset by a net gain of $7 on sales of businesses and a favourable tax adjustment resulting from an assessment of $16 in Canada. The fourth quarter of 2006 included charges of $36 associated with restructuring initiatives across most Business Groups, asset impairment charges of $14 principally in relation to the Gove alumina refinery in Australia, asset retirement obligation adjustments relating to closed sites of $11 and a net loss on business divestments of $8.

The first quarter of 2005 included unfavourable deferred tax adjustments of $27 and expenses of $24 related to the Novelis Spin-off 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 US 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 UK. 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 UK, 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 businesses, 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.

166

SUPPLEMENTARY DATA — (Continued)

QUARTERLY FINANCIAL DATA (unaudited) — (Continued)

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 UK 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 Ventures 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 UK 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 Novelis Spin-off, synergy costs of $32 and a gain of $4 resulting from a dilution of the Company’s interest in an anode-producing Joint Ventures in the Netherlands.

(2) Net income per Common Share calculations are based on the average number of Common Shares outstanding in each period. See note 5 — Earnings Per Share — Basic and Diluted.

167

SUPPLEMENTARY FINANCIAL AND OPERATING DATA

ELEVEN-YEAR SUMMARY

	2006			2005			2004			2003			2002			2001			2000		1999*			1998*			1997*			1996*
	US			US			US			US			US			US			US		Canadian			Canadian			Canadian			Canadian
	GAAP			GAAP			GAAP			GAAP			GAAP			GAAP			GAAP		GAAP			GAAP			GAAP			GAAP
CONSOLIDATED INCOME STATEMENT ITEMS (in millions of US$)
Sales and operating revenues		23,641			20,320			24,948			13,850			12,483			12,545			9,237		7,324			7,789			7,777			7,614
Cost of sales and operating expenses		17,990			16,135			20,270			11,171			10,032			10,108			7,342		5,695			6,076			6,005			5,919
Depreciation and amortization		1,043			1,080			1,337			862			772			809			496		477			462			436			431
Selling, administrative and general expenses		1,475			1,402			1,615			758			580			567			426		388			448			444			422
Research and development expenses		220			227			239			190			115			134			80		67			70			72			71
Interest		284			350			346			212			198			242			67		76			92			101			125
Goodwill impairment		—			122			154			28			—			—			—		—			—			—			—
Restructuring charges and Other expenses (income) — net		256			681			408			131			119			818			32		(40	)		(12	)		(34	)		13
Income taxes		665			257			375			258			287			(15	)		232		211			210			248			212
Equity income (loss)		85			88			54			38			44			44			35		(1	)		(48	)		(33	)		(10	)
Minority interests		(7	)		1			(15	)		(16	)		(3	)		14			1		(14	)		4			(4	)		(1	)
Income (Loss) from continuing operations before amortization of goodwill and extraordinary item		1,786			155			243			262			421			(60	)		598		435			399			468			410
Amortization of goodwill		—			—			—			—			—			—			16		—			—			—			—
Income (Loss) from continuing operations before extraordinary item		1,786			155			243			262			421			(60	)		582		435			399			468			410
Extraordinary gain		—			—			—			—			—			—			—		—			—			17			—
Income (Loss) from continuing operations		1,786			155			243			262			421			(60	)		582		435			399			485			410
Income (Loss) from discontinued operations		4			(26	)		15			(159	)		(21	)		(6	)		—		—			—			—			—
Income (Loss) before cumulative effect of accounting change		1,790			129			258			103			400			(66	)		582		435			399			485			410
Cumulative effect of accounting change, net of income tax		(4	)		—			—			(39	)		(748	)		(12	)		—		—			—			—			—
Net income (Loss)		1,786			129			258			64			(348	)		(78	)		582		435			399			485			410
Net income (Loss) attributable to Common Shareholders		1,775			122			252			57			(353	)		(86	)		572		426			389			475			394
CONSOLIDATED BALANCE SHEET ITEMS (in millions of US$)
Operating working capital***		1,861			1,380			2,380			2,458			1,445			1,237			2,354		1,307			1,682			1,483			1,461
Capital assets and goodwill — net***		17,675			16,759			20,020			20,006			12,023			12,054			12,118		6,434			5,897			5,458			5,470
Total assets		28,939			26,638			33,341			31,948			17,761			17,551			17,846		9,839			9,901			9,374			9,228
Total debt***		5,979			6,415			9,400			9,542			3,747			3,990			4,572		1,489			1,789			1,515			1,516
Deferred income taxes — net***		56			184			482			836			821			751			1,144		781			747			969			996
Minority interests***		71			67			236			403			150			132			244		207			110			43			73
Preference shares		160			160			160			160			160			160			160		160			160			203			203
Common Shareholders’ equity		10,934			9,484			10,566			10,117			8,132			8,410			8,580		5,358			5,359			4,871			4,661
PER COMMON SHARE (in US$)
Net income (Loss) before amortization of goodwill and extraordinary Item — basic		4.75			0.33			0.69			0.18			(1.10	)		(0.27	)		2.37		1.95			1.71			2.02			1.74
Net income (Loss) before extraordinary item — basic		4.75			0.33			0.69			0.18			(1.10	)		(0.27	)		2.37		1.95			1.71			2.02			1.74
Net income (Loss) — basic		4.75			0.33			0.69			0.18			(1.10	)		(0.27	)		2.31		1.95			1.71			2.09			1.74
Dividends paid		0.70			0.60			0.60			0.60			0.60			0.60			0.60		0.60			0.60			0.60			0.60
Common Shareholders’ equity		29.81			25.50			28.56			27.70			25.30			26.21			26.99		24.47			23.71			21.43			20.57
Market price — NYSE close (unaudited)		48.74			40.95			49.04			46.95			29.52			35.93			34.19		41.38			27.06			27.63			33.63

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SUPPLEMENTARY FINANCIAL AND OPERATING DATA — (Continued)

	2006			2005			2004			2003			2002			2001			2000			1999*			1998*			1997*			1996*
	US			US			US			US			US			US			US			Canadian			Canadian			Canadian			Canadian
	GAAP			GAAP			GAAP			GAAP			GAAP			GAAP			GAAP			GAAP			GAAP			GAAP			GAAP
ELEVEN-YEAR SUMMARY — (Continued)
OPERATING DATA (in thousands of tonnes except for LME price) (unaudited)
Consolidated aluminum shipments****
Ingot products (includes primary and secondary ingot, trading and scrap)		3,018			3,070			2,012			1,387			1,429			1,419			974			859			829			858			810
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		1,315			1,269			1,469			562			546			536			352			302			220			—			—
Total fabricated products		1,315			1,269			4,284			3,121			2,604			2,473			2,207			1,911			1,823			1,694			1,539
Conversion of customer-owned metal		—			—			—			—			391			344			328			315			289			276			258
Total aluminum volume		4,333			4,339			6,296			4,508			4,424			4,236			3,509			3,085			2,941			2,828			2,607
Consolidated primary aluminum production		3,406			3,420			3,382			2,354			2,238			2,042			1,562			1,518			1,481			1,429			1,407
Consolidated aluminum purchases		967			843			2,172			1,843			1,855			1,865			1,679			1,297			1,227			1,254			1,003
Consolidated aluminum inventories (end of year)		229			341			831			513			534			528			576			477			469			451			408
Primary aluminum capacity
Consolidated subsidiaries and Joint Ventures		3,468			3,483			3,435			4,076			2,365			2,252			1,899			1,583			1,706			1,558			1,561
Total consolidated subsidiaries, Joint Ventures and related companies		3,468			3,483			3,435			4,076			2,365			2,252			1,899			1,583			1,706			1,695			1,698
Average three-month LME price (US$ per tonne)		2,594			1,900			1,721			1,428			1,365			1,454			1,567			1,388			1,379			1,620			1,536
OTHER STATISTICS
Cash from operating activities from continuing operations (in millions of US$)		3,040			1,535			1,739			1,801			1,519			1,614			1,059			1,182			739			719			981
Cash from (used for) financing activities from continuing operations (in millions of US$)		(1,111	)		(2,647	)		(538	)		3,453			(673	)		(538	)		781			(629	)		(95	)		(46	)		(700	)
Cash from (used for) investment activities from continuing operations (in millions of US$)		(1,909	)		947			(1,708	)		(4,594	)		(860	)		(1,182	)		(2,074	)		(838	)		(656	)		(587	)		178
Cash used for capital expenditures (in millions of US$)		2,081			1,742			1,269			838			627			1,017			1,482			1,169			805			641			482
Cash used for business acquisitions (in millions of US$)		201			112			466			3,819			346			404			244			129			72			—			—
Debt as a percentage of invested capital (%) (unaudited)		35			40			46			47			31			31			34			21			24			23			23
Average number of employees (in thousands) (unaudited)		65			63			82			47			47			48			35			38			36			33			34
Common Shareholders — registered (in thousands at end of year) (unaudited)		17			17			18			18			18			18			19			20			20			21			22
Common Shares outstanding (in millions at end of year)		367			372			370			365			321			321			318			218			226			227			227
Registered in Canada (%) (unaudited)**		82			82			82			82			80			79			76			61			60			61			61
Registered in the United States (%) (unaudited)		18			18			18			18			20			21			24			39			39			39			39
Registered in other countries (%) (unaudited)		—			—			—			—			—			—			—			—			1			—			—
Return on average Common Shareholders’ equity (%) (unaudited)		17			1			2			1			(4	)		(1	)		8			8			7			10			9

*	Amounts during this period were prepared under Canadian generally accepted accounting principles, which may not be comparable to those prepared under US 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 Novelis Spin-off.

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SUPPLEMENTARY FINANCIAL AND OPERATING DATA — (Continued)

SELECTED ALCAN FRANCE S.A.S. UNAUDITED CONSOLIDATED FINANCIAL INFORMATION

This information is presented in accordance with the legal requirements applicable in France to French parent companies that are not required to prepare consolidated Financial Statements. The following table presents selected unaudited consolidated financial information of Alcan France S.A.S. (formerly Pechiney) and its subsidiaries at 31 December 2006, 2005 and 2004, and for each of the years then ended.

Alcan France S.A.S. — Selected consolidated financial information

	31 December 2006		31 December 2005			31 December 2004
	(Unaudited)		(Unaudited)			(Unaudited)
	(In millions of US$,
	except where indicated)
Sales and operating revenues		8,222		7,127			7,236
Net income (Loss)		547		(256	)		(341	)
Total long-term assets		7,607		6,835			7,681
Shareholders’ equity		6,657		5,467			5,012
Average number of employees (in thousands)		26		26			31

This selected unaudited consolidated financial information reflects data included in Alcan’s consolidated Financial Statements with respect to Alcan France S.A.S. and its subsidiaries. This financial information was prepared in accordance with accounting principles generally accepted in the United States of America and includes purchase accounting adjustments arising as a result of the acquisition of Pechiney by Alcan, as well as a $122 charge for goodwill impairment in 2005 (2004: $154) and the impact of changes in the structure of Alcan France S.A.S. and its subsidiaries in 2006, 2005 and 2004. This selected consolidated financial information is not comparable to data for prior years presented in the consolidated Financial Statements previously published by Pechiney, which were prepared in accordance with French generally accepted accounting principles, did not include the purchase accounting adjustments arising as a result of the acquisition of Pechiney by Alcan and reflected the Pechiney structure prior to 2004.

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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 2006, 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 US 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 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 US 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 US GAAP.

As of 31 December 2006, 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 2006 was effective.

Management’s assessment of the effectiveness of the Company’s internal control over financial reporting as of 31 December 2006 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report appearing in the audited Financial Statements included in Item 8 “Financial Statements and Supplementary Data” of this Form 10-K.

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 2006, 2005 and 2004 and the results of its operations and its cash flows for each of the years in the three year period ended 31 December 2006 in accordance with US GAAP. The Financial Statements have been audited by PricewaterhouseCoopers LLP.

ITEM 9B   OTHER INFORMATION

The Company has nothing to report under this Item.

PART III

Information in this part is based on information contained in the Company’s Proxy Circular dated 26 February 2007, 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

171

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 17, 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:

Name	Age		Director since	Committees
Roland Berger		69	2002	CGC, HRC, EHSC
L. Denis Desautels		63	2003	CGC, AC (C)
Richard B. Evans		59	2005	None — Officer
L. Yves Fortier		71	2002	CGC (C), EHSC
Jeffrey E. Garten		60	2007	CGC, AC
Jean-Paul Jacamon		59	2004	CGC, HRC, AC
Yves Mansion		56	2004	CGC, AC, EHSC
Christine Morin-Postel		60	2003	CGC, HRC, NC (C)
Heather Munroe-Blum		56	Nominated in 2007	—
H. Onno Ruding		67	2004	CGC, EHSC
Gerhard Schulmeyer		68	1996	CGC, HRC (C)
Paul M. Tellier		67	1998	CGC, AC, EHSC (C), NC
Milton K. Wong		68	2003	CGC, AC, EHSC

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

For further information regarding the nominees for election as Directors, refer to pages 7 to 9 of the Proxy Circular.

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:

			Position	Professional Experience
Name	Title	Age	Held Since	(last 5 years) and Current Outside Corporate Directorships
Richard B. Evans	President and CEO	59	March 2006	• Executive Vice President, Chief Operating Officer (2005 to March 2006) • Executive Vice President, Multiple Business Groups (1997 to 2005) • Director, Bowater Incorporated and International Aluminium Institute

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			Position	Professional Experience
Name	Title	Age	Held Since	(last 5 years) and Current Outside Corporate Directorships
Michael Hanley	Executive Vice President and Chief Financial Officer	41	October 2005	• Executive Vice President, Office of the President (2005) • President and CEO, Alcan Bauxite and Alumina (2002 to 2005) • Vice President, Investor Relations (2000 to 2002)
David L. McAusland	Executive Vice President, Corporate Development and Chief Legal Officer	53	February 2005	• Senior Vice President, Mergers and Acquisitions, and Chief Legal Officer (2000 to 2005) • Director, Cogeco Inc., Cogeco Cable Inc. and Cascades Inc.
Daniel Gagnier	Senior Vice President, Corporate and External Affairs	60	January 1995	• No change
Jean-Christophe
Deslarzes	Senior Vice President,	43	March 2006	• Vice President, Human Resources and Environment, Health
	Human Resources			and Safety, Alcan Packaging (2003 to March 2006),
				Alcan Packaging (2003 to March 2006), Alcan Rolled   Products Europe (2002 to 2003) and Alcan   Aluminum Fabrication (2001 to 2002)
Gaston Ouellet	Senior Vice President	64	October 2000	• President, Pechiney (2005 to present) • Senior Vice President, Human Resources (2000 to 2006)
Jacynthe Côté	Senior Vice President, Alcan and President and CEO, Alcan Bauxite and Alumina	48	June 2005	• Vice President, Human Resources, Environment, Health and Safety, Alcan Primary Metal (2003 to June 2005) • Vice President, Business Planning and Development, Alcan Primary Metal (2000 to 2003)
Michel Jacques	Senior Vice President, Alcan and President and CEO, Alcan Primary Metal	55	October 2006	• President and CEO, Alcan Engineered Products (2003 to October 2006) • Vice President, Strategic Management Support (2002 to 2003) • Director, Corporate Development (2000 to 2002)
Christel Bories	Senior Vice President, Alcan and President and CEO, Alcan Engineered Products	42	October 2006	• President and CEO, Alcan Packaging (2003 to October 2006) • Senior Executive Vice President, Packaging Sector, Pechiney (1999 to 2003)
Ilene Gordon	Senior Vice President, Alcan and President and CEO, Alcan Packaging	53	December 2006	• President, Alcan Food Packaging Americas (2004 to December 2006) • President, Pechiney Plastic Packaging, Inc. (1999 to 2004)
Rhodri J. Harries	Vice President Finance and Treasurer	43	January 2007	• Vice President and Treasurer (2004 to January 2007) • Assistant treasurer, General Motors Corporation (2001 to 2004)
Cesidio Ricci	Vice President and Controller	42	December 2005	• Vice President, Business Finance Director, Alcan Engineered Products (2003 to December 2005) • Financial Director, Alcan Engineered Products and Composites (2002 to 2003) • Financial Director, Bauxite, Alumina and Specialty Chemicals (1999 to 2002)
Pierre D. Chenard	Vice President and General Counsel, Operations	46	July 2005	• Deputy Chief Legal Officer (2001 to July 2005)
Roy Millington	Corporate Secretary	47	July 2001	• No change

ITEM 11   EXECUTIVE COMPENSATION

The information required is incorporated by reference to the Proxy Circular, on pages 28 to 36, 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.

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

Securities Authorized For Issuance Under Equity Compensation Plans

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 30.

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.

	Amount and Nature of			% of Outstanding
Name and Address of Beneficial Owner	Beneficial Ownership			Common Shares Owned
Capital Group International, Inc.
11 100 Santa Monica Boulevard Los Angeles, California 90025		27,018,110	(1)		7.2

(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 23,254,850 Shares, sole power to dispose of 27,018,110 Shares and shared power to vote or dispose of none of the Shares in a filing with the SEC on Form 13G/A on 12 February 2007. Capital Guardian Trust Company, an affiliate of CGII, also reported that it is the beneficial owner of 18,511,810 or 4.9% of the outstanding Common Shares which are included in the above-mentioned 27,018,100 Shares.

Share Ownership of Directors and Executive Officers

As of 26 February 2007, Directors and Executive Officers as a group beneficially own 126,007 Common Shares (including shares over which control or direction is exercised). This represents 0.03% of Common Shares issued and outstanding. In addition, Executive Officers as a group have Options (as defined in the Proxy Circular) to purchase 1,520,501 Shares.

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The following table lists ownership of Alcan’s Common Shares by each current Director, by each current Named Executive Officer (as defined in the Proxy Circular) in the executive officers’ compensation table on page 28 of the Proxy Circular and by all Directors and Executive Officers as a group as of 26 February 2007.

	Current				Stock Price		Number of			Number of
	Beneficial		Shares Subject		Appreciation		Deferred			Restricted
Name	Holdings		to Options(1)		Units(2)		Share Units			Share Units(3)		Total
Roland Berger (D)		5,000		N/A		N/A		11,357	(4)		—		16,357
L. Denis Desautels (D)		1,212		N/A		N/A		8,400	(4)		—		9,612
L. Yves Fortier (D)		1,000		N/A		N/A		35,932	(4)		—		36,932
Jeffrey E. Garten (D)		—		N/A		N/A		—			—		0
Jean-Paul Jacamon (D)		136		N/A		N/A		6,012	(4)		—		6,148
Yves Mansion (D)		—		N/A		N/A		12,316	(4)		—		12,316
Gwyn Morgan (D)		15,000		N/A		N/A		3,766	(4)		—		18,766
Christine Morin-Postel (D)		—		N/A		N/A		13,712	(4)		—		13,712
H. Onno Ruding (D)		112		N/A		N/A		4,666	(4)		—		4,778
Guy Saint-Pierre (D)		18,837		N/A		N/A		13,937	(4)		—		32,774
Gerhard Schulmeyer (D)		2,542		N/A		N/A		13,276	(4)		—		15,818
Paul M. Tellier (D)		1,980		N/A		N/A		23,387	(4)		—		25,367
Milton K. Wong (D)		40,000		N/A		N/A		14,966	(4)		—		54,966
Richard B. Evans (D, O)		30,702		640,046		57,020		41,449	(5)		72,738		841,955
Michael Hanley (O)		1,790		91,872		N/A		—			29,458		123,120
Michel Jacques (O)		—		25,203		130,282		2,274	(6)		27,052		189,373
Christel Bories (O)		—		133,606		N/A		—			26,956		160,562
David McAusland (O)		—		201,354		N/A		10,043	(6)		19,824		231,221
All Directors and Executive Officers as a group (27 individuals)		126,007		1,520,501		219,358		231,906			249,797		2,347,569

D — Director

O — Officer

(1)	Represents Shares that may be acquired through the exercise of C, D, and F options as described in the Proxy Circular on pages 29 and 30.
(2)	Indicates number of units awarded under the Alcan Stock Price Appreciation Unit Plan. The Plan is described on page 32 of the Proxy Circular. The units are payable in cash.
(3)	Indicates number of units awarded under the Restricted Share Unit Plan. The Plan is described on page 23 of the Proxy Circular. The units are payable in cash except for the French RSU Plan, as described in the Proxy Circular on page 24.
(4)	Indicates number of deferred share units awarded under the Director Deferred Share Unit Plan. The Plan is described on page 37 of the Proxy Circular. The units are payable in cash.
(5)	Mr. Evans holds 37,749 deferred shares units under the Executive Deferred Share Unit Plan, and 3,700 units under the Medium-Term Incentive Plan, which has been discontinued. The Executive Deferred Share Unit Plan is described on page 24 of the Proxy Circular. The units are payable in cash.
(6)	Indicates number of deferred share units under the Executive Deferred Share Unit Plan. The Plan is described on page 24 of the Proxy Circular. The units are payable in cash.

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ITEM 13   CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Indebtedness of Directors and Executive Officers

The information required is incorporated by reference to the Proxy Circular, on page 39, in the section entitled “Indebtedness of Directors, Executive Officers and Employees”.

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

Director Independence

The information required is incorporated by reference to the Proxy Circular, on pages 11 and 12, in the sections entitled “Independence of the Board” and “Committees”.

ITEM 14   PRINCIPAL ACCOUNTANT FEES AND SERVICES

The information required is incorporated by reference to the Proxy Circular, on pages 18 and 19, in the sections entitled “Report of the Audit Committee” and “Auditors”.

PART IV

ITEM 15   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

A.  1.  FINANCIAL STATEMENTS

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

•  Consolidated Statement of Shareholders’ Equity

•  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.)

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(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.)
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.)

177

(10) Material Contracts:

10.1	Employment Agreement dated 14 March 2006 with Richard B. Evans. (Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K filed on 16 March 2006.)
10.2	Employment Agreement dated 10 March 2005 with Michael Hanley. (Incorporated by reference to exhibit 10.3 to the Annual Report on Form 10-K of the Company for 2005.)
10.3	Employment Agreement dated 21 December 2006 with Michel Jacques. (Incorporated by reference to exhibit 10.1 to the Company’s Current Report on Form 8-K filed on 22 December 2006.)
10.4	Employment Agreement dated 14 January 2002 with David McAusland. (Filed herewith.)
10.5	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.)
10.6	Change of Control Agreement dated 1 May 2005 with Michael Hanley. (Incorporated by reference to exhibit 10.8 to the Annual Report on Form 10-K of the Company for 2005.)
10.7	Change of Control Agreement dated 1 May 2005 with Michel Jacques. (Incorporated by reference to exhibit 10.10 to the Annual Report on Form 10-K of the Company for 2005.)
10.8	Change of Control Agreement dated 1 May 2005 with Christel Bories. (Filed herewith.)
10.9	Change of Control Agreement dated 1 May 2005 with David McAusland. (Filed herewith.)
10.10	Alcan Executive Share Option Plan, dated 30 April 1990, as amended. (Incorporated by reference to exhibit 10.11 to the Annual Report on Form 10-K of the Company for 2005.)

10.11  Alcan Executive Performance Award Plan, dated 1 January 2007, as amended and restated. (Filed herewith.).

10.12	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.)
10.13	Alcan Corporation Flexible Perquisites Program (US), dated 1 January 2003. (Incorporated by reference to exhibit 10.6 to the Annual Report on Form 10-K of the Company for 2003.)
10.14	Alcan Corporation Executive Company Vehicle Program (US), dated 7 November 2000. (Incorporated by reference to exhibit 10.7 to the Annual Report on Form 10-K of the Company for 2003.)
10.15	Alcan Pension Plan for Officers, dated 1 January 2006, amended and restated. (Filed herewith.)
10.16	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.)
10.17	Alcan Inc. Stock Price Appreciation Unit Plan, dated 27 September 2001, as amended. (Incorporated by reference to exhibit 10.18 to the Annual Report on Form 10-K of the Company for 2005.)
10.18	Alcan Inc. Deferred Share Unit Plan for Non-Executive Directors, dated 1 April 2001, as amended. (Incorporated by reference to exhibit 10.19 to the Annual Report on Form 10-K of the Company for 2005.)
10.19	Total Shareholder Return Performance Plan, dated 1 January 2002, as amended. (Incorporated by reference to exhibit 10.2 to the Quarterly Report on Form 10-Q of the Company for the quarter ended 30 September 2006.)

178

10.20	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.)
10.21	Alcan Executive Deferred Share Unit Plan, dated 1 January 2003, as amended. (Incorporated by reference to exhibit 10.3 to the Quarterly Report on Form 10-Q of the Company for the quarter ended 30 September 2006.)
10.22	Alcan Restricted Share Unit Plan, dated 20 September 2006, as amended. (Filed herewith.)
10.23	Alcan Supplemental Short Term Incentive Plan, dated 11 February 2006. (Filed herewith.)
10.24	Pechiney Supplemental Pension Plan, dated 8 August 2003, as amended and restated. (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 Registered Public Accounting Firm.
(24)	Powers of Attorney. (Filed herewith.)

(24.1)	Power of Attorney of R. Berger
(24.2)	Power of Attorney of L. D. Desautels
(24.3)	Power of Attorney of L. Y. Fortier
(24.4)	Power of Attorney of J. E. Garten
(24.5)	Power of Attorney of Y. Mansion
(24.6)	Power of Attorney of C. Morin-Postel
(24.7)	Power of Attorney of H. O. Ruding
(24.8)	Power of Attorney of G. Saint-Pierre
(24.9)	Power of Attorney of G. Schulmeyer
(24.10)	Power of Attorney of P. M. Tellier

(31.1)	Section 302 Certification signed by Richard B. Evans on 1 March 2007. (Filed herewith.)
(31.2)	Section 302 Certification signed by Michael Hanley on 1 March 2007. (Filed herewith.)
(32.1)	Section 906 Certification signed by Richard B. Evans on 1 March 2007. (Filed herewith.)
(32.2)	Section 906 Certification signed by Michael Hanley on 1 March 2007. (Filed herewith.)
(99.1)	Proxy Circular. (Filed herewith.)
(99.2)	Board Charter. (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.

