<PAGE>   1
Alcan Aluminium Limited

1997 ANNUAL REPORT

Alcan Aluminium Limited, a Canadian corporation, is the parent company of an
international group involved in all aspects of the aluminum industry. Through
subsidiaries and related companies around the world, the activities of the Alcan
Group include bauxite mining, alumina refining, power generation, aluminum
smelting, manufacturing and recycling as well as research and technology.
Approximately 33,000 people are directly employed by the Company, with thousands
more employed in its related companies.

In the 96 years since it was established, Alcan has developed a unique
combination of competitive strengths, with owned hydroelectricity in Canada,
proprietary process technology and international presence. With operations and
sales offices in more than 30 countries, the Alcan Group is one of the most
international aluminum companies as well as the largest producer of flat-rolled
aluminum products. The word ALCAN and the Alcan symbol are registered trademarks
in more than 100 countries and are synonymous with aluminum the world over.

The Alcan Group is a multicultural and multilingual enterprise reflecting the
differing corporate and social characteristics of the many countries in which it
operates. Within a universal framework of policies and objectives, individual
subsidiaries conduct their operations with a large measure of autonomy.

Alcan Aluminium Limited has approximately 20,700 registered holders of its
common shares and 1,200 registered holders of its preference shares. While
distributed internationally, the Company's shares are mostly held in North
America.


CONTENTS
<TABLE>
<S>     <C>
 1   Highlights of the Year
 2   Message to Shareholders
 8   Corporate Social Responsibility
12  The Alcan Group's Businesses at a Glance
16  Management's Discussion and Analysis
36  Responsibility for the Annual Report, OECD Guidelines and Auditors' Report
37  Consolidated Financial Statements
40  Notes to Consolidated Financial Statements
59  Quarterly Financial Data
60  Eleven-Year Summary
62  Corporate Governance
63  Directors and Officers
64  Shareholder Information
65  The Alcan Group Worldwide
</TABLE>


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TERMS

The word "Alcan" or "Company" means Alcan Aluminium Limited and, where
applicable, one or more consolidated subsidiaries. A "subsidiary" is a company
controlled by Alcan. A "related company" is one in which Alcan has significant
influence over management but owns 50% or less of the voting stock.

The "Alcan Group" refers to Alcan Aluminium Limited, its subsidiaries and
related companies.

In this report, unless stated otherwise, all dollar amounts are stated in United
States dollars and all quantities in metric tons, or tonnes. A tonne is 1,000
kilograms, or 2,204.6 pounds.

The following abbreviations are used:

<TABLE>
<S>    <C>
/t    per tonne
kt    thousand tonnes
kt/y  thousand tonnes per year
Mt    million tonnes
Mt/y  million tonnes per year
</TABLE>


ANNUAL MEETING

The Annual Meeting of the holders of common shares of Alcan Aluminium Limited
will be held on Thursday, April 23, 1998. The meeting will take place at 10:00
a.m. in the Ballroom of the Marriott Chateau Champlain, 1 Place du Canada,
Montreal, Quebec, Canada.




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<PAGE>   3

HIGHLIGHTS OF THE YEAR

<TABLE>
<CAPTION>

                                                                          1997          1996         1995
<S>                                                                     <C>           <C>          <C>
FINANCIAL DATA
(in millions of US$, except per common share amounts)
Sales and operating revenues                                            7,777         7,614        9,287
Net income before extraordinary item                                      468           410          543
Net income                                                                485           410          263
Return (%) on average common shareholders' equity                          10             9           11*
Total assets (at year-end)                                              9,466         9,325        9,736
Capital expenditures                                                      641           482          441
Ratio of borrowings to equity (at year-end)                             23:77         23:77        29:71
Per common share (in US$)
     Net income before extraordinary item                                2.02          1.74         2.30
     Net income                                                          2.09          1.74         1.06
     Cash from operating activities                                      3.17          4.34         4.63
     Dividends                                                           0.60          0.60         0.45
     Common shareholders' equity (at year-end)                          21.43         20.57        19.84

OPERATING DATA
(in thousands of tonnes)
Fabricated products shipments**                                         1,970         1,797        1,958
Ingot products shipments***                                               858           810          801
Primary aluminum production                                             1,429         1,407        1,278
Secondary/recycled aluminum production                                    670           639          523

AVERAGE THREE-MONTH LME PRICE
(in US$/tonne)
                                                                        1,620         1,536        1,830
</TABLE>

[FN]
*** Before extraordinary item.
*** Includes products fabricated from customer-owned metal.
*** Includes primary and secondary ingot and scrap.
</FN>

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<PAGE>   4
NET INCOME (LOSS) AND AVERAGE THREE-MONTH LME PRICE

US$/t
1993 = 1,161
1994 = 1,500
1995 = 1,830
1996 = 1,536
1997 = 1,620

MILLIONS OF US$
1993 = (104)
1994 = 96
1995 = 543
1996 = 410
1997 = 468

Net income improved in 1997 to reflect higher volumes, although products prices
were lower.
* Before extraordinary item.

FABRICATED PRODUCTS SHIPMENTS

Fabricated products shipments 
KT
1993 = 1,651
1994 = 1,952
1995 = 1,958
1996 = 1,797
1997 = 1,970

Fabricated products shipments adjusted for acquisition and divestments
KT
1993 = 1,291
1994 = 1,636
1995 = 1,787
1996 = 1,786
1997 = 1,970

Fabricated products volumes grew 10% to reach their highest-ever level in 1997.
With earlier years adjusted for acquisitions and divestments, compound annual
growth since 1993 was 11%.


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<PAGE>   5
MESSAGE TO SHAREHOLDERS

OUR STRATEGIC PRIORITIES

* Continue implementation of Full Business Potential with the target of
increasing after- tax returns by $300 million and earning our cost of capital.

* Strengthen the position of aluminum in the marketplace and ensure its future
as the material of choice.

* Aggressively seek out opportunities to maximize shareholder value.

We can take great pride in what Alcan accomplished during 1997. Net income for
the year was US$485 million and we achieved a 10% increase in overall shipments
of fabricated products, which translates into increased market share.
Particularly noteworthy were our results in Europe, where we succeeded in
boosting shipments by 16% -- significantly above the growth in regional demand
-- while holding fabricating costs to levels virtually unchanged from the
previous year. Perhaps most importantly from a shareholder's standpoint, we also
made considerable headway during 1997 in terms of improving Alcan's underlying
profitability.

AN EVENTFUL YEAR FOR THE INDUSTRY

Nineteen ninety-seven was an eventful year for the industry with market
fundamentals showing steady improvement until the onset of economic difficulties
in Asia late in the year. Western World aluminum consumption climbed 5.4%, led
by steadily increasing demand from the transportation industry. Gains were
recorded in all major market sectors -- including can stock, where Alcan has a
leading position. In the U.S., manufacturers of aluminum beverage cans surpassed
the 100-billion-can milestone for the first time.

DELIVERING ON ALCAN'S STRATEGIC PRIORITIES

You may recall the three strategic priorities Alcan identified for 1997:
implementing our "Full Business Potential" program; strengthening the position
of aluminum in the marketplace; and maximizing shareholder value. We are pleased
to report that excellent progress has been made in each of these areas.

In terms of full business potential, we have attained one-third of our targeted
$300 million, after tax, in productivity improvements. To date, these
improvements have come primarily in the areas of raw materials and fabricated
products in Europe and North America. This three-year program is proceeding on
plan as 1998 unfolds, with further significant improvement anticipated.

Such progress notwithstanding, Alcan still is not earning its cost of capital.
While we are confident that the achievement of full business potential will get
us to that point, we have introduced Economic Value Added (EVAregistered
trademark) as a tool that will support decision-making and enable us to measure
our effectiveness in terms of creating increased shareholder value. Here, too,
we are determined to deliver on our commitment.

With regard to promoting aluminum as the material of choice, Alcan has been
active on several fronts. For instance, we have forged partnerships with key
customers that will lead to further increases in the use of aluminum by
important global industries. And we have taken a lead role within our own
industry as an advocate of intensified recycling programs and other initiatives
that will enable us to capitalize on the metal's inherently superior properties.
Such endeavours have taken on added significance, given the heightened public
awareness of environment and energy-related issues in the wake of last fall's
Kyoto, Japan, environmental conference.


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<PAGE>   6

NOTEWORTHY ACHIEVEMENTS
Other noteworthy developments during 1997 include:

- Settlement of a long-standing dispute with the government of British
Columbia (B.C.) over the Kemano Completion Project, effectively putting B.C.
back on Alcan's investment map;

- Agreement regarding supply of low-cost bauxite through the development
of our Ely reserves in Australia;

- Solid progress on the major expansion of our Pindamonhangaba, Brazil,
fabricating facilities, the success of which entails close cooperation
between Alcan operations in North and South America; and

- The signing of a memorandum of understanding (MOU) with China National
Non- Ferrous Metals Industry Corporation to complete a detailed feasibility
study for a proposed aluminum smelter and dedicated power-generating
station project in China. This MOU was signed with the full support of
China's State Planning Commission.

Subsequent to the year's end, we announced our decision to proceed with
development of a new 375,000-tonne smelter at Alma, Quebec. Preliminary
planning for this very sizeable US$1.6-billion undertaking was completed
during 1997. Environmental clearance for the project has been obtained from
the government of Quebec, and we also have reached agreement with Hydro-Quebec
on the terms of a long-term contract for the supply of electrical energy. A
key consideration for this project is timing; that is, to ensure that the
additional capacity will come on stream during a period of expanding world
aluminum markets. Work at the site will get under way in early March of this
year, with the first aluminum production expected in the fall of 2000.

SUCCESS BREEDS CONFIDENCE AND ENTHUSIASM

The high level of activity evident throughout Alcan's operations is matched
by a high level of confidence and enthusiasm discernable among Alcan
personnel - and with good reason. Our successful initiatives in critical
areas such as cost reduction, strategic focus and, most recently, full
business potential have clearly demonstrated that this organization can
achieve what needs to be done to enhance Alcan's status as a global industry
leader. Faced with significant challenges - both internal and external -
we have developed appropriate action plans and have executed them successfully.
Having significantly improved the internal environment - those factors over
which we exercise direct control - we are intent on sustaining the positive
momentum by addressing some significant external issues.

A CONSISTENT STRATEGY IS KEY

Consistency is the watchword for 1998. We intend to adhere to our successful
approach by continuing to focus on those three key strategic priorities:

- Continuing implementation of full business potential;

- Maintaining our proactive role in promoting aluminum as the material
of choice, and

- Aggressively seeking out further opportunities to maximize shareholder
value.
<PAGE>   7
PURSUING FULL EMPLOYEE POTENTIAL
The success of Alcan's full business potential program clearly is dependent
upon us also achieving "full employee potential".

Accordingly, the Company has undertaken a number of other important
initiatives designed to ensure that Alcan is able to develop and retain the
best people in the industry, while providing them with a safe, healthy,
stimulating and rewarding work environment. These initiatives include:

- A new thrust in employee develop-ment, with the introduction of
training techniques that focus on maximizing learning and are closely aligned
with achievement of Alcan's business objectives;

- A Code of Conduct that reiterates the Company's expectations regarding
a wide range of ethical issues, and

- A new measurement system to ensure global consistency in tracking
health and safety performance.

