SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

Form
10-K/A

(Amendment No.
1)

[X]
    Annual Report pursuant to Section 13 or
      15(d) ofthe Securities Exchange Act of
      1934For the fiscal year
      ended31 December 2002OR[   ]
    Transition Report pursuant to Section 13 or
      15(d) ofthe Securities Exchange Act of
      1934


Commission
file number 1-3677

Alcan Inc.

Incorporated
      in:
    I.R.S. Employer
      Identification No.:Canada
    Not
      applicable1188 Sherbrooke
      Street West,Montreal, Quebec,
      Canada H3A 3G2Telephone: 
      (514) 848-8000Securities
      registered pursuant to Section 12(b) of the Act:Title
    Name of each
      exchange on which registeredCommon Shares
      without nominal or par value
    New York Stock
      ExchangeCommon Share
      Purchase Rights
    New York Stock
      Exchange4 7/8% Notes due
      2012
    New York Stock
      Exchange


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

Indicate by check mark
whether the Registrant: (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months and (2) has been subject to such filing requirements for the past 90
days:Yes X No __.

Indicate by check mark
if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not
contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.[X]

The aggregate
      market value of the voting stockheld by
      non-affiliates:
    USD12,054 million,
      as of 28 June 2002Common Stock of
      Registrant outstanding:
    321,640,894 Common
      Shares,as of 24 March
      2003Documents
      incorporated by reference:
    Portions of the
      Annual Report to security holders for the fiscal year ended 31 December
      2002 (Parts I, II and IV)Portions of the
      Management Proxy Circular for the Annual Meeting to be held on 24 April
      2003 (Parts III and IV)




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TABLE OF CONTENTS



ITEM 7 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION AND
RESULTS OF OPERATIONS

ITEM 8 FINANCIAL
STATEMENTS AND SUPPLEMENTARY DATA

ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8‐K

SIGNATURES

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EXPLANATORY NOTE

This Form 10-K/A amends the
introduction to Part I and Items 7, 8 and 15 of the Registrant's Annual Report
on Form 10-K for the year ended December 31, 2002 as filed on March 27, 2003
(the "Form 10-K"). The changes are made principally as a result of the
Registrant's recent decision to classify certain non-strategic Packaging segment
assets as held for sale and in response to recent rules adopted by the
Securities and Exchange Commission regarding non-GAAP financial measures. This
amendment (i) reclassifies certain financial information in 2002 and prior years
to present operations currently classified as held for sale as discontinued
operations on the income statement, 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 and makes corresponding
changes to Management's Discussion and Analysis of Financial Condition and
Results of Operations (see note 30 - Discontinued Operations and Assets Held for
Sale to the consolidated financial statements); (ii) eliminates the presentation
of the non-GAAP financial measures "Economic Value Added", or EVA, "effective
income tax rate excluding non-recurring charges and foreign currency balance
sheet translation effects", and "interest coverage ratio"; (iii) clarifies
references to the Registrant's basis for determining the fair value of certain
acquired assets; and (iv) provides (in note 31 - Subsequent Events to the
consolidated financial statements) a description of certain events occurring
after March 27, 2003, the date on which the Registrant initially filed the Form
10-K.

Please note that this amended Annual Report does
not reflect most events occurring after March 27, 2003. For a description of
such subsequent events, please read the Registrant's reports filed with the
Securities and Exchange Commission since March 27, 2003.

3

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

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

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

"Annual
Report" means Alcan's Annual Report to shareholders for the year ended 31
December 2002,

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

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

"Joint
Venture" means an association (incorporated or unincorporated) of companies
jointly undertaking some commercial enterprise and proportionately consolidated
to the extent of Alcan's participation,

"LME"
means the London Metal Exchange,

"Management Proxy Circular"means the management proxy circular
for Alcan's Annual Meeting of Shareholders to be held on 24 April 2003,

"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, but does not include a company in a Joint Venture,

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

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

"UBC"
means a used beverage can.

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 is incorporated by reference to the Annual Report and to the
Management Proxy Circular. Such information is specifically identified herein,
including by the reference"See Annual Report."or"See Management Proxy
Circular.".
With the exception of such information specifically incorporated by reference,
the Annual Report and the Management Proxy Circular are not to be deemed filed
as part of this Form 10-K Report. Information incorporated by reference is
considered to be part of this report, and information filed later with the SEC
will automatically update and supersede this information.

4

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Special Note Regarding Forward-Looking
Statements

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

Factors that could cause actual
results or outcomes to differ from the results expressed or implied by
forward-looking statements include, among other things:

- changes in global aluminum
  supply and demand conditions;
- changes in aluminum ingot
  prices;
- changes in raw materials costs
  and availability;
- changes in the relative values
  of various currencies;
- cyclical demand and pricing
  within the principal markets for Alcan's products;
- changes in government
  regulations, particularly those affecting environmental, health or safety
  compliance;
- fluctuations in the supply of
  and prices for power in the areas in which Alcan maintains production
  facilities;
- the effect of integrating
  acquired businesses and the ability to attain expected benefits;
- potential catastrophic damage,
  increased insurance and security costs and general uncertainties associated
  with the increased threat of terrorism or war;
- the effect of international
  trade disputes on Alcan's ability to import materials, export its products and
  compete internationally;
- relationships with and financial
  and operating conditions of customers and suppliers;
- economic, regulatory and
  political factors within the countries in which Alcan operates or sells
  products; and
- factors affecting Alcan's
  operations, such as litigation, labour relations and negotiations and fiscal
  regimes.

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

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

Alcan files annual, quarterly and
special reports and other information with the SEC. Any document so filed can be
viewed at the SEC's public reference room at 450 Fifth Street, N.W., Washington,
D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference rooms. Alcan's SEC filings are also available
to the public over the Internet at the SEC's web site athttp://www.sec.govor through Alcan's website athttp://www.alcan.com

5

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ITEM 7 MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIALCONDITION AND RESULTS OF OPERATIONS

Management's Discussion and
Analysis

Note regarding Presentation of
Financial Information

During the second quarter of 2003,
the Company committed to a plan to sell
certain non-strategic Packaging operations to release cash for higher value-adding
opportunities. Even though these operations are not major business units within
the Packaging group, the businesses are classified as held for sale and are
included in discontinued operations because the operations and cash flows will
be eliminated as a result of the disposal and the Company will not have any
significant continuing involvement in the operations after the disposal.

New accounting standards require
that the operating results and any impairment charge be disclosed separately as
discontinued operations. Certain financial information has been reclassified in
2002 and prior years to present these businesses as discontinued operations on
the income statement, 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. The financial information contained
in this Management's Discussion and Analysis of Financial Condition and Results
of Operations has been revised from the information initially presented in our
Annual Report to reflect the reclassification. For further details, see note 30
to the financial statements - Discontinued Operations and Assets Held for Sale.

Alcan's improved earnings
demonstrate its ability to deliver results despite soft economic
conditions.

Market OverviewWestern
World* Primary Aluminum Balance

Demand

Total Western World consumption
grew by an estimated 2.8% to about 28.5 million tonnes (Mt) in 2002, a weak
recovery following last year's sharp decline of 5.3%. Of this, 19.5 Mt was
primary metal, up 3.2% from 2001, with the balance comprising secondary/recycled
metal. Demand was up in all regions except Latin America and Africa, but
remained below levels reached in 2000. North American consumption showed the
strongest improvement at 4.6%, rebounding from a steep decline of 11.3% in 2001.
Asian demand rose 4.0% driven by a recovery in exports to China and North
America. A slow economy in Europe generated growth of only 1.0% while the
biggest disappointment was in Latin America, where uncertainty in Brazil and
turmoil in Argentina and Venezuela led to a decline of 2.5%.

Supply

Total Western World primary
aluminum supply (production plus imports) increased 3.1% to 20.0 Mt in 2002. Of
this, primary aluminum production represented 17.2 Mt, up 3.4% from the previous
year but still below the 17.3 Mt reached in 2000, with the balance comprising
2.8 Mt of net imports from China and the former Eastern Bloc (C.I.S. and Eastern
Europe). The increase in Western World primary production was due to restarts of
idled capacity in Brazil and the U.S. Pacific Northwest and a full year of
production from the new Alma and Mozal smelters in Canada and Mozambique. Net
imports from China and the former Eastern Bloc remained essentially flat, with
Chinese increases largely offset by reductions from the C.I.S.

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

6

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((Graph))Western World
      Primary Aluminum Supply and DemandMt/ySupply98:
    19.115
    
    19.016
    
    19.111
    
    19.28999:
    19.386
    
    19.478
    
    19.639
    
    19.90100:
    19.744
    
    19.688
    
    19.559
    
    19.80501:
    19.666
    
    19.467
    
    19.108
    
    19.23702:
    19.780
    
    20.050
    
    19.780
    
    20.300Demand
      (seasonally adjusted)98:
    19.454
    
    19.010
    
    19.201
    
    18.61099:
    19.560
    
    19.201
    
    19.385
    
    19.82500:
    20.132
    
    20.646
    
    20.062
    
    19.86201:
    18.908
    
    18.897
    
    19.072
    
    19.07202:
    19.480
    
    18.880
    
    20.050
    
    19.900


Balance

With primary aluminum supply and
demand increasing at almost the same rate, the surplus remained unchanged from
2001 at about 450 thousand tonnes (kt). This registered as a 407 kt increase in
reported stocks with the remainder in unreported stocks. By the end of the year,
inventories held by the London Metal Exchange (LME), COMEX and aluminum
producers had increased to approximately 4.3 Mt, or the equivalent of about 11.0
weeks of consumption. Average LME prices declined 6% during the year to $1,365
/t from $1,454 /t in 2001.

((Graph))

Total Aluminum Inventories and Ingot
Prices

Total inventories (IAI*, LME and COMEX**) MT

98:
    3.923
    
    3.762
    
    3.816
    
    3.99799:
    3.931
    
    3.833
    
    3.967
    
    4.00100:
    3.919
    
    3.612
    
    3.552
    
    3.48801:
    3.734
    
    3.784
    
    3.872
    
    3.87202:
    4.084
    
    4.226
    
    4.250
    
    4.230LME three-month
      priceUS$/t98:
    1,484
    
    1,392
    
    1,344
    
    1,30099:
    1,212
    
    1,332
    
    1,471
    
    1,53500:
    1,652
    
    1,502
    
    1,587
    
    1,52701:
    1,562
    
    1,511
    
    1,404
    
    1,33702:
    1,395
    
    1,377
    
    1,329
    
    1,358


|*  | International
      Aluminum Institute                    
|-- | ----------------------------------------------------------
|** | Inventories held
      by the New York Mercantile Exchange

Outlook

Demand is expected to rise at a
slightly slower pace than supply in 2003, resulting in a forecast surplus of
approximately 495 kt compared to 450 kt in 2002. Most of the increase in supply
is expected to come from expansions of existing capacity in Norway, India,
Mozambique and Brazil, although there is some risk that drought conditions could
idle capacity in various areas of the globe.

Western World
Consumption

((Graph))

2002 Western World
Consumption by End-Use Market

|Containers and Packaging  | 17%
|------------------------- | ---
|Building and Construction | 18%
|Electrical                | 9% 
|Transportation            | 30%
|Other                     | 26%



7

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Western World demand was up in all
end-use markets except beverage cans. Transportation remained the largest
end-use market for aluminum and the fastest growing in 2002, up 5.5% to 8.6 Mt.
Global light vehicle production rose an estimated 3% in 2002, including a 35%
increase in China. Aluminum use continued to increase in automobiles. The heavy truck and aerospace markets remained
weak. Alcan's revenues from the transportation market increased by 10% to $0.9
billion.

Consumption in the containers and packaging market was up a slight 0.7%
at 5.0 Mt. Can stock demand declined by 0.2% in 2002, mirroring the U.S. decline
in beverage can shipments. Other packaging, principally foil, rose by almost 3%.
Alcan's revenues from the packaging and beverage can markets, which represented
the largest share of the Company's revenues increased by 2% to $5.1 billion.

Demand from the building and construction sector rose a modest 1.7% to
5.1 Mt. While housing starts reached a 16-year high of 1.7 million in the U.S.,
the building and construction market was very weak in Asia and Europe. Alcan's
revenues from building and construction increased by 2% to $1 billion.

After declining more than 7% in 2001, the electrical market saw a 1.4%
gain last year to 2.4 Mt. Much of the increase took place in Brazil (up 21%) in
response to the power crisis of 2001. There was little change in other regions.
Alcan's revenues from the electrical market declined by 10% to $0.6
billion.

Demand from all other markets increased by 2.3% in 2002 to 7.4 Mt. This
includes 2.4 Mt from the machinery and equipment market, and 1.7 Mt from the
consumer durables market. Alcan's revenues from these other markets, including
aluminum ingot, decreased by 5% to $4.7 billion.

((Graph))

Western World Consumption by Geographic
Market

North America
    33%South America
    7%Western Europe
    31%Asia/Pacific/Africa
    29%


Alcan's 2002 Revenues by Geographic Market

North America
    43%South America
    3%Western Europe
    39%Asia/Pacific/Africa
    15%


Merger with algroup

Merger synergies delivered $157 million in
savings.

Alcan completed its merger with
algroup in October 2000. The merger was recorded under the purchase method of
accounting, in a transaction that valued algroup at $5.7 billion. This included
the issue by the Company of 116.1 million shares, having a market value of $3.6
billion, and the assumption of algroup's debt totaling $2.1 billion.

As
of the fourth quarter of 2000, results from the operations of algroup have been
included in the financial results of Alcan.

Merger integration synergies in excess of $200 million before tax have
been achieved, with benefits of $157 million recorded in 2002 earnings. In 2001,
Alcan benefited from about $70 million of synergies. Total one-time
disbursements necessary to obtain these synergies will amount to $89 million, of
which $19 million was incurred in 2002, with $55 million having been spent up to
2001.

Results of OperationsNet Income((Graph))2002
    2001
    2000Net Income (US$M)
    374
    2
    610Non-recurring* (US$M)
    (158)
    (480)
    37LME (US$/t)
    1,365
    1,454
    1,567


*Non-recurring items include both
non-recurring gains (charges) and the effects of foreign currency balance sheet
translation.

Benefits from the Company's cost-saving
initiatives, diversified portfolio and continued financial discipline helped
offset lower LME prices in 2002.

8

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Restructuring benefits reached $178
million.

Net
income was $374 million in 2002 compared to $2 million in 2001 and $610 million
in 2000. The improvement in 2002 reflected the success of the Company's
cost-saving initiatives together with higher overall volumes, a higher-value
product mix, lower interest expense and the absence of goodwill amortization.
These factors combined to offset lower LME prices and higher pension
costs.

Net
income in 2002 included non-recurring charges of $117 million after-tax. The
largest of these were provisions of $68 million for a ruling on a contract
dispute with Powerex (a subsidiary of BC Hydro) and $22 million for the
impairment of certain businesses in Italy. In addition, charges of $21 million
were taken for the closures of the Burntisland Specialty Chemicals plant and the
Banbury R&D facility in the U.K., $17 million relating to other merger
synergies and restructuring as well as $15 million in other special charges.
These items were partially offset by an after-tax gain of $26 million on the
sale of more than half of the Company's remaining portfolio investment in Nippon
Light Metal Company, Ltd. The non-recurring charges of $117 million after tax
are detailed in the first paragraph of footnote 1 of the Quarterly Financial
Data of the Annual Report.

Foreign currency balance sheet translation losses in 2002 were $41
million after-tax, and originated from the revaluation of deferred income taxes
and other net monetary liabilities mostly in Canada and in Australia. In 2001,
there were gains amounting to $51 million after-tax and in 2000 gains of $40
million after-tax.

Anticipating challenging economic conditions, Alcan moved to safeguard
its competitiveness in 2001 by launching a restructuring program aimed at
achieving annual savings of pre-tax $200 million. In 2002, the Company realized
$178 million in cost reductions under the program and reached an annual run rate
in excess of the $200 million by year-end. Costs to implement the program were
$270 million compared to an estimate of $276 million, half of which involved
cash expenditures for redundancy with the balance comprising non-cash items such
as asset write-downs.

Results in 2001 were adversely affected by large restructuring,
impairment and other special charges. Excluding these items, operating income
declined from 2000 as a result of lower average metal prices, partially offset
by merger synergies and the inclusion of algroup results for a full year.

Non-recurring after-tax charges for 2001 consisted mainly of the loss on
the disposal of operations in Jamaica of $90 million, charges related to the
restructuring program of $165 million, charges for the synergy program of $37
million, asset impairment provisions of $87 million and increases to
environmental reserves of $167 million. These charges were slightly offset by a
favourable prior year's tax adjustment of $12 million.

Non-recurring after-tax charges for 2000 included non-cash merger related costs
of $25 million, rationalization charges of $30 million for the closure of
Rogerstone Foil operations in the U.K. and of the village of Kemano, B.C. in
Canada, offset by favourable prior years' tax adjustments of $57 million in
Canada and in Germany.

((Graph))Revenues and Aluminum
      Volumes2002
    2001
    2000Sales and operating revenues
    (US$M)
    12,327
    12,423
    9,097Total aluminum volume * (kt)
    4,437
    4,253
    3,509


*Includes ingot products and
rolled products shipments, conversion of customer-owned metal (tolling) as well
as aluminum used in engineered products and packaging.

Increased volumes helped
offset a 6% reduction in the average 3-month LME price.

Sales and Operating
Revenues

Sales and operating revenues
remained flat as increased volumes in primary metal and rolled product
businesses, and the benefits of a stronger euro, offset a 6% reduction in the
average three-month LME price.

((Graph))Alcan's 2002 Revenues by
      MarketPackaging
    26%Beverage cans
    16%Aluminum ingot
    17%Building and
construction
    8%Electrical
    5%Transportation
    7%Other
    21%


9

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((Graph))Sales Price
      Realizations2002
    2001
    2000Ingot products
      (US$/t)
    1,507
    1,581
    1,667Rolled products (US$/t)
    
    2,295
    2,385
    2,455LME (US$/t)
    
    1,365
    1,454
    1,567


Realizations for both ingot products and
rolled products declined in line with lower LME prices.

Costs and Expenses

Despite a 6% drop in average LME
prices, cost of sales and operating expenses as a percentage of sales and
operating revenues remained flat at 79% compared to 2001 (78% in 2000). The
relative improvement was primarily due to the benefits from cost initiative
programs, including merger integration synergies and the 2001 restructuring
program, as well as the reduction in start-up and pre-operating expenses related
to the new smelter in Alma, Quebec.

((Graph))Total Aluminum Volume and
      Purchases2002
    2001
    2000Total aluminum volume *(kt)
    4,437
    4,253
    3,509Total purchases (kt)
    1,804
    1,822
    1,670


*Includes ingot products and
rolled products shipments, conversion of customer-owned metal (tolling) as well
as aluminum used in engineered products and packaging.

Increased primary production
covered higher rolled product shipments and reduced the need for purchased
metal.

Depreciation expense was $835 million as compared to $799 million in the
previous year and $540 million in 2000. This increase reflected depreciation on
the Alma smelter, which reached its full capacity at the end of September 2001,
and the Company's 40% share of the Alouette smelter in Quebec that was acquired
in two tranches of 20% each in 2002. These increases were offset in part by the
sale of operations in Jamaica in May 2001.

Selling, administrative and general expenses, at $573 million, increased
by 5% from $545 million in 2001, and from $406 million in 2000. The increase in
2002 was due principally to higher pension expenses, and increased consultant
fees related to performance improvement initiatives. Expressed as a percentage
of sales and operating revenues, these expenses increased to 4.6%, representing
a slight deterioration relative to the 2001 and 2000 rates of 4.4% and 4.5%,
respectively.

Alcan's research and development (R&D) activities are closely aligned
with the needs of its core businesses, principally bauxite and alumina,
smelting, fabrication, and packaging. The Company maintains a strong effort in
developing sheet applications and technology for the automotive industry and is
working closely with a number of automotive companies in this regard. In 2002,
the Company decided to focus its fabrication R&D in two locations, Kingston,
Canada and Neuhausen, Switzerland, and is therefore closing its laboratories in
Banbury, U.K. R&D expenses were $115 million for 2002 compared to $135
million in 2001 and $81 million in 2000. Most of the increase from 2000 was due
to the integration of algroup and its dedicated research and development in the
engineered products and packaging sectors.

((Graph))Interest2002
    2001
    2000Capitalized interest
    1
    30
    81Interest expense
    202
    252
    78Effective average interest rate
    5.0
    6.1
    7.1


Interest expense fell as rates declined
and debt decreased.

10

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Both
the effective average interest rate and debt levels decreased in 2002 reflecting
lower short-term interest rates and the Company's strong free cash flows. Total
interest costs rose in 2001 due to the inclusion of algroup debt for a full year
and to the debt incurred to finance capital expenditures.

Interest capitalized in the previous years related mainly to the
construction of the new smelter in Alma, Quebec. The Company does not expect to
capitalize interest in 2003.

Other pre-tax expenses (net of other income) of $114 million, compared to
$112 million in 2001 and $50 million in 2000, comprised mainly a $100 million
provision for a ruling on a contract dispute with Powerex (a subsidiary of BC
Hydro), partially offset by a gain on the sale of more than half of the
Company's remaining portfolio investment in Nippon Light Metal Company, Ltd. of
$36 million. In 2001, other expenses included a $123-million loss on the
disposal of the Jamaican operations. The 2000 figure included rationalization
costs of $45 million as well as a non-recurring environmental provision of $14
million.

Income Taxes

The
reported effective tax rate of 44% in 2002 (43% in 2001 and 29% in 2000)
compares to a composite statutory tax rate of 39% in Canada (40% in 2001 and
2000). The difference represents principally the impact of foreign currency
items, net of unrecorded tax benefits on losses, investment and other allowances
and lower foreign tax rates. A full reconciliation between these two rates is
presented in note 9 to the financial statements.

Goodwill

In 2002, the Company adopted new
accounting standards on goodwill. As a result of this change, goodwill is no
longer being amortized. Goodwill amortization was $72 million and $16 million in
2001 and 2000, respectively. Also under these standards, the Company completed a
review of goodwill and recorded an impairment charge of $748 million as a
reduction in opening retained earnings as of January 1, 2002. The adjustment
reflected the decline in end-market conditions in the period from the algroup
merger in October 2000 to January 1, 2002. This adjustment has no impact on the
future growth of the Company, nor did it affect its cash flows.

Cash Flows and
Liquidity

Operating
Activities

((Graph))Cash from Operations and Free Cash
      Flow *2002
    2001
    2000
    1999
    1998Free Cash Flow (US$M)
    683
    75
    (582)
    (135)
    (214)Cash from Operations (US$M)
    1,614
    1,387
    1,066
    1,182
    739* Includes discontinued
      operations


Cash from operations reached record levels
in 2002.

The
Company achieved an all-time record cash from operations in 2002, despite lower
LME prices, as a result of continued financial discipline. The improvement in
2001 was attained despite lower net income, and resulted mainly from improved
operating working capital.

The
substantial increase in free cash flow (calculated by subtracting dividends and
capital expenditures from cash from operating activities) reflected higher cash
from operations as well as lower capital expenditures.

Continued focus on working capital management resulted in a decline in
net operating working capital of $161 million in 2002, in addition to the
decrease of $150 million in 2001. Net operating working capital increased in
2000 by $225 million. The improvement in 2001 and 2002 was due to reductions in
trade receivables and inventories (30 kt over the two years), offset in part by
a decrease in payables. The increase in 2000 was due mainly to a refinancing of
trade payables by short-term borrowings in Korea and the reduction in payables
related to the Alma smelter in Quebec.

Investment
Activities

Alcan adoptedMaximizing Valueas its governing objective in 2001 and as such uses a value-based approach to
identify investment opportunities. A number of resulting value-maximizing
initiatives were implemented in 2002.

11

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((Graph))Capital Expenditures and
      Depreciation2002
    2001
    2000
    1999
    1998Capital Expenditures (US$M)
    711
    1,091
    1,482
    1,169
    805Depreciation (US$M)
    835
    799
    540
    477
    462


Capital expenditures were well below
depreciation.

Financial discipline resulted in capital expenditures that were well
below depreciation in 2002. Capital expenditures included amounts related to the
Alma smelter project of $250 million in 2001 and $850 million in 2000. The
Company expects to incur $800 to $850 million of capital expenditures in
2003.

During 2002, the Company acquired a 40% joint venture interest in the
Aluminerie Alouette consortium. The first tranche of 20% was purchased from the
Société générale de financement (SGF) and the second tranche of 20% from the
Corus Group plc at costs of $172 million and $171 million, respectively, subject
to certain post-closing adjustments.