179

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.

By:  *

L. Yves Fortier, Chairman of the Board

1 March 2007

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 1 March 2007.

/s/  Richard B. Evans
Richard B. Evans, Director, President and Chief Executive Officer
(Principal Executive Officer)

*
Roland Berger, Director

*
L. Denis Desautels, Director

*
L. Yves Fortier, Chairman of the Board

*
Jeffrey E. Garten, Director

Jean-Paul Jacamon, Director

*
Yves Mansion, Director

Gwyn Morgan, Director

*
Christine Morin-Postel, Director

*
H. Onno Ruding, Director

180

*
Guy Saint-Pierre, Director

*
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

181

EX-10.4

Exhibit 10.4 Employment Agreement dated 14 January 2002 with David McAusland.

31 December 2001

PERSONAL & CONFIDENTIAL

Mr. David McAusland

Dear David:

I wish to confirm my discussion with you pertaining to the position of Senior Vice President, Mergers and Acquisitions and Chief Legal Officer, effective on 1 January 2002. You will report to me.

Salary

Your base salary will be US$320,000 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 50 under Alcan’s structure.

Annual Bonus

You will participate in Alcan’s Executive Performance Award Plan (EPA) with a guideline bonus of 70% of the mid-point salary (US$363,000). Under the modified EPA program, award payment will be related to the global performance of Alcan 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$700,000 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$700,000 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.

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.

1

Pay Disbursement

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.

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.

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/ David McAusland	14 January 2002
David McAusland	date

2

EX-10.8

Exhibit 10.8 Change of Control Agreement dated 1 May 2005 with Christel Bories.

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 Christel Bories (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

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.

2

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.

3

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

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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

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(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;
(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; and
(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.

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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.

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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

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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.

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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/ Christel Bories
	Christel Bories

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EX-10.9

Exhibit 10.9 Change of Control Agreement dated 1 May 2005 with David McAusland.

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 David L. McAusland (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;

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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.

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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.

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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

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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

5

(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.

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	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.

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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

8

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.

9

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/ David McAusland
	David L. McAusland

10

EX-10.11

Exhibit 10.11 Alcan Executive Performance Award Plan, dated 1 January 2007, as amended and restated.

Alcan
Executive Performance
Award (EPA) Plan

For Grades 38 and above

Plan Description

January 2007

Alcan Executive Performance Award (EPA) Plan Grades 38 and above

TABLE OF CONTENTS

Contents

AN OVERVIEW OF ALCAN’S COMPENSATION STRATEGY
Total Direct Compensation	2
Base Salary	2
Executive Performance Award (EPA) Program	2
Long Term Incentive Program (LTI)	3
Total Shareholder Return Plan (TSR)	3
Alcan Restricted Share Unit Plan (RSU)	3
In Summary	4
GENERAL
Introduction to Alcan’s Executive Performance Award (EPA) Plan	4
DESCRIPTION OF THE PLAN
Participation	5
Period of Participation	5
Control	5
Administration	5
Performance Period	5
Target Award	5
PERFORMANCE AWARD COMPONENTS
Financial Performance Award (FPA)	6
Individual/team Award (ITA)	6
Objective Setting (Commitments)	6
Payout Scale	7
CALCULATION OF AWARD
Adjustments	8

1

Alcan Executive Performance Award (EPA) Plan Grades 38 and above

An Overview of Alcan’s Compensation Strategy

Executives of Alcan are eligible to receive compensation delivered through several plans. Each component is designed to incentivize a certain behaviour or activity that maximizes the value of Alcan for its stakeholders. While each plan has its own objectives, together they create a powerful incentive to focus on enhancing shareholder value.

The relative value of each salaried position within the organization is determined by a job evaluation. Alcan’s designated method for evaluating professional and managerial positions worldwide is the Hay system. After each job is evaluated they are grouped together for the purpose of establishing salary grades and total cash levels.

Total Direct Compensation

Total Direct Compensation (TDC) comprises all of the elements of compensation including base salary, short term incentive and long term incentive which includes Restricted Share Units (RSU Plan) and Total Shareholder Return (TSR plan) for eligible participants. TDC levels are set to reflect both the responsibility of each position (internal equity) and competitive market levels (external competitiveness). TDC and its components are periodically (usually annually) compared with the compensation levels of other major global companies of similar size. To ensure Alcan’s competitiveness and its ability to attract and retain its senior managers and executives, market comparisons are not always restricted to the local national market. Today, talented individuals move easily across borders. Therefore, in certain markets in Europe and North America, Alcan may blend market data from more than one country to achieve competitive compensation guidelines. The TDC policy is set at the median of the compensation peer group.

This overview of TDC is supported by detailed descriptions of the plans in each plan text. A summarized description of each component of TDC and its objectives are outlined below:

Base Salary

Base salary is a fixed element of pay that may be reviewed annually to reflect performance or competitive market movement. Base salaries are administered within a salary scale that enables Alcan to reward an employee’s individual performance and contribution in a particular role.

Executive Performance Award Program

The Executive Performance Award (EPA) Program is annual and is subject to Alcan’s performance as well as individual/team performance against key metrics. Currently these comprise the profitability of the company as measured by Economic Value Added (EVA) 70% and individual/team objectives 30%. The latter includes Environment, Health and Safety (EHS) objectives.

Each position has a target award expressed as a percentage of base salary mid point reflecting both the responsibilities of the position and competitive compensation levels. The actual award is dependent upon Alcan’s performance against the metrics outlined above, and to reflect individual and/or team performance. The role that these measures play in creating shareholder value is explained more fully in the present document.

2

Alcan Executive Performance Award (EPA) Plan Grades 38 and above

Long Term Incentive Program

The Long Term Incentive (LTI) Program consists of two components: the RSU plan and the TSR plan for executives in position grade 43 and above. An LTI compensation target is set for each grade, and therefore the target is the same for all employees within a country that have the same grade. The target is set to be competitive with Alcan’s compensation peer group.

Total Shareholder Return (TSR) Plan

The TSR Plan aligns the interests of Alcan executives with those of shareholders by rewarding them for Alcan’s performance over a three-year period. The plan is a cash incentive plan that provides awards based on Alcan’s share price and cumulative dividend yield performance relative to the performance of companies included in the Standard & Poors Materials Index.

If Alcan relative performance ranks less than the 30^th percentile, no award is payable for the performance period. At the 50^th percentile, the award is 100% of the target, and at the 75^th percentile or higher, the payout is 250% of the target award. The award pay-out is prorated between these rankings.

Alcan Restricted Share Unit (RSU) Plan

A RSU is a notional Alcan share that replicates the value of Alcan shares but without the voting or other rights attached to Alcan common shares. Additional RSUs are added to the RSU account for declared dividends on common shares throughout the vesting period. RSUs usually vest three years after the respective grant. Specific conditions may apply depending on the country of residence.

LTI compensation values are set, and awards granted, annually. Details pertaining to the RSU and the TSR plans are available in their respective plan text.

In Summary

In summary, Alcan TDC is designed to motivate Alcan executives to deliver enhanced value to the various stakeholders of Alcan.

Alcan’s Executive Compensation Model

	Components	Measure
100% compared to competitive market	Long Term Incentive	TSR (43 +) RSU	The components vary in proportion relative to the salary grades.
	Executive Performance Award	70% EVA 30% individual/team	Higher salary grades have proportionately more variable compensation.
	Base Salary	Fixed Component

3

Alcan Executive Performance Award (EPA) Plan Grades 38 and above

General

Introduction to Alcan’s Executive Performance Award (EPA) Plan

The Executive Performance Award (EPA) Plan is designed to provide a performance-related reward to employees who contribute substantially to the success of Alcan. A participant’s total cash compensation, in any calendar year, therefore consists of a base salary plus a performance award (if any) that may be paid under this plan.

The EPA plan comprises two elements:

¨ Financial Performance Award (FPA) — 70%

¨ Individual/Team Award (ITA) — 30%

The financial objective of Alcan and its Business Groups are approved by the Human Resources Committee (HRC) of the Board. The ITA objectives are set by the salary administrator of the employee and approved by the business leader of the parental entity (i.e., 2-up approval) or delegated to the corresponding Human Resources Director of the parental entity. Objectives are approved at the beginning of each performance period.

The FPA is related to the level of achievement of an Economic Value Added (EVA) target for the appropriate business group/unit of the company, and its parental entity. The ITA is related to the achievement of the specified individual/team objectives.

Target awards are determined for each participant on the basis of market surveys that are periodically updated. The overall objective is that the annual cash compensation (salary scale plus target bonus) remains competitive with that paid by comparable companies, in the same geographic area, under similar circumstances. Target award values for each participant may be available from his/her salary administrator.

4

Alcan Executive Performance Award (EPA) Plan Grades 38 and above

Description of the Plan

Participation

Employees of Alcan or its subsidiaries in position grades 38 and above, in the Alcan grading structure, are generally eligible to participate in the Plan. The HRC reserves the right to extend participation to, or restrict participation of, certain groups of employees.

Period of Participation

Employees becoming eligible to participate in the Plan during the course of a performance period are entitled to an award pro-rated for the number of months of participation.

When the employment of a participant terminates, except for cause, a prorated award is calculated and paid based on the date of termination and the performance rating for the year. The award is paid before April 1st of the calendar year following the date of termination of employment. Specific conditions may apply depending on the country of residence.

When the employment of a participant is terminated for cause, no award is payable for the performance year in which such termination occurs.

In the case of death of a participant, the award is calculated on the basis of target bonus for the period between January 1^st and the date of death and is payable immediately.

If there is a change in a participant’s job grade or a change in the salary scale during a performance year, the final award is calculated on the basis of a weighted average of the award guidelines at each grade and the annual performance ratings corresponding to the objective periods.

Control

The HRC has full and exclusive power to interpret the Plan rules and to make, amend, and rescind rules and regulations for its administration. The HRC may delegate responsibilities to management.

Administration

For those employees in job grade 43 and above, the Plan is administered by Alcan’s Human Resources Group in Montreal. For all other employees, the administration is done at the appropriate Business Group or Unit level.

Performance Period

All award metrics are set and measured on a calendar year basis, i.e., from January 1 to December 31. Awards are disbursed prior to April 1 of the calendar year following the end of the performance period.

Target Award

Target awards are normally expressed as percentage of base salary midpoints.

5

Alcan Executive Performance Award (EPA) Plan Grades 38 and above

Performance Award Components

Financial Performance Award (FPA)

In order to identify and generate synergies throughout the Company, the plan encourages business units and business groups to work more closely together. Therefore, FPA also includes a component representing the EVA of the parental entity (unit, sector, business group, Alcan Inc.).

The FPA accounts for 70% of the total target award and is based on EVA performance. This award is divided between the entity of the employee (70%) and its parental entity (30%)

Illustration

Individual/team Award (ITA)

The ITA accounts for 30% of the total target award and is based on individual/team objectives which include EHS objectives.

This portion of the EPA award aims to recognize higher individual and team performance that may not be immediately captured by EVA.

A set of key measurable individual/team objectives is established. Objectives are set by the employee and his/her salary administrator and approved through Alcan’s usual 2-up approval process or delegated to the corresponding Human Resources Director of the parental entity.

Objective Setting (Commitments)

Annual objectives are set on the basis of Alcan’s Value Maximization methodology and consistent with the business planning process. The annual Business Group and Corporate EVA targets are approved by the HRC of the Board.

6

Alcan Executive Performance Award (EPA) Plan Grades 38 and above

Payout Scale

Under the Plan, the Alcan CEO annually recommends to the HRC the EVA target level for Alcan Inc. and the four Business Groups that must be achieved to warrant a 100% performance rating. The CEO also recommends the levels that warrant a 0% performance rating up to a maximum of 200% performance rating. (The payout scale is established annually as a straight line between 0% and 200%.) Actual achievements are measured against the approved rating scale as shown in the following illustrative graph.

Below the Business Group level, the payout scale for each relevant EVA centre is also established annually as a straight line between 0% and 200%. The target and the range are set by following the guidelines issued by Corporate HR/Finance, and approved through the usual 2-up approval process.

7

Alcan Executive Performance Award (EPA) Plan Grades 38 and above

Calculation of Award

The Total Award is the sum of the FPA and ITA.

Total Award = Target Award x (FPA rating x 70% + ITA rating x 30%)

Illustration of an EPA framework

Target EPA	EVA Component	Individual and/or Team Targets
	70% ($ 35,000)	30% ($ 15,000)
		Objectives	Weighting
	Business Unit: 70%	1.Integrate a key technology		33	%
$50,000		2.Optimize use of certain assets		33	%
	Business Group: 30%	3.EHS Targets		33	%

Example of payout computation

			ITA (30%)
	FPA (70%)		Individual /
Target Award	EVA Rating		Team
	Employee entity	Parental entity
	70%	30%
$50,000	Rating of 120%	Rating of 130%	Rating of 90%

Total Award	= $50,000 x 70% (120% X 70% + 130% x 30%) + $50,000 X 30% X 90%
	= $43,050 + $13,500
	= $56,550

Adjustments

Adjustments may be made to the actual EVA performance for major factors reasonably beyond the control of management. Any adjustments must be reviewed and approved by senior management (FPA Committee) and the HRC of the Board. It is expected that adjustments will be few and limited to:

• the impact of accounting changes or restatements;

• exchange rates, metal price and other specified commodities/energy price fluctuations;

• other significant “pass through lag” items such as resins and films; and

• adjustments for divestments/acquisitions and/or mergers.

8

EX-10.15

Exhibit 10.15 Alcan Pension Plan for Officers, dated 1 January 2006, as amended and restated.

ALCAN INC.

ALCAN PENSION PLAN
FOR OFFICERS

Amended and Restated
As of 1 January 2006

ARTICLE I: INTRODUCTION

1.01	This document sets out the terms of the Alcan Pension Plan for Officers (Plan), amended and restated as of 1 January 2006.
1.02	The Plan provides a pension based on your earnings in excess of the cap on earnings set under your home country pension plan (HCPP).
1.03	The effective date of the Plan is 1 January 2003.

ARTICLE II: ELIGIBILITY

2.01	You participate in the Plan if you are an officer of Alcan Inc. and the Human Resources Committee of the Board of Alcan Inc. (HRC) designates you a participant.
2.02	Your participation in the Plan begins on the first day of the month and year determined by the HRC and ends on the last day of the month and year determined by the HRC or if occurring before, on the last day of the month following either your death, retirement or termination of employment.

ARTICLE III: PENSION CALCULATION

3.01 The pension formula set out below is the basis on which your pension payable under the Plan is calculated. It takes into account the following three elements:

• your pensionable earnings which are your basic salary plus guideline Executive Performance Award (EPA) subject to a maximum fixed from time to time by the HRC;

• your highest average earnings (HAE) which is the annual average of your 60 highest consecutive months of pensionable earnings as defined above in excess of your highest average earnings for the purpose of your HCPP. Your HAE is determined as of the date that your participation in the Plan ends in accordance with section 2.02;

• your years (including fractional years) of participation in the Plan;

3.02 The pension formula is the following:

3% x HAE x years of participation up to 10

plus

2% x HAE x years of participation between 10 and 20

equals

1

your annual pension (max. 50% of HAE).

3.03 Your annual pension calculated in accordance with the pension formula in section 3.02 is reduced by 10% for each year that your years of service with the Alcan group of companies is less than ten at your retirement, termination or death.

The HRC may, in its sole discretion, waive in whole or in part the reduction contemplated by this section.

ARTICLE IV: PENSION PAYMENT

4.01	Notwithstanding anything to the contrary contained in the Plan, your pension entitlement is conditional on your continued employment with Alcan Inc. or any Alcan Group Company until your entitlement to a vested pension under your HCPP.
4.02	If you retire or terminate employment on or after age 60 and with ten years or more of service with the Alcan group of companies, your annual pension is calculated according to the provisions of Article III and is payable from the first day of the month next following in equal monthly installments during your lifetime with the last payment due on the first day of the month of your death.
4.03	If you retire or terminate employment before age 60 or with less than ten years of service with the Alcan group of companies, your annual pension is calculated according to the provisions of Article III and is payable from the first day of the month next following your attainment of age 65 in equal monthly installments during your lifetime with the last payment due on the first day of the month of your death.
	At your request, payment of your pension shall be made to begin on the same date as your HCPP pension in which case the amount of the monthly payments shall be adjusted based on an actuarially determined equivalent stream of payments.
4.04	If you die before payment of your pension begins, the actuarial value of your pension entitlement shall be paid to the beneficiary designated by you for the purpose of the Plan or where there is no such beneficiary, to your beneficiary designated under your HCPP or where there is no such beneficiary, to the legal representative of your estate.
4.05	At your request, payment of your pension shall be made to correspond to one of the optional forms elected by you for payment of your HCPP pension in which case the amount of the monthly payments shall be adjusted based on an actuarially determined equivalent stream of payments.
4.06	Your pension under the Plan shall be calculated and paid in United States dollars and at your request shall be paid in the currency of your HCPP converted at the rate of exchange prevailing at determination of the pension.
4.07	Any request made by you pursuant to either section 4.03, 4.05 or 4.06 shall be irrevocable.

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ARTICLE V: OTHER PROVISIONS

5.01	The Plan may be amended or terminated at any time by the HRC provided that such amendment or termination shall not reduce any rights which you have acquired prior to the amendment or termination date. Your acquired rights shall be determined on the basis of your years of participation and your earnings at that date.
5.02	Unless otherwise determined by the HRC, the Plan shall remain an unfunded obligation of Alcan Inc. or of any Alcan Group Company and all pensions payable under the Plan represent merely unfunded, unsecured promises of Alcan Inc. or any Alcan Group Company to pay or cause to be paid 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 pensions under the Plan.
5.03	The administration of the Plan shall be managed jointly by Alcan’s Human Resources (Executive Compensation) Department and Alcan Adminco (2000) Inc. Any question arising in the administration of the Plan or the construction of any term of the Plan shall be resolved by the HRC, in its sole discretion.
5.04	The administrators of the Plan shall keep accurate and detailed records of participation in the Plan and upon request shall provide to a participant a statement of benefits.
5.05	Nothing in the Plan shall be deemed to give a participant 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 terminate a participant’s employment at any time.
5.06	Unless otherwise determined by the HRC, all pensions payable under the Plan shall not be subject to any periodic or ad hoc increases according to an index.
5.07	The Plan shall be governed by the laws of the Province of Quebec and the laws of Canada. If any part of the Plan is determined to be void or unenforceable, the validity and enforceability of remaining parts of the Plan shall not be affected as a consequence.

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EX-10.22

Exhibit 10.22 Alcan Restricted Share Unit Plan, dated 20 September 2006, as amended.

ALCAN

RESTRICTED SHARE UNIT PLAN

ALCAN

RESTRICTED SHARE UNIT PLAN

TABLE OF CONTENTS

	Page
1. PREAMBLE AND DEFINITIONS		2
2. CONSTRUCTION AND INTERPRETATION		6
3. ELIGIBILITY		6
4. RSU GRANTS AND RSU ACCOUNTS		6
5. ELECTION		7
6. TERMINATION OF EMPLOYMENT		8
7. CHANGE OF CONTROL EVENT		8
8. BENEFICIARY DESIGNATION		9
9. CURRENCY		9
10. SHAREHOLDER RIGHTS		9
11. ADMINISTRATION		9

ANNEX

A. Award Agreement (for all employees except in France)
B. Award Agreement (for employees in France)
C. Beneficiary Designation Form
D. Change of Beneficiary Form

APPENDIX

1. Subplan for Awards in France

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ALCAN

RESTRICTED SHARE UNIT PLAN

For purposes of the Plan, the following terms are defined as set forth below:

1. PREAMBLE AND DEFINITIONS

1.1	Title
	The Plan herein described shall be called the “Restricted Share Unit Plan” and is referred to herein as the “Plan” dated September 20, 2006, as amended.
1.2	Purpose of the Plan

The purpose of the Plan is to foster the long-term financial success of the Company by promoting alignment of interests between participating executives and shareholders and to attract, retain and motivate talented executives.

1.3 Definitions

1.3.1	“Agreement” or “Award Agreement” means any agreement entered into pursuant to the Plan by which an Award is granted to a Participant.
1.3.2	“Alcan” or “Company” means Alcan Inc., a Canadian company, and includes any successor or assignee corporation or corporations whether by amalgamation, merger or otherwise.
1.3.3	“Award” means Restricted Share Units granted to a Participant under the Plan on a Grant Date, and includes the right to receive dividend equivalents or additional Restricted Share Units credited in relation thereto as a result of dividends declared on Common Shares. Awards shall be subject to the terms and conditions of the Plan and shall be evidenced by an Agreement containing such additional terms and conditions as the Committee shall deem desirable.
1.3.4	“Board” means the Board of Directors of the Company.
1.3.5	“Cause” shall mean, for purposes of determining whether and when a Participant has incurred a Termination of Employment for Cause, any act or omission which permits the Company or a Subsidiary to terminate the written employment agreement or arrangement between the Participant and the Company or Subsidiary, as the case may be, for “cause” as defined in such agreement or arrangement, or in the event there is no such agreement or arrangement or the agreement or arrangement does not define the term “cause,” then “Cause” shall mean any act or failure to act deemed to constitute “cause” under the Company’s or Subsidiary’s established and applied practices, policies or guidelines applicable to the Participant.

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1.3.6 “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, 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 as of the effective date of this 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

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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.

1.3.7	“Committee” means the Human Resources Committee of the Board or such other committee of the Board as may be designated by the Board.
1.3.8	“Common Shares” or “Shares” means the common shares of the Company whether presently or hereafter issued, and any other shares or security resulting from adjustment thereof as described hereinafter, or the common shares of any successor to the Company which is designated for the purpose of the Plan.
1.3.9	“Disability” means the complete permanent inability of a Participant to perform all of his duties under the terms of his employment with the Company as determined by the Plan Administrator upon the basis of such evidence, including independent medical reports and data as the Committee deems appropriate or necessary.
1.3.10	“Deferred Share Unit” or “DSU” means a deferred share unit granted under the EDSUP.
1.3.11	“Election” means the irrevocable election in writing made by a Participant to cancel some or all of the RSUs in the Participant’s RSU Account on a particular Vesting Date in exchange for an equity-related investment in the Company.
1.3.12	“Executive Deferred Share Unit Plan” or “EDSUP” means the Alcan Deferred Share Unit Plan for Executives who are fiscal residents of Canada, as amended by the Board from time to time.
1.3.13	“Fair Market Value” on a particular date shall mean the average of the closing prices of the Common Shares on that date as reported on the New York Stock Exchange over the 21 consecutive trading days preceding the particular date in question.
1.3.14	“Grant Date” means the date as of which an Award is granted pursuant to the Plan.
1.3.15	“Participant” means a person who satisfies the eligibility conditions of Section 3 and to who an Award has been granted by the Committee under the Plan.
1.3.16	“Payment Value” shall mean the value of RSUs under an Award on the Vesting Date, which shall be calculated based on the Fair Market Value on the Vesting Date multiplied by the number of RSUs held by the Participant on the Vesting Date.
1.3.17	“Performance Conditions” shall mean those performance conditions, if any, applicable to an Award as may be set by the Committee at the time of grant.
1.3.18	“Plan Administrator” shall mean Alcan’s Senior Vice President Human Resources or other person occupying the position as the Company’s senior Human Resources officer.
1.3.19	“Restricted Equity-Related Investment” or “RERI” means a restricted equity-related investment in the Company, the terms of which shall be set out in a relevant Appendix to the Plan, which may include restricted Common Shares but in no case shall include a newly issued Common Share of the Company.
1.3.20	“Restricted Share Unit” or “RSU” means a notional unit representing a conditional right to receive, in exchange therefor on the Vesting Date, consideration in the form of, as determined by the Committee: i) Common Shares in a number equal to the

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	number of RSU granted, or ii) cash in an amount equal to the Payment Value, or iii) RERIs in an amount equal to the number of RSUs in the Participants RSU Account on the Vesting Date.
1.3.21	“Retirement” means, in accordance with the best interests of the Participant: i) retirement in accordance with the provisions of those employee benefit plans of the Company or any Subsidiary covering the Participant at the time of retirement or at any time during which the Participant received an Award which has not attained its Vesting Date, or ii) the placing of a terminated Participant on non-active payroll of the Company or any Subsidiary to permit such Participant to attain retirement age as defined in such employee benefit plans, or iii) the departure of the Participant from the service of the Company or any Subsidiary for a reason other than Cause, who at the time of the Participant’s termination of his employment contract, has attained A) the retirement age provided in the Participant’s employment contract, or B) the age of 55 and where the sum of the Participant’s age and continuous years of service with the Company or any Subsidiary amounts to at least 65 years. For the purpose of this definition, Retirement includes the concept of early retirement.
1.3.22	“RSU Account” has the meaning ascribed thereto in Section 4.
1.3.23	“Subsidiary” means a company controlled, directly or indirectly, by Alcan.
1.3.24	“Termination of Employment” means the occurrence of any act or event whether pursuant to an employment agreement or otherwise that actually or effectively causes or results in the person’s ceasing, for whatever reason, to be an employee of the Company or of any Subsidiary. A Termination of Employment shall occur with respect to an employee who is employed by a Subsidiary if the Subsidiary shall cease to be a Subsidiary and the Participant shall not immediately thereafter become an employee of the Company or another Subsidiary.
	With respect to any person who is not an employee of the Company or a Subsidiary, the Agreement shall establish what act or event shall constitute a Termination of Employment for purposes of the Plan.
1.3.25	“Termination Date” means the effective date of a Termination of Employment and for the purposes of this Plan shall be the date specified by the Participant in the notice to the Company or its Subsidiaries, or the date specified in the notice received from the Company or its Subsidiaries.
1.3.26	“Vesting Date” means in respect of any Award of Restricted Share Units, the date when the Award is fully vested, which shall be specified in the Award Agreement but no later than the day that is the third anniversary of the Grant Date.
1.3.27	“Vesting Period” means in respect of any Award of Restricted Share Units, the period of time from the Grant Date to the Vesting Date, both days inclusive.