ASSUMING ENVIRONMENTAL LEADERSHIP
In keeping with our efforts to make certain that Alcan enjoys a reputation
second to none, we revised our corporate Environmental Policy, which commits
us - on the record - to assuming industry leadership in this field.

Further details on many of these initiatives can be found in the Corporate
Social Responsibility section of this report.

YEAR 2000 COMPLIANCE
We should also note that Alcan has in place a Year 2000 compliance action plan.
A program is well under way to examine and resolve Year 2000 issues as they
affect the Company, thus permitting an orderly transition through the year 2000.

ACKNOWLEDGEMENTS
As stated at the outset, 1997 was an eventful - and challenging - year. We are
grateful for the guidance provided by our fellow directors. And, on behalf of
the entire Board, we would like to thank Alcan employees for their exceptional
effort and dedication - knowing that they share our pride in the collective
achievements of 1997. There's no doubt that, working as partners, we can
continue to deliver excellent results in 1998 and beyond. 

LOOKING AHEAD
Industry fundamentals remained sound as the year ended, despite an element of
uncertainty stemming from the economic upset in Asia. With inventories
reduced by some 300,000 tonnes from 1996 levels, the market was pretty much
in balance from a supply-demand perspective and activity continued to be
brisk in North America and Europe. We are cautiously optimistic regarding
the outlook for 1998 and anticipate further volume growth in fabricated
products, unless the impact of the Asian situation spills over into other
major markets to a degree not anticipated at this time.

Dr. John R. Evans             Jacques Bougie

Chairman of the Board         President and Chief Executive Officer
February 19, 1998

<PAGE>   8
EXERGUE

 . . . one-third of our full business potential target attained

 . . . fundamental characteristics of aluminum make it second to none

 . . . pride in our collective achievements

 . . . Our ultimate goal maximizing shareholder value

CAPTION
 
Jacques Bougie (left), President and Chief Executive Officer, and Dr. John R.
Evans, Chairman of the Board.


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<PAGE>   9
CORPORATE SOCIAL RESPONSIBILITY

OUR WAY OF DOING BUSINESS:

* bullet Youth of today are tomorrow's leaders;

* bullet Communities are partners in growth;

* bullet Environmental Management System initiated at all locations;

* bullet Occupational health and safety is paramount;

* bullet Code of Conduct is our reputation;

* bullet Employees lead us to Full Business Potential.

INVESTING IN THE FUTURE

Investing in the future is more than expanding facilities and upgrading
processes. At Alcan, we believe that a successful future also depends on how
well we nurture the leaders of tomorrow. We must pass on the message that good
business means respecting people and the environment. It means cooperation and
integrity with employees, communities, customers, suppliers, shareholders and
governments.

These are the basic principles of a special partnership formed by Alcan and
Ecole Saint- Pierre, in Alma, Quebec, in 1990. With the support of the
community, the school created a micro-business where the students are the
mastercrafters. They recycle paper into greeting cards and collect and sell used
grocery bags and aluminum cans. This initiative has proven so successful that it
has spawned similar ventures at three other Quebec schools. Another similar
project was launched in British Columbia, and a regional program has received
public recognition in Brazil.

The collection and recycling activities enable the students to make a profit,
while Alcan's specially designed workbooks teach them business management
skills. They also learn the importance of matching business principles with
environmental and social responsibility.

COMMUNITY INVESTMENT PROGRAM

Community investment has long been a part of Alcan's corporate culture. In 1997,
Alcan placed a renewed focus on supporting activities that relate both to the
communities in which it operates and to the Company's business interests.

In Canada, for example, over CAN$5 million was invested in communities where
Alcan has a significant presence. The investments covered programs in the areas
of occupational health and safety, education and training. One such pledge was a
five-year, CAN$250,000 grant to Universite Laval in Quebec, in cooperation with
the federal government, to encourage the participation of women in science and
engineering programs. Investments in medical research programs and sponsorships
of civic and cultural events were also undertaken, especially when the themes
related to health or environmental concerns.

The Company also donated 775 acres of land to Nipissing University in Ontario to
be used for teaching, research and environmental conservation purposes. The land
is home to wildlife such as loons and wolves and also has archaeological
significance.


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<PAGE>   10
Alcan's donations and sponsorships foster community partnerships and stimulate
local development, illustrating the Company's commitment to the health and
prosperity of the locations in which it operates.

SPECIAL PARTNERSHIPS

Of course, no community investment would be complete without volunteer efforts,
whether it's the Terry Fox Run for cancer research or helping neighbours
stranded by a natural disaster. In 1997, torrential rains hit Kentucky and
Brazil's Belo Horizonte region, forcing many citizens to leave their homes. And,
in early January 1998, an unprecedented ice storm paralyzed southern Quebec and
parts of neighbouring provinces and states, leaving millions of people without
electricity. In each instance, Alcan people were involved, providing relief,
gathering supplies or raising funds.

In the U.S., Alcan joined an initiative of The Aluminum Association and Habitat
for Humanity International in building affordable homes for needy families. The
program, entitled Aluminum Cans Build Habitat for Humanity Homes, is based on
the collection and recycling of aluminum cans to help finance construction.

Assisting young people with career choices continues to distinguish Alcan. In
Switzerland, Alcan Rorschach AG offers work apprenticeships to young people who
have completed their compulsory schooling. With Alcan personnel acting as
mentors, the program sponsors 27 apprentices in eight different functions.
Through a similar program in Canada, Career Edge, Alcan contributed CAN$800,000
and provided 47 apprenticeships.

ENVIRONMENT

Alcan revitalized its Environmental Policy with a 1997 revision that focuses on
the contribution of every employee in order to achieve a leadership position
within our industry.

An Environmental Management System (EMS) has now been initiated in each and
every Alcan facility. This global approach to environmental management focuses
on processes, smoothing the way to earn new environmental certification such as
ISO 14001 from the International Organization of Standardization.

The Company has taken a lead role in several industry initiatives to promote the
image of aluminum in both North America and Europe. And, Alcan helped spearhead
a joint Life- Cycle Inventory (LCI) of a generic North American family-size
vehicle.

An LCI is used to quantify the environmental performance of a product or process
over its life cycle, including raw material extraction, production, use, and
end-of-life disposal. The study was under the auspices of the U.S. Automotive
Materials Partnership, a coalition of the "big three" U.S. car manufacturers and
the aluminum, plastic and steel industries.

Aluminum has many inherent qualities such as its recyclability, energy
efficiency, strength-to-weight ratio, barrier ability, and thermal and
electrical conductivity. All of these contribute to aluminum being specified as
a material of choice, not only in the automotive sector, but also in other
industries around the globe.

HEALTH AND SAFETY

The elimination of work-related injury and illness is the ultimate objective at
all Alcan locations. In 1997, the traditional indices of safety performance
exhibited a positive trend. Many Alcan facilities reported record safety
performances. Of special significance was the Laterriere smelter, which operated
a full year without a lost-time accident -- an accomplishment all but unheard of
a few years ago for a major aluminum smelter.



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A new health and safety recordkeeping system was implemented at the end of 1997.
Known as AIRS Plus (Alcan Injury and Illness Recordkeeping System), it takes a
global approach, enabling the organization to gather more consistent data and
compare improvements between locations. With AIRs Plus, Alcan looks at health
and safety from the total health perspective, not just at injuries due to
accidents.

The Company encourages and values the involvement of all employees in the
continual improvement of occupational health and safety.


CODE OF CONDUCT

When Alcan published Alcan, Its Purpose, Objectives and Policies some 20 years
ago, it was a demonstration of industry leadership and a commitment to social
responsibility. In 1997, the Company released a companion document - the Code of
Conduct.

The "Code" outlines Alcan's expectations on ethical issues, ranging from
employee behaviour in the workplace to business practices with suppliers and
customers. In an extensive implementation, the Code of Conduct was introduced to
employees around the globe.

In a similar vein in Canada, Alcan voluntarily agreed to a code of international
business practices, dealing with human rights, worker health and safety,
community needs, and environmental responsibility. It also includes a commitment
to conduct business with integrity.

PEOPLE DRIVE SUCCESS

People make the difference at Alcan. In the past year, we saw renewed emphasis
on human resources development, linking training and education directly to the
Company's strategic goals. Whether it was technical training or management
development, the renewed vigour in training and education was highly visible
throughout the year.

Action-learning and other advanced training techniques were incorporated in
programs to make them more relevant and to maximize learning. This was
especially apparent in the new Corporate Management Development Program where
participants work in global teams on strategic issues and undergo individual
development assessments.

Corporate training programs include sessions on Alcan's business environment and
strategy, international competitiveness, leadership and management competencies
for success.

The goal of all Alcan education programs is to build a partnership with each and
every employee. By investing in its people, the Company reinforces its
strengths. When this collective energy is combined with knowledge and
determination, true partnerships are formed and the seamless organization
becomes a reality.

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CAPTION

As part of the entrepreneurship program at Ecole Saint-Pierre in Alma, Quebec,
kindergarten students fabricate greeting cards from recycled paper made at their
school. In Ouro Preto, Brazil, students benefit from the value of aluminum can
collection activities.

Matching business principles with environmental and social responsibility is
important to Alcan. The Company donated 775 acres of land to Nipissing
University in Ontario for teaching, research and environmental conservation
purposes.

In his third year of apprenticeship at Alcan Rorschach in Switzerland, Vincenzo
Nicosiano learns about rotogravure printing from his trainer Willi Birrer.
Currently 27 young people, having completed their compulsory schooling, are
getting hands-on experience from a choice of eight different functions.

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<PAGE>   13
THE ALCAN GROUP'S* AT A GLANCE

*includes subsidiaries, related companies and divisions.


1997 HIGHLIGHTS

CUSTOMERS AND MARKETS
- Total fabricated and non-aluminum sales.

Containers and packaging
- $2.5 billion in sales.
- 43% of total sales.

Transportation
- $483 million in sales.
- 8% of total sales.

Electrical
- $579 million in sales.
- 10% of total sales.

Building and construction
- $952 million in sales.
- 17% of total sales.

Other markets
- $1.3 billion in sales.
- 22% of total sales.

FABRICATED PRODUCTS++
- Over 60 manufacturing plants in 11 countries.

Rolled products
- $3.9 billion (1,476 kt) in sales.++++
- Fabricated 276 kt of customer-owned metal.

Other fabricated products
- $1.2 billion (218 kt) in sales.

Total fabricated products
- $5.1 billion in sales.++++
- 2 Mt of aluminum fabricated in Alcan facilities.


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<PAGE>   14

METAL SUPPLY ++
(Smelting and Power)
- 13 smelters in 4 countries with 1.6 Mt of annual capacity.
- 7 recycling plants in 4 countries with 692 kt of annual capacity.

Purchased ingot and fabricated products
- 730 kt of primary ingot, 2 kt of secondary ingot and 40 kt of fabricated
products purchased.