Asset disposals in 2002 were mainly comprised of the molded glass
operations in the U.S. and China and the rolled products circles operations in
Italy, as well as three company-owned ships and more than half of the Company's
remaining portfolio investment in Nippon Light Metal Company, Ltd.

Financing
Activities

Debt decreased as a result of
strong free cash flow.

((Graph))Total Borrowings and
      Equity2002
    2001
    2000
    1999
    1998Borrowings* (US$M)
    3,867
    4,091
    4,608
    1,489
    1,789Equity** (US$M)
    8,775
    8,902
    9,253
    5,738
    5,629Debt as a percent of invested capital
      (%)
    31
    32
    33
    21
    24


|*  | Includes
      borrowings of operations held for sale.  
|-- | --------------------------------------------------------
|** | Includes minority
      interests and preference shares.

Total borrowings declined during 2002,
resulting in an improved debt/equity ratio.

In January 2002, the Company
redeemed all of its $150-million 8 7/8% debentures originally due on January 15,
2022, for 104.15% of their face value. A loss of $6 million was recognized in
the first quarter of 2002. The redemption was financed by commercial paper
borrowings at a significantly lower rate of interest. In September 2002, the
Company issued $500-million of 4 7/8% global notes due September 15, 2012. Net
proceeds were used to repay existing long-term debt and commercial paper
borrowings.

The
quarterly common share dividend remained at 15 cents per share in 2002. Total
dividends paid (common and preference) to shareholders were $197 million in 2002
compared to $200 million in 2001 and $155 million in 2000.

Cash
and time deposits totaled $109 million at the end of 2002, which is slightly
lower than the $116 million at the end of 2001. Alcan has committed credit
facilities totaling $2 billion. The Company expects that cash from operations,
combined with the $2 billion still available under its credit facilities, will
be more than sufficient to meet the cash requirements of operations, planned
capital expenditures and dividends. In addition, the Company believes that its
ability to access global capital markets, considering its investment grade
rating, should provide any additional liquidity that may be required to meet
unforeseen events.

Environment, Health and Safety
(EHS)

Continuous improvement in
performance while increasing value for stakeholders is the core feature of
Alcan's EHS approach. In 2002, the Company began to implement its revised EHS
Policy. An initiative entitled "A Call to Action" was cascaded throughout the
organization to capture employee feedback on improving Alcan's safety record at
an even faster rate. Other developments during 2002 included better integration
of EHS into business systems and the development of improved performance
metrics.

Alcan produced its first sustainability report, entitledAlcan's Journey Towards Sustainability, that charts the Company's progress in measuring and
managing its economic, environmental and social impacts and also draws a
definitive link between Alcan's business success and its EHS activities.
Furthermore, Alcan was selected for the Dow Jones Sustainability World Index and
for the Gobal Reporters Survey conducted by the United Nations Environment Program (UNEP) and SustainAbility in
recognition of its on-going efforts to implement sustainability within its
businesses.

12

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Finally, the Company won a UNEP award for excellence in sustainable
development, a result of promoting the benefits of recycling and fostering an
entrepreneurial spirit among school children around the world.

Alcan believes that existing and planned EHS measures allow it to exceed
statutory and regulatory demands while improving its competitive position and
efficiency. Alcan's capital expenditures to protect the environment and improve
working conditions were $67 million in 2002. Similar expenditures for 2003 and
2004 are projected to be $106 million and $147 million, respectively. In
addition, expenditures charged against income for environmental protection were
$140 million in 2002, and are expected to be $137 million both in 2003 and 2004.

Operating Segment Review

At the beginning of 2002, the
Company re-aligned its management structure from four to six business groups in
order to improve its performance, move closer to its markets and increase
responsiveness. The six business groups or segments are Bauxite, Alumina and
Specialty Chemicals; Primary Metal; Rolled Products Americas and Asia; Rolled
Products Europe; Engineered Products; and Packaging. EBITDA (Earnings Before
Interest, Taxes, Depreciation and Amortization) continues to be a key financial
performance measure for the operating segments. EBITDA is not a substitute for
net income, cash flows and other measures of financial performance as defined by
generally accepted accounting principles, and may be defined differently by
other companies. The Company considers EBITDA to be a key financial performance
measure used by management for the six operating segments. Management believes
that, for the Company, EBITDA provides a measure of operating results that is
unaffected by the differences in capital structures among otherwise comparable
companies. Additional operating segment information is presented in note 28 to
the financial statements.

((Graph))

Alcan's 2002 Revenues by Business Group

Bauxite, Alumina and Specialty
      Chemicals
    4%Primary Metal
    20%Rolled Products Americas and
      Asia
    27%Rolled Products Europe
    15%Engineered Products
    13%Packaging
    21%


The
information that follows is reported by operating segment on a stand-alone
basis. Transactions between groups are conducted at arm's-length and reflect
market prices. Accordingly, earnings from Bauxite, Alumina and Specialty
Chemicals as well as from Primary Metal operations include profit on alumina or
metal produced by the Company, whether sold to third parties or used in the
Company's fabricating and packaging operations. Earnings from the downstream
operations represent only the value-added portion of the profit from rolled
products, engineered products and packaging products.

Bauxite, Alumina and Specialty
Chemicals

Production costs hit record
lows for second consecutive year.

The Bauxite, Alumina and Specialty
Chemicals (BASC) group operates five refineries and two specialty chemicals
plants and has seven wholly or partially owned bauxite mines/deposits. The
alumina produced is generally used to supply the Company's own smelting
requirements. BASC spent much of the last few years repositioning its business
portfolio around low-cost bauxite and alumina assets in Australia and has moved
from the fourth to the second cash-cost quartile in the industry.

((Graph))Sales and Production -
      BASC2002
    2001
    2000Intersegment sales (US$M)
    757
    771
    536Third-party sales (US$M)
    435
    477
    470Alumina production (kt)
    4,271
    4,625
    3,941


Lower production in 2002 reflected the
earlier sale of Jamaican operations partly offset by record production at Gove
and Vaudreuil.

In
2002, record production levels at the Gove refinery in Australia and Vaudreuil
in Canada refineries helped offset the decrease in production due to the sale of
the Jamaican operations in the second quarter of 2001.

13

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In
the first quarter of 2001, the Company acquired the remaining 30% of the Gove
alumina refinery and related bauxite mine at a cost of $379 million (subject to
certain post-closing adjustments) bringing its interest in these assets to 100%.
This low-cost refinery has total annual capacity of 1.9 Mt and set production
records in 2001 and 2002. This investment has helped the Company to further
reduce its average alumina cost, while giving it access to Gove's significant
low-cost expansion potential in the future.

On
May 31, 2001, the Company completed the sale of its operations in Jamaica, which
had an annual capacity of some 1.1 Mt of alumina.

As a
result of a value-based review of its activities in specialty chemicals, Alcan
announced in January 2002 that it would exit this business in Europe due to the
unprofitable nature of this market, and because of its disadvantaged cost
position. A significant effort was made to sell the Burntisland Specialty
Chemicals plant in the U.K., but a successful transaction could not be
structured. Consequently, Alcan ceased operations in November 2002, following a
consultation process with employees and union representatives.

The
decrease in production and lower alumina prices, partially offset by improved
production costs, contributed to lower EBITDA in 2002. Higher production and
substantial cost reductions, partially offset by lower alumina prices,
contributed to higher EBITDA in 2001 compared to 2000.

Average realized prices for alumina decreased both in 2002 and 2001 in
line with LME prices. The Company continues to pursue lower costs in the face of
ongoing pricing pressure.

((Graph))EBITDA - BASC2002
    2001
    2000EBITDA (US$M)
    249
    301
    265LME (US$/t)
    1,365
    1,454
    1,567


Lower alumina prices and production
contributed to lower EBITDA in 2002.

Production costs were 6% better in 2002, setting a new record for a
second consecutive year, due to the divestment of high-cost operations in
Jamaica, lower raw material prices and to ongoing cost reduction efforts.
Production costs decreased by 3% in 2001 compared to 2000, as a result of
divestment activities, ongoing cost reduction efforts, including synergies from
the algroup merger, and improved productivity.

In
the second quarter of 2002, a production optimization project at Gove was
initiated. This $40-million project will increase the refinery's capacity by 100
kt/y and is expected to further reduce costs on a per tonne basis. Construction
work should be completed in the first quarter of 2003.

Specialty
Chemicals

Operating results for 2002 were
24% lower than in 2001 mainly due to an operating loss of $10 million
attributable to the European business from which the Company exited in November
2002.

Operating results for 2001 were 35% lower than in 2000. While the
European business underwent a major restructuring that streamlined the
organization and improved process efficiencies, worldwide operations were
adversely impacted by the economic slowdown resulting in lower shipments and
prices.

Primary Metal

Our 40% stake in Alouette
exemplifies value-maximizing investment.

Alcan is the second largest
aluminum producer in the Western World. Its Primary Metal group operates or has
interests in sixteen smelters worldwide, 62% of which are supplied by
company-owned power (compared to the industry average of 28%) - a major
competitive advantage. With its focus on continuous improvement in technology
and cost, the Company has an excellent low-cost primary metal position with 50%
of its smelting capacity in the top tier of industry cash cost. In addition to
LME-grade ingot, Primary Metal produces value-added aluminum in the form of
sheet ingot, extrusion billet, cable rods and foundry ingot for other Alcan
plants or third-party customers serving the transportation, building and
construction, consumer goods and machinery markets.

14

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((Graph))Sales and Production -
      Primary Metal2002
    2001
    2000Intersegment sales (US$M)
    2,205
    2,117
    1,674Third-party sales (US$M)
    2,447
    2,546
    1,655Aluminum production (kt)
    2,238
    2,042
    1,562


Alma and Alouette were major contributors
to a 10% increase in production.

A
full year of production at Alma, the 40% acquisition of Alouette and capacity
restarts contributed to the 10% increase in production.

Eleven of the thirteen smelters operating without any water restrictions
set all-time production records in 2002. The Alma smelter reached full
production of 405 kt in 2002, after all pots became operational on September 30,
2001, as compared to the 272 kt produced in 2001.

As
part of its maximizing value initiatives, Alcan acquired a 20% interest in the
Aluminerie Alouette consortium from Société générale de financement (SGF) in
April 2002. Later, in September 2002, the Company purchased an additional 20%
interest in Alouette from Corus Group plc, bringing its total participation to
40%. Alouette is a world-class aluminum smelter located in Sept-Îles, Quebec,
with an annual capacity of 243 kt/y; the acquisition will help the Company
leverage value maximizing synergies within its Quebec smelter system.

In
2002, production at the Kitimat smelter in British Columbia was lower due to
production cut-backs that occurred in 2001 as a result of water shortages.
However, because water levels improved in the Nechako Reservoir in B.C. during
2002, 60 kt/y of idled capacity was gradually restarted beginning in the third
quarter.

Most
of Alcan's smelter production is in the form of value-added ingot. Sales of
these products increased by 12% in 2002 and in fact were at all-time record
levels for each of the three major products: sheet ingot, foundry ingot and
extrusion billet.

Record production was also achieved at the partially owned anode plant,
Aluchemie, in the Netherlands and calcined coke plant in Strathcona, Alberta, as
well as at the Company's power facilities in Quebec.

((Graph))EBITDA - Primary
      Metal2002
    2001
    2000EBITDA (US$M)
    858
    818
    729Average third party realized price
      (US$/t)
    1,533
    1,614
    1,747LME (US$/t)
    1,365
    1,454
    1,567


Higher volumes and improved
costs more than offset a 6% reduction in LME prices.

Additional sales volumes and lower operating costs (including the
reduction in Alma start-up expenses) and benefits from merger synergies and the
restructuring program more than offset a 6% reduction in LME prices and the
unfavourable effects of foreign currency balance sheet translation of $10
million in 2002.

The
main factors contributing to the increase in EBITDA in 2001 were additional
production volumes, lower operating costs and initial merger synergy savings as
well as a gain on foreign currency balance sheet translation of $18 million,
partially offset by lower ingot realizations and increased start-up costs for
the new Alma smelter.

((Graph))Cost of Production -
      Primary Metal2002
    2001
    2000Special charges (US$/t)
    43
    111
    97Cost of production (US$/t)
    1,204
    1,214
    1,233


Total metal production costs for the year
declined by $78/t.

15

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The
decrease of $78 /t in total metal production costs in 2002 was attributable to a
decrease in Alma start-up expenses, lower raw material costs and the benefits
from the merger synergy and restructuring programs.

The
largest of the special charges in 2002 was related to Kitimat's idled capacity.
The charges also included Alma pre-operating and start-up expenses of $10
million ($140 million in 2001 and $73 million in 2000).

In
September 2002, the five co-venturers of Alouette announced their approval of
the phase II expansion project, which will increase production capacity to 550
kt/y. While the project commenced in late 2002, Alcan's $350-million
contribution to the cost will not begin until 2004. The new pots will gradually
come on line starting in February 2005 with completion expected in the fall of
2005. The expansion project was predicated on a 500 MW block of power that was
awarded to Alouette by the provincial power authority.

A
$66-million, 44 kt/y expansion project in Soeral, Norway, in which Alcan has a
50% interest, is on budget and expected to be completed in the first quarter of
2003.

The
high amperage/low energy project at the Lynemouth and Lochaber smelters in the
U.K. was approved in June 2002 for $38 million. By increasing the amperage in
existing pots, this project will result in additional production of 16 kt/y, improved current and power
efficiencies and reduced CO2 emissions.

Construction of a pot-relining centre at the Alma smelter was approved in
January 2003 for $39 million. The centre will include processes for pot
demolition, relining, cathode rodding, as well as minimum storage and shipping
facilities for spent potlining.

A
project to build the Candonga hydropower plant on the Doce River in Brazil, with
a total installed capacity of 140 MW, was approved in 2001. Alcan is
participating equally in this project with CVRD (Companhia Vale do Rio Doce).
Construction began in July 2001 with the first turbine expected to be in
operation by November 2003. Alcan's share of the cost is estimated at $48
million. The project is 75% complete, on budget and ahead of schedule.

Other value-maximizing options were developed in 2002. For example, on
June 6, 2002, the Company announced an agreement in principle to form a joint
venture with Qingtongxia Aluminum Company (QTX), a leading aluminum company in
China. The proposed joint venture provides an opportunity for Alcan to acquire a
50% share in a 130 kt/y aluminum smelter that utilizes modern, pre-bake
technology. In addition, Alcan would have an option for a 50% share in the
planned and approved 150 kt/y expansion of the smelter. Due diligence and the
development of an implementation plan were the main focuses in the latter part
of 2002, in preparation for formal negotiations with QTX and Chinese officials
in 2003.

Significant volume increases
drive Rolled Products' EBITDA performance.

Rolled Products Americas and
Asia

Alcan Rolled Products Americas and Asia (RPAA), with sixteen production
facilities in six countries, is focused on meeting the ever-changing needs of
its global and regional fabrication customers through the rapid transfer and
adoption of best technology and management practices. The RPAA group
manufactures and sells high-quality sheet and light gauge rolled products
serving numerous markets including beverage, automotive, construction, and other
durable goods.

((Graph))Sales and Realized Prices -
      RPAA2002
    2001
    2000Sales (US$M)
    3,327
    3,316
    3,391Average realized price *(US$/t)
    2,218
    2,359
    2,401* Excluding conversion of
      customer-owned metal


Revenues increased despite lower
price.

The
sales increase was driven by higher volumes despite lower average realized
prices. Highlights for 2002 included record shipments in North America and Asia
despite difficult economic and market conditions. Volumes increased by 4% in
North America and 23% in Asia, offsetting market declines in South America
caused largely by currency volatility. Growth in can demand resulted in higher
sales volumes through the Company's Asian assets, as can company qualifications
were completed during the year. Alcan also made further inroads into the North
American beverage can and industrial products markets, as well as in the South
American can market. Increased demand for can stock in North America was
attributable to new brand introductions and packaging innovations by the major
soft drink companies.

16

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Rolled Products Americas and Asia revenues can
be broken down by end-use market as follows:

((Graph))

Can and
    Closures
    54%Distribution
    8%Foil and
    Foilstock
    17%Industry
    10%Automotive
    7%Other
    4%((Graph))EBITDA and Shipments -
      RPAA2002
    2001
    2000EBITDA (US$M)
    
    367
    296
    261Shipments * (kt)
    
    1,613
    1,522
    1,487* Includes
      shipments of rolled products and conversion of customer-owned
      metal.Higher volumes
      and lower costs led to improved EBITDA.


The
financial results for RPAA in 2002 reflected a significant increase in EBITDA
compared to 2001. This was attributable to volume increases along with
particularly successful cost reduction efforts in North America and the
favourable impact of metal price movements. These factors more than offset the
negative impact of a stronger Korean won and a volatile Brazilian economic
situation and currency.

The
improvement in 2001 EBITDA was mainly due to higher can sheet volume in South
America and the benefits from cost reduction initiatives, partially offset by
higher energy prices.

In
the past decade, Alcan has made important investments in the expansion, upgrade
and acquisition of rolled products facilities in North and South America and
Asia with a commitment to innovation, cost reduction, manufacturing excellence
and maximizing value for the shareholder.

RPAA Business
Units

In North America, record shipments
were achieved in 2002 within the industrial products, container, industrial fin
stock and converter foil markets. In addition to the increase in overall
volumes, RPAA's shipments of higher value-added can stock grew by 12% as a
result of the focus on value-based management. Over the past few years, industry
over-capacity in the common alloys market was rationalized through the closing
of two competitors' plants, which helped stabilize the market and improve
margins. In response to global over-capacity in the light gauge sheet and foil
markets and heightened competition from imports, Alcan announced that it would
reduce production at its Fairmont, West Virginia, plant effective in the first
quarter of 2003.

In
2002, the automotive sector continued to be a growth market for Alcan.
Automotive sheet sales were up over 2001 as North American automobile demand
increased in response to financing incentives offered by the automakers. New
Alcan automotive sheet programs for the year included innovations in sport
utility vehicle (SUV) lift-gate and hood technologies resulting from continued
close co-operation with customers.

South American economies were severely impacted in 2002 by political
uncertainty in Brazil, Argentina and Venezuela. The Brazilian real fell 53%
during the year, which reduced demand for U.S.$-based aluminum products and led
to an 8% drop in sheet shipments. Alcan is turning to new export markets and new
product introductions, as well as focusing on higher value-added products, to
help mitigate the decline in local demand. As the only company capable of
producing can sheet in South America, Alcan is well positioned to benefit from
the improving economic trend that began in late 2002.

In
Asia, Alcan Taihan Aluminum Limited (ATA) in Korea achieved a major milestone
when, after two and a half years of dedicated efforts, it qualified its can-body
stock with 28 customer can manufacturing plants in Australia, China, Korea,
Malaysia, Singapore, Taiwan, Thailand and Vietnam. Alcan became the number two
supplier to the Chinese rolled products market, which continues to benefit from
double-digit growth in demand.

Recycling

During 2002, Alcan remained the
world's leader in recycling used aluminum beverage cans (UBCs). Alcan's U.S.
operations recycled 24 billion UBCs, representing an estimated 45% of all
aluminum cans recycled in the United States. RPAA operates three aluminum can
recycling plants located in Oswego, New York; Berea, Kentucky; and Greensboro,
Georgia. At Alcan's Berea recycling facility, the largest UBC recycling facility
in the world, production increased by nearly 22% as a result of improved
manufacturing efficiencies.

In
South America, Brazil with its 85% recycling rate was recognized as the
world-wide leader among countries where UBC recycling is not legally mandated.
At its state-of-the-art recycling operation in Pinda, Alcan recycled 36% of
these cans in addition to metal received from a third-party metal recycler and
utilized 59% of the recycled material to produce can stock.

17

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In
Korea, ATA's Ulsan plant commissioned a new aluminum recycling furnace that is
being used to process scrap from its own operations and from customers. The
30-tonne capacity furnace uses technology that was developed by Alcan, which
enhances the scrap recovery rate.

Rolled Products
Europe

Rolled Products Europe (RPE)
produces a variety of flat rolled products through its eleven plants, with
Alunorf in Germany as its hub. RPE is focused on fully capturing the integration
synergies from the merger with algroup, and continues to optimize its product
portfolio and its production system to better serve its customers and reduce
costs. RPE supplies a number of European markets including beverage can,
industrial sheet and plate, foilstock, lithographic and automotive.

((Graph))Sales and Realized Prices -
      RPE2002
    2001
    2000Sales (US$M)
    1,814
    1,735
    1,666Average realized price *
(US$/t)
    2,467
    2,448
    2,571* Excluding conversion of
      customer-owned metal.


Higher prices and shipments
resulted in increased sales.

Higher realized prices and a 10% increase in shipments resulted in
increased sales. RPE's realized prices improved relative to LME prices as a
result of portfolio changes towards higher value-added products in more
economically attractive markets.

The
European beverage can market grew 5% in 2002, mainly driven by the growing
demand in Eastern Europe. RPE can volumes increased at a faster pace than growth
in demand. The distribution market was slow at the beginning of the year, but
recovered significantly after the summer period, ending 1.5% above 2001 levels.

Most
end-user markets remained weak all year. The industrial plate sector suffered
from difficulties in the aerospace market, while the recovery in the
construction market by-passed Germany. The trend toward substitution of aluminum
for steel in these markets continued, exemplified by the demand for aluminum
automotive sheet which remained strong, with volumes up 16% over 2001.

Rolled Products Europe third-party
revenues can be broken down by end-use market as follows:

((Graph))

Can and Closures
    23%Distribution
    17%Foil and Foilstock
    7%Industry
    16%Lithographic
    10%Automotive
    9%Other
    18%((Graph))EBITDA and
      Shipments - RPE2002
    2001
    2000EBITDA (US$M)
    
    132
    83
    144Shipments * (kt)
    
    836
    759
    696* Includes
      shipments of rolled products and conversion of customer-owned
      metal.


Increased volumes and lower costs resulted
in higher EBITDA.

Increased volumes, at a sustained higher-value mix, as well as benefits
from merger synergy and restructuring programs resulted in higher EBITDA. The
strengthening of the euro and Swiss franc against the U.S. dollar contributed
approximately $7 million to EBITDA in 2002.

Despite increased volumes with the inclusion of algroup's operations for
a full year, lower EBITDA in 2001 was mainly due to the economic downturn in the
second half of the year and lower price realizations.

After a value-based review of alternatives, Alcan announced in late 2001
the restructuring of its rolled products businesses in the U.K. and Italy. The
aim of these measures was twofold: to make the businesses more competitive in
the face of economic difficulties; and to put them in the best possible position
to meet future industry needs.

18

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Virtually all of these measures were completed on plan by the fourth
quarter of 2002. Alcan sold its circles business in Pieve, Italy. In addition,
the restructuring and downsizing of the rolling mill at Rogerstone in the U.K.
have been completed, helping to optimize the product portfolio and align
production capacity across Alcan's European rolling system.

During 2002, the Banbury R&D facility was closed and the main
resources and programs were reallocated to Neuhausen, Switzerland and Kingston,
Canada.

Recycling

In the U.K., Alcan has an
infrastructure of over 300 independent recyclers. In addition to UBCs,
post-consumer and can process scrap support a dedicated recycling facility at
Latchford in the U.K. with a total annual capacity of 148 kt.

This facility significantly
increased its scrap intake and produced over 10% more sheet ingot than in
2001.

Engineered Products

Engineered Products manufactures extruded and cast aluminum products,
including cable, wire and rod, as well as composite materials such as
aluminum-plastic, fibre-reinforced plastic and foam-plastic. The group provides
value-added solutions for weight reduction in the automotive and mass
transportation markets, as well as for the building façade and display markets.
Engineered Products also has the largest aluminum cable position in North
America. Its focus is to capitalize on profitable growth opportunities by
leveraging its superior technology on a global basis.

((Graph))Sales and EBITDA - Engineered
      Products2002
    2001
    2000EBITDA (US$M)
    96
    103
    55Sales and operating revenues
    (US$M)
    1,645
    1,661
    724


Difficult business conditions contributed
to slightly lower EBITDA.

EBITDA was slightly below 2001 due to the difficult business conditions
in light of the strengthening euro, particularly in extrusions and distribution
markets in Europe.

The
increase in both revenues and EBITDA in 2001 was mainly due to the inclusion of
algroup for the full year, as well as good volume growth in the first half of
the year.

Alcan's engineered products
revenues can be broken down by business as follows:

((Graph))

|Extrusions                | 24%
|------------------------- | ---
|Composites                | 19%
|Automotive                | 12%
|Cable                     | 26%
|Service
Centres           | 13%
|Mass
      Transportation | 6% 

Engineered Products Business
Units

EBITDA for Alcan's North American
cable business is comparable to 2001. A softening trend in the latter part of
the year followed a strong market in the first quarter. Total shipments were
flat with increasing rod sales offset by lower building wire and cable sales.
Prices remained under pressure throughout the year, reflecting difficult
conditions in customer markets.