In addition, certain other terms used herein have definitions given to them in the first place in which they are used.

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2. CONSTRUCTION AND INTERPRETATION

2.1	In the Plan, references to the masculine include the feminine and reference to the singular shall include the plural and vice versa, as the context shall require.
2.2	The Plan shall be governed by and interpreted in accordance with the laws of the Province of Quebec and the applicable laws in Canada.
2.3	If any provision of the Plan or part thereof is determined to be void or unenforceable in whole or in part, such determination shall not affect the validity or enforceability of any other provision or part thereof, subject to the ability of the Committee to carry out the intent of the Plan in accordance with their reasonable interpretation of the remaining provisions.
2.4	Headings wherever used herein are for reference purposes only and do not limit or extend the meaning of the provisions herein contained.

3. ELIGIBILITY

Except as herein provided, the persons who shall be eligible to participate in the Plan and be granted Awards shall be those persons who are employees, or contractors, suppliers, consultants and other agents of the Company or any Subsidiary, who shall be in a position, as determined by the Committee, to make contributions to the long term financial success of the Company.

Eligibility to participate in the Plan shall not confer a right to receive an Award. There shall be no automatic entitlement to any grant of an Award.

4. RSU GRANTS AND RSU ACCOUNTS

4.1	The Committee shall have authority to grant Awards of Restricted Share Units under the Plan at any time or from time to time, which shall be subject to the Participant’s satisfaction in full of any conditions, restrictions or limitations imposed in accordance with the Plan or an Agreement (the terms and provisions of which may differ from other Agreements) and subject to Section 5 of the Plan.
4.2	The effective date of a grant of an Award shall occur as of the date determined by the Committee. An Award shall be evidenced by, and subject to the terms of, an Agreement, which shall be executed by the Participant.
4.3	Restricted Share Units shall be subject to such terms and conditions as shall be determined by the Committee, including the following:

4.3.1	The grant price of a Restricted Share Unit on the Grant Date shall be the Fair Market Value on the Grant Date.
4.3.2	The Vesting Period of each Restricted Share Unit shall be fixed by the Committee. Notwithstanding Section 11.4, the Committee may at any time shorten the Vesting Period of all or part of any Award.

4.4	The vesting of an Award may be subject to Performance Conditions set by the Committee at the time of grant thereof and reflected in the Award Agreement.
4.5	An account, to be known as an “RSU Account”, shall be maintained by the Plan Administrator for each Award received by a Participant and such account will be credited with grants of RSUs.

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4.6 Whenever cash dividends are declared on the Common Shares, equivalent additional RSUs will be credited to a Participant’s RSU Account and will vest at the same time and be subject to the same conditions as the Award to which such additional RSUs relate. The number of additional RSUs will be calculated by dividing the aggregate amount of dividends that would have been declared and paid to the Participant if the RSUs in the Participant’s RSU Account had been Common Shares by the Fair Market Value of a Common Share on the date on which dividends were declared on the Common Shares multiplied by the amount of RSUs in the Participant’s RSU Account on the date dividends are declared. The RSUs in the RSU Account will be tabulated and rounded to six decimal places.

4.7 In the event of any stock dividend, stock split, combination or exchange of shares, merger, consolidation, spin-off or other distribution (other than normal cash dividends) of the Company’s assets to shareholders, or any other changes affecting the Common Shares, proportionate adjustments to reflect such change or changes shall be made with respect to the number of RSUs outstanding under the Plan, as determined by the Committee on an equitable basis.

4.8 Remittance of the consideration for the RSU shall be made as soon as reasonably practicable following the Vesting Date and not later than the end of the calendar year following the third anniversary of the Grant Date.

5. ELECTION

5.1	The Committee shall have the authority to allow Canadian Participants who file an Election in accordance with the EDSUP to exchange, subject to Section 5.3, some or all RSUs into DSUs and to receive further DSUs as a Company incentive to encourage the Participants to commit to an equity-related investment in the Company.
	The Committee shall also have the authority to establish an alternative equity-related investment in the Company, if permitted by law, that will allow Participants located in countries other than Canada to file an Election to exchange, subject to Section 5.3, some or all RSUs into such equity-related investment in the Company and receive a Company incentive to encourage the Participants to commit to such exchange. These Participants shall refer to the Appendices to this Plan that may be adopted from time to time for a description of the equity-related investments in the Company available to them according to their country of residence.
	The Participant who is a contractor, supplier, consultant or an agent of the Company or any Subsidiary is not entitled to exchange the Restricted Share Units for DSUs or another equity-related investment in the Company.
5.2	To be effective in respect of an Award, an Election must be filed by the Participant with the Company prior to the Vesting Date of such Award, as required by applicable law and as specified in the Award, and may cover some or all of the Restricted Share Units covered by the Award. Once filed, an Election cannot be revoked by the Participant.
5.3	If a Participant files an Election, provided that the Participant has not incurred a Termination of Employment on or before the Vesting Date or the date that would be the Vesting Date as provided in Section 7, the RSUs specified in the Election that would otherwise vest on the Vesting Date will be cancelled and the Participant will receive the equivalent value of RSUs either in DSUs together with such further DSUs or another equity-related investment in the Company together with a Company incentive that may have been determined to be available by the Committee in accordance with Section 5.1. DSUs will be granted under the EDSUP and will be subject to the terms of the EDSUP governing DSUs.
	If a Participant does not file an Election, the RSUs in the RSU Account will be paid to the Participant in accordance with Section 4.8.

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6. TERMINATION OF EMPLOYMENT

6.1	Termination by Reason of Death or Disability.
	Unless otherwise provided in an Agreement or determined by the Committee, if a Participant incurs a Termination of Employment by reason of death or Disability, the Vesting Date for all Restricted Share Units under an Award shall become the date of death or Disability. The RSUs in the RSU Account will be paid in accordance with Section 4.8.
6.2	Termination by Reason of Retirement.
	Unless otherwise provided in an Agreement or determined by the Committee, if a Participant incurs a Termination of Employment by reason of Retirement, all Restricted Share Units under an Award shall continue in existence until the scheduled Vesting Date. The RSUs in the RSU Account will be paid in accordance with Section 4.8.
6.3	Termination by Reason of Severance.
	Unless otherwise provided in an Agreement or determined by the Committee, if a Participant incurs a Termination of Employment due to a severance other than for Cause, including as a result of the discontinuance, liquidation, sale, transfer or otherwise by the Company or its Subsidiaries of a business owned or operated by the Company or its Subsidiaries, the Vesting Date for all Restricted Share Units under an Award shall become the date of the severance. The RSUs in the RSU Account will be paid in accordance with Section 4.8.
6.4	Forfeiture of Restricted Share Units.
	Unless otherwise provided in an Agreement or determined by the Committee, if a Participant incurs a Termination of Employment that is (a) voluntary on the part of the Participant (and is not due to Retirement), or (b) a Termination of Employment for Cause or for any reason other than as set out in Sections 6.1 to 6.3 above, all Restricted Share Units under an Award shall be forfeited as of the Termination Date.
6.5	Agents.
	In the event a contractor, supplier, consultant or other agent of the Company terminates his or her services to the Company or otherwise ceases to act as an agent of the Company, the terms and conditions set out in the Award Agreement shall govern such situation, but in no case will this Award Agreement permit a payment that would be in contradiction of the three year mandatory payout period described in Section 4.8.

7. CHANGE OF CONTROL EVENT

Upon the occurrence of a Change of Control Event, all RSUs shall become immediately vested and the date of the Change of Control Event shall become the Vesting Date. The RSUs in the RSU Account will be paid in accordance with Section 4.8 and the payment will be made within 30 days following the date of the Change of Control Event.

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8. BENEFICIARY DESIGNATION

8.1	Designation of Beneficiary.
	Each Participant may 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 (Annex C). The Participant may advise the Company of any change in any such information (Annex 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. CURRENCY

All references in the Plan to cash payments refer to payments in lawful U.S. currency, or such other currency as otherwise determined at the time of payment.

10. SHAREHOLDER RIGHTS

RSUs are not shares and will not entitle a Participant to any shareholder rights, including without limitation, voting rights, dividend entitlement (except as described in Section 4.6) or rights on liquidation.

11. ADMINISTRATION

11.1	Unless otherwise determined by the Committee, the Plan shall remain an unfunded obligation of the Company and its Subsidiaries. If the Committee determines that the Plan shall be funded, a Subsidiary may elect not to fund its obligations.
11.2	Payments required to be made to a Participant in respect of Restricted Share Units granted in connection with services, employment or otherwise, provided by a Participant to a Subsidiary shall be paid by such Subsidiary. In the event that a Participant transfers from one Subsidiary to another during the Vesting Period of any Award, the Payment Value of such Award shall be paid to the Participant by the latter Subsidiary on the Vesting Date.
11.3	Any required taxes in respect of benefits under the Plan shall be paid by the Participant.
11.4	The Plan or any outstanding Awards may be amended or terminated at any time by the Committee. However, no such amendment or termination will impair a Participant’s rights under an Award previously granted under the Plan except with the Participant’s written consent or to comply with applicable laws.
11.5	The Committee shall have full authority, but not limited to, interpret the Plan, adopt, amend and rescind rules for the administration of the Plan, determine the size and frequency of Awards, set the terms and conditions of each Award and make all other decisions and determinations deemed necessary or advisable for the administration of the Plan. As permitted by law, the Committee may delegate its authority and responsibilities to the Plan Administrator.

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11.6 The exchange of RSUs into DSUs at the Vesting Date in accordance with Section 5 may not be offered to Participants located in countries other than Canada due to tax laws, securities regulations or other rules. Appendices may be added from time to time to provide a description of the equity-related investments in the Company made available to such Participants together with the Company incentives. These Appendices are an integral part of the Plan once approved by the Committee.

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ANNEX A

Alcan Inc.

SEPTEMBER 2006 RESTRICTED SHARE UNIT AWARD

Employee Name

Number of RSUs Granted:

Grant Date:

[•], [•]

Alcan Inc. is pleased to grant you this Award of Restricted Share Units in respect of your services to Alcan Inc. (“Company”) or a Subsidiary of the Company.

I. Vesting of Restricted Share Units

Subject to the terms and conditions of this letter and the Alcan Restricted Share Unit Plan dated September 20, 2006, as amended (“Plan”), your Award of Restricted Share Units vests and becomes payable on [•],[•] (“Vesting Date”).

II. Payment upon vesting

1. Subject to the terms and conditions of the Plan and paragraphs 2 and 3 below, on the Vesting Date you will be entitled to receive cash in an amount equal to the Payment Value of the RSUs awarded using the Fair Market Value of one Alcan Common Share over the 21 trading days prior to the Vesting Date. The Payment Value shall be calculated in U.S. dollars using the following formula:

The Fair Market Value¹ of one Alcan
Common Share over the 21 trading days
immediately preceding the Vesting Date x The number of Restricted Share
Units held in your RSU Account
on the Vesting Date

2. Whenever cash dividends are declared on Common Shares, additional RSUs will be credited to your RSU Account. The number of additional RSUs will be calculated by dividing the aggregate amount of dividends declared by the Fair Market Value of a Common Share on the date on which dividends are declared on Common Shares multiplied by the amount of RSUs in your RSU Account on the date dividends are declared.

¹ Fair Market Value is determined using the closing price of Common Shares as reported on the New York Stock Exchange.

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3. Payment of the RSUs in your RSU Account will be made to you as soon as reasonably practicable following the Vesting Date. Provided that there is no interruption in your service during the Vesting Period, the obligation to make payment will be that of the Alcan Group entity that employs you on the Vesting Date.

III. Additional Company Incentive

On the Vesting Date, you will be entitled to receive a Company incentive if you elect to exchange some or all your RSUs in your RSU Account into an equity-related investment in the Company in accordance with the following procedure (“Election”).

1.	If you are a Canadian Participant, you will be allowed to irrevocably elect to cancel some or all of the RSUs in your RSU Account in exchange for the right to receive the same number of Deferred Share Units (“DSUs”) under the Executive Deferred Share Unit Plan (“EDSUP”) together with a Company incentive in the form of further DSUs in the amount of 20% of the value of the RSUs that you will exchange.
2.	If you are a Participant in a country other than Canada, you will be allowed to irrevocably elect to cancel some or all of the RSUs in your RSU Account in exchange for the right to receive the same value in an alternative equity-related investment in the Company together with a Company incentive, if any, for an amount of 20% of the value of the RSUs that you will exchange. If you are a resident in a country other than Canada, see the Appendices of the Plan for a description of the Company incentives available to you that may be adopted from time to time.
3.	To make an Election in respect of a particular Award, eligible Participants must notify the Company at least 12 months prior to the Vesting Date. Eligibility will be determined on the basis of your employment as of the date you are required to make the Election. If you do not provide an Election, the value of your RSUs will be paid in cash on the Vesting Date. You will not be entitled to receive a cash payment on the Vesting Date with respect to any RSUs that have been cancelled in accordance with an Election.

IV. Governing Laws

This Award and all related matters shall be governed by and interpreted in accordance with the laws of the Province of Quebec and the applicable laws of Canada.

V. Acknowledgement

I have reviewed the provisions of this Award and the conditions under which it is made; I further acknowledge that this Award is subject to all terms and conditions of the Plan as it may be amended in accordance with the terms thereof from time to time; and that there are no arrangements of any sort, employment or otherwise, outside the strict terms of the Plan and this Award that may affect this Award; Defined words in the Plan shall have the same meaning when used herein. I confirm my acceptance of the Award under these provisions and conditions by clicking the “Accept” button below; this will in turn provide acceptance to this Restricted Share Unit Award. My RSU Account will be administered by Solium.

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[•], [•]

Plan Administrator

Please print out and retain a copy of this Award Agreement for your records.

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ANNEX B

ALCAN INC.

RESTRICTED SHARE UNIT AWARD
(for Employees in France)

Employee Name

Number of RSUs Granted:
Grant Date:	[•], [•]

Alcan Inc. is pleased to grant you this Award of Restricted Share Units in respect of your services to Alcan Inc. (“Company”) or a Subsidiary of the Company.

I. Vesting of Restricted Share Units

Subject to the terms and conditions of this letter and the Alcan Restricted Share Unit Plan dated September 20, 2006, as amended (“Plan”), as amended and the French Subplan (see Appendix 1) for the Award of Restricted Share Units to French Employees (together the “French Plan”), so as to comply with the provisions of Articles L. 225-197-1 to L. 225-197-3 of the French Commercial Code and French employment law, your Award of Restricted Share Units vests and the underlying Shares will be delivered to you on [•], [•] (“Vesting Date”).

II. Delivery upon vesting

Subject to the terms and conditions of the French Plan, on the Vesting Date, you will be entitled to receive only Shares of the Company.

Provided that there is no interruption in your employment with the Company during the Vesting Period, delivery of the Shares underlying the RSUs will be made to you, as soon as reasonably practicable following the Vesting Date, in a number equal to the number of Restricted Share Units vested.

III.	Termination of Employment before the Vesting Date
(i)	Termination of Employment by reason of death

In the event of Termination of Employment by reason of death, your heirs are entitled to request that the numbers of Shares corresponding to the unvested Restricted Share Units at the date of death be delivered, provided such request is made within six months as from the date of death.

(ii) Termination of Employment by reason of Disability

In the event of Termination of Employment by reason of Disability, the Restricted Share Units will vest on the date of Termination of Employment, provided such accelerated vesting is authorized by French law. Otherwise, your Restricted Share Units shall continue to vest according to the scheduled Vesting Date.

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(iii) Termination of Employment by reason of severance

In the event of Termination of Employment by reason of severance other than for Cause, the Restricted Share Units shall continue to vest according to the scheduled Vesting Date.

IV. Dividends equivalents

During the Vesting Period, you are not the holder of Shares and therefore have no shareholders rights.

However, provided you have not incurred a Termination of Employment on or before the Vesting Date, if cash dividends are declared on Common Shares during the Vesting Period, dividend equivalents, in an amount equal to the cash dividend that would have been declared and paid to you if the RSUs had been Common Shares, will be paid in cash to you at the same time as the delivery of the Shares underlying the RSUs.

These dividend equivalents, if any, will be disbursed through your payroll in the same manner as compensation income.

V. Restriction on disposal

Once delivered, you must hold the Shares during a two-year period (“Holding Period”) beginning on the date of the delivery of the Shares, except in any event provided for under French law as an exception to this minimum Holding Period.

After the end of the Holding Period, the Shares may not be sold within the periods as set forth in Article L. 225-197-1, I of the French Commercial Code. These periods are currently the following:

(i) Ten trading days preceding and following the date on which the consolidated financial statements are published.

(ii) The date when Alcan possesses material non-public information and ten trading days following when this information becomes public.

VI. Additional Company Incentive and Election

As a Company incentive, on the Vesting Date, you will be entitled to receive additional RSUs, if you elect, prior to the end of the Vesting Period, to hold voluntarily, the Shares underlying the RSUs until the date of your Termination of Employment.

To be effective, you must file an election prior to the Vesting Date. Once filed, you may not revoke an election.

If you file this election, you will receive additional Restricted Share Units, as a Company incentive, provided you have not incurred a Termination of Employment on or before the Vesting Date and you are still a French Employee or a Corporate Officer on the Grant Date of these additional RSU. These additional RSU will be granted with the next annual Restricted Share Units grant following the Vesting Date will be subject to all the terms and conditions of the French Plan (two-year Vesting Period beginning on the Grant Date of these additional RSUs). Once delivered to you, the Shares underlying these additional RSUs will also be required to be held voluntarily after the end of the Holding Period by you. This voluntary additional Holding Period will end on the date of your Termination of Employment.

VII. Governing Laws

This Award and all related matters shall be governed by and interpreted in accordance with the laws of the Province of Quebec and the applicable laws of Canada.

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VIII. Acknowledgement

I have reviewed the provisions of this Award and the conditions under which it is made; I further acknowledge that this Award is subject to all terms and conditions of the French Plan as it may be amended in accordance with the terms thereof from time to time; and that there are no arrangements of any sort, employment or otherwise, outside the strict terms of the Plan and this Award that may affect this Award; Defined words in the Plan shall have the same meaning when used herein.

I confirm that I have received copies of the Plan and of the French Subplan (Appendix 1) for the Award of RSUs in France in French. I confirm that I have read and fully understood the terms and conditions of the French Plan and notably the conditions of grant and forfeiture of RSUs.

I confirm my acceptance of the Award under these provisions and conditions by clicking the “Accept” button below; this will in turn provide acceptance to this Restricted Share Unit Award. My RSU Account will be administered by Solium.

[•], [•]

Plan Administrator

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ANNEX C

ALCAN INC.

RESTRICTED SHARE UNIT PLAN

Beneficiary Designation Form

I,                     , being a Participant of the Restricted Share Unit Plan (RSU Plan), hereby designate the following person as my Beneficiary for purposes of the RSU Plan and acknowledge that said person is:

Name:

Address:

Under the terms of the RSU 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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ANNEX D

ALCAN INC.

RESTRICTED SHARE UNIT PLAN

Change of Beneficiary Form

I,                     , being a Participant of the Restricted Share Unit Plan (RSU Plan), hereby revoke the designation of                      as my Beneficiary for purposes of the RSU Plan and designate instead:

Name:

Address:

Under the terms of the RSU 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 1

ALCAN INC.
RESTRICTED SHARE UNIT PLAN

Subplan for Awards in France

The French Subplan will apply to Participants in the Alcan Inc. Restricted Share Unit Plan (the “Plan”) who are or may become subject to French taxation (i.e., income tax and/or social security contributions) as a result of Awards granted under the Plan.

The terms of the Plan, as modified by the French Subplan, constitute the “French Plan”, so as to comply with the provisions of Articles L. 225-197-1 to L. 225-197-3 of the French Commercial Code and French employment law. The French Subplan shall be construed and operated with that intention.

The French Subplan should be read in conjunction with the Plan and is subject to the terms and conditions of the Plan except to the extent that the terms and conditions of the Plan differ from or conflict with the terms set out in the French Subplan, in which event, the terms set out in the French Subplan shall prevail.

Under the French Plan, Participants will be granted only Restricted Share Units, as defined in Sections 1.1 of this French Subplan.

Initially capitalized terms used herein and not defined in Section 1 of this French Subplan shall have the meanings ascribed to such terms in the Plan.

A grant of Restricted Share Units shall be subject to the terms of the French Plan if the Award Agreement evidencing such grant refers to the French Plan.

The terms of the French Subplan modify the terms of the Plan as follows.

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1.	Definitions
1.1.	Restricted Share Unit
	The term “Restricted Share Unit” shall mean a notional unit representing a conditional right to receive, free of charge, in exchange therefore on the Vesting Date consideration in the form of Shares of the Company in a number equal to the number of Restricted Share Units granted, provided the conditions which may be set forth in the applicable Award Agreement, are satisfied at the Vesting Date.
1.2.	French Employee
	The term “French Employee” shall mean a current salaried employee resident in France, as defined by French labor law.
1.3.	Corporate Officer
	The term “Corporate Officer” shall only mean a corporate officer (“mandataire social”) as defined in Article L. 225-197-1, II of the French Commercial Code.
1.4.	Share
	The term “Share” shall mean a Common Share in accordance with Section 1.3.8 of the Plan and shall not include a newly issued Common Share of the Company.

2. Eligibility

Only a French Employee, and/or a Corporate Officer of the Company or of a subsidiary having a capital link as defined in Article L. 225-197-1, II of the French Commercial Code², shall be granted Restricted Share Units pursuant to the French Plan.

Notwithstanding any other provision of the Plan, Restricted Share Units granted under the Plan to any Employee or Corporate Officer who is holding Shares representing 10% or more of the Company’s share capital on the Grant Date or who may hold Shares representing 10% or more of the Company’s share capital due to the grant of Restricted Share Units shall not be deemed to have been granted pursuant to the French Plan.

3. Number of Shares granted

The total number of Shares granted freely under the French Plan may not exceed 10% of the Company’s share capital.

Section 4.3.1. of the Plan shall not apply to Awards to French Employees made in 2006 insofar as the grant price therefore shall be the Fair Market Value on September 20, 2006.

4. Grant of Restricted Share Units and delivery of Shares free of charge

Notwithstanding any other provision of the Plan, the Restricted Share Units must be granted and the Shares exchanged therefor must be delivered free of charge.

2	-	At least 10% of the employer’s company capital must be held, directly or indirectly, by the issuing company.
	-	The employer’s company must directly or indirectly hold at least 10% of the issuing company’s capital.
	-	At least 50% of the employer’s company capital must be held, directly or indirectly, by a company which holds at least 50% of the issuing company’s capital.

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5. Minimum Vesting Period during which the Shares can not be delivered

Notwithstanding any other provision of the Plan, Restricted Share Units shall not vest and the Shares underlying the Restricted Share Units shall not be delivered to Participants before the end of a minimum two-year period as from the Grant Date, except in the case of any event provided for under French law as an exception to this minimum Vesting Period, notably in the event of death as described below in Section 13 of the French Subplan.

6. Delivery of Shares only

Notwithstanding any other provision of the Plan, only Shares can be delivered to Participants, and not cash payments or Deferred Share Units.

7. Delivery of whole number of Shares

Notwithstanding any other provision of the Plan, only whole number of Shares shall be delivered to Participants.

8. Definitive delivery of the Shares

Notwithstanding any other provision of the Plan, once delivered on the Vesting Date, Shares shall be deemed to have been definitively delivered and may not be cancelled or rescinded and the Participant shall not be required by the Company to restitute the Shares.

9. Minimum Holding Period

Notwithstanding any other provision of the Plan, once definitively delivered, the Shares must be held by the Participant during a minimum two-year period (“Holding Period”) beginning on the date of their delivery to the Participant, except in any event provided for under French law as an exception to this minimum Holding Period.

Following the Holding Period, a Participant will be entitled to sell the Shares at his own will, subject to the restrictions described in Section 11 of the French Subplan below.

10. Dividends equivalents

Notwithstanding any other provision of the Plan and notably Sections 1.3.3 and 4.6 of the Plan, if dividends are declared on the Common Shares of the Company during the Vesting Period, dividends equivalents will be paid in cash to the Participants at the same time as the delivery of the Shares.

11. Election

Sections 1.3.11 and 5 of the Plan shall not apply to French Employees, for whom the following provisions will apply.

The Participants will be entitled, prior to the end of the Vesting Period, to elect to hold the Shares during an additional period after the end of the Holding Period. This additional period will end on the Termination of Employment date of the Participant. To be effective, a Participant must file an election to such effect prior to the Vesting Date. Once filed, an election may not be revoked by the Participant.

If a Participant has filed this election, the Participant will receive additional Restricted Share Units, as a Company incentive, provided he/she has not incurred a Termination of Employment on or before the Vesting Date and he/she is still an Employee or a Corporate Officer at the Grant Date of these additional Restricted Share Units. These additional Restricted Share Units will be granted with the next annual Restricted Share Units grant following the Vesting Date and will be subject to all the terms and conditions of the French Plan (and notably a two-year Vesting Period

21

beginning on the Grant Date of these additional Restricted Share Units). Once delivered to the Participant, the Shares underlying these additional Restricted Share Units will also be required to be held by the Participant during an additional period after the end of the Holding Period. This additional period will end on the Termination of Employment date of the Participant.

12. Closed periods during which the Shares can not be sold

Notwithstanding any other provision of the Plan, once delivered, Shares may not be sold within the periods as set forth in Article L. 225-197-1, I of the French Commercial Code³.