Primary production
- 1.4 Mt produced.
- $1.2 billion (661 kt) in ingot sales.+++

Secondary recycled aluminum
- 670 kt produced.
- 482 kt of scrap purchased.
- $135 million (82 kt) in ingot sales.
- $164 million (115 kt) in scrap sales.

ALUMINA AND CHEMICALS

(Raw Materials and Chemicals)
- 11 bauxite mines/reserves in 6 countries with 400 Mt of demonstrated
reserves (in subsidiaries+ and related companies).

  12 alumina plants in 9 countries with 5.1 Mt of annual capacity (in
subsidiaries+ and related companies).
- 8 specialty chemicals plants in 4 countries (including related companies).

In addition to the sales of bauxite, alumina and specialty chemicals indicated
above, Alcan's non-aluminum products account for $224 million in sales.

Bauxite mining
- 11.5 Mt used (including related companies).
- $47 million in bauxite third-party sales.

Alumina refining
- 5.0 Mt produced (in subsidiaries+ and related companies).
- $311 million in alumina third- party sales.

Specialty chemicals
- $174 million in sales.

   + includes joint ventures, proportionately consolidated.+
  ++ excluding related companies.
 +++ also includes purchased ingot.
++++ excluding fabrication of customer-owned metal.


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<PAGE>   15
BUSINESS SECTOR REVIEW*

CUSTOMERS AND MARKETS
- Total fabricated and non-aluminum sales.
- The decline in revenues in 1996 was due to business divestments and lower
prices.

Containers and packaging
End uses include beverage cans, household foil, foil dishes and containers,
bottle closures and foil laminates for packaging applications.

Transportation
End uses include automotive structures, body panels and engine parts, wheels
and radiators, aircraft structures, rail carriages, freight cars and ships.

Electrical
End uses include over-head transmission cable, cable wrap, condenser
windings, underground distribution cable and heat sinks.

Building and construction
End uses include windows and doors, roofing and cladding, lighting poles and
fixtures, structures and handrails.

Other markets
End uses include machinery, appliances, heat exchangers, wear components,
synthetic marble and alumina chemicals.

FABRICATED PRODUCTS
- The decline in fabricated products revenues and shipments from 1995 to 1996
is largely attributable to the disposal of a number of downstream businesses.

Third-party sales and operating revenues
In 1997, volumes were up 10% but average prices were lower, principally due
to weaker European currencies.

Total sector operating income
Profits from this sector more than doubled in 1997 with increased volumes and
lower unit costs.

Fabricated products shipments
Shipments were up 10% in 1997, including a 16% increase in Europe.


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<PAGE>   16

METAL SUPPLY
(Smelting and Power)
- The decline in sales and operating revenues and operating income in 1996
from 1995 reflects the 16% reduction in LME prices.

Third-party sales and operating revenues
Both sales volume and average price realizations increased in 1997.

Total sector operating income
Improved earnings reflect higher metal prices.

Primary production
Continued improvements in process efficiencies resulted in increased output
in 1997. Production in 1995 had been affected by a strike in Quebec.


ALUMINA AND CHEMICALS
(Raw Materials and Chemicals)
- Because many alumina contracts are linked with the LME prices of aluminum,
the decline in aluminum prices in 1996 also affected sales and operating
revenues and operating income for alumina.

Third-party sales and operating revenues
Sales volume was up slightly in 1997 and prices were little-changed.

Total sector operating income
The improvement in profitability in the year arose primarily from reduced
costs.

Alumina hydrate production
Alumina hydrate production reached its highest-ever level with new records
achieved in Jamaica and Ireland from existing assets.

* excluding related companies.

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<PAGE>   17
STRATEGIC PRIORITIES AND OBJECTIVES

Alcan's ongoing strategic priorities are to continue the implementation of our
Full Business Potential program, to maintain a proactive role in promoting
aluminum as the material of choice and to aggressively seek out further
opportunities to maximize shareholder value. In so doing, Alcan will exploit its
global presence, continuing to work in close relationship with its select
customers. We will focus on market growth and new market opportunities and
continue to provide excellent service and premium quality products to our
customers. The success of Alcan's strategy is clearly dependent upon the full
participation of every employee towards these goals and the Company's ability to
create a safe and healthy environment in which the full potential of each
employee can be realized. The following are the strategic priorities and
objectives by business sector aimed at maximizing shareholder value.

FABRICATED PRODUCTS

Strategic priorities
- Leverage Alcan's position as the world's largest producer of aluminum rolled
products.
- Invest in those downstreambusinesses with superior returns.

Objectives
- To maintain a global supply position in the can sheet and lithographic
markets.
- To develop an automotive sheet business for the 21st century.
- To maintain the leading position in the South American rolled products
market.
- To capture the value of Alcan's recent investments in rolled products
operations in Europe.
- To invest in and grow the electrical cable business.

METAL SUPPLY
(Smelting and Power)

Strategic Priorities
- Grow the power and smelting business while remaining a low-cost producer.
- Retain our position as the world's largest aluminum used beverage can
recycler.

Objectives
- To efficiently return to full capacity as market conditions permit.
- To achieve improved process efficiencies on existing assets through the
implementation of best operating practices and technology applications.
- To develop and implement low-cost expansion/growth alternatives.
- To ensure a cost-effective stream of recycled aluminum to supplement our
primary aluminum position.

ALUMINA AND CHEMICALS

Strategic Priorities
- Optimize Alcan's alumina and bauxite asset base while substantially
reducing the cost of alumina.
- Achieve profitable growth in Alcan's chemicals business.

- Objectives
  To achieve best operating practices in alumina refining.
- To secure low-cost bauxite.
- To leverage existing assets.
- To pursue opportunities that strengthen Alcan's alumina position.


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<PAGE>   18
MANAGEMENT'S DISCUSSION AND ANALYSIS

AIMING FOR FULL BUSINESS POTENTIAL
* Maximizing the penetration of aluminum in existing end uses
* Seizing opportunities in emerging markets
* Reducing costs of raw materials and processing
* Fully developing our employees' potential

WORLD MARKET REVIEW

PRIMARY ALUMINUM

After only a small increase in Western World* demand for aluminum in 1996, the
early part of 1997 saw a strong recovery as the customer destocking that had
characterized much of 1996 was reversed. In North and South America and in
Europe, industry demand continued to be strong throughout the year. In Japan,
however, GDP growth was strong in the first quarter in anticipation of an
increase in consumption tax, but this was followed by a sharp decline. As a
result, Japanese aluminum demand grew in the first half but declined in the
second half of the year to give total year-over-year growth of 2%, largely
driven by higher exports resulting from the weaker yen. Despite this, and the
financial crisis in Southeast Asia, which resulted in a slowing of growth in
demand as the year progressed, total Western World primary aluminum demand is
estimated to have increased over 6% to reach 18.9 million tonnes (Mt).

Primary aluminum production in the Western World increased some 4% in 1997 to
16.1 Mt with capacity additions in Australia and Nigeria as well as some
restarts of idled

capacity, primarily in Europe. At the end of the year, about 750 thousand tonnes
(kt) of capacity remained idle, representing 4.4% of total capacity. Expansions
planned for 1998 are expected to add some 370 kt per year (kt/y) to capacity by
the end of the year.

Exports of primary aluminum from the C.I.S. to the West remained at a similar
level to 1996 at 2.6 Mt with little evidence of a revival in domestic demand.
Chinese primary production is estimated to have increased 8% in 1997, resulting
in a reduction in China's net imports from the previous year's level of 250 kt
to an estimated 50 kt.

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

Total inventories in the hands of primary aluminum producers and in London Metal
Exchange (LME) warehouses declined over the year by 300 kt to a level of 3.8 Mt,
equivalent to about 10.1 weeks of consumption.

Ingot prices increased during the first part of the year rising to a peak
three-month LME price of $1,755 per tonne (/t) in the third quarter, to be
followed by a decline to $1,558/t by year-end, close to the year's low point.
The average price for the year was $1,620/t, an increase of $84/t over 1996 but
well below the average for 1995 of $1,830/t.


                                       18
<PAGE>   19
WESTERN WORLD CONSUMPTION VERSUS ALCAN SALES

It is estimated that total Western World aluminum consumption in 1997 was 25.5
Mt, three-quarters of which was supplied from primary sources and the remainder
from recycled metal. This represents an estimated increase of 5.4% over 1996.

Alcan's total shipments increased some 8.5% to 2.8 Mt with ingot shipments up
6% and a near 10% increase in shipments of fabricated products. Lower average
prices for fabricated products, resulting from the translation of weaker
European currencies, and product mix changes, however, meant that revenues
increased only 2% over the 1996 level.

The transportation market consolidated its position as the largest market for
aluminum with a 7.4% increase to 6.8 Mt. This resulted from strong production
of light vehicles, up over 4% globally, and the continuing increase in
aluminum penetration. Alcan's revenues from this market increased some 6% in
1997.

The containers and packaging market increased an estimated 3.4% to consume
4.8 Mt of aluminum. Can sheet demand recovered from the decline seen in 1996
to return to the peak levels seen in 1995. In the U.S., can shipments
surpassed the 100 billion mark for the first time and very strong growth
continued to be exhibited in South America. Despite higher can sheet volumes,
Alcan's revenues declined slightly in this market due to soft prices for
flexible packaging in Europe and the effect of weaker European currencies
when revenues are translated into dollars.

Building and construction also posted a healthy gain, rising 3.9% to a level
of 5.1 Mt, with strong growth from Europe and North America offset by a
decline of over 5% in Japan. Alcan's consolidated revenues from this sector
were up 4.5%, primarily in Europe and North America.

Consumption of aluminum in the electrical market was up 6.4% in 1997,
reaching 2.2 Mt, more than reversing a small decline in the previous year.
Alcan's revenues from this market were unchanged. Strong growth in North
America offset the reduction that arose from divestment of a business in
South America.

Other markets include machinery and equipment, durable goods and other
smaller end-use markets. Total aluminum consumption in these markets rose
some 5.6% reflecting generally buoyant economic conditions. Alcan's sales
revenues in this category, which include sales of aluminum ingot and
alumina, were unchanged. Higher alumina volumes and flat prices were offset
by the effect of the divestment of businesses in 1996.

RESULTS OF OPERATIONS
<TABLE>
<S>                                                <C>      <C>      <C>
(millions of US$)                                  1997     1996     1995
Net income before
 extraordinary item                                 468      410      543
Extraordinary gain (loss)                            17       -      (280)
Net income                                          485      410      263
</TABLE>

Alcan reported consolidated net income for 1997 of $485 million after an
extraordinary gain of $17 million arising from the sale of a portion of a
contract to supply power to B.C. Hydro, net of additional write-downs of
remaining Kemano Completion Project (KCP) assets. As part of the settlement
of the dispute regarding the cancellation of KCP, the Company was able to
sell to a third party the right to supply power to B.C. Hydro under an
ongoing contract. Details of the settlement of the KCP dispute can be found
on page 33. Also included in the 1997 income was a net after-tax gain of
$6 million comprising a favourable tax adjustment relating to prior periods
of $26 million, and a net gain on the sale of businesses of $10 million.
This was partly offset by a $30-million provision in respect of contract
losses and restructuring at the Company's Japanese affiliate.