The
overall volume for Alcan's extrusions was slightly below that of 2001. Market
share in the soft alloys and large profiles industry was largely maintained,
while slight increases in hard alloys and supplies to the mass transportation
market were achieved. However, specialized industry volumes were lower due to
depressed end-use markets, principally machinery and capital goods.

The
use of composites in transport and industrial applications continued to grow,
particularly in the wind-power generation market, where the Company is a leading
supplier. While display volumes and prices remained under pressure throughout
the year, architectural applications in Europe and North America had another
year of strong performance. Geographic coverage was improved in 2002 with the
opening of a new plant for the production of Alucobond in Bahia, Brazil.

Overall car production in Europe decreased by 1.5% compared to the
previous year. New car sales dropped by 3.1% in Western Europe and 1.9% in the
U.S. Although the market success of each new model is different, Alcan was able
to maintain sales and further increase order backlogs for structural parts,
including bumper systems, extrusions and high-pressure die-cast structural
parts. For example, sales of cockpit carriers showed strong growth in 2002.

19

---



Alcan's mass transportation systems again achieved record sales in 2002.
This trend reflects the continuing growth in public-sector projects, mainly
involving new high-speed trains, metro trams and light-rail systems. The
"Transrapid" magnetic levitation train project in Shanghai, China, received much
market and media attention for example.

Packaging

Proposed acquisition of VAW
Packaging an example of profitable growth.

With 2002 revenues of $2.6
billion, Alcan Packaging has leading positions in the end-use markets of food,
pharmaceutical, cosmetic and personal care, and tobacco packaging markets. It
offers a variety of packaging solutions using plastics, paper and paperboard as
well as aluminum and other materials. Alcan Packaging is capitalizing on
profitable growth opportunities, both internally and externally, created by
enhanced product ranges, broader distribution systems and new customer
relationships formed by the algroup merger. The group is also focused on
reorganizing its European foil rolling and container businesses.

((Graph))Sales and EBITDA -
      Packaging2002
    2001
    2000EBITDA (US$M)
    327
    328
    67Sales and operating revenues
    (US$M)
    2,599
    2,658
    1,165


Significant cost
improvements helped offset a weak economic environment.

Benefits from cost initiatives, largely related to merger synergy and
restructuring programs, compensated for the weak economic environment resulting
in comparable EBITDA performance relative to 2001.

Margin pressures associated with customer consolidation and over-capacity
in a weakened economic environment characterized packaging markets in 2002.
Demand for food, pharmaceutical and technical applications softened in the first
quarter of 2002 reflecting general economic uncertainty, then gradually
recovered as the year progressed. The divestiture of the molded glass operations
in the third quarter also had an unfavourable impact on sales and operating
revenues compared to 2001.

Both
revenues and EBITDA increased in 2001 largely due to the inclusion of algroup
businesses for the full year.

Alcan's packaging revenues can be
broken down as follows:

((Graph))

By MarketFood
    45%Pharmaceutical
    19%Tobacco
    16%Cosmetics
    3%Other
    17%By Type of InputPlastic and Paper
    43%Aluminum
    33%Paperboard
    12%Glass
    9%Steel
    3%By RegionEurope
    52%North America
    41%South America
    3%Asia
    4%


Acquisition of VAW
Packaging

At the close of 2002, an agreement
was finalized to acquire VAW Flexible Packaging (FlexPac) from Norsk Hydro for
approximately $370 million. The proposed acquisition represents an excellent
platform for profitable growth and is a good example of Alcan's focus on
maximizing value. It would significantly enhance Alcan's global position in
packaging, expanding its footprint technologically and regionally, particularly
in the developing markets of Asia. On completion, Alcan would have world-class
flexible packaging operations in Europe, Asia and the Americas. FlexPac includes 14 plants in 8 countries and 5,400
employees and posted consolidated sales of $680 million in 2001 at today's
exchange rates. Based upon projected earnings for 2002, the purchase price
represents a multiple of approximately 6.9 times EBITDA.

20

---



Packaging Business
Units

Foil and technical products
continued to implement major restructuring programs in the U.K., Germany and
Switzerland, which are key to maximizing shareholder value. To maintain
profitability, these aggressive cost reduction programs were needed to offset
declines in major markets, particularly in the construction industry.

Flexible food packaging, particularly in Europe, was the most
significantly impacted by price pressure. European volumes weakened in the early
months of the year, although North American volumes remained strong. EBITDA was
nonetheless sustained, and in the case of North America significantly improved,
both through leveraging Alcan's strong service offering to key accounts and by
successes in restructuring and other cost initiatives.

Operations began in late 2001 at a new contract packaging and specialty
carton facility in Pennsylvania, building on Alcan's success in another similar
plant in Canada. New investments were also made to relocate one facility and
include it with the construction of a dedicated plant for a major customer in
Spain.

Alcan's food container business counterbalanced the general economic
slowdown in Europe with its cost initiatives and, despite lower sales, recorded
improved profits.

Following volume declines in pharmaceutical and cosmetics packaging in
the last quarter of 2001, the recovery in 2002 has been mixed. Although flexible
pharma packaging has rebounded well, product introductions by customers in
plastics as well as in specialty cartons and contract packaging have been
subject to delays. Aerosol can volumes did recover during the year, but pricing
pressure continued due to European overcapacity. The Company's molded glass
operations were sold at the end of the third quarter in 2002, as they were
disadvantaged from a competitive standpoint. Included in the year were revenues
of $88 million and operating losses of $6 million from these operations.

Alcan's tobacco packaging business reached a new milestone in 2002, with
U.S. carton sales growing by 50% over the prior year as a result of
commissioning a new plant in Richmond, Virginia during 2001. The second year of
the new venture in Kazakhstan saw the achievement of additional new customer
volume, establishing a strong foothold in the markets of western Asia.
Inner-liner volumes also remained very buoyant throughout the year in line with
the projections underpinning Alcan's new metallizing and laminating plant in
Berlin, Germany, which was at an advanced stage of construction by the end of
2002.

Risks and
Uncertainties

For further details, refer to
notes 22, 23 and 24 of the financial statements.

Risk Management

As a multinational company, which
is to a large degree engaged in a commodity-related business, Alcan's financial
performance is heavily influenced by fluctuations in metal prices and exchange
rates. In order to reduce the associated risks, the Company uses a variety of
financial instruments and commodity contracts. Clearly defined policies and
management controls govern all risk management activities. Transactions in
financial instruments for which there is no underlying exposure to the Company
are prohibited, except for a small metal trading portfolio not exceeding 10,000
tonnes.

The
decision whether and when to commence a hedge, along with the duration of the
hedge, can vary from period to period depending on market conditions and the
relative costs of various hedging instruments. The duration of a hedge is always
linked to the timing of the underlying transaction, with the connection between
the two being constantly monitored to ensure effectiveness.

SensitivitiesEstimated after-tax
      effect on Alcan's net income of:Change in
      full
    US$M
    
    US$year
    average*
    
    
    per
      shareExchange rate on long-term
      profitabilityCanadian dollar
    +1 US
cent
    $
    (11)
    $
    (0.03)Euro
    +1 US
cent
    $
    
    
    4
    $
    
    0.01Exchange rate on balance sheet
      translationCanadian dollar
    +1 US
cent
    $
    (17)
    $
    (0.05)Australian dollar
    +1 US
cent
    $
    
    (6)
    $
    (0.02)Metal price on long-term
      profitabilityAluminum
    +US$100/t
    $
    146
    $
    
    0.45


* Except for balance sheet translation which is
point-in-time.

21

---



Foreign Currency
Exchange

Exchange rate movements,
particularly between the Canadian dollar and the U.S. dollar, have an impact on
Alcan's costs and therefore its net results. Because the Company has significant
operating costs denominated in Canadian dollars while its reporting currency is
the U.S. dollar, it benefits long-term from a weakening in the Canadian dollar,
but conversely, is disadvantaged if it strengthens.

Following the algroup merger, exchange movements have a greater impact on
the Company's net income as a result of translating the euro earnings into U.S.
dollars. Alcan benefits from a strengthening of the euro, but conversely, is
disadvantaged if it weakens.

The
Company's deferred income tax liabilities and net monetary liabilities for
operations in Canada and Australia are translated into U.S. dollars at current
rates. The resultant exchange gains or losses are included in income and
fluctuate from quarter to quarter depending on the changes in exchange rates. A
decrease in the Canadian and Australian dollars results in a favourable effect,
whereas an increase results in an unfavourable impact.

Aluminum
Prices

Depending on market conditions and
logistical considerations, Alcan may sell primary aluminum to third parties and
may purchase primary aluminum and secondary aluminum, including scrap, on the
open market to meet the requirements of its fabricating businesses. In addition,
depending on pricing arrangements with fabricated products customers, Alcan may
hedge some of its purchased metal supply in support of those sales.

Through the use of forward purchase and sale contracts and options, Alcan
seeks to limit the impact of lower metal prices.

Critical Accounting
Policies

The Company's significant
accounting policies are presented in note 2 to the financial statements. The
critical accounting policies 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.

Post-retirement
Benefits

The costs of pension and other
post-retirement benefits are calculated based on assumptions determined by
management, with the assistance of independent actuarial firms and consultants.
These assumptions include the long-term rate of return on pension assets,
discount rates for pension and other post-retirement benefits obligations,
expected service period, salary increases, retirement ages of employees and
health care cost trend rates. If actual experience differs from the assumptions
made by management, the pension and other post-retirement benefits expenses will
increase or decrease in future years as a result. See note 26 - Post-retirement
Benefits for additional information, including a sensitivity analysis for
assumed health care cost trend rates.

Environmental Liabilities
and Contingencies

Environmental expenses and
contingencies are accrued on an undiscounted basis when it is probable that a
liability for past events exists and the liabilities can be reasonably
estimated. In determining whether a liability exists, the Company is required to
make judgments as to the probability of a future event occurring. If the
Company's judgments differ from those of legal or statutory authorities, the
provisions for environmental expenses and contingencies could increase or
decrease in future periods.

Property, Plant and
Equipment

Due to changing economic and other
circumstances, the Company regularly reviews and evaluates its property, plant
and equipment for impairment in order to record the assets at the lower of cost
or net recoverable amount. In determining whether the assets are impaired, the
Company makes assumptions and estimates as to future cash flows and
profitability. Actual results could differ from those estimates.

Goodwill

As reported in note 3, Accounting
Changes, effective January 2002, goodwill is no longer amortized but is tested
annually for impairment at the reporting unit level. Impairment is determined by
comparing the fair value of the reporting unit to its carrying value. The fair
value of a reporting unit and assets and liabilities within a reporting unit may
be determined using alternative methods for market valuation, including quoted
market prices, discounted cash flows and net realizable values. In estimating
the fair value of a reporting unit, the Company chose a valuation method
developed by outside consultants and made assumptions and estimates in a number
of areas, including future cash flows and discount rates. The Company regularly
uses independent appraisers and consultants to perform valuations of the assets
and liabilities. The use of different judgments and estimates in the test for
goodwill impairment may result in significantly different results.

22



---



Income Taxes

The provision for income taxes is
calculated based on the expected tax treatment of transactions recorded in the
Company's consolidated financial statements. Income tax assets and liabilities,
both current and deferred, are measured according to the income tax legislation
that is expected to apply when the asset is realized or the liability settled.
The Company regularly reviews the recognized and unrecognized deferred income
tax assets to determine whether a valuation allowance is required or needs to be
adjusted. In forming a conclusion about whether it is appropriate to recognize a
tax asset, the Company must use judgment in assessing the potential for future
recoverability while at the same time considering past experience. 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 in future periods.

Cautionary
Statement

Statements made in this report
that describe the Company's or management's objectives, projections, estimates,
expectations or predictions of the future may be "forward-looking statements"
within the meaning of securities laws, which can be identified by the use of
forward-looking terminology such as "believes", "expects", "may", "will",
"should", "estimates", "anticipates" or the negative thereof or other variations
thereon. The Company cautions that, by their nature, forward-looking statements
involve risk and uncertainty and that the Company's actual actions or results
could differ materially from those expressed or implied in such forward-looking
statements or could affect the extent to which a particular projection is
realized. Important factors that could cause such differences include global
supply and demand conditions for aluminum and other products, aluminum ingot
prices and changes in raw materials' costs and availability, changes in the
relative value of various currencies, cyclical demand and pricing within the
principal markets for the Company's products, changes in government regulations,
particularly those affecting environmental, health or safety compliance,
economic developments, relationships with and financial and operating conditions
of customers and suppliers, the effects of integrating acquired businesses and
the ability to attain expected benefits and other factors within the countries
in which the Company operates or sells its products and other factors relating
to the Company's ongoing operations including, but not limited to, litigation,
labour negotiations and fiscal regimes. The aluminum market overview contained
in this report is based on research that includes information from sources
believed to be reliable, but Alcan does not make any representation that it is
accurate in every detail. The aluminum market overview represents the Company's
views as of February 9, 2003.

As the Company follows Canadian
GAAP, reference should be made to note 7 to the Consolidated Financial
Statements of the Annual Report which compares, for certain items listed, the
amounts as reported with the amounts that would have been reported under U.S.
GAAP. Beginning in 2001, the Company adopted for supplementary U.S. GAAP
reporting purposes only, the Financial Accounting Standards Board Statement Nos.
133 and 138. These standards require that all derivatives be recorded in the
financial statements and valued at fair value.

23

---



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 Canadian generally accepted accounting principles
and include, where appropriate, estimates based on the best judgment of
management. A reconciliation with generally accepted accounting principles in
the United States is also presented. Financial and operating data elsewhere in
the Annual Report are consistent with that contained in the accompanying
financial statements.

Alcan's policy is to maintain
systems of internal accounting, administrative and disclosure controls of high
quality consistent with reasonable cost. Such systems are designed to provide
reasonable assurance that the financial information is accurate and reliable and
that Company assets are adequately accounted for and safeguarded. The Board of
Directors oversees the Company's systems of internal accounting, administrative
and disclosure controls through its Audit Committee, which is comprised of
directors who are not employees. The Audit Committee meets regularly with
representatives of the shareholders' independent auditors and management,
including internal audit staff, to satisfy themselves that Alcan's policy is
being followed. In addition, a Disclosure Committee of management has been
established to manage disclosure of corporate information and oversee the
functioning of the Company's disclosure controls and procedures.

The Audit Committee has
recommended the appointment of PricewaterhouseCoopers LLP as the independent
auditors, subject to approval by the shareholders.

The financial statements have been
reviewed by the Audit Committee and, together with the other required
information in this Annual Report, approved by the Board of Directors. In
addition, the financial statements have been audited by PricewaterhouseCoopers
LLP, whose report is provided on this page.

((Signature)) Travis Engen,
President and Chief Executive Officer

((Signature)) Geoffery E.
Merszei, Executive Vice-President and Chief Financial Officer

February 9, 2003 (except as to
notes 30 and 31 of the Consolidated financial statements, which are as of August
14, 2003)

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 aWorldwide Code of
Employee and Business Conduct, which is
consistent with them.

24

---



Auditors' Report

To the Shareholders of Alcan
Inc

We have audited the consolidated
balance sheets of Alcan Inc. as at December 31, 2002, 2001 and 2000 and the
consolidated statements of income, retained earnings and cash flows for each of
the years in the three-year period ended December 31, 2002. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in
accordance with generally accepted auditing standards in Canada and the United
States. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.

In our opinion, these consolidated
financial statements present fairly, in all material respects, the financial
position of the Company as at December 31, 2002, 2001 and 2000 and the results
of its operations and its cash flows for each of the years in the three-year
period ended December 31, 2002 in accordance with Canadian generally accepted
accounting principles.

We have also reported to the
shareholders under date February 9, 2003 on the consolidated financial
statements of the Company for the years ended December 31, 2002, 2001 and 2000
prior to the reclassification of the discontinued operations as described in
note 30.

((Signature))PricewaterhouseCoopers LLP, Chartered Accountants Montreal, Canada,
February 9, 2003 (except as to notes 30 and 31
which are as of August 14, 2003)

25

---



Comments by Auditors on Canada-United States
Reporting Difference

United States reporting standards
for auditors require the addition of an explanatory paragraph (following the
opinion paragraph) when the financial statements are affected by a change in
accounting principle, such as those changes described in note 3 to the
consolidated financial statements. Although we conducted our audits in
accordance with both Canadian and United States generally accepted auditing
standards, our report to the shareholders dated February 9, 2003 (except as to
notes 30 and 31 which are as of August 14, 2003) expressed in accordance with
Canadian reporting standards which do not permit a reference to such changes in
accounting principles in the auditors' report when the changes are properly
accounted for and adequately disclosed in the financial
statements.

((Signature))

PricewaterhouseCoopers LLP, Chartered
Accountants Montreal, Canada, February 9, 2003
        (except as to notes 30 and 31
which are of August 14, 2003)

26

---



Consolidated Financial
      StatementsConsolidated
      Statement of Income (in millions of US$, except per share
    amounts)Year ended December
31
    2002
    2001
    2000(Restated-note
      3)
    (Restated-note
      3)Sales and operating
      revenues
    12,327
    12,423
    9,097Costs and
    expensesCost of sales and operating
      expenses
    9,748
    9,823
    7,068Depreciation and amortization
      (notes 2 and 6)
    835
    799
    540Selling, administrative and
      general expenses
    573
    545
    406Research and development
      expenses
    115
    135
    81Interest
    202
    252
    78Restructuring, impairment and
      other special charges (note 8)
    69
    654
    -Other expenses (income) - net
      (note 12)
    114
    112
    5011,656
    12,320
    8,223Income from continuing
      operationsbefore income taxes and other items
    671
    103
    874Income taxes (note 9)
    295
    44
    255Income from continuing
      operations before other items
    376
    59
    619Equity income
    3
    3
    4Minority interests
    (3)
    13
    1Income from continuing
      operationsbefore amortization of goodwill
    376
    75
    624Amortization of goodwill (notes
      2 and 6)
    -
    72
    16Income from continuing
      operations
    376
    3
    608Income (Loss) from discontinued
      operations (note 30)
    (2)
    (1)
    2Net income
    374
    2
    610Dividends on preference
      shares
    5
    8
    10Net income (Loss)
      attributable to common shareholders
    369
    (6)
    600Net income (Loss) per common
      share - basicIncome from continuing operationsbefore amortization of goodwill
    1.16
    0.21
    2.46Amortization of goodwill
    -
    0.22
    0.05Income (Loss) from continuing operations
    1.16
    (0.01)
    2.41Income (Loss) from discontinued operations
    (0.01)
    (0.01)
    0.01Net income (Loss) per common share -
      basic
    1.15
    (0.02)
    2.42Net income (Loss) per common
      share - dilutedIncome from continuing operationsbefore amortization of goodwill
    1.15
    0.21
    2.46Amortization of goodwill
    -
    0.22
    0.05Income (Loss) from continuing operations
    1.15
    (0.01)
    2.41Income (Loss) from discontinued operations
    (0.01)
    (0.01)
    0.01Net income (Loss) per common share -
      diluted
    1.14
    (0.02)
    2.42Dividends per common
      share
    0.60
    0.60
    0.60


27

---



Consolidated Statement of Retained Earnings (in
millions of US$)

Year ended December
31
    2002
    2001
    2000Retained earnings -
      beginning of yearAs previously
reported
    4,095
    4,290
    4,227Accounting change - Unamortized
      exchange loss (note 3)
    (21)
    (18)
    (10)As restated
    4,074
    4,272
    4,217Accounting change - Impairment
      of goodwillas at January 1, 2002 (note
      3)
    (748)
    -
    -Net income
    374
    2
    610Amount related to common shares
      purchasedfor cancellation
    -
    -
    (400)Dividends- Common
    (192)
    (192)
    (145)- Preference
    (5)
    (8)
    (10)Retained earnings - end of
      year(note 21)
    3,503
    4,074
    4,272The accompanying notes are an
      integral part of the financial statements.


28

---



Consolidated Balance Sheet (in millions of US$)December 31
    
    
    2002
    2001
    2000(Restated-note 3)
    (Restated-note 3)ASSETSCurrent
      assetsCash and
      time deposits
    
    109
    116
    249Trade
      receivables (net of allowances of $58 in 2002,$51 in 2001 and $53 in 2000)(notes 2 and
    11)
    1,264
    1,190
    1,689Other
      receivables
    
    
    542
    526
    548Inventories- Aluminum
      operating segments- Aluminum
    
    
    905
    875
    1,034- Raw materials
    
    
    390
    413
    414- Other supplies
    
    296
    269
    2681,591
    1,557
    1,716- Packaging
      operating segment
    
    368
    368
    3761,959
    1,925
    2,092Current
      assets held for sale (note 30)
    
    76
    60
    783,950
    3,817
    4,656Deferred
      charges and other assets (note 13)
    
    666
    715
    701Property,
      plant and equipment (note 14)Cost
      (excluding Construction work in progress)
    17,630
    16,094
    14,678Construction work in progress
    
    570
    609
    1,969Accumulated
      depreciation
    
    (8,107)
    (7,130)
    (6,751)10,093
    9,573
    9,896Intangible
      assets, net of accumulated amortizationof $53 in 2002, $26 in 2001 and $5 in 2000 (note
      6)
    318
    285
    315Goodwill (note
      6)
    
    
    2,303
    2,874
    2,613Long-term
      assets held for sale (note 30)
    
    208
    194
    208Total
      assets
    
    
    17,538
    17,458
    18,389


29

---



Consolidated Balance Sheet (in
      millions of US$)December 31
    2002
    2001
    2000(Restated-note
      3)
    (Restated-note
      3)LIABILITIES AND
      SHAREHOLDERS' EQUITYCurrent
      liabilitiesPayables and accrued
      liabilities
    2,294
    2,293
    2,384Short-term borrowings
    381
    553
    1,078Debt maturing within one year
      (note 17)
    295
    652
    333Current liabilities of
      operations held for sale (note 30)
    47
    37
    453,017
    3,535
    3,840Debt not maturing within one
      year (notes 17 and 24)
    3,186
    2,884
    3,195Deferred credits and other
      liabilities (note 16)
    1,418
    1,130
    873Deferred income taxes (note
      9)
    1,120
    986
    1,203Long-term liabilities of
      operations held for sale (note 30)
    22
    21
    25Minority interests
    150
    132
    244Shareholders'
      equityRedeemable non-retractable
      preference shares (note 18)
    160
    160
    160Common shareholders'
      equityCommon shares (note 19)
    4,703
    4,687
    4,597Retained earnings (note 21)
    3,503
    4,074
    4,272Deferred translation adjustments (note 23)
    259
    (151)
    (20)8,465
    8,610
    8,8498,625
    8,770
    9,009Commitments and contingencies
      (note 22)Total liabilities and
      shareholders' equity
    17,538
    17,458
    18,389


The accompanying notes are an integral part of
the financial statements.

Approved by the Board:

((Signature))Travis Engen, Director

((Signature))Guy Saint-Pierre, Director

30

---



Consolidated Statement of Cash
      Flows (In millions of US$)Year ended December
31
    2002
    2001
    2000(Restated - note
      3)
    (Restated - note
      3)Operating
      activitiesIncome from continuing
      operations
    376
    3
    608Adjustments to determine cash
      from operating activities:Depreciation and
      amortization
    835
    799
    540Amortization of
    goodwill
    -
    72
    16Deferred income taxes
    71
    (149)
    52Asset impairment
      provisions
    33
    232
    -Loss (Gain) on sales of
      businesses and investment - net
    (27)
    123
    (9)Change in operating working
      capitalChange in receivables
    153
    112
    (21)Change in inventories
    93
    77
    (116)Change in payables
    (85)
    (39)
    (88)Total change in operating working capital
    161
    150
    (225)Change in deferred charges,
      other assets,deferred credits and other liabilities - net
    152
    133
    42Other - net
    3
    14
    35Cash from operating activities
      in continuing operations
    1,604
    1,377
    1,059Cash from operating activities
      indiscontinued operations (note 30)
    10
    10
    7Cash from operating
      activities
    1,614
    1,387
    1,066Financing
      activitiesNew debt
    848
    1,852
    1,586Debt repayments
    (1,138)
    (1,779)
    (419)(290)
    73
    1,167Short-term borrowings -
      net
    (209)
    (479)
    280Sale of receivables
    -
    300
    -Common shares purchased for
      cancellation
    -
    -
    (530)Common shares issued
    16
    61
    21Dividends- Alcan shareholders (including preference)
    (197)
    (200)
    (155)- Minority interests
    (6)
    (2)
    (2)Cash from (used for) financing
      activitiesin continuing operations
    (686)
    (247)
    781Cash from financing activities
      indiscontinued operations (note 30)
    2
    -
    -Cash from (used for)
      financing activities
    (684)
    (247)
    781


31

---



Consolidated Statement of Cash
      Flows (In millions of US$)Year ended December
31
    2002
    2001
    2000(Restated - note
      3)
    (Restated - note
      3)Investment
      activitiesProperty, plant and
      equipment
    (711)
    (1,091)
    (1,482)Business acquisitions (note
      15)
    (345)
    (404)
    (244)(1,056)
    (1,495)
    (1,726)Net proceeds from disposal of
      businesses, investmentsand other assets
    118
    239
    184Preacquisition loan to algroup
      to finance special paymentto algroup shareholders
    -
    -
    (532)Cash used for investment activitiesin
      continuing operations
    (938)
    (1,256)
    (2,074)Cash used for investment activitiesin
      discontinued operations (note 30)
    (14)
    (19)
    (9)Cash used for investment
      activities
    (952)
    (1,275)
    (2,083)Effect of exchange rate changes
      on cash and time deposits
    13
    (7)
    2Decrease in cash and time
      deposits
    (9)
    (142)
    (234)Cash of subsidiaries
      consolidated (deconsolidated) - net
    -
    -
    180Cash and time deposits -
      beginning of year
    119
    261
    315Cash and time deposits - end of
      yearIn continuing operations
    109
    116
    249Cash and time deposits - end of
      yearin discontinued operations
    1
    3
    12Cash and time deposits - end of
      year
    110
    119
    261


The accompanying notes are an integral part of
the financial statements.