13.	Termination of Employment by Reason of Death or Disability
13.1.	Termination of Employment by Reason of Death
	Notwithstanding any other provision of the Plan, in the event of death of a Participant, his/her heirs are entitled to request that the numbers of Shares corresponding to the unvested Restricted Share Units at the date of death be delivered after the Vesting Period, provided such request is made within six months from the date of death.
13.2.	Termination of Employment by Reason of Disability
	Notwithstanding any provision of the Plan, in the event of Termination of Employment of a Participant by reason of Disability, the Restricted Share Units will vest on the date of Termination of Employment, provided such accelerated vesting is authorized by French law.
14.	Termination of Employment by Reason of Severance

Notwithstanding any provision of the Plan, in the event of Termination of Employment of a Participant by reason of severance other than for Cause, the Restricted Share Units shall continue to vest according to the scheduled Vesting Date as provided in the Award Agreement.

15. Change of Control Event

Notwithstanding any provision of the Plan, in the event of Change of Control Event, the Restricted Share Units shall continue to vest according to the scheduled Vesting Date as provided in the Award Agreement.

16. Non-adjustability of the Restricted Share Units

Notwithstanding any other provision of the Plan, the number of Restricted Share Units granted as well as the number of Shares delivered cannot be modified, except in cases which would be authorized or rendered compulsory under French law.

17. Changes to the Plan

The Committee may not change the Plan in any way that affects this French Subplan, the Restricted Share Units granted or Shares delivered under the French Plan, if the change is inconsistent with French law and, in particular, French legislation regarding the granting of free shares, as defined in Articles L. 225-197-1 to L. 225-197-3 of the French Commercial Code and French labor law.

3	These periods are currently the following:
(i)	Ten trading days preceding and following the date on which the consolidated financial statements are published;
(ii)	The date when Alcan possesses material non-public information and ten trading days following the date on which this information becomes public.

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18. Severability

The terms and conditions provided in the French Plan are severable and if any one or more provisions are determined to be illegal or otherwise unenforceable under French law, in whole or in part, the remaining provisions shall nevertheless be binding and enforceable.

19. Authorized period of granting

Unless the Plan is terminated earlier by the Committee, no Restricted Share Units shall be granted under the French Plan after ten years.

French Subplan approved by the Committee on December 6, 2006.

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EX-10.23

10.23 Alcan Supplemental Short Term Incentive Plan, dated 11 February 2006.

2006 Supplemental Short Term
Incentive Plan (SSTIP)

Table of Contents

INTRODUCTION	2
GOVERNANCE	2
ELIGIBILITY AND OBJECTIVE SETTING	2
AWARDS AND PAYOUT	3
FINANCING	4
APPENDIX A — ROLE OF STEERING COMMITTEE	5
APPENDIX B — PERFORMANCE AND REWARD	5

1

INTRODUCTION

The Supplemental Short Term Incentive Plan (SSTIP) is intended to motivate achievement of specific individual objectives intended to support improvement in Alcan shareholder value that would otherwise not be reflected in the traditional EVA metric for 2006.

During 2006 the Human Resources Committee will undertake a comprehensive review of Alcan’s compensation structure and goals to ensure consistency with overall business strategy. Directionally it is anticipated that the thrust will be to encourage greater individual performance recognition and this plan is a step toward that environment.

GOVERNANCE

The plan was approved by the Human Resources Committee on February 11, 2006. The plan will be administered by a steering committee comprising the CEO, CFO, SVP HR and the Director Compensation Services.

The steering committee will approve objectives, assess results and be responsible for recommending payouts against the objectives. Final approval of all payments will be by the Human Resources Committee.

ELIGIBILITY

Alcan Inc and Business Group management team N-1 and N-2 (excluding the CEO but including Excom members) are eligible. Total eligible employees are approximately 100.

BG Presidents may determine that an additional supplemental plan is required for other key individuals below the management team. While that is outside the scope of this document it is expected that the cost of such a plan would be consistent with the value parameters used in the overall Alcan plan.

2

Objective Setting and Measurement Process

Qualifying objectives will be agreed by the Steering Committee from a list submitted by BG Presidents or Alcan Inc Functional Heads.

Eligible participants will have half of their SSTIP award based upon their contribution to the overall Alcan SG&A initiative. The remaining half will be based upon achievement against two selected individual objectives.

Awards

In January 2007 the Steering Committee will make final evaluations of achievements against objectives in preparation for approval by the Excom at its February meeting and payout with EPA awards at the end of February.

The target payout for the plan is 10% of mid-point base salary range. Half of the award (or 5% of base salary) will be paid against an executive’s contribution to the group SG&A objective and the balance (or 5% of base salary) payable for achievement against individual objectives.

Awards will be payable based upon the following scale:

	SSTIP Objectives
Measurable	10% of	Achievement of Individual Objectives *
Objective	Base Salary	50%	100%	150%
Team SG&A Objective	5% of Base	Evaluation based upon individual contribution to group SG&A objective
Individual Objectives	5% of Base	Payout based upon evidence of real progress and contribution but falling short of objective*	Normative payout based upon target achievement and time line	Payout based upon exceptional achievement significantly in excess of original goals

* Individual awards will be paid at 50%, 100% or 150% consistent for threshold level of achievement

3

EXAMPLE

Illustrative SSTIP payout:

• Base Salary $200,000

• SSTIP Objective 10% of base

		Achievement
SSTIP	Attribution of	Against	Payout
Objective	10% Objective	Objective	Calculation	Award
Group	50%	100%	$200,000	$10,000
			x10%x50%x100%(1)
Individual #1	25%	50%	$200,000	$2,500
			x10%x25%x50%(2)
Individual #2	25%	150%	$200,000	$7,500
			x10%x25%x150%(3)

(1)	Achievement against group objective was at plan and therefore target payout is payable
(2)	Achievement against objective #1 was at 50% and therefore minimum amount is payable
(3)	Achievement against objective #2 was at 150% and therefore maximum amount is payable

Financing

The plan will be financed from a pool of up to a maximum of US$4.5M which approximates 15% of base salaries of all eligible executives. Expected payouts at target would equal $3.0M or 10% of base salaries.

4

Appendix A — Role of Steering Committee

1. The Committee will:

a.	approve individual objectives and confirm metrics and goals
b.	monitor performance and approve any mid-year adjustments to objectives
c.	monitor group performance against stretch budgets
d.	review and approve results prior to final approval by HRC
e.	authorize payment

2. The Committee will assess performance against objectives — not on their actual impact on share price

Appendix B — Performance and Reward

Compensation Element	Expectation	Comments
Base Salary	Overall performance and ongoing personal contribution	Subject to competitive practice and potential
EPA	EVA/EHS Performance of BG or Alcan Inc	EVA/EHS metrics with discretionary adjustment for exceptional individual performance
SSTIP	SG&A and specific individual objectives	Individual Performance against selected objectives

5

EX-10.24

10.24 Pechiney Supplemental Pension Plan, dated 8 August 2003, as amended and restated.

Cancels and supersedes the bylaw of 8/08/2003

PECHINEY GROUP

SUPPLEMENTAL PENSION PLAN

BYLAW

Section 1 — Principles

This bylaw set outs the conditions for the application, effective June 1, 2004, of the Pechiney Group pension plan for beneficiaries who meet all the conditions set forth in Sections 3, 4 and 8 at the time of their retirement.

Section 2 — Participating companies

“Pechiney Group”, hereafter called “the Group”, means the company “Pechiney” and its direct or indirect French subsidiaries that have subscribed to this bylaw.

“Participating companies” to the plan, at its effective date, are included in the list appended to this bylaw.

Subsequently, companies requesting to participate in the present plan and which are approved by the executives of Pechiney shall become “participating companies”.

If a participating company ceases to belong to the Group, the present benefits of retired participants and the future benefits of non-retired participants shall be governed by the provisions of Section 9.

Section 3 — Participants

The Participants are executives who had served as members of the Executive Committee until December 16, 2003.

Section 4 — Condition of eligibility

1/ Eligibility for the benefits of the plan set up by this bylaw shall be established only at the time of retirement of each Participant.

To be eligible, a participant must meet each of the following conditions precedent:

– end his/her professional career within one of the participating companies;

– be at least sixty years of age and be able to claim full commutation of the French social security old age pension and the AGIRC/T2 and ARRCO pensions;

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– have served at least two years on the Executive Committee;

– have his/her French social security old age pension and all supplemental pension entitlements commuted;

– not be eligible for any other of the Group’s pension plans, such as the IPC, ACR, MSA or SAD.

The earliest age of eligibility for the plan is the Participant’s 60^th birthday, provided the Participant can establish that he or she is entitled to claim full commutation of the French social security, AGIRC/T2 and ARRCO retirement pensions.

However, depending on its organizational needs, Pechiney may, for a limited period, allow total or partial benefits under this plan as of age 60 for Participants who commute their pension benefits but are unable to justify the number of quarters necessary for application of the full rate.

In case of departure after the 65^th birthday, entitlement shall be considered effective on the first day of the calendar month immediately following the effective date of departure from the Group.

Section 5 — Reference pay

The reference pay used for calculating pension entitlements shall be the aggregate of the gross annual base salaries paid to the Participant by all participating companies of the Group or by other companies for which he or she acts on behalf of the Group, before any tax or social deductions, plus any bonus that may have been paid for the relevant years.

The reference pay shall be calculated on the average of the gross annual full-time pay so determined for the final years prior to the commutation of the retirement benefits, up to a maximum of five years. In cases of incomplete or part-time reference years, the reference pay shall first be established on an annual basis at the full rate.

Each nominal, fixed or variable annual or annualized pay used for the calculation of these averages shall first be adjusted proportionately to the average change in the value of the AGIRC pension point for each relevant year, in relation to the value of this point at the time of the Participant’s eligibility.

Section 6 — Pension amount

The pension amount shall be equal to 65% of the reference pay, provided such reference pay is less than ten times the contribution ceiling of the French general social security old age pension plan.

For any reference pay exceeding this ceiling, the pension amount shall decrease linearly according to the following formula:

Pension amount (%) = 65 – 1.5 Reference pay   Social security ceiling –10

up to a minimum of 50% from a total pay equal to twenty times the contribution limit of the above-mentioned general plan.

In any event, the supplement that would possibly be due may not exceed 35% of the said reference pay as long as the aggregate of the pension benefits remains greater than 50% of the same reference pay.

2

In case of significant changes in the method of setting the ceiling for the French social security old age pension, the necessary adjustments shall be made to maintain the relative level of the pension amount, as determined on the effective date of this plan.

Section 7 — Deductible pensions

The purpose of this plan is to provide a supplemental pension to executives who meet the conditions set forth in Sections 3 and 4, up to the limits stipulated in Section 6, and taking into account all other pension entitlements vested both in the service of the Group and from any prior professional activity.

To this end, the Participant shall provide, failure to do so will result in forfeiture of the rights, all documents justifying all his/her other pension, retirement and annuity entitlements vested on the effective date of this plan, for his/her entire professional career.

The amounts taken into account shall include all pension entitlements vested prior to the Participant’s entry into the Group.

Section 8 — Specific provisions in case of departure of the Participant at the company’s initiative before the Participant commutes his/her basic pension entitlements (Social Security, AGIRC/T2 and ARRCO)

1) In case of departure at the company’s initiative (except in case of dismissal for serious offence or gross negligence), the pension benefits shall also be maintained for participants who may not be able to claim full commutation of their basic pension entitlements (social security, AGIRC/T2, ARRCO), under the following conditions:

A/ Departure at or after age 60:
No early retirement factor shall be applied.

B/ Departure between age 55 and age 60:
The following factors shall be applied to the pension amount determined in Section 6:

93% between the 59^th and the 60^th birthday
86% between the 58^th and the 59^th birthday
79% between the 57^th and the 58^th birthday
71% between the 56^th and the 57^th birthday
64% between the 55^th and the 56^th birthday

2) In the event of dismissal occurring no later than December 15, 2004, the scale applicable to the pension amount determined in Section 6 shall be as follows:

A/ Departure at or after age 60:
No early retirement factor shall be applied.

B/ Departure between age 55 and age 60:
The following factors shall be applied to the pension amount determined in Section 6:

100% between the 57^th and the 60^th birthday
93% between the 56^th and the 57^th birthday
86% between the 55^th and the 56^th birthday

The reference pay shall be calculated over five years as if the Participant had continued his/her career for three more years in the Group, using:

– the base pay of the penultimate year of service and four times the base pay for the final year;

3

– a bonus calculated on the basis of bonuses actually paid in respect of the last two years of service and 70% of the maximum bonus calculated on the basis of the base pay for the final year of service in respect of the other three years.

3) The amount of the pensions, annuities and retirement benefits contemplated in Section 7 and taken into account in calculating the deferred benefits payable by the Group shall be established on the date of commutation of the entitlements vested in respect of the Participant’s professional activity.

Section 9 — Transfer of a participating company by the Group

Unless provided otherwise in the deed of transfer, when a participating company ceases to be part of the Group, the pension obligations undertaken by the Group shall be transferred to the transferred participating company.

However, the Group may stipulate that it may retain some of the obligations, limited strictly to the prorated number of full calendar years of service for participants in the Group in relation to the number which they would have had at the age of eligibility for the plan if the participating company had continued to be part of the Group. In such case, the following terms shall apply:

- Plan beneficiaries who are still in service on the date of transfer may only claim from the Group the said prorated entitlements vested until the date of transfer, provided they end their careers within the transferred company. The reference pay shall be calculated according to the provisions of Section 5, based on the years of service immediately prior to the transfer, and the adjustments set forth in the last paragraph of the afore-mentioned Section shall be applied over the period running from the date of transfer to the date of eligibility.

- The amounts of pensions, annuities and retirement benefits described in Section 7 and taken into account in calculating the deferred benefits payable by the Group shall be established on the date of commutation of the pension benefits vested from the Participant’s professional activity until the date on which the transferred company ceased to be part of the Group.

- The supplemental pensions and reversionary annuities that are accruing on the date of the transfer shall continue to accrue, subject to the conditions set forth in this bylaw.

If, following a reorganization that affects the structure of the Pechiney Group, the beneficiary continues his/her career in a company which is no longer under the control of Pechiney (as defined in Section 3 of Council Regulation (EEC) No. 4064-89 on the control of concentrations between corporations), Pechiney shall still remain joint and several guarantor of the obligations undertaken on its behalf under this bylaw.

Section 10 — Reversionary pension benefits

Reversionary pension benefits shall be paid to the spouse or to the dependent children of a deceased retiree, up to the maximum of the supplement necessary to bring all their reversionary pension benefits to the level stipulated in Section 11.

Reversionary pension benefits shall be paid to the surviving spouse under the following cumulative conditions:

– the marriage took place at least two years before the effective date of the pension plan;

– the surviving spouse can claim the reversionary annuity of the AGIRC pension plan.

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In the event of remarriage, the reversionary allowance shall be cancelled.

In the event of divorce, the reversionary pension benefits shall be paid under the following conditions:

a)

When the Participant, upon his/her death, leaves behind a divorced ex-spouse who has not remarried, the pension shall revert to the ex-spouse, prorated according to the duration of the dissolved marriage in relation to the insurance period covered by the social security old age pension plan, except when the duration of such marriage was less than two years. The reversionary pension may not, in any event, be greater than the rate stipulated in Section 11§A.

b)

When the Participant, upon his/her death, leaves behind a spouse and one or more divorced and non-remarried ex-spouses, the entitlements of these ex-spouses, calculated according to the duration of their marriage in relation to the total duration of the Participant’s marriages, shall be granted after deducting those of the spouse.

In both of the above-mentioned cases, the amount of the deductible benefits described in Section 7 for each beneficiary shall be equal to the portion of the reversionary benefits due to them from external retirement plans (French social security, ARRCO, AGIRC, etc.).

If there is no surviving spouse, a reversionary pension shall be granted to each dependent child under the age of 18 or under the age of 26 if the child is a regular student, or without age limit if the child is disabled, but subject to deduction of the allowance for adults with a disability.

Section 11 — Reversion rate for the pension benefits

A) Surviving spouse

Subject to the provisions of Section 9 in the event of remarriage, the reversionary pension benefits shall be equal to 60% of the benefits vested by the Participant on the same date.

B) Full orphans

The amount of the reversionary pension benefit for each full orphan (where both parents are deceased) shall be equal to 20% of the pension benefits vested by the Participant on the date of his/her death, but without exceeding 60% of the total benefits.

Section 12 — Death while in service

In cases where the employee dies while in service, no right of reversion shall be granted under this bylaw.

However, for the Participants covered by the provisions of Section 8-1) A) and B) and 8-2) A) and B) of this bylaw, reversionary benefits shall be granted once the AGIRC reversionary pension has been paid. They shall be equal to 60% of the benefits vested by the Participant, for the surviving spouse, and 20% for each full orphan, without exceeding 60% in total.

Section 13 — Payment of benefits

The benefits that would be due under the plan shall be paid in the form of annuities on a quarterly basis and in arrears, commencing on the date of eligibility.

The first payment, which shall be prorated on the basis of the actual period elapsed, shall be made on the last day of the calendar quarter that includes the date of eligibility.

5

If entitlements end during a quarter, a prorated payment shall be made on the last day of that calendar quarter.

Section 14 — Adjustment of benefits

The amount of the supplemental benefits due under the plan shall be determined on the effective date of retirement. This amount shall then be adjusted on the basis of the change in the AGIRC pension points for the entire period of service.

Section 15 — Other Provisions

Pechiney may revise the provisions of this bylaw in the event that laws and/or regulations, notably those governing pension plans, are amended significantly when compared with those in effect on June 1, 2004.

6

EX-21

EXHIBIT NO. 21: SUBSIDIARIES, RELATED COMPANIES, ETC.

With the exception of a number of Subsidiaries which, considered in the aggregate, would not constitute significant Subsidiaries, the Subsidiaries of Alcan, as of 31 December 2006, 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 9.

ALCAN INC.

	Organized	% of Voting shares
	Under the	Held by
Subsidiaries, Related Companies, Etc.	Laws of	Immediate Owner
9121-5988 QUÉBEC INC.	Quebec	100.00
9121-5996 QUÉBEC INC.	Quebec	100.00
ALCAN ADMINCO (2000) INC.	Canada	100.00
ALCAN ALESA TECHNOLOGIES LTD.	Canada	100.00
ALCAN ASIA PACIFIC LIMITED	Canada	100.00
ALCAN CORPORATION	Texas	100.00
ALCAN ALUMINUM EXPORT, INC.	Georgia	100.00
ALCAN MANAGEMENT SERVICES USA INC.	Ohio	100.00
ALCAN POWER MARKETING, INC.	Ohio	100.00
ALCAN PRIMARY PRODUCTS CORPORATION	Texas	100.00
ALCAN PRODUCTS CORPORATION	Texas	100.00
BALMANTA S.A.	Ecuador	98.90	(27)(28)
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
PRODPAC PRODUCTOS DEL PACIFICO S.A.	Ecuador	87.50	(59)
PLANTACIONES DE BALSA PLANTABAL S.A.	Ecuador	52.64	(56) (57) (58)
SANLAM CORPORATION	New York	100.00
PECHINEY METALS LLC	Delaware	100.00
ALCAN INTERNATIONAL NETWORK U.S.A., INC.	New York	92.88	(10)
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	(33)
PECHINEY PLASTIC PACKAGING, INC.	Delaware	100.00
PECHINEY PLASTIC PACKAGING RECEIVABLES CORPORATION	Delaware	100.00
PECHINEY PLASTIC PACKAGING (CANADA) INC.	Ontario	100.00
PMC LEASE CO.	Delaware	100.00
PRP PROPERTY AND EQUIPMENT COMPANY, LLC	Illinois	100.00
TECHPACK AMERICA INC.	Delaware	100.00
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

1

ALCAN INC.

	Organized	% of Voting shares
	Under the	Held by
Subsidiaries, Related Companies, Etc.	Laws of	Immediate Owner
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 EUROPE LIMITED	England and Wales	100.00
ALCAN FINANCES B.V.	The Netherlands	100.00
ALCAN FINANCES (Bda) LTD.	Bermuda	100.00
ALCAN ASIA LIMITED	Hong Kong	100.00
ALCAN PACKAGING (SUZHOU) CO., LTD	China	100.00
ALCAN NIKKEI CHINA LIMITED	Hong Kong	51.00
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	(50)
BOKÉ INVESTMENT COMPANY	Delaware	100.00
COMPAGNIE DES BAUXITES DE GUINÉE	Delaware	51.00
JACQUES-CARTIER REINSURANCE COMPANY LIMITED	Bermuda	100.00
NONFEMET-INTERNATIONAL (China-Canada-Japan) ALUMINIUM COMPANY LIMITED	China	27.00
QUADREM INTERNATIONAL HOLDINGS, LTD.	Bermuda	9.18	(62)
ALCAN HOLDING ITALIA S.p.A.	Italy	100.00
ALCAN PACKAGING ITALIA S.r.l.	Italy	89.00	(11)
bp EUROPACK S.r.l.	Italy	100.00
ALCAN HOLDINGS 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
ALCAN COMPOSITES USA INC.	Missouri	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 THERMAPLATE INC.	New Jersey	100.00
ALUSUISSE ALUMINUM USA 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

2

ALCAN INC.

	Organized	% of Voting shares
	Under the	Held by
Subsidiaries, Related Companies, Etc.	Laws of	Immediate Owner
ALCAN HUNGARIA Kft.	Hungary	100.00
ALCAN ROMANIA SRL.	Romania	100.00
ALCAN CAPITAL JERSEY LIMITED	The Island of Jersey	100.00
ALCAN FINANCE JERSEY LIMITED	The Island of Jersey	100.00
ALCAN DÉCIN EXTRUSIONS s.r.o.	Czech Republic	100.00
ALCAN FINANCES SWITZERLAND AG	Switzerland	100.00
ALCAN FINANCES (IRELAND) COMPANY	Ireland	58.16	(3)
ALCAN HOLDINGS EUROPE B.V.	The Netherlands	100.00
A-L FINANCIAL PRODUCTS LTD.	England and Wales	100.00
ALCAN DISTRIBUZIONE srl	Italy	100.00
ALCAN FRANCE S.A.S.	France	99.04	(4)(5)
ALCAN AEROSPACE	France	100.00
ALCAN ALPHA 2004	France	99.76
ALCAN CENTRE DE RECHERCHES DE VOREPPE	France	100.00
ALCAN CMIC SAS	France	100.00
ALCAN EPSILON 2004	France	100.00
ALCAN FRANCE EXTRUSIONS S.A.S.	France	100.00
ALCAN GAMMA 2004	France	100.00
ALCAN GUINEE — S.A.R.L	Republic of Guinea	100.00
ALCAN PACKAGING BEAUTY SERVICES	France	100.00
BENSON SpA	Italy	100.00
COSMETECH MABLY EUROPE	France	100.00
MT PACKAGING	France	100.00
PT TECHPACK ASIA	Indonesia	95.00
SFG — SOCIÉTÉ FRANÇAISE DE GALVANOPLASTIE	France	100.00
TECHPACK ASIA PTE LTD	Singapore	100.00
TECHPACK DEUTSCHLAND GmbH	Germany	100.00
ALCAN PACKAGING GLASS PHARMA	France	100.00
ALCAN PACKAGING SAINT MAUR	France	100.00
CIVILE IMMOBILIÈRE CELI	France	99.50	(37)
ALCAN PACKAGING SARREBOURG S.A.S.	France	100.00
ALCAN PACKAGING SELESTAT	France	100.00
ALCAN PECHINEY FINANCE S.A.	France	99.96	(17)
ALCAN RHENALU	France	100.00
ALCAN ALUMINIUM-PRESSWERKE 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	12.92	(20)
PECHINEY AVIATUBE	France	100.00
PECHINEY SERVICES FINANCE	France	46.53	(54)(55)
PECHINEY SOFTAL	France	100.00
RHENAROLL S.A.	France	49.85
ALUMINIUM DUNKERQUE	France	100.00
ALUMINIUM PECHINEY	France	98.75	(21)
AFFIMET	France	100.00
ALCAN ABRASIFS RÉFRACTAIRES CERAMIQUES	France	100.00
ALUCAM — COMPAGNIE CAMEROUNAISE DE L’ALUMINIUM	Cameroun	46.67
ALUBASSA	Cameroun	70.09	(18)
ALUCONGO	Congo	55.86	(19)
CENTRE MÉDICAL DES ENTREPRISES DE LA SANAGA	Cameroun	74.89	(35)(36)
COLALU	Central Africa	57.35	(38)
HOSTELLERIE DE LA SANAGA	Cameroun	67.50
SOCATRAL — SOCIÉTÉ CAMEROUNAISE DE TRANSFORMATION DE L’ALUMINIUM	Cameroun	52.55	(64)

3

ALCAN INC.