                                       19
<PAGE>   20
For 1996, consolidated net income was $410 million including net after-tax
charges of $23 million relating to restructuring and early retirement of debt,
offset by gains on business disposals and prior-period tax adjustments.

Net income for 1995 was $263 million after an extraordinary loss of $280 million
after tax for the write-down of the Company's investment in KCP. In addition,
there was a net adverse impact of $61 million, the largest item being the effect
of a labour strike at the Company's operations in Quebec.

In 1997, the Company launched a program of measures aimed at achieving the full
business potential of each of its operating units. A target was sezt to improve
after-tax profitability by $300 million over a three-year period, beginning in
1997. By the end of the year, the Company is approximately one-third of the way
to achievement of this goal. Improvements totalling $160 million before tax have
been achieved. In the raw materials sector, gains of $40 million have been made
through cost reductions and increased production volume. In fabricated products,
improvements totalled $120 million, principally from higher capacity
utilization, $80 million of which arises in Europe and the remainder in North
America. The full impact of these achievements is not visible in the 1997
results due to non-recurring costs associated with the program. These include
pot relining costs at the Company's Lynemouth smelter in the U.K. and expenses
related to information technology and systems.

REVENUES

Sales and Operating Revenues, at $7,777 million, were 2% higher than in 1996 but
16% below the 1995 level. Sales volumes were 8.5% higher than in 1996, but
average price realizations for fabricated products were sharply lower at
$2,999/t compared to $3,279/t in 1996 and $3,557/t in 1995. This reflects the
impact of weaker European currencies when translated into U.S. dollars as well
as changes in product mix due to the sale of certain downstream businesses. The
decline compared to 1995 reflects lower prevailing metal prices and the disposal
of businesses with higher average prices and correspondingly higher
manufacturing costs.

Other income, which comprises interest income and other non-operating gains,
amounted to $88 million in 1997 compared to $75 million and $100 million in 1996
and 1995, respectively. Other than interest received on surplus cash, the main
items included in this category were gains on the disposal of downstream
businesses.

COSTS AND EXPENSES

Despite higher sales volumes, cost of sales and operating expenses increased
only 1.5% in 1997 and this followed a decline of 18% in the previous year. The
improvement in unit costs is due to increased capacity utilization, lower
European costs in dollar terms and some change in product mix, offset in part by
higher cost and increased volume of purchased metal. The decline in 1996 was due
primarily to the impact of business disposals and lower metal purchases.

<TABLE>
<S>                                                      <C>      <C>      <C>
(kt)                                                     1997     1996     1995
Purchases of aluminum
 Ingot products                                           732      509      789
 Scrap                                                    482      446      509
 Fabricated products                                       40       48       67
                                                        1,254    1,003    1,365
</TABLE>

Purchases of aluminum increased in 1997 to 1,254 kt to support increased sales.
Average prices for ingot on the LME were $1,620/t in 1997 compared to $1,536/t
in 1996 and $1,830/t in 1995.


                                       20
<PAGE>   21
Depreciation expense at $436 million in 1997 compares to $431 million in 1996
and $447 million in 1995. The decline in 1996 over 1995 reflected business
disposals.

Selling, administrative and general expenses increased 5% in 1997, to $444
million, following six consecutive years of decline. The increase is due
primarily to expenses totalling $46 million incurred in renewing and updating
information technology systems. These expenses are expected to continue at
similar levels in 1998 and to decline thereafter.

Research and development expenses were $72 million in 1997, little changed from
1995 and 1996. The stable level of spending over the last three years reflects
the full alignment of R & D activities with the technology needs of the
Company's core businesses: principally raw materials, smelting and rolling.
Alcan continues to maintain a strong effort in developing automotive aluminum
materials and technology. Additionally, there are currently several process
optimization initiatives aimed at assisting in the achievement of full business
potential. In 1998, research and development expenditures are expected to
increase moderately.

INTEREST COSTS

<TABLE>
<CAPTION>
           <S>                        <C>          <C>          <C>
(millions of US$)                    1997         1996         1995
Interest expense                      101          125          204
Interest capitalized                    2            -            2
Total interest costs                  103          125          206
Effective average interest rate       6.9%         7.3%         8.2%
</TABLE>

Alcan's interest expense continued its declining trend in 1997. Interest expense
fell by 19% in the year to $101 million. From its peak of $254 million in 1992,
the Company's interest expense has now fallen by $153 million or 60%. The
decline reflects Alcan's debt reduction program over this period and the benefit
of falling interest rates. The pre-tax interest expense coverage ratio continued
to improve to 7.4 times from 5.6 times in 1996 and 4.8 times in 1995.

INCOME TAXES

Income taxes of $258 million for 1997 represent an effective tax rate of 34%,
little- changed from 1996, versus a composite statutory rate of 40%. The
difference in the rates is due primarily to investment and other allowances, the
realization of previously unrecorded tax benefits on losses, as well as
favourable adjustments for prior periods. In 1995 there was little difference
between the two rates.

Income taxes for the years 1988 to 1991 have been reassessed by the Canadian tax
authorities. Most of the additional taxes and interest claimed related to
transfer pricing and are recoverable in other countries. Any unrecoverable
amounts are covered by existing provisions.

EQUITY COMPANIES

Alcan's share of the losses of equity-accounted companies was $33 million
compared to $10 million in 1996 and $3 million in 1995. The increased losses
arise from a restructuring and contract loss provision at Alcan's 45.6%-owned
related company in Japan, Nippon Light Metal Company, Ltd. (NLM).



                                       21
<PAGE>   22
PRODUCT SECTOR REVIEW

The following information is reported by major product sector viewing each
sector on a stand-alone basis. Transactions between sectors are conducted on an
arm's-length basis and reflect market prices. Thus, profit on all alumina
produced by the Company, whether sold to third parties or used in the Company's
smelters, is included in the raw materials and chemicals sector. Similarly,
income from primary metal operations includes profit on metal produced by the
Company, whether sold to third parties or used in the Company's fabricating
operations. Income from the fabricated products sector represents only the
fabricating profit from rolled products and downstream businesses. Additional
product sector information is presented in note 21 to the financial statements.



RAW MATERIALS AND CHEMICALS OPERATIONS

<TABLE>
<CAPTION>
           <S>                        <C>          <C>          <C>
(millions of US$)                    1997         1996         1995
Sales and operating revenues
     Third parties                    536          529          618
     Intersector                      520          507          555
Operating income                      125           95          203
Shipments - third parties (kt)
     Smelter - grade alumina        1,679        1,585        1,325
Alumina hydrate production (kt)     4,727        4,536        4,209
</TABLE>

Profits for the sector rose substantially over the prior year. The main
contributing factors were lower production costs and a small increase in volume.
Prices for third-party sales of alumina remained at similar levels to 1996.

Unit production costs fell significantly in 1997. The decrease was largely
attributed to lower raw materials prices for caustic soda and purchased bauxite
coupled with cost reduction efforts towards achievement of the full business
potential.

BAUXITE

Through subsidiaries and related companies, Alcan has approximately 400 Mt of
demonstrated bauxite reserves, more than sufficient to meet its needs for the
next 30 years. The Company also has access to additional resources to meet its
needs beyond this period.

During 1997, significant progress was made in Australia towards securing a
low-cost bauxite supply for the Company's share in the Queensland Alumina
Limited refinery for the year 2000 and beyond. Early in 1998, agreement was
reached with Comalco Limited for integrated mining of Alcan's Ely bauxite with
Comalco's reserves. This will achieve significant economies of scale and provide
Alcan with low-cost bauxite. In addition, initiatives to increase equity and
expand a mine in Ghana were launched.

ALUMINA

Alumina hydrate production reached 4.7 Mt in 1997, a 4% increase over 1996 and
the highest level ever for the Company. Aughinish Alumina Limited in Ireland and
Alcan Jamaica Company in Jamaica achieved record production levels. Third-party
sales rose 6% to almost 1.7 Mt.

                                       22
<PAGE>   23
CHEMICALS

Operating results for the year were lower than in 1996, mainly in Europe where
the strengthening of the pound sterling, particularly against continental
European currencies, reduced profit margins. Considerable progress has been made
towards improving Alcan's position in the specialty alumina chemicals markets
and capacity expansions have been undertaken for these higher value-added
products.

PRIMARY METAL OPERATIONS

<TABLE>
<S>                                         <C>           <C>          <C> 
(millions of US$)                          1997          1996          1995
Sales and operating revenues
  Third parties                           1,531         1,472         1,612
  Intersector                             1,530         1,653         2,286
Operating income                            589           519           701
Shipments (kt)
  Primary aluminum
  Third parties                             661           592           549
  Intersector                               891         1,008         1,193
Primary production (kt)                   1,429         1,407         1,278
</TABLE>

Operating profits for the primary metal sector rose in 1997 to reflect higher
average aluminum ingot prices. Profits for this sector arise not only from
third-party sales but also from the sale of metal at market prices to the
Company's fabricating operations. The average realized price on third-party
sales of primary ingot was $1,803/t against $1,721/t in 1996 and $2,057/t in
1995.

Alumina is transferred from the Company's raw materials operations to its
smelters at market prices. Alumina prices were little-changed in 1997 from 1996
and still somewhat lower than in 1995. Alcan's average cost of production of
primary aluminum (mainly in the form of extrusion billet and sheet ingot),
including alumina at market prices, was $1,352/t in 1997 versus $1,328/t in 1996
and $1,336/t in 1995. The principal reason for the increase in 1997 was the cost
of refurbishing the idle potline at the Lynemouth smelter in the United Kingdom
in preparation for restart when market conditions allow. This project will be
completed in the first half of 1998.

PRIMARY PRODUCTION

Primary metal production in 1997 was slightly higher than the 1996 level due to
improved performance in Canada and increased water availability at the Company's
hydroelectric power plant in Scotland. Production in 1995 had been adversely
affected by about 75 kt due to a strike at the Company's Quebec smelters.

Alcan continues to have approximately 134 kt/y, or 8%, of its total rated
capacity temporarily idled. This capacity will be restarted only when warranted
by industry conditions. Alcan restarted 22 kt/y of capacity at its smelter in
Kitimat, British Columbia, in November 1997. This restart was one element of a
legal agreement with the government of British Columbia to settle the
outstanding issues related to the government's rejection of the Kemano
Completion Project. This 1997 B.C.-Alcan settlement agreement also provides for
replacement electricity, at attractive prices, to power a potential future
expansion of the Kitimat smelter, as well as improvements to an existing
electricity sale agreement. Further details are given on page 33.

In Quebec, the environmental review and community consultation processes
relating to the proposed 375-kt/y smelter at Alma have been successfully
completed. In February of this year, the Company announced its decision to
proceed with the project. Construction will commence in early March of 1998, and
the first metal will be produced in the fall of 2000.


                                       23
<PAGE>   24
A new two-year power contract was negotiated for the Aratu smelter in Brazil.
Also in Brazil, flooding temporarily affected production at the Ouro Preto
smelter. In the U.S., Alcan has made progress in its efforts to find an
acceptable solution to the economic problems of the power supplier to the
Sebree, Kentucky, smelter. At Lynemouth in the U.K., a two-year capital program
to upgrade and refurbish the closed potline is nearing completion.