32

---



> Notes to Consolidated
>   Financial Statements(in millions of US$, except where
>   indicated)
>   Note 1. Nature of
>   Operations

Alcan is engaged, together with
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 alumina; the generation of electric power for use in
smelting aluminum; the smelting of aluminum from alumina; the recycling of used
and scrap aluminum; the fabrication of aluminum, aluminum alloys and
non-aluminum materials into semi-fabricated and finished products; the producing
and converting of specialty packaging and packaging products for many industries
including the food, pharmaceutical, cosmetic and health sectors; the
distribution and marketing of aluminum, non-aluminum and packaging products;
and, in connection with its aluminum operations, the production and sale of
industrial chemicals. Alcan, together with its subsidiaries, joint ventures and
related companies, has bauxite holdings in five countries, produces alumina in
three countries, smelts primary aluminum in seven countries, operates rolled
products plants in ten countries, has engineered products plants in seventeen
countries, has packaging facilities in fourteen countries and has sales outlets
and maintains warehouse inventories in the larger markets of the world. Alcan
also operates a global transportation network that includes the operation of
bulk cargo vessels, port facilities and freight trains.

> Note 2. Summary of
>   Significant Accounting PoliciesGenerally Accepted Accounting
>   Principles

These financial statements conform
with Canadian generally accepted accounting principles (GAAP). Note 7 -
Differences between Canadian and United States Generally Accepted Accounting
Principles (GAAP), provides an explanation and reconciliation of differences
between Canadian and U.S. GAAP.

> Use of
>   Estimates

The preparation of financial
statements in conformity with GAAP in Canada and the United States requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

> Principles of
>   Consolidation

These consolidated financial
statements include the accounts of subsidiaries that are controlled by Alcan,
all of which are majority owned. Joint ventures, irrespective of percentage of
ownership, are proportionately consolidated to the extent of Alcan's
participation. Companies subject to 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 companies
in which Alcan does not have significant influence 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.

All
business combinations are accounted for under the purchase method.

Foreign
Currency

The financial statements of
self-sustaining foreign operations (located principally in Europe and Asia) are
translated into U.S. dollars at prevailing exchange rates. Revenues and expenses
are translated at average exchange rates for the year while assets and
liabilities are translated at exchange rates in effect at year-end. Differences
arising from exchange rate changes are included in the Deferred translation
adjustments (DTA) component of Common shareholders' equity. 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 or Restructuring,
impairment and other special charges at that time. All other operations,
including most of those in Canada, are considered to be integrated foreign
operations having the U.S. dollar as the functional currency. Under this method,
monetary items are translated at current rates and translation gains and losses
are included in income. (See note 3 - Accounting Changes; Deferred Foreign
Exchange Translation Gains and Losses). Non-monetary items are translated at
historical rates.

The
Company has entered into foreign currency contracts and options that are
designated as hedges of certain future identifiable foreign currency revenue and
operating cost exposures. The exchange gains or losses are not recorded in the
financial statements until the contract is settled or the designated transaction
is recognized. They are then included, together with related hedging costs, in
Sales and operating revenues, Cost of sales and operating expenses, Depreciation
and amortization or Property, plant and equipment, as applicable, concurrently
with recognition of the underlying items being hedged.

Foreign currency forward contracts and swaps are also used to hedge
certain foreign currency denominated debt and intercompany foreign currency
denominated loans. Unrealized currency gains or losses on these contracts are
recorded in earnings concurrently with the unrealized gains or losses on the
foreign currency denominated debt and intercompany foreign currency denominated
loans being hedged.

Other gains and losses from
foreign currency denominated items are included in Other expenses (income) -
net.

33

---



> Revenue Recognition

The Company recognizes revenue when significant
risks and benefits of ownership are transferred, which coincides with when the
goods are shipped or services rendered.

> Commodity Contracts and
>   Options

Virtually all of the forward metal contracts and
options serve to hedge certain future identifiable aluminum price exposures.
Gains or losses on these hedges are not recorded in the financial statements
until early settlement or recognition of the hedged transaction. They are then
included, together with related hedging costs, in Sales and operating revenues
or Cost of sales and operating expenses, as applicable, concurrently with
recognition of the underlying items being hedged.

Unrealized gains
and losses on oil and natural gas futures contracts, swaps and options are
generally not recorded in the financial statements until recognition of the
hedged transactions. In circumstances where a hedging relationship cannot be
demonstrated, the derivatives are recorded at fair value and the unrealized
gains and losses recorded in earnings.

In circumstances
where the Company's purchase or sales contracts for a commodity contain
derivative characteristics, these contracts are generally not recorded at fair
value as they involve quantities that are expected to be used or sold in the
normal course of business over a reasonable period of time.

> Interest Rate Swaps

Amounts receivable or payable under interest
rate swaps are recorded in Interest concurrently with the interest expense on
the underlying debt. Unrealized gains and losses are not recorded in the
financial statements as these contracts hedge interest costs on certain
debt.

> Inventories

Aluminum, raw materials, packaging products and
other supplies are stated at cost (determined for the most part on the monthly
average cost method) or net realizable value, whichever is lower.

> Capitalization of Interest
>   Costs

The Company capitalizes interest costs
associated with the financing of major capital expenditures up to the time the
asset is ready for its intended use.

> Sale of Receivables

When the Company sells certain receivables, it
retains servicing rights and provides limited recourse, which constitute
retained interests in the sold receivables. No servicing asset or liability is
recognized in the financial statements as the fees received by the Company
reflect the fair value of the cost of servicing these receivables. The related
purchase discount is included in Other expenses (income) - net.

> Property, Plant and
>   Equipment

Property, plant and equipment is recorded at the
lower of cost and net recoverable amount. 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.

34

---



> Goodwill

As of January 2002, goodwill is no longer
amortized and is carried at the lower of carrying value and fair value. Goodwill
is tested for impairment on an annual basis at the reporting unit level. Fair
value is determined using discounted cash flows.

Under accounting
standards in effect until December 31, 2001, goodwill was recorded at cost less
accumulated amortization and was amortized over a period of 40 years using the
straight-line method of amortization. Periodic assessments were made to
determine whether there was permanent impairment in the remaining unamortized
goodwill balance based on the undiscounted cash flows of the underlying
operations. (See note 3 - Accounting Changes; Goodwill and Other Intangible
Assets).

> Intangible Assets

Intangible assets are primarily trademarks and
patented and non-patented technology, all of which have finite lives. Intangible
assets are recorded at cost less accumulated amortization and are generally
amortized over 15 years using the straight-line method of
amortization.

> Environmental Costs and
>   Liabilities

Environmental expenses are accrued on an
undiscounted basis when it is probable that a liability for past events exists.
Such liabilities are reviewed and adjusted as required on a regular basis to
reflect current conditions. For future removal and site restoration costs,
provision is made in a systematic manner by periodic charges to income, except
for assets that are no longer in use, in which case full provision is charged
immediately to income. Environmental expenses are normally included in Cost of
sales and operating expenses except for large, unusual amounts which are
included in Other expenses (income) - net. For 2001, the environmental
provisions for treatment costs relating to spent potlining (SPL) in Quebec and
British Columbia, Canada, and for remediation costs relating to red mud disposal
at other sites in Canada and the United Kingdom were included in Restructuring,
impairment and other special charges. Accruals related to environmental costs
are included in Payables and accrued liabilities and Deferred credits and other
liabilities.

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.

> Post-retirement
>   Benefits

The costs of pension benefits and
post-retirement benefits other than pensions are recognized on an accrual basis
over the working lives of employees. 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.
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 does not recognize compensation
expense in earnings for options granted under the share option plan for
employees as stock options are granted at an exercise price equal to the market
price of the underlying stock on the grant date. The pro forma effect, if the
Company had elected to recognize compensation expense for stock options using
the fair value method, is disclosed in note 20 - Stock Options and Other
Stock-Based Compensation. Stock compensation arrangements that can be settled in
cash result in the recognition of compensation expense.

> Income Taxes

The Company uses the liability method for income
taxes, under which deferred income tax assets and liabilities are recorded based
on the temporary differences between the accounting basis and the tax basis of
assets and liabilities. Deferred income tax assets and liabilities are revalued
for all changes in tax rates and exchange rates. The future recoverability of
recognized deferred income tax assets is assessed on a regular basis to
determine whether a valuation allowance is required.

> Cash and Time
>   Deposits

All time deposits have original maturities of 90
days or less and qualify as cash equivalents.

> Recently Issued Accounting
>   StandardsHedging Relationships

The Canadian Institute of Chartered Accountants
(CICA) issued an accounting guideline which establishes certain conditions
regarding when hedge accounting may be applied and which is effective for the
Company's fiscal year beginning January 1, 2004, with earlier application
encouraged. The Company is studying the new guideline and is preparing for
implementation of the hedging provisions. Each hedging relationship will be
subject to an effectiveness test on a regular basis for reasonable assurance
that it is and will continue to be effective.

35

---



Under these rules, any derivative instrument
that does not qualify for hedge accounting will be reported on a mark-to-market
basis in earnings.

> Impairment of Long-lived
>   Assets

The CICA issued Section 3063, Impairment of
Long-lived Assets, which will be effective for the Company's fiscal year
beginning on January 1, 2003. Under this standard, an impairment loss should be
recognized when the carrying amount of a long-lived asset is not recoverable and
exceeds its fair value. The policies of this standard are the same as the
policies contained in the recently adopted Financial Accounting Standards Board
(FASB) Statement No. 144, Accounting for the Impairment or Disposal of
Long-lived Assets. (See note 7 - Differences between Canadian and United States
Generally Accepted Accounting Principles (GAAP)).

> Disposal of Long-lived Assets and
>   Discontinued Operations

The CICA issued Section 3475, Disposal of
Long-lived Assets and Discontinued Operations, which will be effective for
disposal activities initiated by the Company's commitment to a plan on or after
May 1, 2003, with earlier application encouraged. Under this standard, a
long-lived asset to be disposed of by sale should be measured at the lower of
its carrying amount or fair value less cost to sell and should not be amortized
while classified as held for sale. For a long-lived asset to be disposed of
other than by sale, such as by abandonment, before the end of its previously
estimated useful life, depreciation estimates are revised to reflect the use of
the asset over its shortened useful life. Also, the standard requires that the
results of operations of a component of an enterprise that has been disposed of
either by sale or abandonment should be reported in discontinued operations. A
component of an enterprise comprises operations and cash flows that can be
clearly distinguished, operationally and for financial reporting purposes, from
the rest of the enterprise. The policies of this standard are the same as those
policies contained in the recently adopted FASB Statement No.144, Accounting for
the Impairment or Disposal of Long-lived Assets. (See note 7 - Differences
between Canadian and United States Generally Accepted Accounting Principles
(GAAP)).

> Note 3. Accounting ChangesGoodwill
>   and Other Intangible Assets

On January 1, 2002, the Company adopted the new
standard of the CICA concerning goodwill and other intangible assets. Under this
standard, goodwill and other intangible assets with an indefinite life are no
longer amortized but are carried at the lower of carrying value and fair value.
Goodwill and other intangible assets with an indefinite life are tested for
impairment on an annual basis.

Goodwill is tested
for impairment using a two-step test. Under the first step, the fair value of a
reporting unit, based upon discounted cash flows, is compared to its net
carrying amount. If the fair value is greater than the carrying amount, no
impairment is deemed to exist. However, if the fair value is less than the
carrying amount, a second test must be performed whereby the fair value of the
reporting unit's goodwill must be estimated to determine if it is less than its
carrying amount. Fair value of goodwill is estimated in the same way as goodwill
is determined at the date of acquisition in a business combination, that is, the
excess of the fair value of the reporting unit over the fair value of the
identifiable net assets of the reporting unit.

An impairment of
$748 (including $8 relating to assets held for sale) was identified in the
goodwill balance as at January 1, 2002, and was charged to opening retained
earnings in 2002 upon adoption of the new accounting standard. Any further
impairment arising subsequent to January 1, 2002, will be taken as a charge
against income. As a result of the new standard, the Company no longer amortizes
goodwill. The amount of goodwill amortization was $72 in 2001 and $16 in
2000.

> Deferred Foreign Exchange Translation
>   Gains and Losses

As of January 1, 2002, the Company no longer
amortizes the exchange gains and losses arising on the translation of long-term
foreign currency denominated monetary assets and liabilities that have a fixed
or ascertainable life extending beyond the end of the following fiscal year.
These exchange gains and losses are now recognized in income immediately.

This standard has
been applied retroactively and, consequently, prior years' financial statements
have been restated. At December 31, 2001, Retained earnings have been decreased
by $21 (2000: $18) and Deferred charges and other assets have been reduced by
$21 (2000: $18) to reflect the recognition of the unamortized exchange losses
that existed at each year-end.

Related to this
accounting change, in 2002, an exchange loss of $7 (2001: $3; 2000: $8), on the
translation of long-term foreign currency denominated monetary assets and
liabilities, has been included in Other expenses (income) - net.

> Stock Options and Other Stock-based
>   Compensation

On January 1, 2002, the Company adopted the new
standard of the CICA relating to the measurement of stock options and other
stock-based compensation. This standard is being applied to both options granted
after January 1, 2002, and options granted before that date. This standard
encourages but does not require that the fair value method be used for
transactions with employees. In note 20 - Stock Options and Other Stock-based
Compensation, pro forma net income and net income per common share - basic and
diluted are presented as if the fair value based method had been applied to all
stock option awards.

36

---



> Business
>   Combinations

All business combinations initiated on or after
July 1, 2001, are now required to be accounted for under the purchase method.

> Note 4. Income from Continuing Operations
>   per Common Share - Basic and Diluted

Basic and diluted income from continuing
operations per common 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 income from continuing operations per common
share.

2002
    2001
    2000Numerator for basic and
      diluted incomefrom continuing operations per common share:Income (Loss) from continuing
      operationsattributable to common shareholders
    371
    (5)
    598Denominator (number of common
      shares in millions):Denominator for basic income
      fromcontinuing operations per common share -weighted average of outstanding shares
    321
    320
    248Effect of dilutive stock
      options
    1
    1
    -Denominator for diluted income
      fromcontinuing operations per common share -adjusted weighted average of outstanding shares
    322
    321
    248Income (Loss) from
      continuing operationsper common share - basic
    1.16
    (0.01)
    2.41Income (Loss) from
      continuing operationsper common share - diluted
    1.15
    (0.01)
    2.41


Options to purchase 1,146,500 common shares
(2001: 579,000; 2000: nil) at a weighted average price of CAN$60.16 per share
(2001: CAN$59.35) were outstanding during the year but were not included in the
computation of diluted earnings per share because the options' exercise price
was greater than the average price of the common shares.

As at December 31,
2002, there are 321,470,298 common shares outstanding (2001: 320,901,748; 2000:
317,921,113).

> Note 5. Combination with Alusuisse Group
>   Ltd

On October 17, 2000, the Company entered into a
combination agreement with Alusuisse Group Ltd (algroup). At that date, the
shareholders of algroup, in response to the Company's share exchange offer,
tendered 6,747,707 shares, representing 99.37% of the outstanding registered
algroup shares, in exchange for 115,385,790 shares of the Company valued at
$30.11 per share. The Company also assumed from algroup total debt of $2,171.
The combination was completed and algroup became a subsidiary of the Company on
October 17, 2000. During 2001, the Company acquired the remaining shares of
algroup in accordance with the provisions of Swiss law.The combination was
accounted for using the purchase method of accounting and the results of
operations of algroup are included in the consolidated financial statements
since acquisition. At the date of acquisition, the purchase price was allocated
based on the assigned fair values of the assets acquired and liabilities assumed
as follows:

Fair value of net assets
      acquired at date of acquisitionCash and time
deposits
    175Other current assets
    1,641Deferred charges and other
      assets
    162Capital assets
    2,822Total assets
    4,800Current liabilities
    2,002Long-term debt*
    1,292Deferred credits and other
      liabilities
    330Deferred income taxes
    401Fair value of net assets
      acquired at date of acquisition
    775


* Includes a preacquisition loan of $532 from
Alcan to finance a special payment to algroup shareholders.

37

---



Determinations of fair values were made based on
accepted valuation techniques. Allocation of the purchase price involved
estimates and information gathering during the months following the date of the
combination. This estimation process was finalized in 2001.

Net restructuring
and other costs for plant closures of $54 were recognized in the purchase price
allocation. Of the total restructuring and other costs of $54, an amount of $1
was paid out in 2002 (2001: $16) relating primarily to employee severance costs.

In 2001, the fair
values of certain assets and liabilities were adjusted from the amounts
originally assigned at the date of combination. As a result, additional goodwill
of $123 was recorded.

The difference
between the total purchase price and the net fair value of all identifiable
assets and liabilities acquired as at December 31, 2001, was $2,780 (2000:
$2,620) and is accounted for as goodwill. Goodwill was amortized over a period
of 40 years using the straight-line method of amortization until December 31,
2001. As of January 1, 2002, goodwill is no longer amortized but is carried at
the lower of carrying value and fair value. Goodwill is tested for impairment on
an annual basis. (See note 3 - Accounting Changes; Goodwill and Other Intangible
Assets).

Consideration

|Issuance of common shares on
      October 17, 2000 (115,385,790 common shares              
|--------------------------------------------------------------------------------------------
|without nominal or par value; average market value of $30.11 per share)                     
|Issuance of common shares in
      2001 (687,882 common shares without nominal or par value;
|average market value of $44 per share)                                                      
|Other consideration                                                                         
|Total consideration                                                                         

> Supplemental pro forma information (in
>   millions of US$, except per share amounts)

The following unaudited pro forma information
for 2000 presents a summary of consolidated results of operations of the Company
and algroup as if the combination had occurred on January 1, 1999. These pro
forma results have been prepared for comparative purposes only.

|                                                            | 2000(unaudited)
|----------------------------------------------------------- | ---------------
|Sales and operating revenues                                | 13,146         
|Net income before amortization of goodwill                  | 737            
|Net income                                                  | 672            
|Net income per common share before amortization of goodwill | 2.22           
|Net income per common share - basic and diluted             | 2.02           

Note 6. Goodwill and Intangible
Assets

> Goodwill

The changes in the carrying amount of goodwill
for the year ended December 31, 2002, are as follows:

Balance
    
    
    
    Deferred
    Balanceas
    at
    Impairment
    
    
    translation
    as
    atJanuary 1,
      2002
    losses
    Additions
    Adjustments
    adjustments
    December 31,
      2002Bauxite, Alumina and Specialty
      Chemicals
    543
    -
    -
    3
    -
    546Primary Metal
    426
    -
    33
    3
    49
    511Rolled Products
Europe
    163
    (163)
    -
    -
    -
    -Engineered Products
    466
    (321)
    2
    (5)
    19
    161Packaging
    1,255
    (256)
    -
    (8)
    94
    1,085Other
    21
    -
    -
    (21)
    -
    -Total
    2,874
    (740)
    35
    (28)
    162
    2,303


Using the newly adopted accounting standard of
the CICA concerning goodwill and other intangible assets (see note 3 -
Accounting Changes), the Company completed a review to determine whether, at
January 1, 2002, there was impairment in the goodwill balance. As a result of
this review, an impairment loss of $748 (including $8 relating to assets held
for sale) was recognized as a charge to opening retained earnings in 2002. The
adjustment reflects the decline in end-market conditions in the period from the
algroup merger in October 2000 to January 1,
2002. The fair value of all reporting units was determined using discounted
future cash flows. The annual test was completed for the year 2002 and no
further impairment was identified.

38

---



A reduction in
goodwill of $28 was recorded in 2002 principally relating to a decrease in the
valuation allowance related to future income tax assets acquired in the
combination with algroup, but which were not recognized at the date of the
business combination.

Changes in the carrying amount of goodwill for
the year ended December 31 were as follows:

2001
    2000Goodwill - beginning of
      year
    2,613
    -Issuance of common shares to
      complete algroup acquisition
    30
    2,620Goodwill allocated to assets
      held for sale
    -
    (53)Adjustments to fair values of
      algroup assets and liabilities
    123
    _Other consideration to complete
      algroup acquisition
    7
    -Acquisition of the remaining
      30% of the Gove alumina refinery
    234
    -Deferred translation
      adjustments
    (58)
    62Amortization
    (72)
    (16)Amount related to disposal of a
      business
    (3)
    -Goodwill - end of
      year
    2,874
    2,613


Amortizable intangible
      assets
    Gross
      Carrying
    Accumulated
    Net
      BookAmount
    Amortization
    ValueDecember 31,
      2002Trademarks
    138
    20
    118Patented and non-patented
      technology
    213
    32
    181Other
    20
    1
    19371
    53
    318December 31,
      2001Trademarks
    122
    10
    112Patented and non-patented
      technology
    189
    16
    173311
    26
    285December 31,
      2000Trademarks
    125
    2
    123Patented and non-patented
      technology
    195
    3
    192320
    5
    315


The aggregate amortization expense for the year
ended December 31, 2002, was $23. The estimated amortization expense for the
five succeeding fiscal years is approximately $23 per year.

The acquisition of intangible assets amounted to
$20 in the year ended December 31, 2002.

Pro forma income
from continuing operations and income from continuing operations per common
share - basic and diluted, before goodwill amortization, are presented
below.

Year ended December
31
    2001
    2000Reported income from continuing
      operations
    3
    608Goodwill amortization
    72
    16Adjusted income from continuing
      operations
    75
    624Income (Loss) from continuing
      operationsper common share - basic and dilutedReported income (loss) from continuing
      operations
    (0.01)
    2.41Goodwill amortization
    0.22
    0.05Adjusted income from continuing
      operationsper common share - basic and diluted
    0.21
    2.46


39

---



> Note 7. Differences between Canadian and
>   United States Generally Accepted Accounting Principles (GAAP)

Significant differences between Canadian and
United States GAAP are described below.

> Derivatives

Beginning in 2001, the Company was required to
adopt, for U.S. GAAP reporting purposes, the FASB Statement Nos. 133 and 138,
Accounting for Derivative Instruments and Hedging Activities. These standards
require that all derivatives be recorded in the financial statements at fair
value. However, the Company elected not to adopt the FASB's optional hedge
accounting provisions. Accordingly, for U.S. GAAP reporting purposes only,
beginning in 2001, unrealized gains and losses resulting from the valuation of
derivatives at fair value are recognized in net income as the gains and losses
arise and not concurrently with the recognition of the transactions being
hedged. In its primary Canadian GAAP financial statements, the Company continues
to recognize the gains and losses on derivative contracts in income concurrently
with the recognition of the transactions being hedged, except for certain
currency forward contracts and oil put options which are recorded at fair value.

Upon initial adoption of the FASB Statement Nos. 133 and 138 in 2001, the
cumulative effect of the accounting change resulted in a decrease in net income
of $12.

> Currency Translation

The difference between Deferred translation
adjustments under Canadian GAAP and U.S. GAAP arises from the different
treatment of exchange on long-term debt at January 1, 1983, resulting from the
adoption of accounting standards on foreign currency translation.

> Comprehensive Income

U.S. GAAP requires the disclosure of
Comprehensive income which, for the Company, comprises Net income under U.S.
GAAP, the movement in Deferred translation adjustments under U.S. GAAP,
unrealized gains or losses for the period less gains or losses realized during
the period on "available-for-sale" securities and the movement in the minimum
pension liability. The concept of Comprehensive income does not exist under
Canadian GAAP.