	Organized	% of Voting shares
	Under the	Held by
Subsidiaries, Related Companies, Etc.	Laws of	Immediate Owner
SOCIÉTÉ CIVILE IMMOBILIÈRE DE LA SANAGA	Cameroon	100.00
SOTRALGA — SOCIÉTÉ DE TRANSFORMATION DE L’ALUMINIUM AU GABON	Gabon	38.33	(68)
ALUMINIUM PECHINEY SERVICE	France	99.36	(23)
ALUMINIUM PECHINEY SPV	France	100.00
ALUMINIUM PECHINEY UO 5	France	99.80	(24)(25)
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	(40)
ECL SERVICES NL BV	The Netherlands	100.00
ECL SERVICES PTY LIMITED	Australia	100.00
ECL SERVICES, INC.	Quebec	100.00
ECL SERVICOS LIMITADA	Mozambique	85.71	(41)
ECL SHANGHAI	China	100.00
PECHINEY ALUMINA RESOURCES INDIA PRIVATE LTD	India	100.00
PECHINEY PHILIPPINES INC.	Philippines	99.99
PECHINEY TECHNOLOGY LTD.	Quebec	100.00
PECHINEY VÉNÉZUELA, S.A.	Venezuela	100.00
PECHINEY SERVICIOS	Venezuela	100.00
SOCIÉTÉ IMMOBILIÈRE ALPES PROVENCE — SIAP	France	89.44	(66)
CRÉDIT IMMOBILIER DE SAVOIE	France	21.58
SOCIÉTÉ POUR LE DÉVELOPPEMENT DE L’AFRIQUE CENTRALE ET DE L’OUEST SODAFE	France	62.85	(67)
BRANDEIS (BROKERS) LIMITED	England and Wales	100.00
CARBONE SAVOIE	France	100.00
CEBAL S.A.S.	France	68.82	(34)
ALCAN NORDIC AB	Sweden	100.00
ALCAN PACKAGING MOHAMMEDIA	Morocco	49.39	(13)(14)
AL WIFAQ 5	Morocco	99.95
MOGALBAT — MOGHREBIENNE ALUMINIUM POUR LE BATIMENT	Morocco	11.35
SOCIÉTÉ MÉTALLURGIQUE DE MOHAMMEDIA — S.M.M.	Morocco	79.00
CEBAL ITALIANA SPA	Italy	96.56	(32)
CEBAL TUBA SP ZO.O.	Poland	80.00
CEBAL ZHONGSHAN CO. LTD	China	90.00
COTUPLAS	France	76.96	(39)
SOCIÉTÉ MANUFACTURE MAROCAINE DE MOHAMMEDIA — S.M.M.M.	Morocco	99.94
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	99.99	(12)
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	(30)
CEBAL AMERICAS DE REYNOSA S. de R.L. de C.V.	Mexico	99.00	(31)
CEBAL BRASIL LIMITADA	Brazil	100.00
CEPILLOS DE MATAMOROS, S.A. de C.V.	Mexico	100.00
ENVARIL PLASTIC PACKAGING s.r.l.	Argentina	95.00	(42)
ENVARIL PLASTIC PACKAGING URUGUAY SA	Uruguay	100.00
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

4

ALCAN INC.

	Organized	% of Voting shares
	Under the	Held by
Subsidiaries, Related Companies, Etc.	Laws of	Immediate Owner
PECHINEY UK LIMITED	England and Wales	100.00
BRANDEIS 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 SLU	Spain	100.00
ALCAN INTERNATIONAL NETWORK ESPANA S.A.	Spain	100.00
INDUSTRIAS METALICAS CASTELLO S.A.	Spain	100.00
MYCSA	Venezuela	49.00
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	(51)
ALCAN PACKAGING FLEXIBLE FRANCE	France	100.00
ALCAN LEBENSMITTELVERPACKUNGEN 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 VERPACKUNGEN GmbH	Germany	100.00
DANAFLEX PACKAGING CORPORATION LIMITED	New Zealand	100.00
PECHINEY BOUTEILLES PLASTIQUES	France	100.00
SOCIÉTÉ DE FINANCEMENT DES RISQUES INDUSTRIELS — SOFIRI	Luxembourg	90.00	(65)
FRANCE ALUMINIUM RECYCLAGE SA	France	59.99
INTERFILIÈRES MATÉRIAUX	France	20.00
GIE — PECHINEY RECHERCHE	France	93.00 (43	) (44)
		(45) (46) (47	) (48)
PECHINEY CONSOLIDATED AUSTRALIA PTY LIMITED	Australia	55.52	(53)
ALCAN PRIMARY METAL AUSTRALIA (PTY) LTD	Australia	100.00
ALUMINIUM PECHINEY HOLDINGS PTY LTD	Australia	99.00	(22)
JOHCATH HOLDINGS PTY LIMITED	Australia	100.00
CATHJOH HOLDINGS PTY LIMITED	Australia	50.00	(29)
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.	The Netherlands	85.00
PECHINEY WORLD TRADE S.A.S	France	100.00
ALCAN INTERNATIONAL NETWORK AUSTRALASIA (PTY) LIMITED	Australia	100.00
ALCAN INTERNATIONAL NETWORK BELGIUM S.A.	Belgium	99.99
ALCAN INTERNATIONAL NETWORK BRASIL LTDA.	Brazil	100.00
ALCAN INTERNATIONAL NETWORK CHINA LIMITED	Hong Kong	99.90
ALCAN INTERNATIONAL NETWORK SHANGHAI LIMITED	China	100.00

5

ALCAN INC.

	Organized	% of Voting shares
	Under the	Held by
Subsidiaries, Related Companies, Etc.	Laws of	Immediate Owner
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 HELLAS S.A.	Greece	99.46	(8)
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 MIDDLE EAST LIMITED	Egypt	98.00
ALCAN INTERNATIONAL NETWORK NEDERLAND BV	The Netherlands	100.00
ALCAN INTERNATIONAL NETWORK NORDIC AS	Denmark	100.00
ALCAN INTERNATIONAL NETWORK PORTUGAL — IMPORTAÇÕES E EXPORTAÇÕES LDA	Portugal	99.87	(9)
ALCAN INTERNATIONAL NETWORK SA (Pty) Ltd	South Africa	100.00
ALCAN SINGAPORE PRIVATE LIMITED	Singapore	100.00
ALCAN INDIA PRIVATE LIMITED	India	100.00
PECHINEY CHILE LIMITADA	Chile	99.00
PECHINEY DIS TICARET LIMITED SIRKETI	Turkey	100.00
SEFRANEX DUBAI LTD	England and Wales	100.00
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 DE FINANCEMENT POUR AIDER À LA CONVERSION DANS LES BASSINS D’EMPLOI DE PECHINEY	France	100.00
SOCIÉTÉ DÉPARTEMENTALE DE DÉVELOPPEMENT — S.D.D. 65	France	14.29
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
ALCAN HOLDINGS GERMANY GmbH	Germany	99.24	(7)
ALCAN AUTOMOTIVE KAMENICE s.r.o.	Czech Republic	100.00
ALCAN COMPOSITES LTD, SHANGHAI	China	100.00
ALCAN KAPA GmbH	Germany	100.00
ALCAN KOPER d.o.o.	Slovenia	100.00
ALCAN PACKAGING NEUMUNSTER GmbH	Germany	100.00
ALCAN PACKAGING SINGEN GmbH	Germany	99.90	(15)
TSCHEULIN-ROTHAL GmbH	Germany	98.75
ALCAN PACKAGING MOSKAU OOO	Russia	100.00
ALCAN SINGEN GmbH	Germany	100.00
CONSORTIUM STROJMETAL A.S. KAMENICE & ALCAN SINGEN GmbH (Unincorporated)	Czech Republic	50.00
ALCAN TOMOS d.o.o.	Slovenia	66.66
ALMET AG	Germany	100.00
DEUTSCHE ALUMINIUM VERPACKUNG RECYCLING GmbH	Germany	30.00
ALCAN HOLDINGS NEDERLAND B.V.	The Netherlands	100.00
ALCAN NEDERLAND B.V.	The Netherlands	100.00
S.A. ALCAN BELGIUM N.V.	Belgium	99.52	(70)
ALCAN PACKAGING AMSTERDAM BV	The Netherlands	100.00
ALCAN PACKAGING BRABANT BV	The Netherlands	100.00
ALCAN PACKAGING ZUTPHEN BV	The Netherlands	100.00
ALU-VASTGOED B.V.	The Netherlands	100.00
ALUMINIUM & CHEMIE ROTTERDAM B.V.	The Netherlands	53.30	(26)
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

6

ALCAN INC.

	Organized	% of Voting shares
	Under the	Held by
Subsidiaries, Related Companies, Etc.	Laws of	Immediate Owner
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
LAWSON MARDON NORWICH LTD	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
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
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 ISTRA LTD.	Russia	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
ALCAN SLOVENSKO EXTRUSIONS s.r.o.	Slovakia	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 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	(52)
ALCAN PACKAGING KREUZLINGEN AG (SA/LTD.)	Switzerland	100.00
ALCAN PACKAGING RORSCHACH AG	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	(49)
ALUSUISSE SERVICIOS S.A., Panama	Panama	100.00
ALUSUISSE SERVICIOS S.A., Venezuela	Venezuela	100.00
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
ALPAMS (THAILAND) COMPANY LIMITED	Thailand	100.00

7

ALCAN INC.

	Organized	% of Voting shares
	Under the	Held by
Subsidiaries, Related Companies, Etc.	Laws of	Immediate Owner
SUBTANEE HOLDING COMPANY LIMITED	Thailand	51.00	(69)
ALCAN PACKAGING PHETCHABURI COMPANY LIMITED	Thailand	100.00
ALCAN PACKAGING STRONGPACK PUBLIC COMPANY LIMITED	Thailand	50.38	(16)
ALCAN PACKAGING STRONGTHAIPACK COMPANY 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
FOSHAN ALCAN DQ CO., LTD.	China	60.00
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	(60)
PROPACK HUIZHOU NEW MATERIAL CO LTD	China	100.00
VPS PROPACK BEIJING CO., LTD.	China	55.00	(75)
ALCAN PACKAGING RIZAL CORPORATION	Philippines	100.00
SPC REALTY CORPORATION	Philippines	40.00
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 SOUTH PACIFIC PTY LTD	Australia	100.00
ALCAN GOVE DEVELOPMENT PTY LIMITED	Australia	100.00
ALCAN NORTHERN TERRITORY ALUMINA PTY LIMITED	Australia	100.00
GOVE ALUMINIUM LIMITED	Australia	100.00
ALCAN GOVE PTY LIMITED	Australia	50.00	(6)
ALCAN QUEENSLAND SMELTER PTY LTD	Australia	100.00
NABALCO PTY LIMITED	Australia	100.00
QUEENSLAND ALUMINA LIMITED	Australia	21.39	(63)
TRANS TERRITORY PIPELINE PTY LIMITED	Australia	100.00
ALCAN VIETNAM COMPANY LIMITED	Vietnam	100.00
ALUMINERIE ALOUETTE INC.	Quebec	40.00
ALUMINUM COMPANY OF CANADA LIMITED	Canada	100.00
ALCAN FINANCES USA LLC	Delaware	100.00
BAA HOLDINGS S.A.	Luxembourg	100.00

8

ALCAN INC.

	Organized	% of Voting shares
	Under the	Held by
Subsidiaries, Related Companies, Etc.	Laws of	Immediate Owner
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
PT. ALCAN PACKAGING FLEXIPACK	Indonesia	99.99	(61)
SOCIÉTÉ DES ALUMINES ET BAUXITES DE PROVENCE SARL	France	100.00
SOHAR ALUMINIUM CO. L.L.C.	Oman	20.00
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) ALCAN FRANCE S.A.S. 41.84

(4) ALCAN INC. 0.01

(5) ALCAN FRANCE S.A.S. 0.95

(6) SWISS ALUMINIUM AUSTRALIA LIMITED 50.00

(7) ALCAN HOLDINGS SWITZERLAND AG (SA/LTD.) 0.76

(8) ALCAN FRANCE S.A.S. 0.54

(9) COMPAGNIE GÉNÉRALE DE PARTICIPATION INDUSTRIELLE ET FINANCIÈRE 0.13

(10) COMPAGNIE GÉNÉRALE DE PARTICIPATION INDUSTRIELLE ET FINANCIÈRE 7.12

(11) bp EUROPACK S.r.l. 11.00

(12) PECHINEY PLASTIC PACKAGING, INC. 0.01

(13) ALCAN HOLDINGS SWITZERLAND AG (SA/LTD.) 34.54

(14) SOCIÉTÉ MANUFACTURE MAROCAINE DE MOHAMMEDIA — S.M.M.M. 13.45

(15) ALCAN SINGEN GmbH 0.10

(16) ALCAN INC. 49.00

(17) COMPAGNIE GÉNÉRALE DE PARTICIPATION INDUSTRIELLE ET FINANCIÈRE 0.04

(18) SOCIÉTÉ POUR LE DÉVELOPPEMENT DE L’AFRIQUE CENTRALE ET DE L’OUEST — SODAFE 12.64

(19) SOCIÉTÉ POUR LE DÉVELOPPEMENT DE L’AFRIQUE CENTRALE ET DE L’OUEST — SODAFE 25.00

(20) ALCAN PACKAGING MOHAMMEDIA 5.97

(21) ALCAN RHENALU 1.25

(22) ALUMINIUM PECHINEY 1.00

(23) FINANCIÈRE EUROPÉENNE D’EMBALLAGES PECHINEY 0.64

(24) ALUMINIUM PECHINEY SERVICE 0.04

(25) ÉLECTRIFICATION CHARPENTE LEVAGE — E.C.L. 0.04

(26) SOR-NORGE ALUMINIUM AS 10.50

(27) PRODPAC PRODUCTOS DEL PACIFICO S.A. 0.75

(28) COMPANIA ECUATORIANA DE BALSA S.A. 0.35

(29) ALCAN PRIMARY METAL AUSTRALIA (PTY) LTD 50.00

(30) CEBAL MEXICANA LP 1.00

(31) CEBAL MEXICANA LP 1.00

(32) CEBAL ITALIANA SPA 3.32

9

(33) PECHINEY PLASTIC PACKAGING, INC. 1.00

(34) FINANCIÈRE EUROPÉENNE D’EMBALLAGES PECHINEY 31.18

(35) HOSTELLERIE DE LA SANAGA 0.05

(36) SOCATRAL — SOCIÉTÉ CAMEROUNAISE DE TRANSFORMATION DE L’ALUMINIUM 0.07

(37) ALCAN FRANCE S.A.S. 0.50

(38) SOCIÉTÉ POUR LE DÉVELOPPEMENT DE L’AFRIQUE CENTRALE ET DE L’OUEST — SODAFE 25.00

(39) CEBAL VERPACKUNGEN GmbH 0.05

(40) ECL SERVICES, INC. 10.00

(41) ECL SCES AFRICA ENGINEERING 14.29

(42) PECHINEY PLASTIC PACKAGING, INC. 5.00

(43) ALUMINIUM PECHINEY 1.00

(44) PECHINEY AVIATUBE 1.00

(45) SOCIÉTÉ DES FONDERIES D’USSEL 1.00

(46) ALCAN RHENALU 1.00

(47) PECHINEY SOFTAL 1.00

(48) SATMA 1.00

(49) GOVE ALUMINIUM LIMITED 30.00

(50) ALUMINIUM PECHINEY 10.47

(51) PECHINEY PLASTIC PACKAGING, INC. 0.01

(52) LAWSON MARDON PACKAGING LTD. 1.00

(53) PECHINEY HOLDINGS, INC. 44.48

(54) ALUMINIUM PECHINEY 45.63

(55) ALCAN CENTRE DE RECHERCHES DE VOREPPE 7.84

(56) COMPANIA ECUATORIANA DE BALSA S.A. 38.68

(57) ALCAN PRODUCTS CORPORATION 4.72

(58) BALMANTA S.A. 3.97

(59) PLANTACIONES DE BALSA PLANTABAL S.A. 12.50

(60) EVERWEAL INTERNATIONAL LIMITED 23.65

(61) ALUMINUM COMPANY OF CANADA LIMITED 0.01

(62) COMPAGNIE GÉNÉRALE DE PARTICIPATION INDUSTRIELLE ET FINANCIÈRE 6.07

(63) PECHINEY RESOURCES PTY, LIMITED 20.00

(64) ALUMINIUM PECHINEY 5.44

(65) COMPAGNIE GÉNÉRALE DE PARTICIPATION INDUSTRIELLE ET FINANCIÈRE 10.00

(66) ALCAN FRANCE S.A.S. 10.56

(67) UGINA 1.95

(68) SOCIÉTÉ POUR LE DÉVELOPPEMENT DE L’AFRIQUE CENTRALE ET DE L’OUEST — SODAFE 25.00

(69) ALCAN INC. 49.00

(70) ALCAN HOLDINGS SWITZERLAND AG (SA/LTD.) 0.48

(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

10

EX-23

Exhibit 23     Consent of Independent Registered Public Accounting Firm.

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

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 report dated 1 March 2007 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 which appears under Item 8 of 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
1 March 2007	/s/ PricewaterhouseCoopers LLP
	PricewaterhouseCoopers LLP

1

EX-24.1

Exhibit 24.1

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS

     WHEREAS, ALCAN INC., a Canadian corporation (the “Company”), proposes shortly to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934 as amended (the “Act”), the Annual Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.

     WHEREAS, the undersigned is an Officer and/or a Director of the Company as indicated below;

     NOW, THEREFORE, the undersigned hereby constitutes and appoints R. Millington, D. McAusland and P. Chenard and each of them, as attorneys for the undersigned and in the undersigned’s name, place and stead, and in each of the undersigned’s offices and capacities as an Officer and/or a Director of the Company, to execute and file such Annual Report on Form 10-K, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

     IN WITNESS WHEREOF, I have hereunto set my hand this 27^th day of February 2007.

Signed:	/s/ Roland Berger
Name:	Roland Berger
Title:	Director

EX-24.2

Exhibit 24.2

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS

     WHEREAS, ALCAN INC., a Canadian corporation (the “Company”), proposes shortly to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934 as amended (the “Act”), the Annual Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.

     WHEREAS, the undersigned is an Officer and/or a Director of the Company as indicated below;

     NOW, THEREFORE, the undersigned hereby constitutes and appoints R. Millington, D. McAusland and P. Chenard and each of them, as attorneys for the undersigned and in the undersigned’s name, place and stead, and in each of the undersigned’s offices and capacities as an Officer and/or a Director of the Company, to execute and file such Annual Report on Form 10-K, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

     IN WITNESS WHEREOF, I have hereunto set my hand this 27^th day of February 2007.

Signed:	/s/ L. Denis Desautels
Name:	L. Denis Desautels
Title:	Director

EX-24.3

Exhibit 24.3

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS

     WHEREAS, ALCAN INC., a Canadian corporation (the “Company”), proposes shortly to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934 as amended (the “Act”), the Annual Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.

     WHEREAS, the undersigned is an Officer and/or a Director of the Company as indicated below;

     NOW, THEREFORE, the undersigned hereby constitutes and appoints R. Millington, D. McAusland and P. Chenard and each of them, as attorneys for the undersigned and in the undersigned’s name, place and stead, and in each of the undersigned’s offices and capacities as an Officer and/or a Director of the Company, to execute and file such Annual Report on Form 10-K, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

     IN WITNESS WHEREOF, I have hereunto set my hand this 27^th day of February 2007.

Signed:	/s/ L. Yves Fortier
Name:	L. Yves Fortier
Title:	Director

EX-24.4

Exhibit 24.4

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS

     WHEREAS, ALCAN INC., a Canadian corporation (the “Company”), proposes shortly to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934 as amended (the “Act”), the Annual Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.

     WHEREAS, the undersigned is an Officer and/or a Director of the Company as indicated below;

     NOW, THEREFORE, the undersigned hereby constitutes and appoints R. Millington, D. McAusland and P. Chenard and each of them, as attorneys for the undersigned and in the undersigned’s name, place and stead, and in each of the undersigned’s offices and capacities as an Officer and/or a Director of the Company, to execute and file such Annual Report on Form 10-K, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

     IN WITNESS WHEREOF, I have hereunto set my hand this 27^th day of February 2007.

Signed:	/s/ Jeffrey E. Garten
Name:	Jeffrey E. Garten
Title:	Director

EX-24.5

Exhibit 24.5

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS

     WHEREAS, ALCAN INC., a Canadian corporation (the “Company”), proposes shortly to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934 as amended (the “Act”), the Annual Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.

     WHEREAS, the undersigned is an Officer and/or a Director of the Company as indicated below;

     NOW, THEREFORE, the undersigned hereby constitutes and appoints R. Millington, D. McAusland and P. Chenard and each of them, as attorneys for the undersigned and in the undersigned’s name, place and stead, and in each of the undersigned’s offices and capacities as an Officer and/or a Director of the Company, to execute and file such Annual Report on Form 10-K, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

     IN WITNESS WHEREOF, I have hereunto set my hand this 27^th day of February 2007.

Signed:	/s/ Yves Mansion
Name:	Yves Mansion
Title:	Director

EX-24.6

Exhibit 24.6

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS

     WHEREAS, ALCAN INC., a Canadian corporation (the “Company”), proposes shortly to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934 as amended (the “Act”), the Annual Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.

     WHEREAS, the undersigned is an Officer and/or a Director of the Company as indicated below;

     NOW, THEREFORE, the undersigned hereby constitutes and appoints R. Millington, D. McAusland and P. Chenard and each of them, as attorneys for the undersigned and in the undersigned’s name, place and stead, and in each of the undersigned’s offices and capacities as an Officer and/or a Director of the Company, to execute and file such Annual Report on Form 10-K, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

     IN WITNESS WHEREOF, I have hereunto set my hand this 27^th day of February 2007.

Signed:	/s/ Christine Morin-Postel
Name:	Christine Morin-Postel
Title:	Director

EX-24.7

Exhibit 24.7

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS

     WHEREAS, ALCAN INC., a Canadian corporation (the “Company”), proposes shortly to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934 as amended (the “Act”), the Annual Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.

     WHEREAS, the undersigned is an Officer and/or a Director of the Company as indicated below;

     NOW, THEREFORE, the undersigned hereby constitutes and appoints R. Millington, D. McAusland and P. Chenard and each of them, as attorneys for the undersigned and in the undersigned’s name, place and stead, and in each of the undersigned’s offices and capacities as an Officer and/or a Director of the Company, to execute and file such Annual Report on Form 10-K, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

     IN WITNESS WHEREOF, I have hereunto set my hand this 27^th day of February 2007.

Signed:	/s/ H. Onno Ruding
Name:	H. Onno Ruding
Title:	Director

EX-24.8

Exhibit 24.8

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS

     WHEREAS, ALCAN INC., a Canadian corporation (the “Company”), proposes shortly to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934 as amended (the “Act”), the Annual Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.

     WHEREAS, the undersigned is an Officer and/or a Director of the Company as indicated below;

     NOW, THEREFORE, the undersigned hereby constitutes and appoints R. Millington, D. McAusland and P. Chenard and each of them, as attorneys for the undersigned and in the undersigned’s name, place and stead, and in each of the undersigned’s offices and capacities as an Officer and/or a Director of the Company, to execute and file such Annual Report on Form 10-K, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

     IN WITNESS WHEREOF, I have hereunto set my hand this 27^th day of February 2007.

Signed:	/s/ Guy Saint-Pierre
Name:	Guy Saint-Pierre
Title:	Director

EX-24.9

Exhibit 24.9

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS

     WHEREAS, ALCAN INC., a Canadian corporation (the “Company”), proposes shortly to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934 as amended (the “Act”), the Annual Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.

     WHEREAS, the undersigned is an Officer and/or a Director of the Company as indicated below;

     NOW, THEREFORE, the undersigned hereby constitutes and appoints R. Millington, D. McAusland and P. Chenard and each of them, as attorneys for the undersigned and in the undersigned’s name, place and stead, and in each of the undersigned’s offices and capacities as an Officer and/or a Director of the Company, to execute and file such Annual Report on Form 10-K, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

     IN WITNESS WHEREOF, I have hereunto set my hand this 27^th day of February 2007.

Signed:	/s/ Gerhard Schulmeyer
Name:	Gerhard Schulmeyer
Title:	Director

EX-24.10

Exhibit 24.10

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS

     WHEREAS, ALCAN INC., a Canadian corporation (the “Company”), proposes shortly to file with the Securities and Exchange Commission, under the provisions of the Securities Act of 1934 as amended (the “Act”), the Annual Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.

     WHEREAS, the undersigned is an Officer and/or a Director of the Company as indicated below;

     NOW, THEREFORE, the undersigned hereby constitutes and appoints R. Millington, D. McAusland and P. Chenard and each of them, as attorneys for the undersigned and in the undersigned’s name, place and stead, and in each of the undersigned’s offices and capacities as an Officer and/or a Director of the Company, to execute and file such Annual Report on Form 10-K, hereby giving and granting to said attorneys full power and authority to do and perform all and every act and thing whatsoever requisite and necessary to be done in and about the premises as fully, to all intents and purposes, as the undersigned might or could do if personally present at the doing thereof, hereby ratifying and confirming all that said attorneys may or shall lawfully do, or cause to be done, by virtue hereof.

     IN WITNESS WHEREOF, I have hereunto set my hand this 27^th day of February 2007.

Signed:	/s/ Paul M. Tellier
Name:	Paul M. Tellier
Title:	Director

EX-31.1

Exhibit 31.1     Section 302 Certification signed by Richard B. Evans on 1 March 2007.

CERTIFICATION

I, Richard B. Evans, 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: 1 March 2007	/s/ Richard B. Evans
	Richard B. Evans
	President and Chief Executive Officer

1

EX-31.2

Exhibit 31.2     Section 302 Certification signed by Michael Hanley on 1 March 2007.

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: 1 March 2007	/s/ Michael Hanley
	Michael Hanley
	Executive Vice President and Chief Financial Officer

1

EX-32.1

Exhibit 32.1     Section 906 Certification signed by Richard B. Evans on 1 March 2007.

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 2006 (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: 1 March 2007	/s/ Richard B. Evans
	Richard B. Evans
	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.

1

EX-32.2

Exhibit 32.2     Section 906 Certification signed by Michael Hanley on 1 March 2007.

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 2006 (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: 1 March 2007	/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.

1

EX-99.1

Notice of Annual Meeting

of Shareholders

26 April 2007

Proxy Circular

Dear Shareholder:

You are cordially invited to attend the 105^th Annual Meeting of Shareholders of Alcan Inc., which will take place on Thursday, 26 April 2007, 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.

26 February 2007

(i)

Proxy Circular 2007 Alcan Inc.