In October, Alcan announced the formation of a team to conduct a feasibility
study on a proposed 225-kt/y expansion of its Kitimat smelter in northern
British Columbia. A month later, a memorandum of understanding was signed with
the China National Non-Ferrous Metals Industry Corporation for a feasibility
study related to the potential construction of an aluminum smelter and power
station in Shanxi province, China. The results of both of these feasibility
studies are expected in the next 15 to 18 months.

SECONDARY PRODUCTION

In addition to its used beverage can recycling operations, which are included in
the fabricated products sector, Alcan recycles other forms of aluminum scrap at
four facilities in Italy, Thailand, the U.K. and the U.S. that have a total
capacity of 192 kt/y. Third-party sales, primarily of foundry alloys for the
automotive industry, were 82 kt in 1997 compared to 119 kt in 1996 and 124 kt in
1995. The decline in 1997 arises from the sale, late in 1996, of the Company's
facility at Guelph, Ontario. These secondary smelters also produce rolling ingot
for use in the Company's own fabricating operations.

FABRICATED PRODUCTS OPERATIONS

<TABLE>
<S>                                         <C>         <C>         <C>
(millions of US$)                          1997        1996        1995
Sales and operating
  revenues                                5,693       5,593       6,983
Operating income                            290         127         346
Shipments (kt)                            1,694       1,539       1,733
Fabrication of
 customer-owned metal                       276         258         225
Total volume                              1,970       1,797       1,958
</TABLE>

Alcan's fabricated products volumes, including fabrication of customer-owned
metal, rose 10% in 1997 to a record level of just under two million tonnes, more
than compensating for the 1996 fall that was due mainly to the divestment of
downstream businesses. As well as enjoying strong market conditions in Europe
and North America, the Company achieved an increased share of a number of
important markets. Adjusting for the impact of divestments, fabricated products
sales have grown at a compound annual rate of 11% since 1993.

Operating income, at $290 million, was more than double the 1996 level as a
result of higher volumes and the impact on margins of increased capacity
utilization.


                                       24
<PAGE>   25
ROLLED PRODUCTS

Following capacity expansions in North America and Europe in recent years,
Alcan's focus in these regions has been to consolidate its position as the
world's largest producer of rolled aluminum products. Total rolled products
volume, including conversion of customer-owned metal, rose to 1,752 tonnes, an
increase of 12% over 1996. Sales revenue increased 7% to $3,894 million, the
lower percentage gain reflecting lower realizations primarily due to weaker
European currencies. Rolled products shipments were 1,476 kt compared to 1,304
kt in 1996 and 1,337 kt in 1995. The average realized price of $2,637/t was down
from $2,797/t in 1996 and $2,950/t in 1995. The 1997 decline was attributable to
the lower dollar realizations on translation of European sales.

In North America, total demand increased some 5% and Alcan's shipments were up
slightly more at 5.7%. The beverage can market grew by some 1.6% with can sheet
shipments up about 2% over 1996. Alcan's shipments into domestic can sheet
markets increased over 5% indicating a gain in market share. Distributor markets
were also strong with industry demand up over 10% and Alcan increasing its
shipments by 36%. This was offset to some degree by a reduction in the Company's
shipments of building sheet. Capacity utilization was approximately 90%.

The European rolled products market recovered from its decline in 1996 to grow
by an estimated 6.5% in the year, reflecting stronger economic conditions in all
the major economies and a reversal of the customer destocking that occurred in
1996.

Alcan's European rolling operations increased shipments by 16% with improved
market share and higher exports. This sales growth was broadly-based, with the
most significant increases being in foil stock, can body stock, lithographic
sheet and painted products. German foil markets were particularly competitive
so, despite a significant increase in sales volumes, revenues were insufficient
to prevent a decline in profitability of those businesses. Higher sales volumes
have led to most plants operating at their manned capacity during 1997, although
there is still further potential for increased volumes, particularly at
Nachterstedt in eastern Germany where the program to modernize and expand the
plant has now been completed.

In South America, rolled products consumption continued to be led by can sheet,
which grew 45% in 1997 with the start-up of several new canning lines. During
the year, Alcan commenced a project to expand capacity at its Pindamonhangaba,
Brazil, rolling mill from 100 kt to 280 kt and to build a used beverage can
recycling facility. This mill is the only rolling mill in South America capable
of producing can sheet.

AUTOMOTIVE

During the year, Alcan continued to make significant gains in growing
its automotive sheet business capturing a majority of the autobody sheet
business in North America. Alcan is now the leading supplier of these products
to North American automotive manufacturers.

Ford Motor Company showcased its impressive Project 2000 PNGV (Partnership for a
New Generation of Vehicles) car to the public at the end of 1997. Produced under
a joint auto industry and U.S. government initiative aimed at the development of
fuel-efficient and environmentally-friendly cars, the vehicle improves fuel
consumption to 63 m.p.g. and achieves a 53% mass reduction in the body
structure. As a full development partner, Alcan, with its Aluminum Vehicle
Technology, helped Project 2000 produce the lightest mid-sized vehicle in the
world at just 2,000 lbs.


                                       25
<PAGE>   26
The Ford Project 2000 and General Motors' EV1 (electric vehicle) programs bear
witness to the growing importance the automotive community is placing on
delivering earth- friendly, fuel-efficient vehicles for the next generation of
consumer transportation. Aluminum is positioned to play a key role in helping
the automakers achieve these goals. Alcan's strategic initiatives have put the
Company in a strong position to benefit from these growth opportunities.

OTHER FABRICATED PRODUCTS

Sales of other fabricated products have declined in recent years as a result of
the divestment of non-strategic downstream businesses, most of which was
completed by 1996. Shipments in 1997 were 218 kt compared to 235 kt in 1996 and
396 kt the year before. Sales revenues were also lower, at $1,187 million,
compared to $1,404 million in 1996 and $2,219 million in 1995. Average price
realizations were $5,445/t compared to $5,946/t and $5,611/t respectively in the
two previous years. The 1997 decline arose largely in Europe where currencies
were substantially lower against the U.S. dollar.

Alcan's North American cable business achieved further growth in the year.
Demand for overhead transmission cable and service cable increased moderately,
but building wire exhibited major growth resulting in near-record shipments and
increased profitability. It is expected that this trend will continue in 1998.

Alcan's architectural products business faced highly competitive business
conditions in France but performed well in other markets.

RECYCLING ACTIVITIES

Alcan's North American used beverage can (UBC) recycling plants again increased
output by 7.5%, to a record level of 18.5 billion UBCs processed, of which over
2.1 billion were collected by Alcan in Canada. In the U.K., where Alcan has the
only UBC recycling facility, the rate of beverage can recycling continued to
increase.

In Brazil, as part of Alcan's expansion of can sheet capacity, a new UBC
recycling operation was commissioned in February of 1998.

GEOGRAPHIC REVIEW

The improvement in earnings in most geographic regions that was seen towards the
end of 1996 continued into 1997, as customer destocking was reversed and
economic activity accelerated. The effects of the economic crisis in Asia and
slowdown in Japan were felt in the second half of the year.

Net income data included in this Geographic Review relate to Alcan's operations
in each region, whereas the shipment data are classified according to
third-party customer location. Net income, presented below, does not reflect the
prior year tax reassessment in Canada and related recovery from other
jurisdictions.

CANADA

<TABLE>
<CAPTION>
                                      1997      1996      1995
                                          (millions of US$)
<S>                                   <C>       <C>       <C>
Net income*                           245       175       216
Net income excluding
    special items*                    219       188       231
Shipments (kt)
    Ingot products                    101       120       120
    Fabricated products               110       120       112
</TABLE>


                                       26
<PAGE>   27
* Net income in 1995 and 1997 is before extraordinary items. Special items
include: 1997 prior year tax adjustments, 1996 rationalization expenses and loss
on early retirement of debt, and 1995 loss on early retirement of debt.

Earnings from Canadian operations improved in 1997 to reflect higher aluminum
ingot prices but remained below the 1995 level. Ingot prices in 1995 were
substantially higher than in 1996 and 1997. Income for 1995 was adversely
affected by some $70 million by a labour strike in Quebec. The Canadian economy
remained robust in 1997, with low interest rates spurring pent-up demand.
Domestic aluminum consumption recovered in the year to increase by 4% following
a 1% decline in 1996.

Expansion of aluminum smelting operations in Canada is planned. In February
1998, the go-ahead was given for a 375-kt smelter at Alma, Quebec. Also, a
feasibility study is under way on a possible 225-kt expansion in British
Columbia.

UNITED STATES

<TABLE>
<S>                                                     <C>     <C>     <C>
(millions of US$)                                      1997    1996    1995
Net income                                             136      70     123
Net income excluding
 special items*                                        136      72      99
Shipments (kt)**
 Ingot products                                        379     380     380
Fabricated products                                    905     874     918
</TABLE>

*  Special items include: 1996 loss on sale of business and tax write-backs, and
1995 gain on sale of a business.
** Includes fabrication of customer-owned metal.

Net income in the U.S. almost doubled in 1997 principally due to the strong
increase in fabricated products sales volume.

The U.S. economy continued at a strong, steady pace and total aluminum
consumption was up 6.3% after a flat year in 1996. High levels of vehicle
production and construction activity were key drivers of growth, and can sheet
demand was better than expected with higher can volumes and a slowing in the
rate of downgauging. The aluminum cable market was also robust with a good
financial performance from Alcan Cable.

SOUTH AMERICA

<TABLE>
<S>                                                     <C>     <C>     <C>
(millions of US$)                                      1997    1996    1995
Net income                                              27      42      15
Net income excluding
 special items*                                         17      29      15
Shipments (kt)
 Ingot products                                         27      21      13
 Fabricated products                                   146     153     133

</TABLE>

* Special items include: 1997 and 1996 gain on sale of businesses.

South America reported operating results lower than in 1996, largely due to
divestments. This resulted in a change in product mix with a higher proportion
of shipments in the form of primary metal. Adjusted for divestments, fabricated
products shipments increased by 18% in 1997.


                                       27
<PAGE>   28
Despite very high real interest rates introduced in Brazil to protect the
currency in the wake of the Asian crisis, aluminum demand in the region grew by
about 10% in 1997, driven principally by can sheet. Strong regional growth is
expected again in 1998.

An expansion of Alcan's Pindamonhangaba rolling mill from 100 kt to 280 kt with
associated UBC recycling capacity is under way, with the increased capacity
becoming available in stages in 1998 and 1999.

EUROPE

<TABLE>
<S>                                                       <C>     <C>     <C>
(millions of US$)                                        1997    1996    1995
Net income                                                55      21     161
Net income excluding
 special items*                                           55      26     161
Shipments (kt)**
 Ingot products                                          106      89      95
 Fabricated products                                     726     630     756

</TABLE>

*  Special items include: 1996 rationalization expenses and tax write-backs.
** Includes fabrication of customer-owned metal.