> Investments

Under U.S. GAAP, certain portfolio investments,
which are considered to be "available-for-sale" securities, are measured at
market value, with the unrealized gains or losses included in Comprehensive
income. Under Canadian GAAP, these investments are measured at cost.

> Minimum Pension
>   Liability

Under U.S. GAAP, if the accumulated benefit
obligation exceeds the market value of plan assets, a minimum pension liability
for the excess is recognized to the extent that the liability recorded in the
balance sheet is less than the minimum liability. Any portion of this additional
liability that relates to unrecognized past service cost is recognized as an
intangible asset while the remainder is charged to Comprehensive income.
Canadian GAAP has no such requirement to record a minimum liability.

> Joint Ventures

Under Canadian GAAP, joint ventures are
accounted for using the proportionate consolidation method, while under U.S.
GAAP, joint ventures are accounted for under the equity method. Under an
accommodation of the U.S. Securities and Exchange Commission, accounting for
joint ventures need not be reconciled from Canadian to U.S. GAAP. The different
accounting treatment affects only the display and classification of financial
statement items and not net income or shareholders' equity. (See note 10 - Joint
Ventures for summarized financial information about joint ventures).

> Consolidated Statement of
>   Income

Under U.S. GAAP, income from continuing
operations before amortization of goodwill and income from continuing operations
per common share before amortization of goodwill would not be presented.

> Consolidated Balance Sheet

Under U.S. GAAP, assets and
liabilitiesclassified as held for sale are presented separately as
one line in each of the asset and liability sections, respectively, in the
balance sheet. Under Canadian GAAP, current and long-term assets and liabilities
are presented separately.

> Statement of Cash
>   Flows

Under U.S. GAAP, separate subtotals within
operating, financing and investment activities would not be presented.

40

---



> Recently Adopted Accounting Standards
>   for U.S.GAAP Presentation

In 2002, the Company adopted the FASB Statement
No. 141, Business Combinations, and the FASB Statement No. 142, Goodwill and
Other Intangible Assets. Both statements are the same as the recently issued
Canadian accounting standards except that under U.S. GAAP, goodwill impairment
identified as at January 1, 2002, is charged to income as the cumulative effect
of an accounting change. Under Canadian GAAP, an impairment loss of $748
(including $8 relating to assets held for sale) was recognized as a charge to
opening retained earnings in 2002. (See note 3 - Accounting Changes, for a
description of the impact on the Company and see note 6 - Goodwill and
Intangible Assets).

In 2002, the
Company adopted the FASB Statement No. 144, Accounting for Impairment or
Disposal of Long-lived Assets. This statement amends previous accounting and
disclosure requirements for impairments and disposals of long-lived assets and
discontinued operations.

The FASB issued
Interpretation No. 45, Guarantor's Accounting and Disclosure Requirements for
Guarantees, Including Indirect Guarantees of Indebtedness of Others. This
interpretation addresses disclosure and initial recognition and initial
measurement requirements for a guarantor that issues a guarantee. In 2002, the
Company adopted the disclosure requirements of the Interpretation, which
elaborates on the disclosures to be made by a guarantor about its obligations
under certain guarantees that it has issued.

In 2002, the
Company adopted the FASB Statement No. 148, Accounting for Stock-based
Compensation. This statement amends transition and disclosure provisions
provided in the FASB Statement No. 123, Accounting for Stock-based Compensation.
(See note 2 - Summary of Significant Accounting Policies; Stock Options and
Other Stock-based Compensation).

> Recently Issued Accounting
>   Standards

The FASB has issued Statement No. 143,
Accounting for Asset Retirement Obligations, which will be effective for the
Company's fiscal year beginning on January 1, 2003. This statement establishes
accounting standards for recognition and measurement of a liability for an asset
retirement obligation and the associated asset retirement cost. The Company is
studying these requirements and has not yet determined its impact.

The FASB has
recently issued Statement No. 146, Accounting for Costs Associated with Exit or
Disposal Activities, which will be effective for the Company's fiscal year
beginning on January 1, 2003. This standard requires that a liability associated
with an exit or disposal activity be recognized when the liability is incurred
rather than at the date of the Company`s commitment to an exit plan. The
provisions of this new standard are generally to be applied
prospectively.

Under the recently
issued FASB Interpretation No. 45, Guarantor's Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others, the initial recognition and measurement provisions are to be applied on
a prospective basis to guarantees issued or modified after December 31, 2002.
The Company is studying the accounting requirements of this interpretation and
is preparing for its implementation.

In January 2003
the FASB issued Interpretation No. 46, Consolidation of Variable Interest
Entities, which applies in the first fiscal year or interim period beginning
after June 15, 2003, to variable interest entities in which the Company holds a
variable interest that it acquired before February 1, 2003. This Interpretation
requires existing unconsolidated variable interest entities to be consolidated
by their primary beneficiaries if the entities do not effectively disperse risks
among parties involved. An entity that holds a significant variable interest but
is not the primary beneficiary is subject to specific disclosure requirements.
The Company is studying this Interpretation and has not yet determined its
impact.

41

---



Reconciliation of Canadian and
      U.S. GAAP2002
    2001
    2000Income from continuing
      operations- as reported (restated for 2001 and 2000 - note 3)
    376
    
    3
    608Differences due to:- Valuation of derivatives
    60
    
    (72)
    -- Other
    (2)
    
    5
    (4)- Deferred tax effect on the above
    (20)
    
    23
    -Income (Loss) from continuing
      operationsbefore cumulative effect of
      accounting changes - U.S. GAAP
    414
    
    (41)
    604Income (Loss) from discontinued
      operations
    (2)
    
    (1)
    2Cumulative effect of accounting
      changes - net of taxes- Valuation of derivatives
    -
    
    (12)
    -- Impairment of goodwill
    (748)
    
    -
    -Net income (Loss) - U.S.
      GAAP
    (336)
    
    (54)
    606Dividends on preference
      shares
    (5)
    
    (8)
    (10)Net income (Loss) attributable
      to common shareholders - U.S. GAAP
    (341)
    
    (62)
    596Net income (Loss) per common
      share - basic and diluted - U.S. GAAPIncome (Loss) from continuing operations
    1.27
    (0.15)
    2.39Income
      (Loss) from discontinued operations
    (0.01)
    (0.01)
    0.01Cumulative effect of accounting changes
    (2.32)
    (0.03)
    -Net income (Loss) per common
      share - basic and diluted - U.S. GAAP
    (1.06)
    (0.19)
    2.40






December 31
    2002
    2001
    
    2000As
    U.S.
    As
    U.S.
    
    As
    U.S.Reported
    GAAP
    Reported
    GAAP
    Reported
    GAAP(Restated
    
    (Restated- note 3)
    
    - note
      3)Deferred charges and other
      assets
    666
    663
    715
    716
    
    701
    716Intangible assets, net
    ofaccumulated amortization
    318
    461
    285
    303
    
    315
    315Payables and accrued
      liabilities
    2,294
    2,311
    2,293
    2,366
    
    2,384
    2,384Deferred credits and other
      liabilities
    1,418
    2,028
    1,130
    1,363
    
    873
    873Deferred income taxes
    1,120
    963
    986
    889
    
    1,203
    1,207Retained earnings
    3,503
    3,537
    4,074
    4,070
    
    4,272
    4,324Deferred translation
      adjustments (DTA)
    259
    205
    (151)
    (207)
    
    (20)
    (76)


Year ended December
31
    2002
    2001
    2000Comprehensive income
      (loss)Net income (Loss)
    (336)
    (54)
    606Net change in deferred
      translation adjustments
    
    412
    (131)
    56Net change in excess
      of market value over book value of "available-for-sale"
    securities
    8
    
    (7)
    (4)Reclassification to net income
      on disposal of "available-for-sale" securities
    
    (10)
    
    -
    -Net change in minimum pension
      liability - net of taxes of $81 (2001: $67)
    (172)
    (148)
    -Comprehensive income
      (loss)
    
    (98)
    (340)
    658December 31
    2002
    2001
    2000Accumulated other
      comprehensive lossDeferred translation
      adjustments
    
    205
    (207)
    (76)Minimum pension
    liability
    (320)
    (148)
    -Unrealized gain on
      "available-for-sale" securities
    
    6
    
    8
    15Accumulated other
      comprehensive loss
    (109)
    (347)
    (61)


42

---



> Note 8. Restructuring, Impairment and Other
>   Special Charges

Restructuring, impairment and other special
charges of $654 pre-tax, which were recorded in 2001, included restructuring and
asset impairment charges of $408 and other special charges of $246.

> Restructuring and Asset Impairment
>   Charges

The provision balances and related cash payments
for the restructuring and asset impairment charges consisted of:

AssetSeverance
    ImpairmentCosts
    Provisions
    Other
    Total2001:Charges
    111
    268
    29
    408Cash payments -
      net
    (7)
    -
    (7)
    (14)Non-cash
      charges
    -
    (268)
    -
    (268)Provision balance as
      at December 31
    104
    -
    22
    1262002:Charges
    36
    26
    27
    89Cash payments -
      net
    (63)
    -
    -
    (63)Non-cash
      charges
    (6)
    (26)
    (7)
    (39)Provision balance
      as at December 31
    71
    -
    42
    113


In 2001, the Company recorded charges of $408
pre-tax in Restructuring, impairment and other special charges as a result of a
restructuring program aimed at safeguarding its competitiveness. The aim of the
restructuring program was twofold: to make the businesses more competitive in
the face of the current economic difficulties; and to put them in the best
position to meet future industry needs. These aims are being achieved through
cost reduction measures, exiting from non-core products and the consolidation of
certain operations and are resulting in a series of plant sales, closures and
divestments throughout the organization. The charges associated with this
program consisted of severance costs of $111 related to workforce reductions of
approximately 2,190 employees, impairment of long-lived assets of $268 and other
exit costs related to the shutdown of facilities of $29.

The workforce
reductions of 2,190 employees, which consist principally of manufacturing
employees from all segments of the Company's worldwide operations, are comprised
of:

- 500 employees - Primary Metal (principally
  Canada)
- 200 employees - Rolled Products Americas and
  Asia
- 400 employees - Rolled Products Europe (U.K.
  and Italy)
- 790 employees - Packaging (U.K., Canada, U.S.
  and other areas)
- 300 employees - Other operating
  segments

In 2002, the Company
recorded charges of $69 pre-tax in Restructuring, impairment and other special
charges, including restructuring and asset impairment charges of $89 and a
reduction in other special charges of $20. Charges of $89 relating to the
restructuring program consisted of severance costs of $36 relating to workforce
reductions of approximately 950 employees, impairment of long-lived assets of
$26 and other exit costs related to the shutdown of facilities of $27.

Severance charges
of $36 relate primarily to the closure of the Burntisland facility, U.K.
(Bauxite, Alumina and Specialty Chemicals), certain cable operations in North
America (Engineered Products) and extrusion operations in Malaysia and
light-gauge operations in Fairmont, West Virginia (Rolled Products Americas and
Asia).

Asset impairment
charges of $26 relate primarily to the extrusion operations in Pieve, Italy
(Engineered Products) and the Borgofranco plant in Italy (Rolled Products
Europe).

Other exit costs
of $27 consist principally of closure costs of $19 for the Burntisland facility,
U.K., a loss of $5 on the sale of the extrusion operations in Thailand arising
from the realization of deferred translation losses (Rolled Products Americas
and Asia), a loss of $4 on the sale of the rolled products circles production
unit at Pieve, Italy (Rolled Products Europe), other costs of $3 and offset in
part by income of $4 from the write-back of excess contract loss provisions upon
settlement with a customer (Engineered Products).

The workforce
reductions in 2002 of approximately 950 employees were comprised of 380
employees in Bauxite, Alumina and Specialty Chemicals, 250 employees in Rolled
Products Americas and Asia, 200 employees in Engineered Products and 120
employees in Packaging.

In 2002, the
Company completed the sale of certain glass packaging operations located in Park
Hills, Missouri, and Mays Landing, Williamstown and Millville, New Jersey for
proceeds of $15, equal to book value. As well, the Company sold its rolled
product circles production unit at its Pieve plant in Italy for proceeds of $14
and its two Pharmatech rubber stopper and aluminum seals operations located in
Salisbury, Maryland, U.S. for proceeds of $9 equal to book value.

As at December 31,
2002, approximately 2,880 of a total of 3,140 employees (2,190 employees in 2001
and 950 employees in 2002) had been terminated, consisting of approximately 390
employees in 2001 and 2,490 employees in 2002.

43

---



Total impairment
charges of $294 consisted of a charge of $268 in 2001 ($226 for assets to be
held and used and $42 for assets held for disposal) and charges of $26 in 2002
($17 for assets to be held and used and $9 for assets to be held for disposal).
These charges related principally to buildings, machinery and equipment and some
previously capitalized project costs.

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.

The cumulative
impairment charge of $243 for assets to be held and used consisted of $45 for
Bauxite, Alumina and Specialty Chemicals; $22 for Primary Metal; $17 for Rolled
Products Americas and Asia; $79 for Rolled Products Europe; $16 for Engineered
Products; $43 for Packaging; and $21 for Other. The impairment charge arose as a
result of negative projected cash flows and recurring losses. The charges
principally related to the cold mill at the Rogerstone plant in the U.K. (Rolled
Products Europe); the foil facilities at Glasgow, U.K. (Packaging); the
specialty chemicals plant at Burntisland, U.K. (Bauxite, Alumina and Specialty
Chemicals) and the engineered cast products plant in Quebec, Canada (Primary
Metal). An impairment provision was recorded to the extent that the net
recoverable amount, which approximates fair value based on discounted cash
flows, was below the net book value.

The cumulative
impairment charge of $51 for assets held for disposal consisted of $8 for Rolled
Products Americas and Asia; $31 for Rolled Products Europe; and $12 for
Packaging. The charges principally related to the extrusion operations in
Malaysia and Thailand (Rolled Products Americas and Asia); certain rolled
products and recycling operations at the Pieve and Borgofranco plants in Italy
(Rolled Products Europe); and the Pharmatech rubber stopper and aluminum seals
operations in the U.S. (Packaging). An impairment provision was recorded to
bring the net book value to net realizable value. These assets were disposed of
in 2002, except for the extrusion operations in Malaysia and the recycling
operations at the Borgofranco plant in Italy. The assets held for disposal
had:

- sales and operating revenues of $250 in 2001
(Rolled Products Americas and Asia - $30; Rolled Products Europe - $90;
Packaging - $130) and $190 in 2002, (Rolled Products Americas and Asia - $16;
Rolled Products Europe - $84; and Packaging - $90).

- net operating losses of $(10) in 2001 (Rolled
Products Americas and Asia - nil; Rolled Products Europe - nil; Packaging -
$(10)) and losses of $(9) in 2002 (Rolled Products Americas and Asia - $(2);
Rolled Products Europe - $(1); and Packaging - $(6)).

- assets of $200 at December 2001 (Rolled
Products Americas and Asia - $20; Rolled Products Europe - $100; Packaging -
$80) and $15 at December 2002 (Rolled Products Americas and Asia - $10; Rolled
Products Europe - $5 and Packaging - nil).

- liabilities of $110 at December 2001 (Rolled
Products Americas and Asia - $10; Rolled Products Europe - $30; Packaging - $70)
and $40 at December 2002 (Rolled Products Americas and Asia - $5; Rolled
Products Europe - $35 and Packaging - nil).

The restructuring
program was completed in 2002, with the exception of the closure of facilities
at Glasgow, U.K., which is expected to be completed in mid-2003, the shut-down
of one of the two cold mills at the Fairmont, West Virginia, plant in the first
quarter for 2003, and the sales of the extrusion operations in Malaysia and the
recycling operations at the Borgofranco plant in Italy, which are expected to be
completed in 2003, as scheduled per the Company's plans. The closure plans
include the orderly shutdown of facilities after existing customer requirements
have been satisfied and in some situations, the transfer of production
operations to other facilities. The provision balance of $113 at December 31,
2002, is expected to be largely paid out in 2003.

> Other Special
>   Charges

In 2001, the Company increased its environmental
provisions by $246 pre-tax to cover treatment costs of $150 for stored spent
potlining (SPL) in Quebec and British Columbia, Canada, as well as to cover
remediation costs of $96 relating to red mud disposal at other sites in Canada
and the U.K. The charges were recorded in the income statement in Restructuring,
impairment and other special charges and on the balance sheet in Deferred
credits and other liabilities $(235) and in Payables and accrued liabilities
$(11).

SPL, which is a
waste material generated by the smelting process, needs to be treated in a safe
and environmentally sound manner. The Company's objectives have been to find the
best alternative to stockpiling SPL and various technical studies were carried
out to identify treatment alternatives that are economically viable. Following
these studies, which were completed in 2001, and in accordance with local laws
and regulations, the Company has initiated a project to identify the best
treatment technology to treat the stored SPL. The liability of $150 reflected
the Company's best estimate of the cost to treat the stored SPL in Quebec and to
have the SPL in British Columbia treated by a third party. The liability
recorded in 2001 is being paid over a period of approximately twenty years.

The liability of
$96 relating to red mud disposal reflected the Company's best estimate of the
cost of rehabilitation. Red mud is the normal residue associated with extracting
alumina from bauxite. The charge represents the cost to fill and seal the
sites.

In 2002, the
environmental provision of $150 for SPL was reduced by $4 for the recovery from
a third party of a portion of the environmental provision. In addition, the
environmental provision of $96 for red mud disposal was reduced by $18 due to
lower remediation costs at the Burntisland facility in the U.K. The reductions
in the provisions were recorded in the income statement in Restructuring,
impairment and other special charges and on the balance sheet as an increase in
Other receivables and a reduction in Deferred credits and other
liabilities.

44

---

> Note 9.
>   Income Taxes

2002
    2001
    2000(Restated
    (Restated- note 3)
    - note
  3)Income from continuing
      operationsbefore income taxes and other itemsCanada
    (65)
    (303)
    431Other countries
    736
    406
    443671
    103
    874Current income
      taxesCanada
    (9)
    (48)
    19Other countries
    233
    241
    184224
    193
    203Deferred income
      taxesCanada
    56
    (69)
    25Other countries
    15
    (80)
    2771
    (149)
    52Income tax
      provision
    295
    44
    255


The composite of the applicable statutory
corporate income tax rates in Canada is 39.0% (2001: 40.0%; 2000: 40.2%). The
following is a reconciliation of income taxes calculated at the above composite
statutory rates with the income tax provision:

2002
    2001
    2000(Restated
    (Restated- note 3)
    - note
  3)Income taxes at the composite
      statutory rate
    262
    41
    351Differences attributable
      to:Exchange translation
      items
    35
    3
    10Exchange revaluation of
      deferred income taxes
    16
    (26)
    (18)Effect of tax rate changes on
      deferred income taxes
    -
    (8)
    (20)Unrecorded tax benefits on
      losses - net
    23
    26
    (19)Investment and other
      allowances
    (18)
    8
    (38)Large corporations
tax
    7
    8
    6Withholding taxes
    5
    8
    9Reduced rate or tax exempt
      items
    (18)
    (2)
    (12)Foreign tax rate
      differences
    (25)
    (6)
    7Prior years' tax
      adjustments
    (3)
    (14)
    (40)Other - net
    11
    6
    19Income tax
      provision
    295
    44
    255At December 31, the principal
      items included in Deferred income taxes are:2002
    2001
    2000(Restated
    (Restated- note 3)
    - note
  3)Liabilities:Property, plant, equipment and
      intangibles
    1,341
    1,158
    1,267Undistributed earnings (note
      21)
    17
    24
    34Inventory valuation
    66
    78
    80Other - net
    175
    193
    1661,599
    1,453
    1,547Assets:Tax benefit
carryovers
    361
    297
    326Accounting provisions not
      currently deductible for tax
    363
    382
    220724
    679
    546Valuation allowance (amount
      not likely to be recovered)
    245
    212
    202479
    467
    344Net deferred income tax
      liability
    1,120
    986
    1,203


45

---



The valuation allowance relates principally to
loss carryforward benefits and tax credits where realization is not likely due
to time and other limitations in the tax legislation giving rise to the
potential benefits, as well as uncertain economic conditions in certain
countries, principally Brazil and Korea. In 2002, $11 (2001: $4; 2000: $4) of
the valuation allowance was reversed when it became more likely than not that
benefits would be realized. Of that amount, $5 reduced goodwill since it related
to a future income tax asset acquired in the combination with algroup in 2000,
but which was not recognized at the date of the business combination.

Based on rates of
exchange at December 31, 2002, tax benefits of approximately $145 relating to
prior and current years' operating losses and $49 of benefits related to capital
losses and tax credits carried forward will be recognized in income when it is
more likely than not that such benefits will be realized. These amounts are
included in the valuation allowance above. Approximately $17 of these potential
tax benefits expire in 2003.

In 1997, income
taxes on Canadian operations for the years 1988 to 1991 were reassessed by the
Canadian tax authorities. Most of the additional taxes and interest related to
transfer pricing issues and are recoverable in other countries. The process to
obtain recoveries from other countries is underway. During 1999, the Canadian
tax authorities indicated their intention not to proceed with the reassessments
made in 1997 in respect of the years 1988 and 1989. In 2000, certain provinces
decided not to proceed with the reassessments pertaining to 1988 and 1989. As a
result of this and other adjustments, in 2000 the Company recorded $32 of tax
recoveries. During 2002, the Canadian and U.S. tax authorities settled the
majority of the transfer pricing issues related to the 1997 reassessments. As a
result of this and other adjustments, in 2002 the Company recorded $4 of tax
recoveries. (See note 27 - Information by Geographic Areas).

> Note 10. Joint Ventures

The activities of the Company's major joint
ventures are the procurement and processing of bauxite in Australia, Brazil and
Guinea, smelting operations in Norway and Canada, as well as aluminum rolling
operations in Germany and the United States. In 2002, the Company acquired a 40%
interest in the Aluminerie Alouette consortium in Quebec, Canada. In 2001, the
Company sold its bauxite and alumina operations in Jamaica. (See note 15 - Sales
and Acquisitions of Businesses and Investments).

Alcan's
proportionate interest in all joint ventures is included in the consolidated
financial statements. Summarized financial information relating to Alcan's share
of these joint ventures is provided below. Except for the Company's interest in
the Aluminerie Alouette consortium, most of the activities of the Company's
joint ventures result in the supplying of materials to other operations of the
Company.

2002
    2001
    2000Statement of income
      information for the year ended December 31Revenues
    72
    11
    9Expenses
    60
    8
    6Net income
    12
    3
    3Financial position at
      December 31Inventories
    99
    72
    113Property, plant and equipment -
      net
    945
    551
    768Other assets
    130
    54
    103Total assets
    1,174
    677
    984Short-term debt
    50
    45
    28Debt not maturing within one
      year
    67
    82
    106Other liabilities
    253
    167
    208Total liabilities
    370
    294
    342Cash flow information for
      the year ended December 31Cash from operating
      activities
    14
    3
    4Cash used for financing
      activities
    (13)
    (7)
    (17)Cash used for investment
      activities
    (85)
    (73)
    (57)


46

---



> Note 11. Sales of
>   Receivables

Under an agreement effective December 18, 2001,
the Company sold to a third party an undivided interest in certain trade
receivables of $330, with limited recourse. Net cash proceeds from this ongoing
agreement were $300 with $30, which represents the maximum credit exposure to
the Company, held in reserve by the third party. This amount has been recorded
in Deferred charges and other assets. Net proceeds were used to repay commercial
paper borrowings in 2001. The Company acts as a service agent and administers
the collection of the receivables sold.

> Note 12. Other Expenses (Income) -
>   Net

Other expenses (income) - net
      comprise the following elements:2002
    2001
    2000Rationalization
    expenses
    3
    (1)
    45Loss (Gain) on disposal of
      businesses and investment - net (note 15)
    (36)
    123
    (9)Legal provisions
    113
    -
    14Interest revenue
    (12)
    (25)
    (22)Exchange (gains)
    losses
    37
    (8)
    (5)Other
    9
    23
    27114
    112
    50Note 13. Deferred Charges and Other AssetsDeferred charges and other
      assets comprise the following elements:2002
    2001
    2000(Restated
    (Restated- note 3)
    - note
  3)Prepaid pension costs
    314
    344
    284Income taxes
    recoverable
    -
    51
    52Marketable securities
    37
    40
    44Prepaid mining
    expenses
    56
    57
    60Investments*
    46
    52
    50Reserve for receivables sold
      (note 11)
    30
    30
    -Net assets held for
      disposal
    -
    -
    70Premiums on currency and metal
      options
    -
    2
    1Amount receivable on currency
      swap of debt
    -
    (12)
    16Long-term notes and other
      receivables
    105
    84
    60Other
    78
    67
    64666
    715
    701*InvestmentsCompanies accounted for under
      the equity method
    18
    21
    19Portfolio investments - at
      cost
    28
    31
    3146
    52
    50Note 14. Property, Plant and Equipment2002
    2001
    2000Cost (excluding Construction
      work in progress)Land and property rights
    371
    299
    292Buildings
    3,154
    2,864
    2,607Machinery and equipment
    14,105
    12,931
    11,77917,630
    16,094
    14,678


Accumulated depreciation relates primarily to
Buildings and Machinery and equipment.