	What’s Inside:
1	Notice of Annual Meeting of Shareholders of Alcan Inc.
2	Proxy Circular
2	Definitions
3	Questions & Answers on Voting and Proxies
6	Business to be Transacted at the Meeting
7	Nominees for Election as Directors
10	Corporate Governance Practices
18	Report of the Audit Committee
19	Auditors
20	Report on Executive Compensation
27	Performance Graphs
28	Executive Officers’ Compensation
37	Employment Agreements
37	Directors’ Compensation
39	Indebtedness of Directors, Executive Officers and Employees
40	Directors’ and Officers’ Liability Insurance
40	Additional Information
40	Approval of the Board of Directors
41	Schedule A: Resolution — Alcan Executive Share Option Plan
41	Schedule B: Summary — Alcan Executive Share Option Plan

La version française du présent document ainsi que le formulaire de procuration qui l’accompagne seront envoyés aux actionnaires sur demande. Veuillez communiquer avec la Compagnie Trust CIBC Mellon, en appelant au 1-800-387-0825 (sans frais) ou à frais virés au 416-643-5500.

(ii)

Proxy Circular 2007 Alcan Inc.

Notice of Annual Meeting of Shareholders of Alcan Inc.

The 105^th Annual Meeting of the holders of the Common Shares of Alcan Inc. will be held on Thursday, 26 April 2007 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 2006,
2.	electing Directors,
3.	appointing Auditors and authorizing the Directors to fix their remuneration, and
4.	approving certain amendments to the Alcan Executive Share Option Plan as described in the attached Proxy Circular.

Shareholders who cannot attend the Annual Meeting may submit their proxies in accordance with the procedures set out in the attached Proxy Circular.

By order of the Board of Directors,

/s/ Roy Millington

Roy Millington

Corporate Secretary

Montreal, Canada

26 February 2007

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Proxy Circular 2007 Alcan Inc.

Proxy Circular

(All information is current as of 26 February 2007, 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 26 April 2007 (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,

“GAAP” means US generally accepted accounting principles,

“Meeting” means the Annual Meeting of Shareholders to be held on 26 April 2007 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,

“Option Plan” means the Alcan Executive Share Option Plan described on page 29,

“Pechiney” means Pechiney, a Subsidiary of the Company following its acquisition in 2003, now known as Alcan France S.A.S.,

“SEC” means the US Securities and Exchange Commission,

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

“Shareholder” means a holder of the Shares,

“SOX” means the US 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 US Dollars.

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Proxy Circular 2007 Alcan Inc.

Questions & Answers on Voting and Proxies

If you are not a registered Shareholder, please also refer to page 5 “Voting by Non-Registered Shareholders” for a description of the procedure to be followed to vote your Shares.

Q:	WHO IS SOLICITING MY PROXY?
A:	This Circular is furnished in connection with the solicitation by Alcan of Shareholder proxies to be used at the Meeting to vote your Shares. The solicitation of proxies will be made primarily by mail, but may also be made by electronic means, by telephone or in person. The cost of soliciting proxies will be borne by Alcan. Georgeson Shareholder Communications Canada and Morrow & Co., Inc. have been retained by Alcan in Canada and the United States, respectively, to assist in the solicitation of proxies from Shareholders. For these services, Georgeson Shareholder Communications Canada and Morrow & Co., Inc. are expected to receive, from Alcan, fees of approximately Can. $25,000 and $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

      • the approval of amendments to the Option Plan.

Q:	HOW WILL THESE MATTERS BE DECIDED AT THE MEETING?
A:	A simple majority of the votes cast, by proxy or in person, will carry each of the matters specified in this Circular.
Q:	WHAT DOCUMENTS ARE AVAILABLE TO SHAREHOLDERS?
A:	The documents available to Shareholders are the annual report on Form 10-K for the fiscal year ended 31 December 2006, which includes the audited consolidated financial statements, management’s discussion and analysis thereof, the 2006 annual review 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.
Q:	WHO IS ENTITLED TO VOTE?
A:	On 26 February 2007, 367,434,802 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:	You can vote your Shares if you are a registered Shareholder by proxy or in person.
1.	By Proxy:

There are four ways that you can vote by proxy:

      • By mail
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. The form of proxy must be returned by mail in the envelope provided prior to the commencement of the Meeting or delivered to the chairman of the Meeting or any adjournment thereof.

      • By telephone
To vote your proxy by telephone (in Canada and the U.S. only), you must call 1-866-271-1207 (toll free throughout Canada and the U.S.). You will need the control number located on the enclosed form of proxy. You do not need to return your form of proxy.

      • By telecopier
You may complete and sign the enclosed form of proxy and forward same by telecopier to 1-866-781-3111 (toll free throughout Canada and the U.S.) or 416-368-2502.

      • Electronically
To forward your proxy electronically, you must go to this website address: www.eproxyvoting.com/alcan, enter your personalized e-voting control number located on your form of proxy and follow the instructions.

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,

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Proxy Circular 2007 Alcan Inc.

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.

2.	In person at the Meeting:
	You may vote in person at the Meeting. You must present yourself at the registration table with the Annual Meeting identification ticket attached to your form of proxy.

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 26 April 2007 and wish to vote your Shares in person at the Meeting, it is not necessary for you to complete or return the form of proxy. Your vote will be taken and counted at the Meeting. Please register with the transfer agent, CIBC Mellon, upon arrival at the Meeting.

Your participation in person in a vote by ballot at the Meeting would automatically revoke any proxy that you had previously given in respect of 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:	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 FOR the approval of amendments to the Option Plan.
Q:	IF I CHANGE MY MIND, CAN I TAKE BACK MY PROXY ONCE I HAVE GIVEN IT?
A:	Yes. A Shareholder who has voted by proxy may revoke it by voting again in any manner (telephone, mail, telecopier or electronically). In addition, a Shareholder may revoke a voted proxy by depositing 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 Trust Company, 320 Bay Street, Banking Hall, Toronto, Ontario, M5H 4A6, Canada or by telecopier at 416-368-2502, no later than 5:00 p.m. EDT on 25 April 2007, 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.

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Proxy Circular 2007 Alcan Inc.

Q:	WHO COUNTS THE VOTES?
A:	The Company’s transfer agent, CIBC Mellon, counts and tabulates the proxies. This is done independently of the Company and proxies are referred to the Company only in cases where a Shareholder intends to send a message to management or where necessary to comply with legal requirements.
Q:	HOW CAN I CONTACT THE TRANSFER AGENT?
A:	You can contact the transfer agent at:

CIBC Mellon Trust Company

             320 Bay Street, Banking Hall

             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 2008 ANNUAL MEETING?
A:	The final date for submitting shareholder proposals to Alcan is 28 November 2007.
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 SEC that they owned 7.2% of Alcan Shares on 31 December 2006.

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 usually is or acts on behalf of 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 procedures which should be carefully followed by non-registered Shareholders to ensure that their Shares are voted at the Meeting. These procedures generally allow voting by telephone, electronically, by mail or by telecopier.

      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 attend or 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 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.

5

Proxy Circular 2007 Alcan Inc.

Business to be Transacted at the Meeting

(See Notice of Annual Meeting of Shareholders of Alcan Inc.)

1.  Presentation of Financial Statements

The consolidated financial statements for the year ended 31 December 2006 and the Auditors’ Report for 2006 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 annual report on Form 10-K for the fiscal year ended 31 December 2006 that is being sent to Shareholders who have requested it together 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 to 9.

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, on the advice of its 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.  Approval of Amendments to the Option Plan

As an item of special business, the Shareholders will be asked at the Meeting to adopt a resolution as set out in Schedule A hereto, approving certain amendments to the Option Plan.

To be adopted, this resolution must be approved by a majority of the votes cast on the matter at the Meeting excluding the votes attached to Shares beneficially owned by insiders of the Company to whom options may be granted under the Option Plan and their associates. Consequently, the votes attached to an aggregate of 40,188 Shares held by such individuals will not be calculated for the purpose of approving the amendments to the Option Plan.

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Proxy Circular 2007 Alcan Inc.

Nominees for Election as Directors

Roland Berger	69, 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 5,000 Common Shares 11,357 Deferred Share Units
L. Denis Desautels, o.c., fca	63, 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. and of Bombardier Inc. and vice chair of the Accounting Standards Oversight Council of the Canadian Institute of Chartered Accountants. CGC, AC(C), NC 1,212 Common Shares 8,400 Deferred Share Units
Richard B. Evans	59, Director since 2005 Montreal, Quebec
	Mr. Evans has been President and Chief Executive Officer of Alcan since March 2006, having served earlier as Executive Vice President and Chief Operating Officer since October 2005. Mr. Evans joined Alcan in 1997 and has held several senior management positions including Executive Vice President, Office of the President. Prior to joining the Company, Mr. Evans held senior management positions with Kaiser Aluminum & Chemical Corporation. Mr. Evans is a director of Bowater Inc. and the International Aluminium Institute. 30,702 Common Shares 41,449 Executive Deferred Share Units 72,738 Restricted Share Units 640,046 Options to purchase Shares 57,020 Stock Price Appreciation Units
L. Yves Fortier †, c.c., o.q., q.c.	71, Director since 2002 Montreal, Quebec
	Mr. Fortier is the Chairman of the Board of Alcan and is chairman and a senior partner of the law firm Ogilvy Renault. From 1988 to 1992, he was Ambassador and Permanent Representative of Canada to the United Nations. Mr. Fortier is a director of NOVA Chemicals Corporation. From 1998 to 2006, he was governor of Hudson’s Bay Company. He was also a director of the Royal Bank of Canada from 1992 to 2005. From 2000 to 2006, he was a trustee of the International Accounting Standards Committee. CGC(C), EHSC 1,000 Common Shares 35,932 Deferred Share Units
Jeffrey E. Garten	60, Director since 2007 East Hampton, New York
	Mr. Garten is the Juan Trippe Professor at the Yale School of Management. He was previously dean of the School from 1995 to 2005. He is also chairman of Garten Rothkopf, a global consulting firm. Prior to Yale, he was undersecretary of commerce for international trade with the U.S. government and previously was a managing director with Lehman Brothers and with the Blackstone Group. Mr. Garten is a director of Aetna Corporation, CarMax, Inc., Credit Suisse Asset Management, The Conference Board, the Lee Kwan Yee School of Public Policy in Singapore and The International Rescue Committee. He is also on the international advisory boards of Toyota Motor Corporation and the Chicago Climate Exchange. CGC, AC
Jean-Paul Jacamon	59, Director since 2004 Mareil-Marly, France
	Mr. Jacamon is senior adviser of Cognetas, a private equity investment firm, and non-executive chairman of Cameron France Holding. 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 Tokheim. CGC, AC, HRC 136 Common Shares 6,012 Deferred Share Units

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Proxy Circular 2007 Alcan Inc.

Yves Mansion	56, Director since 2004 Paris, France
	Mr. Mansion is 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, EHSC 12,316 Deferred Share Units
Christine Morin- Postel	60, Director since 2003 Neuilly sur Seine, France
	Mrs. Morin-Postel was, until 2003, executive vice president in charge of human resources at Suez Group. She was previously chief executive officer of Société Générale de Belgique from 1998 to 2001. Mrs. Morin-Postel is a director of 3i Group plc and Royal Dutch Shell plc. CGC, HRC, NC(C) 13,712 Deferred Share Units
Heather Munroe-Blum, o.c.	56, Nominated in 2007 Montreal, Quebec
	Mrs. Munroe-Blum is currently principal and vice-chancellor of McGill University, a position she has held since 2003. From 1994 to 2002, she was governor, professor and vice-president of research and international relations at the University of Toronto. She is a director of the Four Seasons Hotels Inc. and the Yellow Pages Group. She is also an honourary member of the board of NeuroScience Canada and a director of Sir Mortimer B. Davis Jewish General Hospital, the Conference Board of Canada and the Association of Universities and Colleges of Canada. She is a member of the American Association of Universities and the Trilateral Commission.
H. Onno Ruding	67, Director since 2004 Brussels, Belgium
	Dr. Ruding was Minister of Finance of the Netherlands, 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 committee of Citigroup. CGC, EHSC 112 Common Shares 4,666 Deferred Share Units
Gerhard Schulmeyer	68, Director since 1996 Greenwich, Connecticut
	Mr. Schulmeyer was professor of practice at the MIT Sloan School of Management until 2006. 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) 2,542 Common Shares 13,276 Deferred Share Units
Paul M. Tellier, p.c., c.c., q.c.	67, 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. Mr. Tellier is chairman of the board of GCT Global Container Terminals Inc. He is also a director of McCain Foods, Bell Canada, BCE Inc., Canfor Corporation and the advisory board of General Motors of Canada. He is also a strategic advisor to Société Générale (Canada). CGC, AC, EHSC(C), NC 1,980 Common Shares 23,387 Deferred Share Units

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Proxy Circular 2007 Alcan Inc.

Milton K. Wong, c.m.	68, 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. He serves as a director on the boards of the Aga Khan Foundation Canada, Seaspan Corporation and the International Institute for Sustainable Development. 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, EHSC 40,000 Common Shares 14,966 Deferred Share Units
Committee Memberships CGC:  Corporate Governance Committee AC:    Audit Committee HRC:   Human Resources Committee EHSC: Environment, Health & 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.

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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 SEC. 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 ensure that it is managed in the interest of its Shareholders as a whole, while taking into account the interests of other stakeholders. It delegates to management the authority and responsibility for day-to-day affairs, and reviews management’s performance and effectiveness.

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 expenditures 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 businesses and 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 Board charter is reviewed annually and is posted on Alcan’s Internet site (www.alcan.com). The charter is also an exhibit to the Form 10-K for the fiscal year ended 31 December 2006 and is incorporated herein by such reference.

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. Other than this retirement provision, the Board has not established any term limit for its Directors. Term limits have the potential disadvantage of causing the pre-mature loss of the contribution of Directors who, over time, have developed insight into the Company and provide valuable contribution to the Board. In addition, term limits are unnecessary given that the Board has established a robust evaluation process as described below.

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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 implemented by a SEC rule. 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.

Except for Richard B. Evans, President and CEO of Alcan, all Directors are Independent Directors. In particular, the Board has determined that Mrs. Morin-Postel and Messrs. Berger, Desautels, Fortier, Garten, Jacamon, Mansion, Morgan, Ruding, Saint-Pierre, Schulmeyer, Tellier and Wong are Independent Directors. To assist the Board with its determination, all Directors annually complete a detailed questionnaire about their business relationships.

In accordance with the Board charter and normal Company practices, Mr. Saint-Pierre is not a nominee, having reached retirement age. Mr. Morgan will not be standing for re-election for personal reasons.

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. Mr. Fortier neither facilitates nor is 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.

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.

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Majority Voting in Director Election

The Board of Directors has adopted a policy providing that, in an uncontested election of Directors, any nominee from whom a greater number of Shares are withheld from voting than are voted in favour of the nominee, will be expected to submit his or her resignation to the Chairman of the Board promptly. The Board, acting through the Corporate Governance Committee, will consider all relevant circumstances surrounding the nominee’s failure to obtain a majority vote and will, in the absence of compelling circumstances, accept the resignation. It is expected that the acceptance of a resignation would take place within 90 days of its submission. A Director who tenders a resignation pursuant to this policy will not participate in any meeting of the Board of Directors or the Corporate Governance Committee at which the resignation is considered.

Committees

The Board has established four main 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 & 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 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 matters under the categories of Board composition, responsibility, meetings and committees.

The Corporate Secretary will prepare a report of the results which will be discussed with the Committee. As part of this survey, each Director also completes a self-evaluation and an evaluation of other individual members of the Board. On a biannual basis, this exercise is conducted by an outside consultant to ensure candour. The results of these evaluations are compiled by the outside consultant and are received by the Chairman. The Chairman will discuss the peer review process with each Director and will summarize the process to the Committee. 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, 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. A skills matrix was established to set out the various competencies and areas of expertise determined to be optimal for Board members to possess.

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The various skills considered include the following:

• former/active CEO;

• geographic working experience;

• financial acumen;

• investment banking background;

• manufacturing or industry background;

• public policy/academic/government affairs background;

• technology background;

• human resources/compensation background;

• large project experience; and

• strategy and corporate development background.

The skills matrix is updated as required, reviewed by the Committee and is used to assist with the Board recruitment process. 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. Garten was recommended for election to the Board by the Committee following a search conducted by an executive search firm.

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 practices, as well as overseeing financial and accounting controls and reviewing and approving financial statements and proposals for the issuance of securities. The Committee also 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.

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 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 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, namely 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 as defined by securities rules.

Mr. Desautels serves on the audit committees of four public companies, including Alcan’s Audit Committee. The Board has determined that his simultaneous service on other audit committees does not impair his ability to effectively serve on the Company’s Audit Committee, because he has the required time available to serve on all the audit committees in question. The Company believes that Mr. Desautels’ 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

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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 and Policies on page 16 and Report of the Audit Committee on page 18.

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 its 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.

The Committee approves the Company’s general compensation strategy 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 20).

The Committee’s mandate also includes recommending the level of Directors’ compensation to the Board. See page 37 for a description of Directors’ compensation.

The Committee engages its own 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 $460,000 in fees related to work on executive compensation matters for the Committee in 2006. The individuals who provide services to the Committee are excluded from providing services to the Company and their pay does not depend on Towers Perrin’s work for Alcan. In 2006, Towers Perrin billed $955,000 for general human resources services for the Company.

Environment, Health & Safety Committee

This Committee has the responsibility to review the policy, management practices and performance of Alcan in environmental, health and safety matters and make recommendations to the Board on such matters in light of current and changing requirements. The Committee also reviews, assesses and provides advice to the Board on worldwide policy 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 2006:

Board(1)	11
Corporate Governance Committee	5
Audit Committee(2)	9
Human Resources Committee	6
Environment, Health and Safety Committee	2
Nominating Committee	5
(1) Includes 3 telephone conference Board meetings.
(2) Includes 5 telephone conference Audit Committee meetings.

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Attendance of current Directors in 2006:

Director	Board Meetings		Committee Meetings
Roland Berger	11 of 11	100%	5 of 5 (CGC)	100%
			5 of 6 (HRC)	83%
			2 of 2 (EHSC)	100%
L. Denis Desautels	11 of 11	100%	5 of 5 (CGC)	100%
			9 of 9 (AC)	100%
			5 of 5 (NC)	100%
Richard B. Evans	11 of 11	100%	(1)
L. Yves Fortier	11 of 11	100%	5 of 5 (CGC)	100%
			2 of 2 (EHSC)	100%
Jean-Paul Jacamon	11 of 11	100%	5 of 5 (CGC)	100%
			3 of 4 (AC) (2)	75%
			6 of 6 (HRC)	100%
			1 of 1 (EHSC) (3)	100%
Yves Mansion	11 of 11	100%	5 of 5 (CGC)	100%
			8 of 9 (AC)	89%
			1 of 1 (EHSC) (4)	100%
Gwyn Morgan	10 of 11	91%	4 of 4 (CGC) (4)	100%
			2 of 5 (HRC) (4)	40%	*
Christine Morin-Postel	11 of 11	100%	5 of 5 (CGC)	100%
			5 of 6 (HRC)	83%
			5 of 5 (NC)	100%
H. Onno Ruding	10 of 11	91%	5 of 5 (CGC)	100%
			4 of 5 (AC) (3)	83%
			1 of 1 (EHSC) (2)	100%
Guy Saint-Pierre	11 of 11	100%	5 of 5 (CGC)	100%
			6 of 6 (AC) (4)	100%
			6 of 6 (HRC)	100%
Gerhard Schulmeyer	11 of 11	100%	5 of 5 (CGC)	100%
			6 of 6 (HRC)	100%
Paul M. Tellier	11 of 11	100%	5 of 5 (CGC)	100%
			8 of 9 (AC)	89%
			2 of 2 (EHSC)	100%
Milton K. Wong	11 of 11	100%	5 of 5 (CGC)	100%
			8 of 9 (AC)	89%
			2 of 2 (EHSC)	100%

Committees Memberships:
CGC:	Corporate Governance Committee
AC:	Audit Committee
HRC:	HRC: Human Resources Committee
EHSC:	Environment, Health & Safety Committee
NC:	Nominating Committee

*	Upon joining the Board in January 2006, Mr. Morgan had indicated that in 2006 there would be a significant amount of overlap with existing commitments.
(1)	Mr. Evans attends Committee meetings at the request of the Committees.
(2)	member from 30 July 2006
(3)	member until 30 July 2006
(4)	member from 27 April 2006

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 at meetings dedicated for such purposes. At Board meetings, financial plans and forecasts, 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 all 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 2006 annual meeting of Shareholders.

Information to the Board

Alcan’s Corporate Secretary maintains a Directors’ Manual which provides a comprehensive review of the duties and responsibilities of the Directors, the role of the Board and each of its committees. The Directors’ Manual 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

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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, businesses and operations.

Care is taken to ensure that new Directors understand the roles and responsibilities of the Board and its Committees, as well as the commitment level that Alcan expects of its Directors. Directors are expected to prepare thoroughly in advance of each meeting in order to actively participate in deliberations and decisions. Meetings are held involving the Board and management, enabling the Directors to 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. Recently, through these organized visits, Directors have visited the following Company’s operations: Alouette, Quebec (smelter), Vaudreuil, Quebec (alumina plant), Neuf-Brisach, France (specialty sheet), Issoire, France (aerospace sheet) and Dijon, France (food packaging). Individual visits by Directors of other sites are also organized.

Code of Conduct and Policies

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. To date, the Board has granted no waivers from the Code. If the personal or business relationships or interests of Directors could conflict with those of the Company, Directors would be required to disclose the nature and extent of the conflict of interest. In the event of a conflict of interest, a Director would leave the relevant portion of the meeting and would not participate in the decision. Aside from human resources matters involving Mr. Evans (a Director who is also an employee), there have been no such matters in 2006.

In addition to the Code, the Company has adopted several corporate policies including policies on competition law, combating corrupt practices, disclosure, insider trading, record management, engagement of consultants and environment, health and safety.

The Company has “whistleblower” procedures so that an employee can confidentially or 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 SEC rules implementing 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.

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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 composed of management has the responsibility for the accuracy and timeliness of the disclosure of material information.

The Company’s annual report on Form 10-K for the fiscal year ended 31 December 2006 will contain an assessment of the effectiveness of Alcan’s internal control over financial reporting by management, as required by sec. 404 SOX which was implemented by a SEC rule. 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 grants 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. Presentations at investor conferences are promptly made available on the Internet site. These services facilitate the reception 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 CEO position description, the Worldwide Code of Employee and Business Conduct, the Code of Ethics for Senior Officers, the Guidelines on Independence and the Majority Director election policy as well as contact details are posted on Alcan’s Internet site (www.alcan.com).

The Corporate Governance Committee

L. Yves Fortier, Chairman of the Committee

Roland Berger

L. Denis Desautels

Jean-Paul Jacamon

Yves Mansion

Gwyn Morgan

Christine Morin-Postel

H. Onno Ruding

Guy Saint-Pierre

Gerhard Schulmeyer

Paul M. Tellier

Milton K. Wong

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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 13 and are set out in its charter posted on Alcan’s Internet site.

Management has primary responsibility for the preparation of the Company’s financial statements and the development and maintenance of adequate systems of internal accounting and financial controls. The Auditors have responsibility to review and audit, when appropriate, those financial statements and internal controls. Based upon the audit conducted in accordance with generally accepted auditing standards, the Auditors are responsible for expressing an opinion on the financial statements and internal controls. The Audit Committee monitors and oversees all of these processes.

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 related management discussion and analysis, the Committee reviews them and makes recommendation to the Board for their approval and inclusion in the Company’s annual report on Form 10-K. In the case of the unaudited interim financial statements and related 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 19) and has considered whether the fees paid for such other services are compatible with maintaining the Auditors’ independence.

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

Jean-Paul Jacamon

Yves Mansion

Guy Saint-Pierre

Paul M. Tellier

Milton K. Wong

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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 2005 and 2006 are:

	2005	2006
	($‘000)	($‘000)
Audit Fees	22,385	18,897
Audit-Related Fees	969	762
Tax Fees	238	360
All Other Fees	99	0
Total	23,692	20,119

“Audit fees” include professional services for the audit of consolidated financial statements and local statutory audit work. Included in the audit fees for 2006 are fees incurred in connection with audit work related to Alcan and the assessment of internal controls over financial reporting in accordance with sec. 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.

The Audit Committee has considered whether the provision of those services other than audit services is compatible with maintaining the Auditors’ independence and has concluded that they are. The Audit Committee approved a procedure that prohibits the Company from engaging the Auditors for certain non-audit services specified by SOX.

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 Audit Committee determines their independence and makes recommendations for the appointment of auditors. The services related to the annual audit of the Company’s consolidated financial statements is approved by the Audit Committee on an annual basis. The chairman of the Audit Committee reviews the terms of engagement of the Auditors and signs the audit engagement letter.

All permitted Auditors’ services are pre-approved according to procedures established by the Audit Committee through established procedures; these are limited to audit services, audit-related services, certain 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 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 Audit 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 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 2006 quarterly financial statements and have discussed these and the quarterly earnings press releases with management and members of the Audit Committee prior to their issuance.

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Proxy Circular 2007 Alcan Inc.

Report on Executive Compensation

General

The Human Resources Committee of the Board (“Committee”) is responsible for approving the compensation policy for the Company’s executives. The executive compensation strategy recognizes the importance and contribution of highly effective leaders in improving the performance of the Company and to maximize value for Shareholders.

The Committee has established specific objectives to:

•  attract, retain and motivate highly qualified individuals;

•  align the interests 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 its compensation policies. The Committee is assisted by a consultant employed by Towers Perrin (see page 14 for more detail), in its study of other global companies based in North America, Europe and Asia.