Net income from European operations was sharply higher in 1997 due to a 16%
increase in fabricated products sales volume, offset in part by pressure on
profit margins in some markets.

All the major European economies experienced better economic conditions in 1997
than in the previous year. Aluminum consumption rebounded from the drop in 1996
to record growth estimated at 6.5%, led principally by the building,
transportation and can sheet markets. Alcan's shipments significantly exceeded
the market gains with sales volume up 16%, indicating an increased share in many
markets, as well as increased exports. Most European currencies weakened against
the U.S. dollar. It was not possible to pass on the resultant local-currency
increase in purchased metal costs to customers immediately, leading to downward
pressure on profit margins, especially during the early part of the year.

Shipments from German operations were up 24%, with increased exports helped by
the weaker Deutschmark. Foil markets were subject to increased competitive
pressure, resulting in a decline in earnings from those businesses. Utilization
of the newly expanded capacity at Norf and Nachterstedt improved during the
year.

In the U.K., the volume increase was more modest, at 4%, partly due to the
stronger pound sterling impacting export sales, and partly to production
constraints in the early part of the year. The refurbishment of the idled
potline at the Lynemouth smelter is near to completion and will allow the
restart of 66 kt of annual capacity when market conditions permit. Exceptional
costs of $18 million after tax are included in respect of this project.

Sales volumes from Alcan's operations in Italy were up 17% with strong sales of
painted sheet products.

In France, conditions in the building systems market continued to be highly
competitive, while the overseas business of Alcan France performed well in most
markets.

The alumina refinery in Ireland maintained its low conversion costs and achieved
its highest-ever production volume.


                                       28
<PAGE>   29
ASIA AND PACIFIC

<TABLE>
<CAPTION>

                              1997      1996       1995
                                  (millions of US$)
<S>                           <C>       <C>        <C>
Net income (Loss)              (1)       13         43
Net income excluding
    special items*             29        25         43
Shipments (kt)
    Ingot products            245       199        193
    Fabricated products        76        13         32
</TABLE>

* Special items include: 1997 construction contract losses and rationalization
expenses, and 1996 rationalization expenses.

Income, excluding special items, from this region was little changed in the
year, but the second half was marked by a deterioration in business conditions.
The increase in fabricated products shipments reflects the consolidation for the
full year of operations in Malaysia and Thailand following the restructuring of
Alcan's investments in the region in 1996, as well as increased exports into the
region. In the third quarter, a charge to net income of $30 million was made in
respect of construction contract losses and restructuring costs at the Company's
45.6%-owned related company in Japan, Nippon Light Metal Company, Ltd. (NLM).

Aluminum consumption grew by an estimated 3% in the region in 1997 but the trend
reversed sharply with strong growth in the first half of the year and a decline
in the second half. The outlook for 1998 remains uncertain.

In Japan, a consumer boom in the first quarter ahead of an increase in
consumption tax was followed by a severe downturn in demand with the
construction market particularly badly affected. Alcan's affiliate, NLM,
experienced a sharp drop in shipments to the building market and its building
products subsidiary is undergoing a major rationalization program. In addition,
a number of other restructuring and divestment measures are being initiated.

For Alcan's fabricating businesses in Southeast Asia, it was a difficult and
challenging year. The financial crisis, which hit the region in the second half
of 1997, saw currencies plunge and demand for aluminum products fall. In
Thailand, business was particularly hard hit by a collapse in large-scale
construction activity. In Malaysia, lower profits mainly reflected reduced
demand for sheet products. With this tough environment foreseen to continue in
1998, Alcan's businesses in the region are focusing on export opportunities,
cost reduction, and working capital management.

In Australia, earnings from alumina sales improved in 1997 to reflect higher
alumina prices.

Indian aluminum demand growth was lower than in recent years at about 3%. At
Indian Aluminium Company, Limited (Indal), 34.6%-owned by Alcan, prices and
margins were under pressure due to competitors' capacity expansions.
Accordingly, cost reduction and improved asset utilization have emerged as key
priorities for Indal.


                                       29
<PAGE>   30
OTHER AREAS

<TABLE>
<CAPTION>
                         1997      1996       1995
                             (millions of US$) 
<S>                      <C>       <C>        <C>
Net income               35        31         39
Net income excluding
    special items*       35        35         39
Shipments (kt)
    Ingot products       --         1         --
                          7         7          7
</TABLE>

* Special items in 1996 were mainly rationalization expenses.

Activities in other areas include raw materials operations in Jamaica, Guinea
and Ghana, and trading, shipping and insurance activities in Bermuda. Alcan also
sells metal in other parts of the world such as the Middle East and Africa.


LIQUIDITY AND CAPITAL RESOURCES

Cash generation in 1997 was slightly ahead of the previous year reflecting the
improvement in profitability. Calculated by taking the net income for the year
and adding back depreciation and deferred income taxes, cash generation was $913
million compared to $856 million in 1996 and $1,164 million in 1995.

Net operating working capital requirements increased $125 million in 1997,
following a $63-million decline the previous year. This was entirely due to
higher sales volumes with tight working capital management reflected by a fall
in the number of days' sales in working capital.

Following reassessment of income taxes relating to prior years, an amount of
$134 million was paid to the Canadian authorities to prevent the further accrual
of interest. Most of this is recoverable from other jurisdictions and has,
accordingly, been included in deferred receivables.

Disposal proceeds from the sale of non-strategic businesses and other assets
were $54 million, sharply lower than the 1996 level of $660 million as the
divestment program reached its conclusion.

Total borrowings were little changed during the year, following the substantial
debt repayments and preference share redemption of the preceding year. Cash and
time deposits increased $62 million in 1997, reaching a level of $608 million at
year-end. The ratio of total borrowings to equity was unchanged from the
previous year at 23:77 which compares to 29:71 at the end of 1995. The ratio
improves further, to 16:84, when adjusted for surplus cash reserves.

                                       30
<PAGE>   31
INVESTMENT ACTIVITIES

Capital investment in the year was $641 million, an increase from $482 million
and $441 million in 1996 and 1995, respectively. On an ongoing basis,
approximately $450 to $500 million is required annually to maintain the
integrity and competitiveness of the Company's assets. Additional expenditures
in 1997 related primarily to the refurbishment and upgrade of the Lynemouth
smelter in the U.K. and the expansion of rolling capacity in Brazil.

In 1998, projects, other than to maintain existing assets, include the
continuation of the rolling mill expansion project in Brazil, with approximately
$150 million expenditure planned in the year. The Alma smelter project in
Quebec, commencing in March 1998, will entail an investment of $1.6 billion over
a three-year period. In addition, the Company intends to bid, in partnership
with Aluminum Company of America, for 70% of the state- owned aluminum assets in
Venezuela that are being privatized in 1998. If successful, Alcan would have an
effective 28% share of those assets.

The program of divestment of non-strategic businesses was largely completed by
early 1997. Over a three-year period, the Company made a number of disposals in
Canada, the U.S., the U.K., Australia and South America which generated proceeds
of $1.25 billion, used mainly to repay debt.

Financing Activities

Total borrowings at the end of 1997 were unchanged from 1996 at $1.5 billion and
$470 million less than in 1995. Alcan's debt to equity ratio of 23:77 is the
lowest in the Company's history and positions Alcan well to take advantage of
attractive investment opportunities as they become available.

The quarterly common share dividend was maintained at 15 cents per share in 1997
compared to 1996. The dividend was increased from 7.5 cents to 15 cents per
share in 1995. Total dividends paid to common shareholders were $136 million in
1996 and 1997 compared to $101 million in 1995. Preference share dividends were
$10 million versus $16 million in 1996 and $24 million in 1995.

Cash reserves totalled $608 million at the end of the year compared to $546
million and $66 million at the end of 1996 and 1995, respectively. In addition,
the Company continues to have a $1 billion global, multi-year and multi-currency
credit facility with a syndicate of major international banks. At December 31,
1997, no funds had been borrowed under this facility and the full amount was
available. The Company's investment grade credit rating also provides Alcan with
ready access to global capital markets through the issuance of debt and equity
instruments.

The Company expects that cash generated from operations, combined with the above
resources, will be more than sufficient to meet the cash requirements of
operations, planned capital expenditures and dividends. Existing resources, and
liquid capital markets also provide ample liquidity to meet unforeseen events.

                                       31
<PAGE>   32
KEMANO COMPLETION PROJECT

In the third quarter of 1995, the Company wrote down its investment in the
Kemano Completion Project (KCP), following the project's cancellation by the
British Columbia government. After estimated disposal proceeds and site
restoration costs, the amount of the write-down was $420 million, resulting in
an extraordinary loss of $280 million on an after-tax basis.

In early 1997, Alcan filed, in the British Columbia Supreme Court, a writ of
summons naming the province of British Columbia as defendant in a lawsuit for
damages arising from the government's rejection of KCP. The Company continued
negotiations with the Province and, on August 5, 1997, a final settlement
agreement was signed that resolved the issues surrounding KCP.

The principal elements of the agreement were the provision of replacement power,
which would be made available if Alcan were to expand its operations in British
Columbia in the future, and the maintenance and enhancement of an existing
contract whereby Alcan sells power to B.C. Hydro. Alcan also agreed to
contribute to environmental improvements in the region. The agreement provided
for the issuance by the Province of Alcan's final Water Licence and Permit of
Occupation.

The availability of replacement power restores to Alcan the opportunity of a
low-cost smelter expansion in British Columbia. The Company believes that the
settlement agreement is in the best interests of shareholders.

Following the settlement, the power sales contract was split and the right to
sell 167 MW to B.C. Hydro, at the California-Oregon border, was sold to Enron
Corp., a U.S.-based energy provider. The gain on this sale, net of the write-off
of remaining KCP assets, amounting to $17 million, is one element of the
settlement that is realized and quantifiable. Accordingly, it has been treated
as an extraordinary gain.

ENVIRONMENTAL MATTERS

Alcan is committed to the continued environmental improvement of its operations
and products. The Company has devoted, and will continue to devote, significant
resources to control air and water pollutants, to dispose of wastes and to
remediate sites of past waste disposal. Alcan estimates that annual
environment-related spending, both capital and expense, will average about $190
million per year over the next several years and is not expected to have a
material effect on its competitive position. While the Company does not
anticipate a material increase in the projected level of such expenditures,
there is always a possibility that such increases may occur in the future in
view of the uncertainties associated with environmental exposures, including new
information concerning sites with identified environmental liabilities and
changes in laws and regulations and their application.

Included in total operating costs and expenses for the year are amounts for
safeguarding the environment and improving working conditions in plants. In
1997, such expenses totalled $88 million. This amount was largely for costs
associated with reducing air emissions and mitigating the impact of waste and
by-products. In 1995 and 1996, these expenses totalled $76 million and $96
million, respectively.

Included in capital spending in 1997 was $84 million for environment-related
projects. Such spending was largely on equipment designed to reduce or contain
air emissions generated by Alcan plants. Spending in 1995 and 1996 was $53
million and $60 million, respectively.