Capital
expenditures are expected to be approximately $800 to $850 in 2003 of which $42
is subject to firm commitments with suppliers.

47

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> Note 15. Sales and Acquisitions of
>   Businesses and Investments2002 Canada

In April 2002, the Company acquired the Société
générale de financement (SGF) 20% joint venture interest in the Aluminerie
Alouette consortium at a cost of $172 and in September 2002, the Company
acquired the Corus Group plc's 20% joint venture interest at a cost of $171
giving the Company a 40% ownership in Alouette. These business combinations are
accounted for using the purchase method of accounting and the results of
operations are included in the consolidated financial statements since
acquisition.

Determinations of
fair values of property, plant and equipment were made based on accepted
valuation techniques. Allocation of the purchase price involves estimates and
information gathering during the months following the date of the combination.
This estimation process will be finalized in 2003. Accordingly, there may be
some changes to the assigned values presented below. The total purchase price
was allocated based on the assigned fair values of the assets acquired and
liabilities assumed as follows:

2002Current assets
    31Deferred charges and other
      assets
    3Property, plant and
      equipment
    300Intangible assets
    20354Current liabilities
    9Deferred credits and other
      liabilities
    15Deferred income taxes
    20Fair value of net
    assets
    310


The difference between the total purchase price
of $343 and the net fair value of all identifiable assets and liabilities was
$33 and is accounted for as goodwill. (See note 6 - Goodwill and Intangible
Assets).

In September 2002,
the five co-venturers of the Aluminerie Alouette consortium announced their
final approval of the plant expansion in Sept-Îles, Quebec. Alcan's share of the
cost will be approximately $350. Construction will begin in the spring of
2003.

> Japan

In 2002, the Company sold a portion of its
investment in Nippon Light Metal Company, Ltd (NLM), included in the geographic
area Asia and Other Pacific, for net cash proceeds of $22, reducing its holdings
to an effective ownership of 2.2%. Included in Other expenses (income) - net is
a gain of $36. The after-tax gain included a previously deferred gain of $8
related to the sale in 1996 of Toyo Aluminium K.K. to NLM.

> Germany, Other Europe and Asia and Other
>   Pacific

In December 2002, the Company announced that it
signed a definitive agreement with Norsk Hydro to purchase VAW Packaging
(FlexPac) for approximately € 345 million (approximately $370). FlexPac includes
14 plants in 8 countries and has 5,400 employees. FlexPac comprises a set of
custom manufacturing businesses producing high-quality flexible packaging
products for a wide variety of end-use customers and manufacturers of consumer
goods, including those in the food, dairy and pharmaceutical industries. The
transaction is expected to be completed in the first half of 2003 subject to the
necessary regulatory approvals.

> 2001 Australia

In 2001, the Company acquired the remaining 30%
of the Gove alumina refinery and related bauxite mine for a cash consideration
of $379 subject to certain post-closing adjustments. As a result of this
transaction, the Company owns 100% of these assets. The acquisition was
accounted for using the purchase method of accounting. The purchase price was
allocated based on the assigned fair values of the assets acquired and
liabilities assumed as follows:

Fair value of net assets
      acquired
    2001Working capital
    15Property, plant and
      equipment
    172187Other liabilities -
    net
    41Long-term debt
    142Fair value of net
      assets
    145


48

---



The difference between the total purchase price
and the net fair value of all identifiable assets and liabilities acquired was
$234 and is accounted for as goodwill, which, until December 31, 2001, was being
amortized over a period of 40 years using the straight-line method of
amortization. (See note 3 - Accounting Changes).

> Jamaica

In 2001, the Company completed the sale of its
Jamaican operations, included in the geographic area All other. Proceeds from
the sale were $153. The total pre-tax loss on the sale was $123, which was
recorded in Other expenses (income) - net.

> United Kingdom, Germany and Other
>   Europe

The following transactions were completed in
2001 as part of the divestment requirements imposed by the European Commission
as a condition to its approval of the merger between Alcan and algroup in
October 2000.

- The Company sold its alumina specialties
  production plant, Martinswerk, located in Bergheim, Germany.
- The Company sold a number of foil container
  manufacturing assets in Spain and Germany.
- The Company sold certain assets at its
  lithographic sheet production plant, Star Litho, located in Bridgnorth,
  U.K.

> The Company received proceeds of approximately
>   $54 from these sales.
>   Korea

In 2001, the Company's subsidiary Alcan Taihan
Aluminum Limited (ATA) acquired the remaining 5% of Aluminium of Korea Limited
(Koralu), included in the geographic area Asia and Other Pacific, for $21. As a
result of the transaction, the Company's ownership of ATA was reduced to 66%
from 68%.

> 2000 Korea

In 2000, ATA acquired a 95% interest in Koralu
for $200 in cash and the assumption of $114 of debt.

Included in the Company's balance sheet at the
date of acquisition in 2000 were the following assets and
liabilities:

Fair value of net assets
      acquired
    2000Working capital
    (2)Property, plant and
      equipment
    347345Other liabilities -
    net
    4Long-term debt
    77Minority interest
    64Fair value of net
      assets
    200


> India

In 2000, the Company sold its 54.6% interest in
Indian Aluminium Company, Limited, included in the geographic area Asia and
Other Pacific, to Hindalco Industries Limited. Net proceeds from the sale were
$162 resulting in a gain of $3, included in Other expenses (income) -
net.

> Note 16. Deferred Credits and Other
>   Liabilities

Deferred credits and other
      liabilities comprise the following elements:2002
    2001
    2000Post-retirement and
      post-employment benefits
    640
    562
    539Environmental
    liabilities
    327
    327
    91Rationalization costs
    27
    41
    23Claims
    206
    37
    43Fair value of foreign currency
      forward contracts
    25
    (12)
    41Long-term payables
    77
    70
    35Other
    116
    105
    1011,418
    1,130
    873


49

---

> Note 17.
>   Debt Not Maturing Within One Year

2002
    2001
    2000Alcan Inc.Commercial paper - CAN$(a)
    390
    585
    897Commercial paper - US$(a)
    246
    166
    578Long-term credit
      facilities(a)
    -
    -
    250Bank loans, due 2003/2005 (€
      87 million)(b)
    91
    105
    1425.375% Swiss franc bonds, due
      2003(c)
    129
    105
    1095.5% Euro note, due 2006 (€
      600 million)
    629
    528
    -4.875% Global notes, due
      2012
    500
    -
    -CARIFA loan(d)
    -
    -
    606.25% Debentures, due
      2008
    200
    200
    2006.45% Debentures, due
      2011
    400
    400
    -7.25% Debentures, due
      2031
    400
    400
    -8.875% Debentures, due 2022(e)
    -
    150
    1507.25% Debentures, due
      2028
    100
    100
    100Other debt
    -
    7
    7Alcan Deutschland GmbH and
      subsidiary companies5.65% Bank loans
    -
    -
    75.06% Bank loans
    -
    -
    12Bank loans, due 2008/2013 (€
      7 million)(b)
    7
    7
    8Queensland Alumina
      LimitedBank loans, due
      2003/2006(b)
    52
    84
    77Alcan Holdings Switzerland
      AG6.75% Swiss franc bond
    -
    -
    924.5% Bank loan (CHF 100
      million)
    -
    59
    61Alcan Finance Jersey
      LimitedEuro Medium Term Note Program
      (EMTN)EMTN, (€ 400 million)(f)
    -
    352
    372EMTN, due 2008 (€ 13 million)(f)
    14
    11
    12EMTN, due 2008 (€ 8 million)(f)
    8
    7
    8ALA (Nevada) Inc.Bank loan, due 2005(b)
    60
    60
    60EMTN
    -
    -
    33Alcan Packaging Canada
      Limited5.69% Bank loan, due 2003
    35
    35
    356.24% Bank loan, due 2004
    30
    30
    30Swiss Aluminium Australia
      LimitedBank loans(b)
    -
    -
    62OtherBank loans, due
      2003/2011(b)
    138
    84
    864% Eurodollar, due 2003(g)
    14
    14
    14Other debt, due
      2003/2024
    38
    47
    663,481
    3,536
    3,528Debt maturing within one year
      included in current liabilities
    (295)
    (652)
    (333)3,186
    2,884
    3,195


50

---



(a)   The Company has two long-term,
global, multi-year and multi-currency facilities with a syndicate of major
international banks each amounting to $1,000 (2001: $1,000 and $1,000; 2000:
$1,000 and $1,750). One of the facilities expires in tranches in 2005 and 2006
while the other facility is renewed annually. These facilities are also
available as back-up for commercial paper issued by the Company in Canada and
the U.S. At December 31, 2000, the $250 borrowed under these facilities was
classified as Debt not maturing within one year since the Company had both the
intent and ability to refinance the borrowings on a long-term basis.At
December 31, 2002, 2001 and 2000, the entire amount of commercial paper
borrowings has been classified as Debt not maturing within one year since the
Company had both the intent and ability, through its long term credit
facilities, to refinance the borrowings on a long-term
basis.In 2002, 2001 and 2000,
commercial paper borrowings of principal amounts of CAN$616 million, CAN$940
million and CAN$1,368 million, respectively, were swapped for $391, $599 and
$894, respectively, through the use of forward exchange contracts. In 2001 and
2000, commercial paper borrowings of principal amounts of $307 and $518,
respectively, with a rate tied to U.S. LIBOR had been swapped for CHF505 million
and CHF920 million, respectively, with a rate tied to CHF LIBOR for the period
to May 2002.

(b)   Interest rates fluctuate
principally with the lender's prime commercial rate, the commercial bank bill
rate, or are tied to LIBOR rates.

(c)   The Swiss franc bonds were
issued as CHF178 million and were swapped for $105 at an effective interest rate
of 8.98%.

(d)   The Caribbean Basin Projects
Financing Authority (CARIFA) loan was repaid at par.

(e)   The 8.875% debentures were
redeemed in January 2002 at a price of 104.15%. The loss on redemption of $6
pre-tax is included in Other expenses (income) - net. In 2000, $18 of
the 9.625% debentures were redeemed at face value. The 9.5% debentures were
redeemed in January 2000 at a price of 104.64%. The loss on redemption of $3
pre-tax was included in Other expenses (income) - net in 2000.

(f)    The Euro Medium Term Note
Program (EMTN) notes of principal amounts of € 13 million and € 8 million with
rates tied to EURIBOR or LIBOR were swapped for £9 million and £5 million,
respectively.

(g)  Debenture holders are entitled to
receive at their option 1,772 common shares held by the Company in NLM, a
portfolio investment, in exchange for each ten thousand dollar principal amount
of debentures.

The Company can redeem
the debentures at 100% of the principal.

The Company has
swapped, to 2003, the interest payments on $3 (2001: $59; 2000: $61) of its
floating rate debt in exchange for fixed interest payments. Also, the interest
payments on $9 of its fixed rate debt have been swapped to 2004 in exchange for
floating rate payments.

Based on rates of
exchange at year-end, debt repayment requirements over the next five years
amount to $295 in 2003, $135 in 2004, $98 in 2005, $658 in 2006 and $8 in
2007.

> Note 18. Preference Shares
>   Authorized

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

> Authorized and
>   Outstanding

In each of the years 2002, 2001 and 2000, there
were authorized and outstanding 5,700,000 series C and 3,000,000 series E
redeemable non-retractable preference 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.

51

---



> Note 19. Common Shares

The authorized common share capital is an
unlimited number of common shares without nominal or par value. Changes in
outstanding common shares are summarized below:

Number
      (in thousands)
    Stated
      Value2002
    2001
    2000
    2002
    2001
    2000Outstanding - beginning of
      year
    320,902
    317,921
    218,315
    4,687
    4,597
    1,230Issued for cash:Executive share option plan
    292
    2,158
    521
    7
    55
    13Dividend reinvestment and sharepurchase plans
    276
    135
    237
    9
    5
    8Issued in exchange for
      tenderedalgroup shares
    -
    688*
    115,446**
    -
    30
    3,476Purchased for
      cancellation
    -
    -
    (16,598)
    -
    -
    (130)Outstanding - end of
      year
    321,470
    320,902
    317,921
    4,703
    4,687
    4,597


* The 688 common shares were issued to acquire
the remaining algroup shares in accordance with the provisions of Swiss law.

* * 115,386 common shares were issued in
accordance with the Company's share exchange offer; 60 common shares were issued
after the Company's share exchange offer.

In June 2000, the Company obtained
authorization, which terminated on June 18, 2001, to repurchase up to 21,800,000
common shares under a normal course issuer bid. In 2001, no common shares were
purchased under this authorization and in 2000, 16,598,100 common shares were
purchased and cancelled at a cost of $530.

> 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 at the 2002 Annual Meeting with no amendments. The rights
under the plan are not currently exercisable but may become so upon the
acquisition by a person or group of affiliated or associated persons ("Acquiring
Person") of beneficial ownership of 20% or more of the Company's outstanding
voting shares or upon the commencement of a takeover bid. Holders of rights,
with the exception of an Acquiring Person, in such circumstances will be
entitled to purchase from the Company, upon payment of the exercise price
(currently $100.00), such number of additional common shares as can be purchased
for twice the exercise price based on the market value of the Company's common
shares at the time the rights become exercisable.

The plan has a
permitted bid feature which allows a takeover bid to proceed without the rights
under the plan becoming exercisable, provided that it meets certain minimum
specified standards of fairness and disclosure, even if the Board does not
support the bid.

The plan expires
in 2008, subject to reconfirmation at the Annual Meeting of Shareholders in 2005
but may be redeemed earlier by the Board, with the prior consent of the holders
of rights or common shares, for $0.01 per right. In addition, should a person or
group of persons acquire outstanding voting shares pursuant to a permitted bid
or a share acquisition in respect of which the Board has waived the application
of the plan, the Board shall be deemed to have elected to redeem the rights at
$0.01 per right.

52

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> Note 20. Stock Options and Other
>   Stock-based Compensation

Under the executive share option plan, certain
employees may purchase common shares at an exercise price that is based on the
market value of the shares on the date of the grant of each option. The vesting
period for options granted beginning in 1998 is linked to Alcan's share price
performance, but does not exceed nine years. Options granted before 1998 vest
generally over a fixed period of four years from the grant date and expire at
various dates during the next 10 years. Changes in the number of shares under
option as well as the average exercise price are summarized below:

|                                      | Number
      of Options (in thousands) | Weighted
      Average Exercise Price (CAN$)
|------------------------------------- | -------------------------------------- | --------------------------------------------
|                                      | 2002                                   | 2001                                        
|                                      |                                        |                                             
|                                      |                                        |                                             
|Outstanding - beginning of
      year | 7,108                                  | 7,326                                       
|Granted                               | 1,937                                  | 1,945                                       
|Exercised                             | (292)                                  | (2,158)                                     
|Forfeited                             | (66)                                   | (5)                                         
|Expired                               | -                                      | -                                           
|                                      |                                        |                                             
|Outstanding - end of
      year       | 8,687                                  | 7,108                                       
|                                      |                                        |                                             
|Exercisable - end of
      year       | 5,007                                  | 4,665                                       
|                                      |                                        |                                             
|                                      |                                        |                                             

Options
      Outstanding at December 31, 2002WeightedWeighted
    
    AverageNumber of
    Range
      of
    
    
    Average
    
    RemainingOptions
    Exercise
      Price
    
    
    Exercise
      Price
    Contractual Life(in thousands)
    (CAN$)
    
    
    (CAN$)
    
    (Years)73
    23.31-34.00
    
    
    29.37
    
    0.911,957
    34.01-40.00
    
    
    37.92
    
    8.241,251
    40.01-46.00
    
    
    44.07
    
    4.514,259
    46.01-52.00
    
    
    46.93
    
    5.121,147
    52.01-64.25
    
    
    60.16
    
    8.628,687Options
      Exercisable at December 31, 2002WeightedNumber of
    Range
      of
    
    
    AverageOptions
    Exercise
      Price
    
    
    Exercise
      Price(in thousands)
    (CAN$)
    
    
    (CAN$)73
    23.31-34.00
    
    
    29.37470
    34.01-40.00
    
    
    35.071,236
    40.01-46.00
    
    
    44.072,975
    46.01-52.00
    
    
    47.00253
    52.01-64.25
    
    
    58.235,007


Upon consummation of the combination with
Alusuisse Group Ltd, described in note 5 - Combination with Alusuisse Group Ltd,
all options granted under the Company's executive share option plan prior to the
consummation were vested.

At December 31,
2002, the Company had reserved for issue under the executive share option plan
15,408,702 shares.

Stock options are
generally granted at an exercise price equal to the market price on the grant
date. The weighted average fair value of stock options granted in 2002 is $8.69
(2001: $12.00; 2000: $10.87).

To compute the pro
forma compensation expense, the Black-Scholes valuation model was used to
determine the fair value of the options granted. Using the model, the fair value
of options averages approximately 27% to 41% of the exercise price. (See note 2
- Summary of Significant Accounting Policies; Stock Options and Other
Stock-based Compensation).

53

---



The fair value of
each option grant is estimated on the date of grant with the following weighted
average assumptions used for the option grants:

2002
    2001
    2000Dividend yield (%)
    1.65
    1.93
    2.11Expected volatility (%)
    35.73
    30.83
    33.10Risk-free interest rate (%)
    3.50
    5.57
    5.75Expected life (years)
    6
    10
    10


For pro forma income purposes, the fair value of
options granted is being amortized over their respective vesting periods.

Pro forma net
income and net income per common share - basic and diluted, as if the fair value
method had been applied to all stock option awards, are presented
below.

2002
    2001
    2000Net income as
reported
    374
    2
    610Compensation expense if the
      fair value method was used
    (11)
    (24)
    (27)Pro forma net income
      (Loss)
    363
    (22)
    583Net income (Loss) per common
      share - basic - as reported
    1.15
    (0.02)
    2.42Pro forma net income (loss) per
      common share - basic
    1.12
    (0.10)
    2.31Net income (Loss) per common
      share - diluted - as reported
    1.14
    (0.02)
    2.42Pro forma net income (loss) per
      common share - diluted
    1.11
    (0.10)
    2.31


> Compensation To Be Settled in
>   Cash

In addition, a small number of employees are
entitled to receive stock price appreciation units whereby they are entitled to
receive cash in an amount equal to the excess of the market value of a share on
the date of exercise over the market value of a share as of the date of grant of
such units. In 2002, 275,600 units (2001: 311,060 units) were granted of which
214,635 units (2001: nil units) were vested. The vesting period is linked to
Alcan's share price performance, but does not exceed nine years. At December 31,
2002, 580,305 units (2001: 311,060 units) were outstanding.

A number of
employees are entitled to receive cash awards under a cash incentive plan which
provides performance awards to eligible employees based on the relative
performance of the Company's share value and share dividend yield compared to
other corporations included in the Standard & Poor's Industrials Index
measured over a 3-year period commencing on October 1, 2002. If the performance
results for the shares is below the 30th percentile compared to all companies in
the Standard & Poor's Industrials Index, the employee will not receive an
award. At or above the 75th percentile rank, the employee will be paid the
maximum award, which is equal to 300% of the target set for the period. The
actual amount of the award (if any) will be prorated between the percentile
rankings. In 2002, a total target cash award of $12 was granted to specific key
employees.

Under the
Executive Deferred Share Unit Plan, executive officers based in Canada may
elect, prior to the beginning of any particular year, to receive Executive
Deferred Share Units (EDSUs) with a value equal to either 50% or 100% of their
Executive Performance Award in respect of that year, instead of a cash payment.
The number of EDSUs is determined by dividing the amount so elected by the
average price of a share on the Toronto and New York stock exchanges at the end
of the preceding year. Additional EDSUs are credited to each holder thereof
corresponding to dividends declared on shares. The EDSUs are redeemable only
upon termination of employment (retirement, resignation or death). The amount to
be paid by the Company upon redemption will be calculated by multiplying the
accumulated balance of EDSUs by the average price of a share on the said
exchanges at the time of redemption. In 2002, 9,771 units (2001: 36,214 units;
2000: 70,673 units) were granted and 939 units (2001: 12,467 units; 2000: nil
units) were redeemed. At December 31, 2002, 224,869 units (2001: 216,037 units;
2000: 192,290 units) were outstanding.

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 so elected by the average price of a 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 shares. The DDSUs are redeemable only upon termination
(retirement, resignation or death). The amount to be paid by the Company 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. In
2002, 25,913 units (2001: 15,859 units; 2000: 5,777 units) were granted and
8,876 units (2001: 5,905 units; 2000: 921 units) were redeemed. At December 31,
2002, 48,212 units (2001: 31,175 units; 2000: 21,221 units) were outstanding.

The compensation
cost for stock-based employee compensation awards that can be settled in cash,
which is based on the change in the share price during the year, is recognized
in income. Total compensation cost for such awards was $2 in 2002 (2001: $4;
2000: $1).

54

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> Note 21. Retained Earnings

Consolidated retained earnings at December 31,
2002, include $3,146 (2001: $3,243; 2000: $3,118) of undistributed earnings of
subsidiaries and joint ventures, some part of which may be subject to certain
taxes and other restrictions on distribution to the parent company. No provision
is made for such taxes as these earnings are considered to be permanently
reinvested in the businesses.

> Note 22. Commitments and
>   Contingencies

In 1997, as part of the claim settlement
arrangements related to the British Columbia Government's cancellation of the
Kemano Completion Project, the Company obtained the right to transfer a portion
of a power supply contract with BC Hydro to a third party. The Company sold the
right to supply this portion to Enron Power Marketing Inc. (EPMI), a subsidiary
of Enron Corporation (Enron) for cash consideration. In order to obtain the
consent of BC Hydro to this sale, the Company was required to retain a residual
obligation for EPMI's performance of the power supply contract in the event that
EPMI became unable to perform. This contingent obligation is contractually
subject to a maximum aggregate amount of $100, with mitigation and subrogation
rights. On December 2, 2001, EPMI and Enron filed for protection under Chapter
11 of the U.S. Bankruptcy Code. Powerex Corporation (Powerex), the BC Hydro
affiliate which now holds the rights to the portion of the power supply contract
transferred to EPMI, maintains that it has terminated the power supply contract
and as a result filed a claim for $100 against Enron on March 15, 2002. Neither
Enron nor EPMI responded to that claim and the Company received, on March 22,
2002, a demand for payment in the amount of $100 from Powerex. The Company
disputed its obligation to pay on the demand by Powerex and the matter was
submitted to arbitration in accordance with applicable contractual requirements.
The arbitration hearings took place in December and on January 17, 2003, the
decision was issued confirming Powerex's claim for $100. The decision will
become enforceable after the expiry of the delays to apply for judicial review
and the completion by Powerex of the necessary filing process before the
appropriate Court. Under the circumstances the Company has recorded a pre-tax
charge of $100 in Other expenses (income) - net in the fourth quarter of 2002.

The Company has
guaranteed the repayment of approximately $3 of indebtedness by third parties.
Alcan believes that none of these guarantees is likely to be invoked.
Commitments with third parties and certain related companies for supplies of
goods and services are estimated at $140 in 2003, $131 in 2004, $109 in 2005,
$109 in 2006, $97 in 2007 and $988 thereafter. Total payments to these entities
were $50 in 2002, $36 in 2001 and $106 in 2000, excluding $218 and $749 in 2001
and 2000, respectively, in relation to the Alma smelter.

Minimum rental
obligations are estimated at $55 in 2003, $46 in 2004, $41 in 2005, $34 in 2006,
$30 in 2007 and $130 thereafter. Total rental expenses amounted to $82 in 2002,
$72 in 2001 and $58 in 2000.

Alcan, in the
course of its operations, is subject to environmental and other claims, lawsuits
and contingencies. The Company has environmental contingencies relating to
approximately 29 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.
Environmental provisions were recorded in 2002 and 2001 for treatment costs
relating to spent potlining in Canada and for remediation costs relating to red
mud disposal at other sites in Canada and the U.K.

Although it is
possible that liabilities may arise in other instances for which no accruals
have been made, the Company does not believe that such an outcome will
significantly impair its operations or have a material adverse effect on its
financial position.

In addition, see
reference to income taxes in note 9, capital expenditures in note 14, debt
repayments in note 17, and financial instruments and commodity contracts in note
24.