In 2006, the Company undertook a strategic compensation review overseen by the Committee. The objective of this review was to better reflect Alcan’s business strategy with competitive compensation practices and to achieve a more uniform and global approach in regard to compensation. The review was considered advisable as the Company had undergone significant changes in the past few years since the last major compensation review. The strategic compensation review resulted in changes to several aspects of total direct compensation. Certain of the changes were implemented in 2006 as described below.

The total direct compensation policy, which covers base salary, annual incentives (bonus) and long-term incentives, is aligned with prevalent competitive median compensation practices. Compensation data is obtained from two different compensation surveys: (1) a peer group of 25 companies constituting a broad range of relevant material and resource companies, the composition of which was revised following the strategic compensation review; and (2) a group composed of 124 large multinational companies with revenues of $10 billion or more.

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 executive compensation and incentive programs, which applied in 2006, are outlined below.

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 group referred to above.

In order to ensure greater equity among certain senior Executive Officers, their compensation is set against US competitive compensation practices, irrespective of the countries in which they work. Executive Officers may elect to receive their annual compensation in local currency according to the annual average exchange rate of the previous year.

Relative Weighting of Each Compensation Element

The relative weighting of each element of compensation (base salary, short-term 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

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Proxy Circular 2007 Alcan Inc.

compensation, averaged in relation to the title indicated.

Title	Base Salary	Short- Term Incentive		Long- Term Incentive
CEO	14%		17%		69%
Executive Vice Presidents	21%		18%		61%
Senior Vice Presidents	24%		18%		58%
Vice Presidents	39%		21%		40%

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 group. 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 approved by the Committee. For each Executive Officer’s position, a target award is set (expressed as a percentage of the mid-point of base salary) reflecting both the responsibilities of the position and competitive compensation levels. For 2006, the EPA had two components, each based on a different aspect of performance:

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 and/or the relevant business group as measured against the quantifiable financial metric EVA. Actual amounts paid under this component are subject to certain adjustments for factors such as accounting changes, strategic 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. The achievement of the objectives is validated by the Committee for the Company and the business groups. In 2006, the five objectives using both leading and lagging indicators of performance were: i) recordable case rates; ii) serious injuries rates; iii) environmental impact intensity; iv) EHS risk initiatives; and v) strategic initiatives for the business groups. Each of these objectives has a target of 2% of the EHS compensation component of the EPA.

Both components of the EPA for Executive Officers who are part of corporate head office are contingent upon performance versus the pre-established targets for the Company. In the case of Executive Officers who are responsible for a business group, both components of the EPA are contingent on meeting the pre-established targets of their respective business group in respect of 70% of the total EPA with the remainder based on the performance of the Company.

The EPA targets for both components are developed on a bottom-up basis with each business group aggregating results from all of their business units to obtain an overall target for its business group. The corporate function’s target is an aggregate of each of the business group’s targets and the corporate budget.

The overall EPA award paid is the sum of the weighted results of each component (i.e., EVA and EHS) modified where appropriate to reflect particular circumstances by rating for individual performance and contribution to the Company.

The award paid may vary from zero when the results achieved are at or 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 2006, the Committee approved EPA awards for Executive Officers that were generally above the target amounts reflecting performance that was generally above target.

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Proxy Circular 2007 Alcan Inc.

The following table sets out for each component of the EPA the respective ratings and the payout.

EVA and EHS Ratings for EPA results
		Bauxite and Alumina	Primary Metal	Engineered Products	Packaging	Total Alcan
	EVA Rating	78%	129%	200%	130%	118%
	90% of EVA Rating	70%	116%	180%	117%	106%
	EHS Rating	38%	150%	122%	151%	147%
	10% of EHS Rating	4%	15%	12%	15%	15%
	Payout	74%	131%	192%	132%	121%

The following table sets out the EPA ratings for the Named Executive Officers in 2006, expressed as a percentage of their EPA targets.

Name(1)		EVA (90%)	EHS (10%)
	Richard B. Evans	113%(2)	147%
	Michael Hanley	113%(2)	147%
	Michel Jacques(3)	171%	131%
	Christel Bories(4)	129%	148%
	David L. McAusland	118%	147%

(1)	T. Engen was paid a prorated target EPA.
(2)	CEO and Chief Financial Officer excluded from certain adjustments.
(3)	Prior to 1 December, M. Jacques held a similar position in the Engineered Products Group.
(4)	Prior to 1 December, C. Bories held a similar position in the Packaging Group.

As a bridging measure until an updated EPA Plan takes effect for 2007 (see below), the Committee approved the Supplemental Short Term Incentive Plan (“SSTIP”) which had the objective of motivating the achievement of specific individual objectives to support the improvement of Shareholder value. The Executive Officers except the CEO were eligible to participate in the SSTIP. The target payout under the SSTIP is 10% of the mid-point of each Executive Officer’s base salary range: i) 5% based on the Executive Officer’s contribution to the reduction of Alcan’s selling, general and administrative expenses, and ii) 5% based on the achievement of two individual performance objectives. The SSTIP covered a total of 84 senior employees with an aggregate cash award of $2.6 million. Payouts under the SSTIP averaged 117% of the target amounts. The amounts of the SSTIP awards for the Named Executive Officers in 2006 are set out in the Summary Compensation Table (see page 28).

Long-Term Incentive Plan

Long-term incentive compensation for the most senior executives is provided through (1) the Alcan Total Shareholder Return (“TSR”) Plan and (2) the Alcan Restricted Share Unit Plan (“RSU Plan”). In 2006, 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 them for maximizing value over time through relative Share price increases.

The TSR Plan is a US 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”) Industrials 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 on the ranking of the Company against the other companies in the S&P Industrials Index at the end of the Performance Period. If the Company’s Total Shareholder Return performance ranks below the 30th percentile rank of that of the companies in the index, the employee will not receive any award for that Performance Period. At the 30th percentile rank, the employee will be paid an award equal to 60% of the target for that Performance Period. 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

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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.

Effective 20 September 2006, further to the strategic compensation review, the TSR Plan was amended. The amendments apply to all awards issued on or after that date. Including the 2006 grant referred to below, the comparator group of companies was changed from the S&P Industrials Index to the S&P Materials Index to better reflect the Company’s performance among comparable companies. Furthermore, the maximum payout amount has been modified. At or above the 75th percentile rank, the employee will earn a maximum award of 250% (rather than 300%) of the target. The actual amount of award (if any) will continue to be prorated between the percentile rankings.

In addition, the TSR Plan was amended to allow eligible employees with the option to receive an additional 20% of their payout if they elect to exchange the TSR payout into a long-term Company equity-related investment.

Fiscal residents in Canada will be entitled to exchange their TSR Plan payout into Deferred Share Units in accordance with the Executive Deferred Share Unit Plan (see below) and to receive an additional 20% Deferred Share Units of the TSR payout exchanged. The 20% Company match is to encourage the employees to commit to a long-term investment in the Company.

In 2006, an aggregate TSR Plan target award of $15,715,019 was granted to 102 key employees around the world. The actual amount of cash awards, if any, in relation to this target will be paid in 2009. The amount of the award is expensed in the Company’s income statement throughout the Performance Period.

For more details on TSR Plan grants, see page 33.

In 2006, an aggregate cash award of $4,304,275 was paid out to 60 key employees for the Performance Period that commenced 1 October 2003 and terminated on 30 September 2006. This cash award was the subject of an adjustment for the Company’s performance before and after the spin-off of Novelis Inc. on 6 January 2005 The total cash payout was 42% of the target award.

2. The practice of granting options under the Alcan Executive Share Option Plan (“Options”) (see page 29) and Stock Price Appreciation Units under the Stock Price Appreciation Unit Plan (“SPAUs”) (see page 32) in connection with long-term incentive plan has been suspended in favour of granting Restricted Share Units in accordance with the RSU Plan (“RSUs”). The RSU Plan was introduced in September 2006 following the strategic compensation review.

The purpose of the RSU Plan is to encourage the long-term financial success of the Company by promoting alignment of interests between participating executives and Shareholders. The Company suspended the granting of Options/ SPAUs and introduced the RSU Plan to align itself with evolving practices.

The RSU Plan provides for the granting of RSUs to eligible participants. RSUs are notional share equivalents with the underlying value of the Company’s Shares. The RSUs will have a vesting period of no longer than three years (“Vesting Period”). The participants will also be credited additional RSUs corresponding to dividends on Shares.

The RSUs are redeemed in cash at the end of the Vesting Period based on the Fair Market Value (defined as the average of the closing prices of the Common Shares on the New York Stock Exchange over the previous 21 trading days) on that date multiplied by the number of RSUs held by the participant.

On 20 September 2006, RSUs were awarded with a three-year Vesting Period. The participants will be awarded an additional 20% of the RSU value in the form of a Company incentive if a participant elects to exchange the RSUs into a long-term Company equity-related investment.

Fiscal residents in Canada will be entitled to exchange their RSUs into Deferred Share Units in accordance with the Executive Deferred

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Proxy Circular 2007 Alcan Inc.

Share Unit Plan (see below) and to receive an additional 20% Deferred Share Units of the RSUs exchanged. The 20% Company match is to encourage these executives to commit to a long-term Company equity-related investment.

On 6 December 2006, the Committee approved a subplan to the RSU Plan to be applicable to fiscal residents in France (“French RSU Plan”) and granted them RSUs with a two-year vesting period (“French Vesting period”). The adoption of the French RSU Plan was necessary to accommodate the French fiscal regime. At the end of the French Vesting Period, the French participants will receive the same number of Shares in exchange of their RSUs. Any dividend declared during the French Vesting Period will be paid in cash. The French participants will not be entitled to dispose of the Shares for two years from the end of the French Vesting Period. Prior to the end of the French Vesting Period, a French participant may elect to hold the Shares until termination of employment (retirement, resignation or death). If such election is made, the French participant will be entitled to receive an additional 20% of RSUs that will also be subject to another two-year French Vesting Period and two-year holding period.

In 2006, a total of 1,098,900 RSUs were granted to 793 key employees around the world. The actual amount of the award will be paid in 2009, or 2008 in the form of Shares in the case of the French RSU Plan. The amount of the award is expensed in the Company’s income statement over the vesting periods.

Executive Deferred Share Unit Plan

Under the terms of the Executive Deferred Share Unit Plan (“EDSU Plan”), executives with fiscal residence 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 executives may also elect to receive EDSUs for their TSR Plan award for the Performance Period then ending and for their RSU award for the Vesting Period then ending, instead of a cash payment in each case. As described above, following the compensation review, eligible executives who make this election would also receive from the Company an additional 20% of EDSUs for their TSR Plan payout and RSUs exchanged to encourage these executives to commit to a long-term investment in the Company. The ability to elect to receive EDSUs for the TSR Plan award and the 20% Company match is subject to a pending ruling from Canadian taxation authorities.

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. The number of EDSUs for the RSU Plan will equal the number of RSUs at the end of the Vesting Period. 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.

Executive Share Ownership Guidelines

As a result of the strategic compensation review, the Committee approved Share ownership requirements for Executive Officers to align their interests with those of Shareholders by having a portion of the Executive Officer’s wealth tied with the performance of the Company. The requirements are in proportion to the Executive Officer’s compensation and position and must, in each case, be attained by the Executive Officers by the later of 31 December 2009 or the third anniversary of their becoming Executive Officers, through holdings of the Company’s Shares, RSUs, EDSUs and units in savings plans.

The following tables set out the minimum ownership requirements and the holdings of the Named Executive Officers as at 31 December 2006

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Proxy Circular 2007 Alcan Inc.

using the closing of the Company’s Share on the last trading day prior to year-end ($48.74).

Title	Minimum Ownership
	Requirement
CEO		5 times salary
Executive and Senior Vice Presidents		3 times salary
Vice Presidents		1 time salary

	Minimum		Ownership		Current
	Ownership		Value at		Ownership
	Requirement to		31		Multiple
	be attained by		December		of
Name	31 December		2006		Salary
	2009		$
	$
Richard B. Evans		5 times		7,073,058		6.4
Michael Hanley		3 times		1,597,764		2.7
Michel Jacques		3 times		1,425,102		2.5
Christel Bories		3 times		1,338,400		2.3
David L. McAusland		3 times		1,564,106		3.1

Changes for 2007

For 2007, as a result of the strategic compensation review, the Committee approved a change to the determination of the two components of the EPA Plan. The EPA Plan will be divided as follows: i) 70% of the incentive compensation based on EVA which is further divided into 70% for the individuals own reporting unit and 30% for the next highest reporting unit, and ii) 30% which represents individual and/or team targets with a component relating to EHS objectives.

Compensation of the chief executive officer

The CEO’s annual compensation is administered by the Board, based on the review of the CEO’s performance by the Committee and on its recommendations according to the policies described above.

Mr. Engen, the former CEO, retired from Alcan on 11 March 2006. From 1 January 2006 to 11 March 2006, he was paid a base salary of $295,455 (prorated on the basis of his annual salary of $1,500,000) and a prorated target EPA award in the amount of $479,452. The terms of Mr. Engen’s employment agreement provide that all Options granted and TSR awards will vest over their entire terms.

Mr. Evans became CEO on 12 March 2006 and entered into a new employment agreement with Alcan.

The Board of Directors initially set Mr. Evans’ compensation on a competitive level with other US chief executive officers of global companies of similar size and also provided Mr. Evans with a comparable level of compensation to the compensation offered by comparable US companies. Decisions pertaining to the CEO’s compensation are based on the Board evaluation of the CEO’s performance relating to financial and strategic objectives which are consistent with the performance metrics of the EPA (see page 21).

The CEO’s total direct compensation (base salary, target annual incentives and target long-term incentives) was set by the Committee between the 25th and the 50th percentiles of the US market to reflect his recent appointment as CEO.

In 2006, Mr. Evans’ annual base salary was $1,100,000 upon his appointment. An annual EPA award based on an established target and on performance objectives was paid. For 2006, the target was 125% of the base salary. The Board effected a positive EPA adjustment of $100,000 reflecting Mr. Evans individual performance. The total EPA amount paid for 2006 was $1,611,542.

As part of his long-term incentive, Mr. Evans received a target compensation value of five times the amount of his annual base salary of which one-half will be in RSUs under the RSU Plan and the other half under the TSR Plan. He received 72,100 RSUs which is based on a compensation value of $2,750,000. The RSUs will be payable at the end of the three-year Vesting Period (19 September 2009) under the terms and conditions of the RSU Plan (see page 23). He also received a TSR target cash award of $2,750,000 payable at the end of the three-year Performance Period (30 September 2009) under the terms and conditions of the TSR Plan (see page 33).

To reflect the time between his appointment as CEO and the Company’s annual award of long-term incentive compensation, Mr. Evans has been granted an Option to purchase 167,250 Common Shares representing 50% of the target long-term incentive compensation value. This performance-based “C” Option was granted on 13 March 2006 at an exercise price of Can. $49.59 per Share with a compensation value of $2,750,000, based on a Lattice model evaluation (see page 29). The Lattice or binomial model is essentially a mathematical decision tree which divides the life of the long-term incentive into time periods, where the share price is modeled to move either up or down according to a probability derived from the input factors.

Mr. Evans received a TSR cash payout of $405,087 for the three-year period that commenced 1 October 2003 and terminated on 30 September 2006.

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Proxy Circular 2007 Alcan Inc.

The employment agreement provides that Mr. Evans could elect to receive his additional pension entitlement as CEO, either in the form of a pension or as an amount payable in the form of stock units. Mr. Evans elected to receive the entitlement in the form of a pension in the Alcan Pension Plan for Officers. Mr. Evans will continue to participate in the Alcan Pension Plan for Officers and his pension entitlement will be calculated to reflect his pensionable earnings (see page 35).

The portion of Mr. Evans’ 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. Evans is eligible for a termination payment in the event his employment is terminated by the Company without cause prior to the age of 63, in which case Mr. Evans will receive an amount equal to twice the sum of his base salary and target bonus on the termination date. In the event of termination after the age of 63, Mr. Evans will be entitled to a severance amount reduced on a proportionate basis for each month to age 65.

In case of termination of employment prior to age 65, Mr. Evans’ pension entitlement will be calculated on the basis of termination on the earlier of two years following the actual date of termination and the date he reaches the age of 65. Mr. Evans would also be entitled to the acceleration of vesting of all Options.

In addition, Mr. Evans and the Company entered into a change of control agreement which would be 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. Evans would be entitled to an amount equal to 36 times the sum of his (a) monthly base salary on the date of termination and (b) monthly EPA guideline amount in effect at the date of termination. He would also be entitled to an amount determined under the RSU Plan and 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. Evans in 2006 as established by the Committee.

Compensation	2006			2005	2004
Base salary		1,037,262		781,200	781,200
EPA		1,611,542		950,000	932,257
Other annual compensation(1)		1,088,847		368,346	656,598
Grant of Options(2)		2,750,000	(3)	1,571,500	1,588,500
Grant of RSUs		2,750,000	(4)	—	—
Grant of TSR Plan target cash amount(5)		2,750,000		1,571,500	1,588,500
Current service cost(6)	364,000			216,000	195,000
Total		12,351,651		5,458,546	5,742,055

(1)	Detailed information on these amounts is presented in the “Summary Compensation Table” on page 28.
(2)	Target long-term incentive value of the Options. Actual gains, if any, on exercise will depend on the value of the Shares on the date of exercise.
(3)	One time grant for the time between the date of appointment as CEO and normal annual long-term incentive compensation date.
(4)	Target long-term incentive value of the RSUs. Actual payment will depend on the Fair Market Value of the RSUs as calculated in accordance with the RSU Plan (see page 23 for a description of the RSU Plan).
(5)	Not in the form of a payment — the target amount under the TSR Plan for the Performance Period (see page 22 for a description of the TSR Plan). Actual payment, if any, will depend on the total shareholder return as calculated in accordance with the TSR Plan. In 2006, Mr. Evans received a TSR Plan cash award of $405,087 for a TSR Plan target granted in September 2003 for the three-year period which commenced on 1 October 2003 and terminated on 30 September 2006 (see above).
(6)	Annual pension service cost is the value of the projected pension benefit attributable by the pension benefit formula to services rendered in the specific year.

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

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Proxy Circular 2007 Alcan Inc.

Performance Graphs

The following graphs compare the cumulative total Shareholder return on Can. $100 and US $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 Industrials Index and the Standard & Poor’s Diversified Metals & Mining Index. The Company intends to replace the Standard & Poor’s Diversified Metals & Mining Index with the Standard & Poor’s Materials Index, because while the former is an index of companies that are in the metals and mining industry, the latter comprises companies whose businesses are more closely comparable to those of the Company. In accordance with statutory requirements, both of these indices are included this year. The Company believes the comparisons with the additional indices are appropriate.

Canadian dollar table

US dollar table

	31 December	2001		2002		2003		2004		2005		2006
		Can. $	US $	Can. $	US $	Can. $	US $	Can. $	US $	Can. $	US $	Can. $	US $
Alcan Inc.		100	100	83	83	110	136	108	144	100	137	121	166
S&P/ TSX Composite Index		100	100	88	88	111	136	127	168	158	216	185	253
S&P Industrials Index		100	100	76	76	79	98	81	108	82	112	94	129
S&P Diversified Metals & Mining Index		100	100	94	85	106	152	111	154	113	184	134	233
S&P Materials Index		100	100	84	95	124	131	117	148	135	155	171	183

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Proxy Circular 2007 Alcan Inc.

Executive Officers’ Compensation

The following table sets out the compensation for the CEO, the former CEO, the Chief Financial Officer and the three other most highly compensated Executive Officers (collectively, the “Named Executive Officers”) for the year ended 31 December 2006 and for each of the two preceding years.

Summary Compensation Table

											Long-Term Compensation
			Annual Compensation								Awards						Payouts
											Shares Under
											Options or
											Appreciation			Shares or			Long-Term
Name and								Other Annual			Units			Restricted			incentive Plan			All Other
Principal Position	Year		Salary		Bonus			Compensation			Granted			Share Units			Payouts			Compensation
					(1)(2)			(3)			(4)(5)			(6)(7)			(8)			(3)
			($)		($)			($)			(#)			($)			($)			($)
Richard B. Evans		2006		1,037,262		1,611,542	(9)		1,088,847	(10)		167,250	(11)		2,845,066	(12)		405,087	(13)		41,529
President and Chief		2005		781,200		950,000			368,346			141,500	(11)		0			2,200,673			35,396
Executive Officer												5,702	(14)
		2004		781,200		932,257			656,598			110,700	(11)		0			0			32,966
Travis Engen (15)		2006		295,455		479,452	(9)		16,927			0			—			1,815,690			118,363
Former President and		2005		1,500,000		3,500,000			(942,664	) (16)		450,100	(11)		0			5,642,750			80,775
Chief Executive Officer		2004		1,350,000		2,031,750			402,073			348,000	(11)		0			0			96,031
Michael Hanley		2006		600,000		719,586	(17)		33,230			0			1,152,232	(12)		159,989			16,729
Executive Vice President		2005		550,358		625,000			31,524			84,600	(11)		0			800,819			13,672
and Chief Financial		2004		404,300		410,202			29,045			33,600	(11)		0			0			10,368
Officer
Michel Jacques (18)		2006		495,250		805,166	(17)		120,248	(19)		0			775,389	(12)		152,351			11,009
Senior Vice President and															358,416	(20)
President and Chief		2005		427,700		731,756			135,710			55,700	(21)		0			181,350			0
Executive Officer,		2004		407,700		689,257			176,399			39,300	(21)		0			0			56
Primary Metal Group
Christel Bories (22)		2006		552,083		584,914	(17)		32,698			0			1,336,593	(23)		0			0
Senior Vice President and		2005		520,000		477,071			6,845			69,200	(11)		0			0			0
President and Chief		2004		490,000		625,165			13,542			48,000	(11)		0			0			0
Executive Officer,
Engineered Products Group
David L. McAusland		2006		506,000		653,344	(17)		31,609			0			775,389	(12)		668,086	(24)		18,383
Executive Vice President		2005		440,600		590,000			29,169			69,200	(11)		0			840,770			14,756
Corporate Development and		2004		440,600		721,384			27,255			48,000	(11)		0			0			13,040
Chief Legal Officer

(1)	See page 21 for description of the Executive Performance Award Plan.
(2)	See page 22 for description of the Supplemental Short Term Incentive Plan.
(3)	See Other Compensation on page 29.
(4)	See page 29 for description of the Alcan Executive Share Option Plan.
(5)	See page 32 for description of the Alcan Stock Price Appreciation Unit Plan.
(6)	See page 24 for description of the Executive Deferred Share Unit Plan.
(7)	See page 23 for description of the Restricted Share Unit Plan.
(8)	See pages 22 and 33 for description of the Total Shareholder Return Performance Plan.
(9)	See Compensation of the Chief Executive Officer on page 25.

(10)	Tax equalization payment of $1,043,739 is made to adjust Mr. Evans’ net income after taxes so that it would not be less than it would have been in the U.S.
(11)	Granted as C Options (see page 29 for description).
(12)	Granted as Restricted Share Units on 20 September 2006 with a Vesting Period of three years, based on a Share price of $39.46 on the grant date: R. B. Evans, 72,100 RSUs; M. Hanley, 29,200 RSUs; M. Jacques, 19,650 RSUs; D. L. McAusland, 19,650 RSUs.
(13)	Mr. Evans elected to receive 50% of this TSR payout under the EDSU Plan; he received 5,127 EDSUs.
(14)	Grant of D Options became effective (see page 29 for description).
(15)	Mr. Engen retired from Alcan on 11 March 2006.
(16)	A $961,075 adjustment for Mr. Engen’s tax equalization (which is a tax adjustment so that net income after taxes is not less than it would have been in the US) for 2004.
(17)	EPA payments: M. Hanley, $628,839; M. Jacques, $736,761; C. Bories, $510,290; D. L. McAusland, $579,445. SSTIP payments: M. Hanley, $90,747; M. Jacques, $68,405; C. Bories, $74,624; D. L. McAusland, $73,899.
(18)	Mr. Jacques was Senior Vice President and President and Chief Executive Officer, Engineered Products Group until 30 November 2006.
(19)	Includes payments of $65,229 for housing assistance and of $33,390 for expatriate benefits.
(20)	Granted as 7,200 Restricted Share Units on 6 December 2006 with a Vesting Period of three years, based on a Share price of $49.78 on the grant date.
(21)	Granted as Stock Price Appreciation Units (see page 32 for description).
(22)	Ms. Bories was Senior Vice President and President and Chief Executive Officer, Packaging until 30 November 2006.
(23)	Granted as 26,850 Restricted Share Units on 6 December 2006 with a French Vesting Period of two years, based on a Share price of $49.78 on the grant date.
(24)	Comprises: (i) TSR payout of $167,586; (ii) special restricted share units granted on 15 December 2003 in recognition of his contribution to the combination with Pechiney vested on 15 December 2006 as 10,004 such restricted share units, which at a share price of $50.03 represents $500,500. The restricted share units were exchanged for EDUs.

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Other Compensation

In addition to benefits under the Executive Performance Award Plan (described above), the Supplemental Short Term Incentive Plan (described above), the Alcan Executive Share Option Plan (described below), the Alcan Stock Price Appreciation Unit Plan (described on page 32), the RSU Plan (described on page 23) and the TSR Plan (described on pages 22 and 33), compensation benefits are made available to senior employees under various plans. These compensation benefits are reported as “Other Annual Compensation” or “All Other Compensation” in the Summary Compensation Table. The Other Annual Compensation column includes benefits from plans for the use of automobiles, plans for professional financial advice and for club membership fees, and in applicable cases, expatriate benefits, tax equalization payments and housing assistance. The All Other Compensation column includes benefits from retirement benefit plans, life insurance plans and savings plans.

Alcan Executive Share Option Plan

The Alcan Executive Share Option Plan (“Option Plan”) provides for the granting to senior employees of non-transferable options (“Options”) to purchase Shares. No annual grant of Options was made in 2006 as a component of the long-term incentive compensation except that Mr. Evans received a special grant upon being appointed CEO. Options may be exercised only for so long as the optionee remains an employee. No repricing of Options is permitted.