                                       32
<PAGE>   33
RISKS AND UNCERTAINTIES

RISK MANAGEMENT

As a multinational company 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. All risk management
activities are governed by clearly defined policies and management controls.
Transactions in financial instruments for which there is no underlying exposure
are prohibited.

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 constantly monitored to ensure effectiveness.

FOREIGN CURRENCY EXCHANGE

Exchange rate movements, particularly between the Canadian dollar and the U.S.
dollar, have an important impact on Alcan's results. For example, on an annual
basis, each US$0.01 permanent change in the value of the Canadian dollar has an
after-tax impact of approximately $11 million on the Company's long-term
profitability. Alcan benefits from a weakening in the Canadian dollar, but,
conversely, is disadvantaged if it strengthens. In order to reduce the
short-term volatility in costs arising from movements in exchange rates, Alcan
hedges a substantial portion of its Canadian dollar exposure through the use of
forward exchange contracts and currency options.

For further details, refer to note 16 of the financial statements.

From the beginning of 1998, following a change to the accounting standards of
the Canadian Institute of Chartered Accountants on accounting for income taxes,
the Company's deferred income tax liability is translated into U.S. dollars at
current rates. The resultant exchange gains or losses are included in income.
The impact of a US$0.01 movement in the value of the Canadian dollar on deferred
income taxes is approximately $6 million.

ALUMINUM PRICES

Depending on market conditions and logistical considerations, Alcan may sell
primary aluminum to third parties and may purchase primary 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, while retaining the ability to
benefit from higher prices. The Company may also, through a combination of
hedging instruments, establish a range of sales prices for a certain portion of
its future revenues.

Alcan estimates that on an annual basis, each $100 per tonne change in the price
of aluminum has an after-tax impact of approximately $100 million on the
Company's long-term profitability. For further details, refer to note 16 of the
financial statements.


                                       33
<PAGE>   34
THE YEAR 2000 ISSUE

Alcan has a program which is well under way to examine and resolve Year 2000
issues as they affect the Company. The objective of the program is to ensure
that the business-and process-related systems technology relied on by the
Company accurately processes date-related data prior to, during and after, the
year 2000. The program includes the assessment of hardware and software as well
as coordination with third parties where electronic interaction is present. In
the event that Year 2000 issues could not be resolved in a timely fashion, the
Company could face potential business interruptions or delays. Alcan is
therefore dedicating substantial resources to its program to permit an orderly
transition through the year 2000. The Company has not completed its assessment
of Year 2000 issues. Based on information to date, the costs of remediation and
coordination are not expected to have a material adverse impact on the Company's
financial condition.

CAUTIONARY STATEMENT

Statements in this report that describe the Company's objectives, projections,
estimates, expectations or predictions of the future may be-looking statements'
within the meaning of applicable securities laws and regulations. The Company
cautions that such statements involve risk and uncertainty and that actual
results could differ materially from those expressed or implied. Important
factors that could cause differences include global aluminum supply and demand
conditions, aluminum ingot prices and other raw materials' cost or availability,
cyclical demand and pricing in the Company's principal markets, changes in
government regulations, economic developments within the countries in which the
Company conducts business, and other factors relating to the Company's
operations, such as litigation, labour negotiations and fiscal regimes.

CAPTIONS
 
At left, Michel Villeneuve, smelting operator at Grande-Baie Works in Quebec,
prepares for an anode change. The recent decision to proceed with the 375-kt/y
Alma smelter project in Quebec is in keeping with Alcan's strategic priority to
grow the power and smelting business, building on its low-cost position.

Aluminum's high strength-to-weight ratio, corrosion resistance, recyclability
and especially, today's all-important energy management are reasons why
automobile designers are choosing aluminum. Alcan, with its Aluminum Vehicle
Technology, helped the Ford Motor Company produce the Project 2000-sized
vehicle in the world at just 2,000 lbs.

Aluminum's inherently unique properties, its light-weight formability,
strength-to-weight ratio as well as high recyclability and residual value make
it the material of choice. Alcan, the world's largest producer of aluminum
rolled products, is committed to solidifying aluminum's position in end-use
markets such as transportation, and containers and packaging.

Throughout its worldwide operations, Alcan is committed to excellence in
research and technology, raw materials, chemicals, casting ingot, extrusion
billet, rolled products and downstream fabricated products. At the Petaling Jaya
plant in Malaysia, Harun Sonder Ali removes ingots after casting.

Aluminum cans are, by far, the most recycled beverage container of any kind and
Alcan is the world's largest can recycler. Aluminum's high salvage value
contributes to the success of many fund-raising efforts and substantially covers
the cost of community collection and recycling programs.

Alcan offers the technology and the metal to the automotive industry. Aluminum
is used in fin stock for heat exchanger components as well as engine parts such
as Alcan's high performance pistons made from advanced alloys for the latest
low-emission engines.


                                       34
<PAGE>   35
Architects and designers are finding that aluminum's high strength-to-weight
ratio, versatility, durability and decorative potential offer unique advantages
over alternative materials.

For the packaging market, not only does aluminum provide superior barrier
qualities, blocking out light, oxygen and moisture, it also offers graphic
design possibilities as well as being economical, convenient and recyclable.

Aluminum's high electrical conductivity has long made it a material of choice.
Alcan is a major supplier to all sectors of the electrical industry and has
established growing relationships with power utilities, distributors and
equipment manufacturers.


GRAPHICS

WESTERN WORLD PRIMARY ALUMINUM SUPPLY AND DEMAND
Production plus imports from C.I.S.

Shipments (seasonally adjusted)

Demand eased from the high levels at the beginning of the year, then rebounded
in the fourth quarter. Supply increased steadily throughout the years.

THE ALUMINUM INVENTORIES AND INGOT PRICES
Total inventories (IPAI*, LME)

LME three-month prices

Inventories were declining for most of the year with prices trading in a narrow
range before coming under pressure towards year-end, as the decline in Asian
demand was left.

*International Primary Aluminum Institute

1997 WESTERN WORLD ALUMINUM CONSUMPTION BY END-USE MARKET (25.5 million tonnes)

9%  Electrical

19% Containers and packaging

20% Building and construction

26% Transportation

26% Other



                                       35
<PAGE>   36
NUMBER OF EMPLOYEES
Adjusted for business acquisitions and disposals (at year-end)

Productivity improved in 1997, as 10% more fabricated products shipments were
achieved with a similar number of employees.

thousands

1993 - 34.1
1994 - 33.0
1995 - 33.1
1996 - 32.7
1997 - 32.9

ALCAN'S 1997 FABRICATED AND NON-ALUMINUM SALES BY MARKET (US$5.8 billion)

10% Electrical
43% Containers and packaging
17% Building and construction
8% Transportation
22% Other

ALUMINUM SHIPMENTS AND PURCHASES
kt

Ingot products*
1993 - 887
1994 - 897
1995 - 801
1996 - 810
1997 - 858

Fabricated products**
1993 - 1,651
1994 - 1,952
1995 - 1,958
1996 - 1,797
1997 - 1,970

Total purchases
1993 - 865
1994 - 1,350
1995 - 1,365
1996 - 1,003
1997 - 1,254

*  Includes primary and secondary ingot and scrap.
** Includes products fabricated from customer-owned metal.

Higher total shipments in 1997 resulted in an increase in third-party purchases
of aluminum.


                                       36
<PAGE>   37
1997 ALUMINUM SHIPMENTS BY REGION

Western World consumption
North America - 38%
South America - 4%
Europe - 27%
Asia and Pacific - 30%
Africa - 1%

Alcan Group Shipments (includes Alcan's share of released companies)
North America - 53%
South America - 6%
Europe - 29%
Asia and Pacific - 12%
Africa - 0%

TOTAL BORROWINGS AND EQUITY (AT YEAR-END)
millions of US$

Total borrowings
1993 - 2,652
1994 - 2,485
1995 - 1,985
1996 - 1,516
1997 - 1,515

Equity (includes minority interests and preference shares)
1993 - 4,519
1994 - 4,689
1995 - 4,863
1996 - 4,937
1997 - 5,117

ratio

Ratio of total borrowings to equity
1993 - 37:63
1994 - 35:65
1995 - 29:71
1996 - 23:77
1997 - 23:77

Alcan's borrowings-to-equity ratio remained at a healthy level in 1997 despite
the working capital requirements of increased volume. Adjusted for surplus cash
at year-end, the ratio was 16:84.

                                       37
<PAGE>   38
CASH FLOWS
million of US$

Sales of assets and investments
1993 - 31
1994 - 427
1995 - 168
1996 - 660
1997 - 54

Cash from operating activities
1993 - 444
1994 - 65
1995 - 1,044
1996 - 981
1997 - 719

Dividends paid
1993 - 85
1994 - 88
1995 - 125
1996 - 152
1997 - 149

Capital expenditures
1993 - 370
1994 - 356
1995 - 441
1996 - 482
1997 - 641

Cash generation remained in excess of capital expenditure and working capital
requirements. Debt levels were unchanged and cash reserves increased to $608
million.

                                       38
<PAGE>   39
RESPONSIBILITY FOR THE ANNUAL REPORT

Alcan's management is responsible for the preparation, integrity and fair
presentation of the financial statements and other information in the Annual
Report. The financial statements have been prepared in accordance with
accounting principles generally accepted in Canada and include, where
appropriate, estimates based on the best judgement of management. They conform
in all material respects with accounting principles established by the
International Accounting Standards Committee. A reconciliation with accounting
principles generally accepted 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 and administrative
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 and administrative 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.

The Audit Committee has recommended the reappointment of Price Waterhouse 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 Price
Waterhouse, whose report is provided below.


<TABLE>
<S>                           <C>
Jacques Bougie,               Suresh Thadhani,
Chief Executive Officer       Chief Financial Officer
</TABLE>

February 12, 1998


                                       39
<PAGE>   40
OECD GUIDELINES

The Organization for Economic Cooperation and Development (OECD), which consists
of 24 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 the Company's own
statement, Alcan, Its Purpose, Objectives and Policies, is consistent Xwith
them. This statement, first published in 1978, has been distributed in 11
languages to Alcan employees worldwide to strengthen the awareness of the basic
principles and policies which have guided the conduct of Alcan's business over
the years.

The statement of Alcan's purpose, objectives and policies, the Company's annual
information form and its 10-K report are all available to shareholders on
request. The latter two documents contain a complete list of significant Alcan
Group companies worldwide.


AUDITORS' REPORT

TO THE SHAREHOLDERS OF ALCAN ALUMINIUM LIMITED

We have audited the consolidated balance sheet of Alcan Aluminium Limited as at
December 31, 1997, 1996 and 1995 and the consolidated statements of income,
retained earnings and cash flows for each of the years in the three-year period
ended December 31, 1997. 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. 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,
1997, 1996 and 1995 and the results of its operations and its cash flows for
each of the years in the three-year period ended December 31, 1997 in accordance
with Canadian generally accepted accounting principles.