> Note 23. Currency Gains and
>   Losses

The following are the amounts recognized in the
financial statements:

2002
    2001
    2000Currency gains (losses)
      excluding realized deferred translation adjustments:Gains (Losses) realized and
      unrealized on exchange derivatives
    (146)
    15
    34Gains (Losses) on translation
      of monetary assets and liabilities
    106
    (23)
    (2)(40)
    (8)
    32Deferred translation
      adjustments - beginning of year
    (151)
    (20)
    (76)Effect of exchange rate
      changes
    463
    (129)
    9Losses (Gains)
      realized*
    (11)
    2
    47Debt designated as an equity
      hedge of foreign subsidiaries
    (42)
    (4)
    -Balance - end of
      year
    259
    (151)
    (20)


* The gain realized in 2002 relates to a gain on
the partial sale of the Company's investment in Nippon Light Metal Company,
Ltd., which was offset in part by a loss on the sale of Alcan Nikkei Thai
Limited. The loss realized in 2000 related principally to the sale of the
Company's investment in Indian Aluminium Company, Limited.

In 2001, $6 (2000: $26) of exchange losses
relates to hedging of Canadian dollar construction costs of the new smelter at
Alma, Quebec. In 2002 and 2001, these costs are included in Property, plant and
equipment - cost and in 2000, were included in Construction work in progress.
(See note 9 - Income Taxes for amounts of exchange gains and losses included in
income taxes).

55

---



> Note 24. Financial Instruments and
>   Commodity Contracts

In conducting its business, the Company uses
various derivative and non-derivative instruments, including forward contracts,
swaps and options, to manage the risks arising from fluctuations in exchange
rates, interest rates, aluminum prices and other commodity prices. Generally,
such instruments are used for risk management purposes only.

> Derivatives -
>   Currency

The Company enters into forward currency
contracts and options that are designated as hedges of certain identifiable
foreign currency revenue and operating cost exposures. Foreign currency forward
contracts and swaps are also used to hedge certain foreign currency denominated
debt and intercompany foreign currency denominated loans.

Outstanding at
      December 31
    2002
    
    2001
    
    2000Financial
    
    Notional
    Fair
    Notional
    Fair
    Notional
    FairInstrument
    Hedge
    Amount
    Value
    Amount
    Value
    Amount
    ValueForward exchange
    Future firm net operating cash
      flows(1)
    876
    (16)
    933
    (16)
    2,248
    14contractsCurrency options
    Future firm operating cost
      commitments(1)
    163
    6
    220
    (1)
    58
    (2)Cross currency
    To swap CAN$
    commercial
    391
    -
    599
    (9)
    894
    17interest swap
    paper borrowings to US$(2)Forward exchange
    Intercompany foreign
    797
    (34)
    415
    (7)
    193
    (3)contracts
    currency denominated loans(3)Cross currency
    To swap 5.375% CHF178
      million
    105
    24
    105
    -
    105
    4interest swap
    bonds to US$(4)Cross currency
    To swap US$ third
    party
    271
    (5)
    -
    -
    -
    -interest swap and
    borrowings to KRW(5)forward exchangecontractsCross currency
    To swap € 400 million medium
      term
    -
    -
    360
    (8)
    373
    1interest swap
    notes to CHF608 million(6)Cross currency
    To swap€21 million medium
    23
    (1)
    20
    (2)
    21
    -interest swap
    term notes to &14
      million(6)Forward exchange
    Future commitments(7)
    -
    -
    20
    -
    212
    -contractsCross currency
    To swap US$
commercial
    -
    -
    307
    3
    518
    (48)interest swap
    paper borrowings for CHF(8)


(1)
    Included in Deferred charges
      and other assets and Other receivables is an amount of $1 (2001: nil;
      2000: $1) consisting of net losses on terminated forward exchange
      contracts and options, as well as the net cost of outstanding options,
      used to hedge future costs. These deferred charges will be included in the
      cost of the underlying transactions being hedged upon their recognition.
      Included in Payables and accrued liabilities is an amount of $1 which
      offsets the revaluation of the underlying items being
      hedged.(2)
    An amount of nil (2001:
      liability of $12; 2000: asset of $12) related to the swap of the principal
      has been recorded in Deferred charges and other assets. The CAN$616
      million swap, outstanding at December 31, 2002, matures at various dates
      in 2003. The CAN$940 million swap, outstanding at December 31, 2001,
      matured in 2002. The CAN$1,368 million swap, outstanding at December 31,
      2000, matured in 2001.(3)
    A net liability of $34,
      which is recorded in the balance sheet, offsets the revaluation of the
      underlying intercompany foreign currency denominated loans being
      hedged.(4)
    The 5.375% Swiss franc bonds
      of principal amount of CHF178 million have been swapped for $105 at an
      effective interest rate of 8.98%. An asset of $24 related to the swap of
      the principal (2001: nil; 2000: asset of $4) has been recorded in Other
      receivables (2000: Deferred charges and other assets). The swap matures in
      April 2003.(5)
    A liability of $4 which is
      recorded in Payables and accrued liabilities, offsets the revaluation of
      the underlying third party borrowings being hedged.(6)
    Part of the EMTN Program,
      whereby an amount of nil (2001: liability of $8; 2000: asset of $1) has
      been recorded in the balance sheet.(7)
    Mainly Canadian dollar,
      principally for the construction of the smelter at Alma,
    Quebec.(8)
    An amount of nil (2001:
      asset of $8; 2000: liability of $48) has been recorded in the balance
      sheet. Because the swap is hedging an intercompany CHF loan, it has no net
      income impact. The CHF920 million swap, outstanding at December 31, 2000,
      matured in February 2001. The CHF505 million swap, outstanding at December
      31, 2001, matured in May 2002.


56

---



> Derivatives - Interest
>   Rates

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

If all interest
rate swap agreements had been closed out on December 31, 2002, the Company would
have paid nil (2001: paid $1; 2000: received $2).

> Derivatives and Commodity Contracts -
>   Metal

Depending on supply and market conditions, as
well as for logistical reasons, the Company may sell primary metal to third
parties and may purchase primary and secondary aluminum on the open market to
meet its fabricated products requirements. In addition, the Company may hedge
certain commitments arising from pricing arrangements with some of its
customers.

Through the use of
forward purchase and sales contracts and options, the Company seeks to limit the
negative impact of low metal prices.

Outstanding at December
      31
    2002
    2001
    2000Financial
      InstrumentForward contracts (principally
      forward purchase contracts)Tonnes
      covered
    556,051
    650,400
    410,650Maturing
      principally in years
    2003 to
      2004
    2002 to
    2004
    2001 to
    2003Call options
purchasedNumber of
      tonnes
    88,050
    379,925
    175,650Maturing
      principally in years
    2003
    2002 to
    2003
    2001 to
    2002Put options purchasedNumber of
      tonnes
    -
    42,000
    151,000Maturing
      principally in years
    -
    2002
    2001 to
    2003Fair value
    15
    (25)
    10


Included in Other receivables or Deferred
charges and other assets is $4 (2001: $12; 2000: $23) representing the net cost
of outstanding options. Also included in Other receivables is an amount of $5
consisting of net losses on terminated forward metal contracts used to hedge
future costs. These deferred charges will be included in the cost of the items
being hedged at the same time as the underlying transactions being hedged are
recognized.

> Derivatives - Oil

As a hedge of future oil purchases, the Company
had outstanding as at December 31:

2002
    2001
    2000Futures, swaps and optionsNumber of barrels (in
      millions)
    14.0
    17.1
    18.1Maturing at various times in the
      years
    2003 to
      2006
    2002 to
      2006
    2001 to
      2006Fair value
    9
    (12)
    (7)


In 2002, a net liability of $4 (2001: $10)
relating to the oil derivatives is recorded in the balance sheet.

57

---



> Derivatives - Natural
>   gas

As a hedge of future natural gas purchases, the
Company had outstanding as at December 31:

2002
    2001
    2000SwapsNumber of
      decatherms (in millions)
    1.5
    -
    -OptionsNumber of
      decatherms (in millions)
    0.4
    -
    -Fixed price contractsNumber of
      decatherms (in millions)
    0.8
    5.3
    -Maturing in various times
      throughout
    2003
    2002
    -Fair value
    2
    (4)
    -


> Counterparty
> Risk

As exchange rates, interest rates, metal, oil
and natural gas prices fluctuate, the above contracts will generate gains and
losses that will be offset by changes in the value of the underlying items being
hedged. The Company may be exposed to losses in the future if the counterparties
to the above contracts fail to perform. However, the Company is satisfied that
the risk of such non-performance is remote, due to its monitoring of credit
exposures.

> Financial Instruments - Fair
>   Value

On December 31, 2002, the fair value of the
Company's long-term debt totalling $3,481 (2001: $3,536; 2000: $3,528) was
$3,699 (2001: $3,579; 2000: $3,516), based on market prices for the Company's
fixed rate securities and the book value of variable rate debt.

At December 31,
2002, the quoted market value of the Company's portfolio investments having a
book value of $28 (2001 and 2000: $31) was $34 (2001: $39; 2000: $46).

At December 31,
2002, the fair value of the Company's preference shares having a book value of
$160 (2001 and 2000: $160) was $131 (2001: $128; 2000: $139).

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

> Note 25. Supplementary
>   Information

2002
    2001
    2000Income
    statementInterest on long-term
      debt
    158
    218
    123Capitalized interest
    (1)
    (30)
    (81)Balance sheetPayables and accrued
      liabilities include the following:Income and
      other taxes
    158
    200
    168Accrued
      employment costs
    280
    242
    288At December 31, 2002,
      the weighted average interest rate on short-term borrowings for the
      continuingoperations was 4.1% (2001:
      5.0%; 2000: 6.5%).Statement of cash
      flowsInterest paid
    204
    264
    160Income taxes paid
    183
    213
    204


58

---



> Note 26. Post-retirement
>   Benefits

Alcan, its subsidiaries and joint ventures have
established pension plans in the principal countries where they operate,
generally open to all employees. Most plans provide pension benefits that are
based on the employee's highest average eligible compensation before retirement.
Pension payments are periodically adjusted for cost of living increases, either
by Company practice, collective agreement or statutory requirement. Plan assets
consist primarily of listed stocks and bonds.

Alcan's funding
policy is to contribute the amount required to provide for benefits attributed
to service to date, with projection of salaries to retirement, and to amortize
unfunded actuarial liabilities for the most part over periods of 15 years or
less. All actuarial gains and losses are amortized over the expected average
remaining service life of the employees which is 12 years in 2002 (2001 and
2000: 13 years).

The Company
provides life insurance benefits under some of its retirement plans. Certain
early retirement arrangements also provide for medical benefits, generally only
until the age of 65. These plans are generally not funded.

|                                                     | Pension Benefits | Other
      Benefits
|---------------------------------------------------- | ---------------- | --------------------
|                                                     | 2002             | 2001                
|                                                     |                  |                     
|Change in benefit
      obligation                   |                  |                     
|Benefit obligation at January
      1                | 6,514            | 6,317               
|Service cost                                         | 126              | 120                 
|Interest cost                                        | 405              | 376                 
|Members'
contributions                               | 27               | 26                  
|Benefits paid                                        | (388)            | (346)               
|Amendments                                           | 111              | 153                 
|Acquisitions/divestitures                            | (6)              | (71)                
|Actuarial (gains)
    losses                         | (38)             | 23                  
|Currency (gains)
    losses                          | 447              | (84)                
|                                                     |                  |                     
|Benefit obligation at
      December 31              | 7,198            | 6,514               
|                                                     |                  |                     
|Change in market
      value of plan assets (Assets) |                  |                     
|Assets at January 1                                  | 6,047            | 7,014               
|Actual return on
    assets                          | (349)            | (537)               
|Members'
contributions                               | 27               | 26                  
|Benefits paid                                        | (388)            | (346)               
|Company contributions                                | 128              | 80                  
|Acquisitions/divestitures                            | (4)              | (117)               
|Currency gains
    (losses)                          | 316              | (73)                
|                                                     |                  |                     
|Assets at December
      31                          | 5,777            | 6,047               
|                                                     |                  |                     
|Assets in excess of (less
      than)                |                  |                     
|benefit obligation                                   | (1,421)          | (467)               
|Unamortized                                          |                  |                     
|- actuarial (gains) losses                           | 656              | (193)               
|- prior service cost                                 | 687              | 653                 
|                                                     |                  |                     
|Net liability in balance
      sheet                 | (78)             | (7)                 
|                                                     |                  |                     

For certain plans, the accumulated benefit
obligation (ABO) exceeds the market value of the assets. For these plans, the
projected benefit obligation is $3,862 (2001: $2,495; 2000: $657), the ABO is
$3,576 (2001: $2,414; 2000: $588) while the market value of the assets is $2,608
(2001: $1,882; 2000: $308).

59

---



Pension Benefits
    Other
      Benefits2002
    2001
    2000
    2002
    2001
    2000Components of net
      periodic benefit costService cost
    126
    120
    83
    5
    5
    5Interest cost
    405
    376
    255
    15
    15
    12Expected return on
    assets
    (437)
    (480)
    (345)
    -
    (1)
    -Amortization- actuarial (gains) losses
    9
    (47)
    (102)
    (2)
    (1)
    (2)- prior service cost
    69
    89
    89
    -
    -
    -Curtailment/settlement (gains)
      losses
    9
    40
    -
    (2)
    -
    -Net periodic benefit
      cost
    181
    98
    (20)
    16
    18
    15Weighted average
      assumptions at December 31Discount rate (%)
    5.8
    6.1
    6.3
    6.5
    6.9
    7.3Average compensation growth
      (%)
    3.3
    3.6
    3.7
    3.9
    4.4
    4.5Expected return on assets
      (%)
    7.1
    7.3
    7.0
    8.5
    8.5
    n/a


The assumed health care cost trend rate used for
measurement purposes is 8.9% for 2003, decreasing gradually to 4.6% in 2008 and
remaining at that level thereafter. A one percentage point change in assumed
health care cost trend rates would have the following effects:

Other
      Benefits1%
    1%Increase
    DecreaseSensitivity AnalysisEffect on service and interest
      costs
    
    
    1
    (1)Effect on benefit
      obligation
    
    
    12
    (10)Note 27.
      Information by Geographic AreasLocation
    2002
    2001
    2000Sales and operating
      revenues
    Canada
    707
    584
    625- third parties (by
      destination)
    United States
    4,574
    4,597
    3,665Brazil
    395
    470
    465United Kingdom
    933
    964
    575Germany
    1,402
    1,365
    751Switzerland
    191
    184
    63Other Europe
    2,256
    2,283
    1,457Australia
    103
    39
    131Asia and Other
Pacific
    1,646
    1,709
    1,227All other
    120
    228
    138Total
    12,327
    12,423
    9,097Sales and operating
      revenues
    Canada
    2,354
    2,127
    2,042- intercompany (by
      origin)
    United States
    602
    541
    563Brazil
    54
    64
    44United Kingdom
    385
    408
    373Germany
    319
    242
    181Switzerland
    765
    670
    235Other Europe
    620
    600
    149Australia
    299
    288
    114Asia and Other
Pacific
    13
    5
    9All other
    97
    190
    322Sub-total
    5,508
    5,135
    4,032Consolidation
      eliminations
    (5,508)
    (5,135)
    (4,032)Total
    -
    -
    -


60

---

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

Location
    2002
    2001
    2000Sales and operating
      revenues
    Canada
    999
    1,045
    915- third parties (by
      origin)
    United States
    4,389
    4,355
    3,713Brazil
    420
    424
    443United Kingdom
    829
    828
    543Germany
    2,028
    2,022
    1,401Switzerland
    1,356
    1,421
    410Other Europe
    1,053
    997
    574Australia
    183
    208
    137Asia and Other
Pacific
    972
    1,014
    857All other
    98
    109
    104Total
    12,327
    12,423
    9,097Income (Loss)
    from
    Canada
    94
    (57)
    287continuing operations (*)
      (**)
    United States
    74
    137
    155Brazil
    38
    29
    34United Kingdom
    10
    (138)
    8Germany
    36
    19
    43Switzerland
    8
    (14)
    1Other Europe
    16
    (4)
    25Australia
    68
    87
    59Asia and Other
Pacific
    3
    (30)
    (22)All other
    24
    (38)
    48Consolidation
      eliminations
    5
    12
    (30)Total
    376
    3
    608


(*)
    In 2002, Income (Loss) from
      continuing operations includes after-tax non-recurring charges (income)
      pertaining to restructuring and other special charges, revisions to
      environmental provisions, impairment provisions and business and
      investment disposal gains and losses of $85 for Canada, $20 for the United
      States, $(2) for Brazil, $12 for the United Kingdom, $(5) for Germany, $2
      for Switzerland, $26 for Other Europe, $(16) for Asia and Other Pacific
      and $(5) for All other.     In 2001, Income (Loss) from continuing operations
      included after-tax non-recurring charges (income) pertaining to
      restructuring and merger integration costs, revisions to environmental
      provisions, impairment provisions, business disposal loss and a prior
      year's tax adjustment of $200 for Canada, $23 for the United States, $2
      for Brazil, $161 for the United Kingdom, $(3) for Germany, $11 for
      Switzerland, $42 for Other Europe, $1 for Australia, $4 for Asia and Other
      Pacific and $90 for All other. (See note 8 - Restructuring, Impairment and
      Other Special Charges).     In 2002, Income (Loss) from continuing operations
      includes income (charges) for transfer pricing adjustments of $69 for
      Canada, $(70) for the United States and $5 for the United Kingdom. (See
      note 9 - Income Taxes).(**)
    If presented to reflect the
      effect of prior years' income tax reassessments described in note 9, in
      2000, Income (Loss) from continuing operations in Canada would be
      increased by $25 and decreased by $14 in the United States, $5 in the
      United Kingdom and $6 in Germany.






61

---



Location
    2002
    2001
    2000Property, plant and
      equipment,
    Canada
    4,317
    4,114
    4,002Intangible assets and
      Goodwill at
    United States
    1,500
    1,689
    1,579December 31 (*)
      (**)
    Brazil
    743
    731
    736United Kingdom
    807
    755
    967Germany
    1,108
    1,166
    1,322Switzerland
    630
    704
    737Other Europe
    1,702
    1,686
    1,600Australia
    1,215
    1,199
    959Asia and Other
Pacific
    627
    607
    626All other
    65
    81
    296Total
    12,714
    12,732
    12,824Cash paid for capital
      expenditures
    Canada
    477
    399
    1,097and business
      acquisitions
    United States
    96
    196
    113Brazil
    78
    61
    42United Kingdom
    70
    87
    45Germany
    85
    73
    55Switzerland
    43
    44
    18Other Europe
    103
    113
    74Australia
    58
    416
    12Asia and Other
Pacific
    33
    79
    239All other
    13
    27
    31Total
    1,056
    1,495
    1,726Average number of
      employees
    Canada
    12
    12
    11(in thousands -
      unaudited)
    United States
    9
    10
    5Brazil
    3
    3
    3United Kingdom
    4
    5
    3Germany
    8
    8
    4Switzerland
    3
    4
    1Other Europe
    6
    6
    2Australia
    1
    1
    -Asia and Other
Pacific
    2
    2
    5All other
    1
    1
    3Total
    49
    52
    37


(*)
    In 2002, Property, plant and
      equipment, Intangible assets and Goodwill - net includes goodwill
      impairment charges of $9 for Canada, $130 for the United States, $33 for
      the United Kingdom, $208 for Germany, $171 for Switzerland and $189 for
      Other Europe.(**)
    In 2001, Property, plant and
      equipment, Intangible assets and Goodwill - net included asset write-offs
      of $31 for Canada, $33 for the United States, $1 for Brazil, $127 for the
      United Kingdom, $8 for Germany, $4 for Switzerland, $7 for Other Europe
      and $11 for Asia and Other
Pacific.






62

---



> Note 28. Information by Operating
>   Segments

The following presents selected
information by operating segment, viewed on a stand-alone basis. Effective
January 1, 2002, a new operating management structure comprised of six operating
segments was put in place. The six operating segments are Bauxite, Alumina and
Specialty Chemicals; Primary Metal; Rolled Products Americas and Asia; Rolled
Products Europe; Engineered Products; and Packaging. Prior to 2002, there were
four operating segments: Primary Metal; Aluminum Fabrication, Americas and Asia;
Aluminum Fabrication, Europe; and Packaging. Comparative information has been
restated to conform to the 2002 organizational structure. Transactions between
operating segments are conducted on an arm's-length basis and reflect market
prices. Thus, earnings from the Primary Metal group represent mainly profit on
metal produced by the Company, whether sold to third parties or used in the
Company's Rolled Products, Engineered Products and Packaging groups. Earnings
from the Rolled Products, Engineered Products and Packaging groups represent
only the fabricating profit on their respective products. The accounting
principles used to prepare the information by operating segment are the same as
those used to prepare the consolidated financial statements of the Company
except that the 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. Some corporate office and certain
other costs have been allocated to the respective operating segments. The
operating segments are described below.

> Bauxite, Alumina and Specialty
>   Chemicals

This segment, which consists of a network of
bauxite mines/deposits in five countries and alumina refineries and specialty
chemical plants in three countries, supplies the primary metal operations and
third-party sales of alumina and specialty chemicals.

> Primary Metal

This segment produces primary aluminum in seven
countries. The alumina is sourced primarily from the Bauxite, Alumina and
Specialty Chemicals segment and the ingot produced is used by the Company's
fabricating businesses as well as sold to third-parties. The segment produces
value-added products in the form of sheet ingot, extrusion billet, cable rods
and foundry ingot for end-use markets in consumer goods, transportation,
building and construction and other industrial applications.

> Rolled Products Americas and
>   Asia

This segment, which has an extensive network of
16 rolled products facilities in North and South America and Asia, manufactures
sheet and light-gauge products, including can stock, automotive sheet and
industrial products. In addition, the segment has a well-established used
beverage can recycling capability in North and South America.

> Rolled Products
>   Europe

This segment has 11 rolled products plants and
serves a number of European markets with advanced value-added sheet products,
including automotive sheet, lithographic sheet, industrial sheet, can sheet and
foil stock.

> Engineered Products

This segment, which has 47 engineered products
plants in 17 countries, develops, manufactures and sells value-added engineered
products for a variety of applications, including extrusions, composites,
systems and components for mass transportation and automotive applications and
electrical cables.

> Packaging

This segment has 76 plants in 14 countries and
is focused on serving specific end-use markets: food, pharmaceutical and
personal care, and tobacco packaging. Seven of these plants have been excluded
from the operating segment information as they have been reclassified to
discontinued operations and assets held for sale.

> Intersegment and Other

This classification includes the deferral or
realization of profits on intersegment sales of aluminum and alumina as well as
other non-operating items.



63

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Sales and operating
      revenues
    Intersegment
    Third
      parties2002
    2001
    2000
    2002
    2001
    2000Bauxite, Alumina and Specialty
      Chemicals
    757
    771
    536
    435
    477
    470Primary Metal
    2,205
    2,117
    1,674
    2,447
    2,546
    1,655Rolled Products Americas and
      Asia
    185
    173
    71
    3,327
    3,316
    3,391Rolled Products
Europe
    333
    338
    319
    1,814
    1,735
    1,666Engineered Products
    17
    22
    18
    1,645
    1,661
    724Packaging
    21
    60
    58
    2,599
    2,658
    1,165Other
    (3,518)
    (3,481)
    (2,676)
    60
    30
    26-
    -
    -
    12,327
    12,423
    9,097


EBITDA (Earnings
      before interest, taxes, depreciation and amortization)
    2002
    2001
    2000Bauxite, Alumina and Specialty
      Chemicals
    
    
    
    249
    301
    265Primary Metal
    
    
    
    858
    818
    729Rolled Products Americas and
      Asia
    
    
    
    367
    296
    261Rolled Products
Europe
    
    
    
    132
    83
    144Engineered Products
    
    
    
    96
    103
    55Packaging
    
    
    
    327
    328
    67EBITDA from operating
      segments
    
    
    
    2,029
    1,929
    1,521Depreciation and
      amortization
    
    
    
    (835)
    (799)
    (540)Restructuring,
      impairment and other special charges
    
    (69)
    (654)
    -Intersegment and
other
    
    
    
    (153)
    (43)
    24Corporate office
    
    
    
    (96)
    (75)
    (49)Interest
    
    
    
    (202)
    (252)
    (78)Income taxes
    
    
    
    (295)
    (44)
    (255)Minority interests
    
    
    
    (3)
    13
    1Income from continuing
      operationsbefore amortization of goodwill
    
    
    
    376
    75
    624Income from continuing
      operationsafter amortization of goodwill
    
    
    
    376
    3
    608


Included in 2002 EBITDA for
Bauxite, Alumina & Specialty Chemicals is a gain of $5 related to the sale
of fixed assets.