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 may have connected stock appreciation rights, if so determined by the Human Resources Committee.

Currently, the Board is entitled to amend, suspend or terminate the Option Plan. Shareholder approval is required for any fundamental change to the Option Plan. As described in Schedule B, the Company proposes to make certain modifications to the amendment provisions of the Option Plan.

A Options

Prior to 22 April 1993, the Option Plan provided for the granting of Options, referred to as “A Options”. 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 9³/4 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 39).

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 C Options granted to certain senior executives in 1997 and 1998, Alcan has granted further Options, referred to as “D Options”. The grant shall become effective upon the exercise of associated C Options and upon the executive placing at least one-half of the Shares resulting from the exercise of the 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 C Options. D Options are exercisable

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in the same manner as the associated C Option. The option period for the D Option will terminate on the same date as the associated C Options. The vesting provisions of the D Options are identical to those of the associated C Option.

F Options

Certain options granted under the stock option plans of Pechiney 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 eight series of Pechiney options. As this was a transitional measure related to the acquisition of Pechiney, 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, as well as the number of Common Shares remaining available for issuance under the Option Plan for 2006.

Equity Compensation Plan Information for 2006

Plan category			Number of securities to be issued upon exercise of Options (a)	Weighted-average exercise price of outstanding Options (b)	Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c)
	Equity compensation plans approved by security holders
	• Alcan Executive Share Option Plan (except F Options)		8,139,547 (1)	Can. $44.99	12,448,818 (2)
	• F Options		2,698,873 (3)	€32.49
	Equity compensation plans not approved by security holders		—	—	—
		Total	10,838,420	N/A	12,448,818
(1) This represents 2.2% of the total outstanding Shares of Alcan.
(2) This represents 3.4% of the total outstanding Shares of Alcan.
(3) This represents 0.7% of the total outstanding Shares of Alcan.

The following table provides information pertaining to Options granted to the Named Executive Officers during 2006.

Option Grants during 2006

Name		Shares Under Options Granted (#)	Percent of Total Options Granted to Employees in 2006	Exercise Price and Market Value on Date of Grant (Can. $/Share)	Expiration Date
	R. B. Evans	167,250 (1)	100%	49.59	13 March 2016
(1) C Option grant on 12 March 2006.

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The following tables summarize, for each of the Named Executive Officers, (a) the number of Shares acquired by Options exercised during 2006, (b) the aggregate value realized upon exercise, which is the difference between the market value of the underlying Shares on the exercise date and the exercise price of the Option, (c) the total number of Shares underlying unexercised Options held at 31 December 2006, and (d) the aggregate value of unexercised in-the-money Options at 31 December 2006, which is the difference between the exercise price of the Options and the market value of the average price of the Shares on the last trading day prior to year-end, which was Can. $56.57 per Share and €36.98 per Share for the F Options. 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.

Aggregated Option Exercises during 2006 and Year-End Option Values (except F Option)

				Shares Underlying		Value of
		Shares	Aggregate	Unexercised		Unexercised
		Acquired	Value	Options at		In-the-Money Options at
Name		on Exercise	Realized	31 Dec. 2006 (1)		31 Dec. 2006 (1)
		(#)	(Can. $)	(#)		(Can. $)
	R. B. Evans	115,968	2,788,206		E: 221,384		E: 4,011,966
					U: 418,662		U: 3,701,610
	T. Engen	0	0		E: 638,766		E: 7,725,913
					U: 1,626,851		U: 9,517,533
	M. Hanley	106,996	2,160,722		E:           0		E:           0
					U: 91,872		U: 1,017,636
	M. Jacques	1,939	46,938		E: 25,585		E: 454,363
					U: 4,180		U: 66,115
	C. Bories	0	0		E: 46,134		E: 844,714
					U: 77,805		U: 727,782
	D. L. McAusland	58,494	1,124,018		E: 89,878		E: 1,714,986
					U: 111,476		U: 1,136,439
(1) E: Exercisable  U: Unexercisable

Aggregated F Option Exercises during 2006 and Year-End Option Values

				Shares Underlying		Value of
		Shares	Aggregate	Unexercised		Unexercised
		Acquired	Value	Options at		In-the-Money Options at
Name		on Exercise	Realized	31 Dec. 2006 (1)		31 Dec. 2006 (1)
		(#)	(€)	(#)		(€)
	C. Bories	63,770	544,915		E: 55,801		E:           0
					U:           0		U:           0
(1) E: Exercisable  U: Unexercisable

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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 considerations in countries of the employees’ residence. No annual grant of SPAUs was made in 2006. 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 was approved on 26 September 2001 by the Human Resources Committee.

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 29).

In 2006, no SPAUs were granted to any of the Named Executive Officers.

The following table summarizes, for each of the Named Executive Officers, (a) the number of SPAUS exercised during 2006, (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 SPAU, (c) the total number of SPAUs unexercised held at 31 December 2006, and (d) the aggregate value of unexercised in-the-money SPAUs at 31 December 2006, which is the difference between the exercise price of the SPAUs and the market value of the average price of the Shares on the last trading day prior to year-end, which was Can. $56.57 per Share. The aggregate values indicated with respect to unexercised in-the-money SPAUs at financial year-end have not been, and may never be, realized. These SPAUs 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.

Aggregated SPAU Exercises during 2006 and Year-End SPAU Values

						Value of
			Aggregate	SPAUs		Unexercised
		SPAUs	Value	Unexercised		In-the-Money SPAUs at
Name		Exercised	Realized	at 31 Dec. 2006 (1)		31 Dec. 2006 (1)
		(#)	(Can. $)	(#)		(Can. $)
	R. B. Evans	28,510	561,267		E: 28,510		E: 447,892
					U:28,510		U:447,892
	M. Jacques	0	0		E: 47,054		E: 783,183
					U:83,228		U:796,612
(1) E: Exercisable  U: Unexercisable

Restricted Share Unit Plan and Executive Deferred Share Unit Plan

The RSU Plan, described on page 23, provides for the granting to eligible executives of RSUs. The purpose of the plan is also to attract and retain employees and to encourage an increased proprietary interest in the Company. In 2006, 175,333 RSUs were granted to the Named Executive officers.

The EDSU Plan, described on page 24, provides to executives the possibility of electing to receive their EPA, Total Shareholder Performance or RSUs earned awards in the form of EDSUs.

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The following table summarizes the number of EDSUs and RSUs held by each Named Executive Officers and the value of such EDSUs and RSUs as at 31 December 2006, based on the Share price on the last trading day prior to year-end ($48.74).

RSUs and EDSUs Outstanding at Year-End and Year-End Values

	Restricted Share Unit Plan		Executive Deferred Share Unit Plan
	Aggregate number	Value as at	Aggregate number	Value as at
	of Units	31 December 2006	of Units	31 December 2006
Name (1)	(#)	($)	(#)	($)
R. B. Evans	72,451	3,531,262	41,287	2,012,328
M. Hanley	29,342	1,430,129	—	—
M. Jacques	26,945	1,313,299	2,265	110,396
C. Bories	26,850	1,308,669	—	—
D. L. McAusland	19,745	962,371	10,004	487,595

(1) T. Engen did not hold RSUs or EDSUs as at 31 December 2006.

Total Shareholder Return Performance Plan

The TSR Plan, described on page 22, 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 Industrials 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 2006

	Securities,
	Units or
	other		Estimated Future Payouts
	Rights	Performance	Threshold	Target	Maximum
Name (1)	(#) (2)	Period	($)	($)	($)
R. B. Evans	0	1 Oct. 2006 — 30 Sept. 2009	0	2,750,000	6,875,000
M. Hanley	0	1 Oct. 2006 — 30 Sept. 2009	0	1,114,575	2,786,438
M. Jacques	0	1 Oct. 2006 — 30 Sept. 2009	0	749,500	1,873,750
C. Bories	0	1 Oct. 2006 — 30 Sept. 2009	0	749,500	1,873,750
D. L. McAusland	0	1 Oct. 2006 — 30 Sept. 2009	0	749,500	1,873,750

(1)	T. Engen was not granted any target cash performance award under the TSR Plan since he resigned from Alcan in March 2006.
(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.

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Proxy Circular 2007 Alcan Inc.

Retirement Benefits

Canadian Plan

During 2006, M. Hanley, M. Jacques and D. L. McAusland 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.

Eligible	Years of Service
Earnings
	10	15	20	25	30	35
$400,000	17%	25%	33%	42%	50%	59%
$500,000
—	17%	25%	34%	42%	50%	59%
$600,000
$700,000
—	17%	25%	34%	42%	51%	59%
$2,000,000

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 2006 eligible earnings and projected service upon normal retirement age of 65 were as follows: M. Hanley $445,900 and 32 years; M. Jacques, $403,960 and 21 years; D. L. McAusland, $533,260 and 20 years.

US Plan

During 2006, R. B. Evans participated in an Alcan-sponsored qualified pension plan in the US which, together with supplemental arrangements for payment directly by Alcan of pensions in excess of statutory limits, is herein referred to as the “US Plan”.

The US Plan is available to Alcan salaried employees in the US 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	Years of Service
Earnings
	10	15	20	25	30	35
$700,000
—	17%	25%	34%	42%	51%	59%
$1,300,000
$1,400,000
—	17%	26%	34%	43%	51%	60%
$2,000,000

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 2006 eligible earnings of R. B. Evans and projected service upon normal retirement age of 65 were $1,101,240 and 16 years.

French Plan

During 2006, C. Bories participated in an Alcan-sponsored supplemental pension plan in France, herein referred to as the “French Plan”. The French

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Plan was adopted in 2000 by Pechiney for executive officers in France with at least two years of service. The lifetime pension is a percentage of eligible earnings varying from 65% to 50% depending on their eligible earnings. The eligible earnings consist of the average annual salary together with the annual bonus during the five years preceding the retirement. The eligible earnings are adjusted for inflation from the payment date of earnings to the year of retirement. Following the Pechiney acquisition, no new executive officers were eligible to participate in the French Plan and the eligible earnings were from that date set with reference to the executive officers’ position prior to the Pechiney acquisition.

The following table shows estimated lifetime pension expressed as a percentage of eligible earnings, payable upon normal retirement at age 65 to persons in the indicated earnings classifications.

Eligible Earnings

$400,000	65%
$500,000	61%
$600,000	57%
$700,000	53%
$800,000	50%

The retirement benefits are reduced by other retirement benefits such as social security benefits, benefits payable from French retirement schemes and benefits from prior employment, but excluding benefits paid from the Pension Plan for Officers described below.

The normal form of payment of pensions is a lifetime annuity with a 60% lifetime pension to the surviving spouse.

The 2006 eligible earnings of C. Bories were $724,560. Retirements benefits under the French Plan only vest at retirement.

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”).

Eligible earnings under these plans are subject to a maximum and the part of their earnings in excess thereof is eligible for the Pension Plan for Officers (“PPO”). This design assures internal equity between Officers who are compensated on the same US salary scale but participate in home country pension plans with different standards and who have been with the Company for different lengths of service prior to becoming an officer.

The PPO provides benefits only in respect of services rendered while an officer.

The five aforementioned Named Executive Officers participated in the PPO.

Participants in the PPO are the CEO and officers who report to the CEO (a total of ten individuals at the end of 2006) and are designated by the Human Resources Committee.

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.

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 2006 salary and EPA at its guideline amount and projected service as an Officer upon retirement age of 65 were as follows: R. B. Evans, $2,332,600 and 16 years; M. Hanley, $1,140,240 and 29 years; M. Jacques, $925,920 and 14 years; C. Bories, $987,920 and 26 years; D. L. McAusland, $943,920 and 20 years.

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T. Engen did not participate in any of the pension plans sponsored by the Company.

Value of the Retirement Benefits

In the interest of greater disclosure and clarity for Shareholders, this section provides details on the value of the retirement benefits for each Named Executive Officer.

A measure of the value of the Canadian Plan, the US Plan, the French Plan and the PPO that can be deemed to be part of the total 2006 compensation of the five 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.

Another measure of the value of pension plans or pension benefits is the projected benefit obligation (“PBO”) that can also be deemed to be part of the total 2006 compensation of the Named Executive Officers. 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 increase of the PBO over a year includes the service cost, the normal increase arising from the PBO being discounted by one year less, variations arising from a change of the interest rate used to discount the PBO and from the assumptions being different from actual experience.

The service cost and the PBO amounts are only estimates of the discounted value of contractual entitlements. The value of these estimated entitlements will change over time because they are based on long term assumptions in relation to future events that will not represent actual developments. Assumptions will vary by plan to take into account the general characteristics of its membership, such as the expected distribution of retirement ages, future compensation increases and life expectancy.

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 current service cost and the projected benefit obligation as disclosed in the note on Post-Retirement Benefits to Alcan’s 2006 annual financial statements. There is no contractual undertaking by the Company to pay benefits of equivalent amounts.

The following table provides, for each Named Executive Officer, the estimated annual total pension based on current compensation and assuming retirement at age 65, the current 2006 service cost and the projected benefit obligation calculated at year-end 2005 and 2006.

	Name	Projected Annual pension payable at age 65 ($)	Projected Benefit Obligation 31 December 2006 ($) (a)	Projected Benefit Obligation 31 December 2005 ($) (b)	Current 2006 Service Cost ($) (c)	Change in Projected Benefit Obligation Excluding Service Cost (1) ($) (d)=(a)-(b)-(c)
	R. B. Evans	842,300	4,292,000	2,640,000	364,000	1,288,000
	T. Engen	323,800(2)	4,524,000	4,313,000	226,000	(15,000)
	M. Hanley	636,900	1,856,000	1,517,000	263,000	76,000
	M. Jacques	342,400	1,178,000	801,000	225,000	152,000
	C. Bories	362,000(3)	962,000	813,000	112,000	37,000
	D. L. McAusland	425,700	1,957,000	1,672,000	207,000	78,000
(1)	Includes any change in the PBO resulting from a variation of the discount rate between year-end 2005 and 2006. An increase of the interest rate reduces the PBO and a decrease of the interest rate increases the PBO. The interest rate used to discount the PBO is based on long-term bond yields prevailing at the year-end, calculated in the country where the plan is located. The change does not take into account investment income on pension funds provided for the PBO.
(2)	Amount in pension paid since April 2006 in accordance with a retirement adjustment contract under which he was entitled to the same level of retirement benefits he would have received had he remained employed with his previous employer.
(3)	Amount after reduction for estimated other retirement benefits.

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Proxy Circular 2007 Alcan Inc.

Employment Agreements

On various dates, Alcan entered into employment agreements with the Named Executive Officers, 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.

On various dates, the Company entered into change of control agreements with certain key senior employees, 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 employees’s employment with the Company either by the Company without cause or by the employee for defined reasons. In such cases, the employees 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 RSU Plan and the TSR Plan.

Directors’ Compensation

Annual Fees

For the second half of 2006, Non-Executive Director compensation was reviewed and increased to align compensation levels with competitive levels based on the recommendation of the Human Resources Committee’s consultant.

The following table sets out the annual fees for Non-Executive Directors according to the Chairman position, directorship, Audit Committee membership and chairman positions of the various committees for the first and second half of the year 2006.

Position		Annual fee to 30 June 2006 ($)			Annual fee as of 1 July 2006 ($)
	Chairman of the Board		350,000			380,000
	Other Directors		150,000			180,000
	Audit Committee Chairman		25,000	(1)		30,000	(1)
	Audit Committee Member		5,000	(1)		7,000	(1)
	Human Resources Committee Chairman		—	(2)		10,000	(1)
	Environment, Health and Safety Committee Chairman		—	(2)		5,000	(1)

(1)	These fees are in addition to the annual compensation fee for each Non-Executive Director.
(2)	No specific annual fee.

Director Deferred Share Units

To ensure alignment of the interests of the Non-Executive Directors with those of Shareholders, at least 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. DDSUs are the economic equivalent of Shares.

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.

Ownership Guidelines

The Board believes it is important that Non-Executive Directors demonstrate their commitment to Alcan’s growth through share ownership. In 2006, the Board approved a share ownership guideline for Non-Executive Directors. All Non-Executives Directors must hold a minimum of the equivalent of

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three times their respective annual fees in the form of (i) Common Shares of the Company and/or (ii) DDSUs. Non-Executive Directors will have five years from the time of their first election to the Board to meet these Share ownership requirements.

Other Compensation

In 2006, Non-Executive Directors could invest all or part of the cash portion of their fees (if applicable) in Shares through the Share Investment Plan for Directors which included the Share Purchase Plan and Dividend Reinvestment Plan. This plan was similar to the Share Investment Plan available to all Alcan Shareholders. The Share Purchase Plan for Directors was terminated at the end of 2006 in conjunction with the termination of the Share Purchase Plan.

Non-Executive Directors are not granted Share options. No current Non-Executive Directors have sold any Shares in the past three years.

Non-Executive Directors are reimbursed for transportation and other expenses incurred in attending Board and Committee meetings.

Non-Executive Directors who are not Canadian residents are entitled to paid tax advice. During 2006, Messrs. Jacamon, Ruding and Schulmeyer were each reimbursed $1,500 for this purpose.

An employee of Alcan who is a Director is not entitled to receive fees for serving on the Board.

The following table sets out the compensation of each Non-Executive Director for 2006.

		Portion of Fees in
		Director’s
		Deferred
		Share Unit			DDSUs/
	Annual Fees	Plan		Cash	Common	Cash
Name	($)	(%)		(%)	Shares*	$
Roland Berger	165,000		100	—	3,865	—
L. Denis Desautels (1)	192,500		62.5**	37.5	2,666	42,188
L. Yves Fortier (2)	365,000		100	—	8,703	—
Jean-Paul Jacamon (3)	168,500		50	50	1,977	84,250
Yves Mansion (4)	171,000		100	—	4,013	—
Gwyn Morgan	165,000		100	—	3,752	—
Christine Morin-Postel	165,000		100	—	3,900	—
H. Onno Ruding (5)	167,500		50	50	1,944	83,750
Guy Saint-Pierre (6)	169,750		100**	—	3,677	—
Gerhard Schulmeyer (7)	170,000		50	50	2,222	81,250
Paul M. Tellier (4)(8)	173,500		100	—	4,245	—
Milton K. Wong (4)	171,000		100	—	4,053	—

*	Includes dividends reinvested on previously-held DDSUs and Common Shares.
**	As of 1 October 2006, the Non-Executive Directors elected to modify their participation in DDSUs to the amounts indicated.
(1)	Chairman of the Audit Committee.
(2)	Chairman of the Board.
(3)	Member of the Audit Committee from 30 July 2006.
(4)	Member of the Audit Committee.
(5)	Member of the Audit Committee until 30 July 2006.
(6)	Member of the Audit Committee from 27 April 2006.
(7)	Chairman of the Human Resources Committee.
(8)	Chairman of the Environment, Health and Safety Committee.

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The following table sets out each Non-Executive Director’s equity ownership in the Company and any changes in the ownership interest since 26 February 2006.

												Market Value
	Equity Ownership as				Equity Ownership as				Net Changes in			of Equity as at
	at 26 February 2006				at 26 February 2007				Equity Ownership			26 February
	Common				Common				Common			2007(1)		Share Ownership
Name	Shares		DDSUs		Shares		DDSUs		Shares		DDSUs	($)		Requirement Met
Roland Berger		—		7,472		5,000		11,357		5,000	3,885		899,471	ü
L. Denis Desautels		960		5,971		1,212		8,400		252	2,429		528,564	(2)
L. Yves Fortier		1,000		27,178		1,000		35,932		—	8,754		2,030,891	ü
Jeffrey E. Garten		—		—		—		—		—	—		—	(3)
Jean-Paul Jacamon		136		4,024		136		6,012		—	1,988		338,079	(4)
Yves Mansion		—		8,282		—		12,316		—	4,034		677,257	ü
Gwyn Morgan		15,000		—		15,000		3,766		—	3,766		1,031,942	ü
Christine Morin-Postel		—		9,790		—		13,712		—	3,922		754,023	ü
H. Onno Ruding		112		2,712		112		4,666		—	1,954		262,742	(4)
Guy Saint-Pierre		17,734		11,345		18,837		13,937		1,103	2,592		1,802,243	ü
Gerhard Schulmeyer		2,421		11,158		2,542		13,276		121	2,118		869,832	ü
Paul M. Tellier		1,969		19,123		1,980		23,387		11	4,264		1,394,931	ü
Milton K. Wong		40,000		10,890		40,000		14,966		—	4,076		3,022,580	ü

(1)	The market value is determined based on the Share price ($54.99) on this date.
(2)	Equity ownership requirement must only be met in 2008.
(3)	Equity ownership requirement must only be met in 2012.
(4)	Equity ownership requirement must only be met in 2009.

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)	442,669	—
	Other	5,156,016	—

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Proxy Circular 2007 Alcan Inc.

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 2006 ($)	Amount Outstanding as at 26 February 2007 (1) ($)	Financially Assisted Share Purchases During 2006 (#)	Security for Indebtedness	Amount Forgiven During 2006
	G. Ouellet	Lender	45,142	41,380	0	(2)	0
	Senior Vice President

(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 2006 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 SEC at www.sec.gov. Financial information is provided in Alcan’s financial statements and management’s discussion and analysis report, which may be obtained, without charge, on request from the Corporate Secretary of Alcan at the registered office of Alcan, 1188 Sherbrooke Street West, Montreal, Quebec, Canada, H3A 3G2, telephone: (514) 848-8000.

Approval of the Board of

Directors

The Board of Directors has approved the contents of this Circular and its sending to Shareholders.

/s/ Roy Millington

Roy Millington
Corporate Secretary

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Proxy Circular 2007 Alcan Inc.

Schedule A

Resolution — Adoption of Amendments to the Alcan Executive Share Option Plan

THAT the amendments to the Alcan Executive Share Option Plan (as described in Schedule B of the Proxy Circular dated 26 February 2007), be and are hereby approved.

Schedule B

Summary of the Alcan Executive Share Option Plan Amendments

On 6 June 2006, the Toronto Stock Exchange (“TSX”) published a Staff Notice in regard to security based compensation arrangements such as the Alcan Executive Share Option Plan (“Option Plan”), relating to the amendments provisions and the extension of Option (“Option”) expiry dates which fall within or soon after a blackout period. Unless the proposed amending provisions are adopted by 30 June 2007, the TSX-listed companies will not be permitted to make any amendments to plans similar to the Option Plan without shareholder approval.

Although the Company introduced the Restricted Share Unit Plan in 2006 as a new long-term incentive plan to be used instead of the Option Plan, the Company may in the future again decide to issue Options under the Option Plan and, therefore, recommends the proposed amendments below.

The Company’s proposed amendments will:

         a) require Shareholder approval for the following changes to the Option Plan:

                    •  reducing the subscription price (except for adjustments to reflect certain transactions made pursuant to the Option Plan) including a cancellation of Options for the purpose of re-issuing new Options;

                    •  increasing the number of Common Shares that may be issued under the Option Plan;

                    •  extending the expiry date beyond ten years from the grant date;

                    •  changing the provisions relating to the transferability of Options other than those already allowed under the Option Plan; and

                    •  expanding the eligibility of individuals for participation in the Option Plan.

         b) specify that the Board of Directors may make the following amendments without Shareholder approval:

                    •  modifying the Option Periods during which Options may be exercised, subject to the Option Period terminating no later than the tenth anniversary of the date of the grant of the Option;

                    •  changing the terms on which new Options may be granted and exercised including, without limitation, the provisions relating to the vesting, expiry, waiting period and the adjustments to be made pursuant to the Option Plan;

                    •  making any addition to, deletion from or alteration of the provisions of the Option Plan that are necessary to comply with applicable law or the requirements of any applicable regulatory authority or stock exchange;

                    •  correcting or rectifying any ambiguity, defective provision, error or omission in the Option Plan;

                    •  changing the provisions relating to the administration of the Option Plan; and

                    •  any other amendment that does not require Shareholder approval by virtue of the Option Plan, applicable laws or relevant regulatory requirements.

         c) provide for an extension of the Option Period when it would terminate while a trading blackout is in effect. In keeping with Alcan’s policies, Options must not be exercised by insiders when a trading blackout is in effect. This may pose a problem when an Option is set to expire during a blackout period.

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Proxy Circular 2007 Alcan Inc.

The TSX allows issuers’ stock option plans to be amended to extend the exercise period for up to ten business days beyond the end of an issuer’s trading blackout period. The proposed amendment to the Option Plan adds a new definition to define “Blackout Period” and “Business Day” as well as a new section whereby, if the date on which an option expires occurs during a “Blackout Period” or within ten business days after the last day of a “Blackout Period”, the date of expiry of such option will be the last day of such ten business day period.

The Company’s proposed amendments to the Option Plan have been approved by the TSX, subject to disinterested Shareholder approval. A copy of the full text of the Option Plan, as proposed to be amended, is available on Alcan’s Internet site at www.alcan.com. Shareholders may also obtain a copy of the full text of the Option Plan, as proposed to be amended, from the Corporate Secretary’s office, 1188 Sherbrooke Street West, Montreal, Quebec, Canada, H3A 3G2.

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Proxy Circular 2007 Alcan Inc.

PRINTED IN CANADA

EX-99.2

Exhibit 99.2     Board Charter.

ALCAN INC. 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 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.

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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.

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.

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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;
(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 approving 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;

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(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;
(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.

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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.

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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.

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 Shareholders, at least one half of the Directors’ fees are paid to non-executive Directors in Deferred Share Units, being the economic equivalent of the Common Shares of the Company.

All non-executive Directors must hold a minimum of the equivalent of three times their respective annual Director’s fees in the form of (i) Common Shares of the Company and/or (ii) Deferred Share Units. Directors will have five years from the time of their first election to the Board to meet these Share ownership requirements.

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.

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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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