Restructuring, impairment and other special charges for 2002 includes $14
for Bauxite, Alumina & Specialty Chemicals , $(6) for Primary Metal, $15 for
Rolled Products Americas and Asia, $13 for Rolled Products Europe, $10 for
Engineered Products, $8 for Packaging and $15 for Intersegment and other.

Included in 2002 Intersegment and other are net charges of $84 relating
principally to a provision of $100 for the ruling on a contract dispute with
Powerex (a subsidiary of BC Hydro), an increase of $9 to legal provisions, a
loss of $6 on redemption of debt, and partially offset by a gain of $36 on the
sale of a portfolio investment.

Included in 2001 EBITDA for Primary Metal and Packaging were $1 and $(5)
related to rationalization costs (write-back of provision), respectively.

64

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Restructuring, impairment and other special charges for 2001 included
$149 for Bauxite, Alumina & Specialty Chemicals, $201 for Primary Metal, $16
for Rolled Products Americas and Asia, $148 for Rolled Products Europe, $7 for
Engineered Products, $92 for Packaging and $41 for Intersegment and other.

Included in 2001 Intersegment and other is a loss on the sale of Jamaican
bauxite and alumina operations of $123.

Included in 2000 EBITDA for Bauxite, Alumina & Specialty Chemicals,
Primary Metal and Packaging are $3, $15 and $26 related to rationalization
costs, respectively.

Total assets at December
    31
    2002
    2001
    2000Bauxite, Alumina and Specialty
      Chemicals
    2,073
    2,164
    2,176Primary Metal
    6,316
    5,889
    5,682Rolled Products Americas and
    Asia
    2,496
    2,522
    2,709Rolled Products Europe
    1,620
    1,638
    2,139Engineered Products
    1,373
    1,490
    1,438Packaging
    3,277
    3,279
    3,426Other
    99
    222
    533Assets held for sale
    284
    254
    28617,538
    17,458
    18,389


Cash
    paid for
    capital expenditures
    and business acquisitionsDepreciation and amortization2002
    2001
    2000
    2002
    2001
    2000Bauxite, Alumina and Specialty
      Chemicals
    83
    93
    77
    104
    479
    105Primary Metal
    295
    260
    167
    556
    462
    1,009Rolled Products Americas and
      Asia
    146
    146
    143
    73
    149
    355Rolled Products
Europe
    77
    82
    65
    63
    73
    89Engineered Products
    69
    60
    21
    63
    61
    30Packaging
    154
    145
    57
    188
    247
    88Other
    11
    13
    10
    9
    24
    50835
    799
    540
    1,056
    1,495
    1,726


> Note 29. Prior Year
> Amounts

Certain prior year amounts have been
reclassified to conform with the 2002 presentation.

> Note 30. Discontinued Operations and Assets
>   Held for Sale

In the second quarter of 2003, the
Company committed to a plan to sell certain non-strategic Packaging operations.
Accordingly, certain financial information has been reclassified in 2002 and the
prior years to present these businesses as discontinued operations on the income
statement, 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. All of these divestments are expected to be
completed by the end of the second quarter of 2004. Selected financial
information for the businesses included in discontinued operations is reported
below:

2002
    2001
    2000Sales
    213
    203
    51Income (Loss) from
      operations
    (4)
    (2)
    1Loss from impairment
    -
    (1)
    -Pre-tax income (loss)
    (4)
    (3)
    1Income taxes
recovered
    2
    2
    1Income (Loss) from discontinued
      operations
    (2)
    (1)
    2




65

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

2002
    2001
    2000Current assets held for
      sale:Cash and time deposits
    1
    3
    12Trade receivables
    36
    26
    32Other receivables
    11
    6
    11Inventories
    28
    25
    2376
    60
    78Long-term assets held for
      sale:Deferred charges and other assets
    1
    1
    -Property, plant and equipment, net
    140
    129
    137Intangible assets, net
    14
    13
    15Goodwill, net
    53
    51
    56208
    194
    208Current liabilities of
      operations held for sale:Payables and accrued liabilities
    43
    35
    43Short-term borrowings
    4
    2
    247
    37
    45Long-term liabilities of
      operations held for sale:Debt not maturing within one year
    1
    -
    -Deferred credits and other liabilities
    1
    1
    1Deferred income taxes
    20
    20
    2422
    21
    25


> Note 31. Subsequent Events
>   Contract dispute between Powerex and Alcan
>   (as described in note 22 to the financial statements - Commitments and
>   Contingencies)

Between January and March 2003, a
standstill agreement had been in effect. The parties remain in discussions while
taking steps to preserve their respective rights. To this end, Alcan is pursuing
an application before the U.S. Federal District Court for the district of Oregon
for judicial review of the arbitrator's decision. Powerex filed a petition in
the British Columbia Supreme Court in which Powerex asks the Court to, among
other things, recognize and enforce the January 17, 2003 arbitration decision by
granting judgement to Powerex and declaring that the award is enforceable in the
same manner as a judgement or order of the Court. On July 10, 2003, the B.C.
Supreme Court adjourned the hearing of the Powerex petition pending a decision
of the District Court in Oregon regarding Alcan's application for judicial
review. The District Court hearing occurred on August 12, 2003 and a decision
will likely be issued at a later date.

> Long Term Debt

On May 1, 2003, the Company issued $500 4.5%
global notes due May 15, 2013.

> VAW Flexible Packaging

On April 30, 2003, the Company
completed the acquisition of VAW Flexible Packaging from Norsk Hydro for a cost
of $339, subject to post-closing adjustments.

As
part of the acquisition of VAW Flexible Packaging in the second quarter of 2003,
the Company acquired, directly and indirectly, 63% of the total issued share
capital of Strongpack Plc in Thailand. Strongpack is engaged in packaging
businesses, providing production and processing services on all types of
flexible packaging materials. On June 20, 2003, the Company acquired an
additional 11% of Strongpack at a price of $4.

> Baltek Corporation

On July 1, 2003, the Company completed the
acquisition of Baltek Corporation for approximately $35. Baltek is the world's
leading supplier of balsa-based structural core materials.



66

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> Tender Offer for Pechiney

On July 7, 2003, the Company
announced its intention to launch a tender offer to acquire all of the
outstanding shares, convertible debentures, Bonus Allocation Rights and American
Depositary Shares of Pechiney. The significant terms of the offer are that three
Alcan common shares and Euro 123 in cash would be offered for every five
Pechiney shares. The consideration offered for Pechiney convertible debentures,
Bonus Allocation Rights and American Depositary Shares would be based on similar
terms. Based on Alcan's current share price and prevailing foreign exchange
rates, the aggregate value of the consideration offered amounts to approximately
$4.6 billion.

Pechiney is an international group
listed on the Paris and New York Stock exchanges. Its three core businesses are
primary aluminum, aluminum conversion and packaging. Pechiney employs 34,000
employees. The offer is conditional upon government and regulatory approvals as
well as the tendering of more than 50% of the total diluted number of Pechiney
shares to the offer. The Company expects the offer to be completed by December
31, 2003.





67

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Quarterly Financial
      Data(in millions of US$, except where
      indicated)(unaudited)
    
    
    
    First
    Second
    Third
    Fourth
    Year2002Revenues
    
    
    
    2,888
    3,146
    3,170
    3,123
    12,327Cost of sales and
      operating expenses
    
    
    2,287
    2,473
    2,499
    2,489
    9,748Depreciation and
      amortization
    
    
    199
    212
    207
    217
    835Income taxes
    
    
    
    79
    122
    64
    30
    295Other items
    
    
    
    236
    267
    208
    362
    1,073Income from
      continuing operations(1)
    
    
    87
    72
    192
    25
    376Income (Loss) from
      discontinued operations
    
    
    (1)
    (1)
    (1)
    1
    (2)Net income
    
    
    
    86
    71
    191
    26
    374Dividends on
      preference shares
    
    
    1
    1
    1
    2
    5Net income
      attributable to common shareholders
    
    
    85
    70
    190
    24
    369Net income per common
      share - (basic) (in US $)Income from
      continuing operations
    
    
    0.26
    0.22
    0.59
    0.08
    1.16Loss from discontinued operations
    
    
    -
    -
    -
    -
    (0.01)Net income per common
      share - (basic) (in US$)(2)
    
    0.26
    0.22
    0.59
    0.08
    1.15Net income per common
      share - (diluted) (in US$)(2)Income from
      continuing operations
    
    
    0.26
    0.22
    0.59
    0.08
    1.15Loss from
      discontinued operations
    
    
    -
    -
    -
    -
    (0.01)Net income per common
      share - (diluted) (in US$)(2)
    
    0.26
    0.22
    0.59
    0.08
    1.14Net income (Loss)
      under U.S. GAAP(3)
    
    
    (595)
    58
    160
    41
    (336)(unaudited)
    
    
    
    First
    Second
    Third
    Fourth
    Year2001 (Restated - note
      3)Revenues
    
    
    
    3,212
    3,110
    3,110
    2,991
    12,423Cost of sales and
      operating expenses
    
    
    2,527
    2,431
    2,442
    2,423
    9,823Depreciation and
      amortization
    
    
    190
    199
    199
    211
    799Income taxes
    
    
    
    58
    100
    68
    (182)
    44Other items
    
    
    
    286
    289
    232
    875
    1,682Income (Loss) from
      continuing operationsbefore amortization
      of goodwill
    
    
    151
    91
    169
    (336)
    75Amortization of
      goodwill
    
    
    17
    19
    18
    18
    72Income (Loss) from
      continuing operations(1)
    
    
    134
    72
    151
    (354)
    3Income (Loss) from
      discontinued operations
    
    
    1
    2
    (2)
    (2)
    (1)Net income (Loss)
    
    
    
    135
    74
    149
    (356)
    2Dividends on
      preference shares
    
    
    2
    2
    2
    2
    8Net income (Loss)
      attributable to common shareholders
    
    133
    72
    147
    (358)
    (6)Net income (Loss) per
      common share - (basic) (in US$)Income (Loss) from
      continuing operationsbefore amortization
      of goodwill
    
    
    0.47
    0.28
    0.52
    (1.04)
    0.21Amortization of
      goodwill
    
    
    0.05
    0.05
    0.06
    0.06
    0.22Income (Loss) from
      continuing operations
    
    
    0.42
    0.23
    0.46
    (1.10)
    (0.01)Loss from discontinued operations
    
    
    -
    -
    -
    (0.01)
    (0.01)Net income (Loss) per
      common share- (basic) (in US$)(2)
    
    
    
    0.42
    0.23
    0.46
    (1.11)
    (0.02)Net income (Loss) per
      common share - (diluted) (in US$)Income (Loss) from
      continuing operationsbefore amortization
      of goodwill
    
    
    0.46
    0.27
    0.52
    (1.04)
    0.21Amortization of
      goodwill
    
    
    0.05
    0.05
    0.06
    0.06
    0.22Income (Loss) from
      continuing operations
    
    
    0.41
    0.22
    0.46
    (1.10)
    (0.01)Loss from
      discontinued operations
    
    
    -
    -
    -
    (0.01)
    (0.01)Net income (Loss) per
      common share- (diluted) (in US$)(2)
    
    
    0.41
    0.22
    0.46
    (1.11)
    (0.02)Net income (Loss)
      under U.S. GAAP(3)
    
    
    74
    94
    104
    (326)
    (54)


68

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(unaudited)
    
    First
    Second
    Third
    Fourth
    Year2000 (Restated - note
      3)Revenues
    
    1,962
    2,025
    1,979
    3,131
    9,097Cost of sales and
      operating expenses
    
    1,454
    1,560
    1,530
    2,524
    7,068Depreciation and
      amortization
    
    116
    114
    120
    190
    540Income
taxes
    
    104
    88
    34
    29
    255Other items
    
    117
    111
    116
    266
    610Income from
      continuing operations(1)before amortization of goodwill
    
    171
    152
    179
    122
    624Amortization of
      goodwill
    
    -
    -
    -
    16
    16Income from
      continuing operations
    
    171
    152
    179
    106
    608Income from
      discontinued operations
    
    -
    -
    -
    2
    2Net income
    
    171
    152
    179
    108
    610Dividends on
      preference shares
    
    2
    3
    2
    3
    10Net income
      attributable to common shareholders
    
    169
    149
    177
    105
    600Net income per common
      share - (basic) (in US$)Income from continuing operationsbefore amortization of goodwill
    
    0.77
    0.69
    0.84
    0.37
    2.46Amortization of goodwill
    
    -
    -
    -
    0.05
    0.05Income from continuing operations
    
    0.77
    0.69
    0.84
    0.32
    2.41Income from discontinued operations
    
    -
    -
    -
    0.01
    0.01Net income
      per common share - (basic) (in US$)(2)
    0.77
    0.69
    0.84
    0.33
    2.42Net income
      per common share - (diluted) (in US$)Income from continuing operationsbefore amortization of goodwill
    
    0.77
    0.68
    0.84
    0.37
    2.46Amortization of goodwill
    
    -
    -
    -
    0.05
    0.05Income from continuing operations
    
    0.77
    0.68
    0.84
    0.32
    2.41Income from discontinued operations
    
    -
    -
    -
    0.01
    0.01Net income
      per common share - ( diluted) (in US$)(2)
    0.77
    0.68
    0.84
    0.33
    2.42Net income under U.S.
      GAAP(3)
    
    171
    152
    179
    104
    606


(1) The first quarter of 2002
includes net after-tax charges of $7 relating mainly to the restructuring
program announced in 2001. The charges include a fixed asset impairment charge
of $9 relating to the recycling operations at the Borgofranco plant in Italy and
a loss of $5 on the sale of extrusion operations in Thailand. The second quarter
of 2002 includes net after-tax charges of $8 relating mainly to the
restructuring program announced in 2001. The charges include severance and
pension costs of $7 relating to the closure of the Bracebridge cable plant in
Ontario, Canada. The third quarter of 2002 includes net after-tax charges of $16
relating mainly to the restructuring program in 2001 and increases to legal
provisions. The restructuring program net charges include fixed asset impairment
charges of $12 relating principally to the extrusion operations in Pieve, Italy,
severance costs of $4 for the extrusion operations in Malaysia, light-gauge
operations in Fairmont, West Virginia, and certain cable operations in North
America and income of $8, primarily for the write-back of excess contract loss
provisions. The fourth quarter of 2002 includes net after-tax charges of $86
relating mainly to a provision of $68 for the ruling on a contract dispute with
Powerex (a subsidiary of BC Hydro) and charges of $20 for the closures of the
specialty chemicals plant at Burntisland, U.K. and the Banbury, U.K. R&D
facilities. These charges are partially offset by a gain of $26 on the sale of a
portfolio investment.

The
first quarter of 2001 included after-tax charges for the impairment in value of
fixed assets of $70 for Jamaica and rationalization costs of $1. The second
quarter of 2001 included an after-tax charge of $20 for post-closing adjustments
relating to the divestment of Jamaica, partly offset by a write-back of
rationalization costs of $4 in the U.K. The results for the fourth quarter of
2001 included a net non-recurring after-tax charge of $444. This included a $165
charge related to the restructuring program announced on October 17, 2001, and a
$37 charge related to the synergy program announced in the fourth quarter of
2000 in relation to the merger with algroup. Also included are impairment
provisions of $87 in relation to certain assets and capitalized project costs, a
$167 charge related to environmental provisions, and a favourable prior year's
tax adjustment of $12.



69

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The
second quarter of 2000 included an after-tax gain of $6 from disposal of
property and a gain of $10 from the demutualization of the Company's life
insurance providers. This was offset in part by a non-operating exceptional
provision of $9 in the U.S., merger costs of $4 and rationalization costs of $2.
The third quarter of 2000 included favourable tax adjustments of $43, partially
offset by asset write-offs of $12. The fourth quarter of 2000 included non-cash
merger charges related to the merger with algroup of $25, rationalization
charges in respect of the closure of foil operations at Rogerstone in the U.K.
of $18, asset write-offs of $6, partially offset by favourable tax adjustments
of $14.

(2) Net income per common share
calculations are based on the average number of common shares outstanding in
each period. (See note 4 - Net Income per Common Share - Basic and Diluted).

(3) See note 7 - Differences
between Canadian and United States Generally Accepted Accounting Principles
(GAAP) for explanation of differences between Canadian and U.S. GAAP.





70

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ITEM 15 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM
8‐K

(a)  1.   FINANCIAL STATEMENTS

The
Registrant's required financial statements are included herein under Item
8.

2.  FINANCIAL STATEMENT
SCHEDULES

The
required information is provided in the consolidated financial statements or
notes thereto.

3.  
EXHIBITS

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



(3)      Articles of Incorporation and
By‐laws:

3.1.      Certificate of Amalgamation
dated 1 January 1995, Certificate of Amendment dated 8 May 1995. (Incorporated
by reference to exhibit 3.1 to the Annual Report on Form 10-K of the Company for
1996.)

3.1.1    Certificate of Amendment dated 1 March
2001. (Incorporated by reference to exhibit 3.11 to the Annual Report on Form
10-K of the Company for 2000.)

3.2       Restated Articles of
Incorporation dated 12 September 2002. (Incorporated by reference to exhibit 3
to the Quarterly Report on Form 10-Q of the Company for the quarter ended
30 September 2002.)

3.3       By‐law No. 1A.
(Incorporated by reference to exhibit 3.5 to the Annual Report on Form 10‐K of
the Company for 1987.)

3.3.1     Amendment to By-law No. 1A.
(Incorporated by reference to exhibit 3.2 to the Quarterly Report on Form 10-Q
of the Company for the quarter ended 30 June 2002.)

(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 June 30, 1989 to the Indenture dated as of May 15, 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).



71

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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 May 15, 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.
33-35977) filed with the Commission on 20 July 1990).

4.1.6    Fifth Supplemental Indenture dated as
of 1 January 1995 to the Indenture dated May 15, 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 May 15, 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    Specimen Form of Debt Security
(Incorporated by reference to exhibit 4.1 to Form 8-A filed with the
Commission on 10 September 2002).

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

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

(10)    Material Contracts

10.1     Alcan Pension Plan (Canada), restated version, as
of October 1990. (Incorporated by reference to exhibit 10.1 to the Annual Report
on Form 10‐K of the Company for 1990.)

10.1.1  Amendments dated 1 January 1992. (Incorporated by reference to
exhibit 10.1.1 to the Annual Report on Form 10-K of the Company for
1991.)





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10.1.2   Amendments dated 1 January 1990,
Schedule 93-2.  (Incorporated by reference to exhibit 10.1.2 to the Annual
Report on Form 10-K of the Company for 1994.)

10.1.3  Amendments dated 1 January 1994, Schedule 93-3
and Schedule 93-4.  (Incorporated by reference to exhibit 10.1.3 to the
Annual Report on Form 10-K of the Company for 1994.)

10.1.4   Amendments dated 31 December 1994, Schedule
95-1, 1 January 1996 Schedule 95-2, 1 January 1992, Schedule 95-3 and 1 January
1995, Schedule 95-4. (Incorporated by reference to exhibit 10.1.4 to the Annual
Report on Form 10-K of the Company for 1995.)

10.1.5  Amendments dated 1 July 1996, Schedule 96-1, 1
November 1996, Schedule 96-2, 1 January 1992 for paragraphs 1, 2 and 3 of
Schedule 96-3 and 1 January 1996 for paragraph 4 of Schedule 96-3. (Incorporated
by reference to exhibit 10.1.5 to the Annual Report on Form 10-K of the Company
for 1996.)

10.1.6   Amendments dated 1 January 1998, Schedule
97-1, 30 March 1998, Schedule 98-1 and 1 November 1998, Schedule 98-2.
(Incorporated by reference to exhibit 10.1.6 to the Annual Report on Form 10-K
of the Company for 1998.)

10.1.7   Amendments dated 1 May 1999, Schedule
99-1, 1 October 1999, Schedule 99-2, 1 January 2000 and 1 July 2000, Schedule
00-1, 1 October 2000, Schedule 00-2 and 31 December 2000, Schedule 00-3.
(Incorporated by reference to exhibit 10.1.7 to the Annual report on Form 10-K
of the Company for 2000.)

10.1.8   Amendments dated 1 July 2001, Schedule
01-1 and 1 October 2001, Schedule 01-2.  (Incorporated by reference to
exhibit 10.1.8 to the Annual Report on Form 10-K of the Company for
2001.)

10.1.9   Amendments dated 15 October 2002,
Schedules 02-1, 02-2, 02-3 and 29 November 2002, Schedule 02-4. (filed
herewith.)

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

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

10.4     Alcan Financial Counselling Plan.
(Incorporated by reference to the exhibit of that name filed with the Annual
Report on Form 10-K of the Company for 1981.)

10.5     Alcan Executive Automobile
Program revised as of 1 January 1992.  (Incorporated by reference to
exhibit 10.5 to the Annual Report on Form 10-K of the Company for
1991.)



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

10.7     Form of Supplemental Retirement
Benefits Agreement. (Incorporated by reference to exhibit 10.6 filed with the
Annual Report of the Company on Form 10-K for 1983.)

10.8     Alcan Supplemental Retirement
Benefit Plan (Canada), February 1992 edition. (Incorporated by reference to
exhibit 10.8 to the Annual Report on Form 10-K of the Company for
1991.)

10.8.1   Amendments dated 1 January 1994, Schedule
93-1.  (Incorporated by reference to exhibit 10.7.1 to the Annual Report on
Form 10-K of the Company for 1994.)

10.8.2   Amendments dated 23 September 1993. 
(Incorporated by reference to exhibit 10.8.2 to the Annual Report on Form 10-K
of the Company for 1994.)

10.8.3   Amendments dated 1 November 1998, Schedule
98-1. (Incorporated by reference to exhibit 10.8.3 to the Annual Report on Form
10-K of the Company for 1998.)

10.8.4   Amendments dated 1 May 1999, Schedule
99-1 and 1 January 2000, Schedule 00-1. (Incorporated by reference to exhibit
10.8.4 to the Annual Report on Form 10-K of the Company for
2000.)

10.8.5    Amendments dated 15 October 2002,
Schedules 02-1 and 02-2. (Filed herewith.)

10.9     Alcan Retirement Compensation
Plan for Non-Executive Directors dated 27 April 1995. (Incorporated by reference
to exhibit 10.10 to the Annual Report on Form 10-K of the Company for
1995.)

10.10   Amendment dated 1 January 1997.
(Incorporated by reference to exhibit 10.10.1 to the Annual Report on Form 10-K
of the Company for 1996.)

10.11    B.C./Alcan 1997 Agreement.
(Incorporated by reference to exhibit 10.1 to the Quarterly Report on Form 10-Q
of the Company for the quarter ended 30 June 1997.)

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

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

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





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10.15    Employment Agreement dated 31
December 2001 with Richard B. Evans. (Incorporated by reference to exhibit 10.18
to the Annual Report on Form 10-K of the Company for 2001.)

10.16    Employment Agreement dated 31
December 2001 with Brian W. Sturgell. (Incorporated by reference to exhibit
10.19 to the Annual Report on Form 10-K of the Company for
2001.)

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

10.18    Change of Control Agreement dated
1 August 2002 with Travis Engen*.

10.19   Change of Control Agreement dated 1
August 2002 with Richard B. Evans.  Substantially similar agreements have
been entered into with B.W. Sturgell, G. E. Merszei and C.
Carroll.)

(13)    Annual Report*.

(21)    Subsidiaries and Related Companies of the
Company*.

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

(24)    Powers of
Attorney*.

24.1         Power of
attorney of R. Berger

24.2         Power of
attorney of L.Y. Fortier

24.3         Power of
attorney of B.M. Levitt

24.4         Power of
Attorney W. R. Loomis

24.5         Power of
attorney of J.E. Newall

24.6         Power of
attorney of G. Saint-Pierre

24.7         Power of
attorney of G. Schulmeyer

(31)

31.1         
Certification of Chief Executive Officer pursuant to Rule 13a-14(a)
    under Securities Exchange Act of 1934

31.2         
Certification of Chief Financial Officer pursuant to Rule 13a-14(a) under
    Securities Exchange Act of 1934

32.1         
Certification of Chief Executive Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002

32.2         
Certification of Chief Financial Officer pursuant to Section 906 of the
    Sarbanes-Oxley Act of 2002



(99)        
Management Proxy Circular*.

*    Previously filed on Form 10-K for the year ended
December 31, 2002.

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(b)  REPORTS ON FORM 8-K

The Company has filed a report on Form 8-K during the quarter ended 31
December 2002 concerning Item 5 thereof:  "Other Events."  The filing
date was 22 November 2002.







SIGNATURES

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

ALCAN INC.

September 11,
2003                                                       
By: /s/  Roy
Millington                                                                                           
Corporate
Secretary                                                                                           
(A Duly Authorized Officer)







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