<TABLE>
<S>                      <C>
Price Waterhouse         Montreal, Canada
Chartered Accountants    February 12, 1998
                         (except as to note 22 which is as of February 19, 1998)
</TABLE>


                                       40
<PAGE>   41
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME
(in millions of US$, except per share amounts)

<TABLE>
<CAPTION>
Year ended December 31
                                                     1997      1996      1995
<S>                                                 <C>        <C>       <C>
REVENUES
Sales and operating revenues                        $7,777    $7,614    $9,287
Other income                                            88        75       100
                                                     7,865     7,689     9,387
COSTS AND EXPENSES
Cost of sales and operating expenses                 5,995     5,905     7,233
Depreciation (note 2)                                  436       431       447
Selling, administrative and general expenses           444       422       484
Research and development expenses                       72        71        76
Interest                                               101       125       204
Other expenses                                          54        88        61
                                                     7,102     7,042     8,505
Income before income taxes and other items             763       647       882
Income taxes (note 5)                                  258       226       340
Income before other items                              505       421       542
Equity loss (note 7)                                   (33)      (10)       (3)
Minority interests                                      (4)       (1)        4
Net income before extraordinary item                $  468    $  410    $  543
Extraordinary gain (loss) (note 3)                      17        --      (280)
Net income                                          $  485    $  410    $  263
Dividends on preference shares                          10        16        24
Net income attributable to common shareholders      $  475    $  394    $  239
Net income per common share before
extraordinary item (note 2)                         $ 2.02    $ 1.74    $ 2.30
Extraordinary gain (loss) per common share (note 3)   0.07        --     (1.24)
Net income per common share (note 2)                $ 2.09    $ 1.74    $ 1.06
 Dividends per common share                         $ 0.60    $ 0.60    $ 0.45
</TABLE>


CONSOLIDATED STATEMENT OF RETAINED EARNINGS
 (in millions of US$)

<TABLE>
<CAPTION>
Year ended December 31
                                                     1997      1996      1995
<S>                                                 <C>        <C>       <C>
Retained earnings - beginning of year               $3,217    $2,959    $2,821
Net income                                             485       410       263
                                                     3,702     3,369     3,084
Dividends - Common                                     136       136       101
- Preference                                            10        16        24
Retained earnings - end of year (note 14)           $3,556    $3,217    $2,959
</TABLE>


                                       41
<PAGE>   42
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

CONSOLIDATED BALANCE SHEET
(in millions of US$)

<TABLE>
<S>                                                <C>         <C>         <C>
December 31                                       1997        1996        1995
ASSETS
Current assets
Cash and time deposits                          $  608     $   546     $    66
Receivables                                      1,292       1,262       1,449
Inventories
  Aluminum                                         800         736         888
  Raw materials                                    307         325         321
  Other supplies                                   234         244         281
                                                 1,341       1,305       1,490
                                                 3,241       3,113       3,005

Deferred charges and other assets                  424         314         364
Investments (notes 7 and 9)                        343         428         695
Property, plant and equipment (note 8)
  Cost                                          11,715      11,517      11,735
  Accumulated depreciation                       6,257       6,047       6,063
                                                 5,458       5,470       5,672
Total assets                                   $ 9,466     $ 9,325     $ 9,736
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Payables                                       $ 1,052     $ 1,008     $ 1,107
Short-term borrowings                              238         178         212
Income and other taxes                              98          98         101
Debt maturing within one year (note 11)             36          19          28
                                                 1,424       1,303       1,448

Debt not maturing within one year
  (notes 11 and 16)                              1,241       1,319       1,745
Deferred credits and other liabilities
  (note 10)                                        715         770         701
Deferred income taxes                              969         996         979
Minority interests (note 9)                         43          73          28
Shareholders' equity
Redeemable non-retractable preference shares 
  (note 12)                                        203         203         353
Common shareholders' equity
  Common shares (note 13)                        1,251       1,235       1,219
  Retained earnings (note 14)                    3,556       3,217       2,959
  Deferred translation adjustments (note 15)        64         209         304
                                                 4,871       4,661       4,482
                                                 5,074       4,864       4,835
Commitments and contingencies (note 17)
Total liabilities and shareholders' equity     $ 9,466     $ 9,325     $ 9,736
</TABLE>

<TABLE>
<S>                                              <C>
Approved by the Board:
Jacques Bougie,                                  W.R.C. Blundell,
Director                                         Director
</TABLE>


                                       42
<PAGE>   43
CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions of US$)

<TABLE>
<CAPTION>
Year ended December 31                                            1997           1996          1995
           <S>                                                     <C>            <C>           <C>
OPERATING ACTIVITIES
Net income                                                       $ 485         $ 410         $  263
Adjustments to determine cash from operating activities:
  Extraordinary loss                                                 -              -           280
  Depreciation                                                     436            431           447
  Deferred income taxes                                             (8)            15           174
  Equity income                                                     39             21            12
  Change in receivables                                            (30)           187           (38)
  Change in inventories                                            (37)           185          (107)
  Change in payables                                                44            (99)           11
  Change in income and other taxes payable                           -             (3)           78
  Changes in operating working capital due to:
    Deferred translation adjustments                               (93)           (29)           33
    Acquisitions, disposals and
    consolidations/deconsolidations                                 (9)          (178)          (77)
    Change in deferred charges, other assets, deferred credits
    and other liabilities - net                                   (139)            25            30
  Gain on sales of businesses - net                                (12)            (8)          (34)
  Other - net                                                       43             24           (28)
Cash from operating activities                                     719            981         1,044

FINANCING ACTIVITIES
New debt                                                            22             56            90
Debt repayments                                                    (25)          (459)         (738)
                                                                    (3)          (403)         (648)
Short-term borrowings - net                                         90            (11)            4
Common shares issued                                                16             16            24
Shares issued by subsidiary companies                                -              -             1
Redemption of preference shares                                      -           (150)            -
Dividends - Alcan shareholders (including preference)             (146)          (152)         (125)
          - Minority interests                                      (3)             -             -
Cash used for financing activities                                 (46)          (700)         (744)

INVESTMENT ACTIVITIES
Property, plant and equipment                                     (641)          (482)         (390)
Investments                                                          -              -           (38)
Other                                                                -              -           (13)
                                                                  (641)          (482)         (441)
Net proceeds from disposal of businesses and other assets           54            660           168
Cash from (used for) investment activities                        (587)           178          (273)
Effect of exchange rate changes on cash and time deposits          (12)            (1)            1
Increase in cash and time deposits                                  74            458            28
Cash of companies consolidated (deconsolidated) - net              (12)            22            11
Cash and time deposits - beginning of year                         546             66            27
Cash and time deposits - end of year                             $ 608          $ 546        $   66
</TABLE>

                                       43
<PAGE>   44

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)

1. NATURE OF OPERATIONS

Alcan is engaged, together with subsidiaries and related companies, in all
aspects of the aluminum business 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
distribution and marketing of aluminum and non-aluminum products; and, in
connection with its aluminum operations, the production and sale of industrial
chemicals. Alcan, together with its subsidiaries and related companies, has
bauxite holdings in six countries, produces alumina in nine, smelts primary
aluminum in six, operates aluminum fabricating plants in 14 and has sales
outlets and maintains warehouse inventories in the larger markets of the world.
Alcan also operates a global transportation network that includes bulk cargo
vessels, port facilities and freight trains.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles 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
The consolidated financial statements, which are expressed in U.S. dollars, the
principal currency of Alcan's business, are prepared in accordance with
generally accepted accounting principles (GAAP) in Canada. They include the
accounts of companies controlled by Alcan, virtually all of which are majority
owned. Joint ventures, irrespective of percentage of ownership, are
proportionately consolidated to the extent of Alcan's participation.
Consolidated net income also includes Alcan's equity in the net income or loss
of companies owned 50% or less where Alcan has significant influence over
management, and the investment in these companies is increased or decreased by
Alcan's share of their undistributed net income or loss and deferred translation
adjustments since acquisition. Investments in companies in which Alcan does not
have significant influence over management are carried at cost less amounts
written off.

Intercompany balances and transactions, including profits in inventories, are
eliminated.

FOREIGN CURRENCY 
The financial statements of self-sustaining foreign operations are translated
into U.S. dollars at prevailing exchange rates. Differencesarising from exchange
rate changes are included in the Deferred translationadjustments (DTA) component
of Common shareholders' equity. If there is areduction in the Company's
ownership in a foreign operation, the relevantportion of DTA is recognized in
Other income or Other expenses at that time.

Gains or losses on forward exchange contracts or currency options, all of which
serve to hedge certain future identifiable foreign currency exposures, are
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.


                                       44
<PAGE>   45
Unrealized gains or losses on currency swaps, all of which are used to hedge
certain identifiable foreign currency debt obligations, are recorded
concurrently with the unrealized gains or losses on the debt obligations being
hedged.

Other gains and losses from foreign currency denominated items are included in
Other income or Other expenses.

COMMODITY CONTRACTS AND OPTIONS
Gains or losses on forward metal contracts and options, all of which serve to
hedge certain future identifiable aluminum price exposures, are included,
together with related hedging costs, in Sales andoperating revenues or Cost of
sales and operating expenses, as applicable, concurrently with recognition of
the underlying items being hedged.

INTEREST RATE SWAPS
Net cash flows related to interest rate swaps are recorded in Interest
concurrently with the interest expense on the underlying debt.

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

DEPRECIATION
Depreciation is calculated on the straight-line method using rates based on
the estimated useful lives of the respective assets. The principal rates are
2 1/2% for buildings and range from 1% to 4% for power assets and 3% to 12 1/2%
for chemical, smelter and fabricating assets.

ENVIRONMENTAL COSTS AND LIABILITIES
Environmental expenses are accrued when it is probable that a liability for
past events exists. 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. Accruals related to environmental costs are
included in Payables 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 post-retirement benefits other than pensions are recognized on
an accrual basis over the working lives of employees.

NET INCOME PER SHARE
Net income per common share is calculated by dividing Net income attributable
to common shareholders by the average number of common shares outstanding
(1997: 227.0 million; 1996: 226.2 million; 1995: 225.3 million).


                                       45
<PAGE>   46
3.EXTRAORDINARY ITEMS  - KEMANO COMPLETION PROJECT

An extraordinary gain of $26 ($17 after tax or 7 cents per common share) in the
fourth quarter of 1997 arises from the sale of a portion of a contract to supply
power to B.C. Hydro, net of additional write-downs of remaining Kemano
Completion Project ("KCP") assets. In addition to the commitment by the
government of British Columbia to supply replacement power at attractive rates
for a possible smelter expansion, the settlement of the dispute regarding the
cancellation of KCP allowed the Company to sell to a third party the right to
supply a specified amount of power to B.C. Hydro under an ongoing contract. An
extraordinary loss of $420 ($280 after tax or $1.24 per common share) was
recorded in 1995 following the cancellation of the project.

4. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (GAAP)

DEFERRED INCOME TAXES
Under Canadian GAAP, deferred income taxes are measured at tax rates prevailing
at the time the provisions for deferred taxes are made. Deferred income taxes
for U.S. GAAP are revalued each period using currently enacted tax rates.

Under Canadian GAAP, deferred income taxes of operations using the temporal
method are translated at historical exchange rates, while under U.S. GAAP,
deferred income taxes of all operations are translated at current exchange
rates.

Beginning in 1998, the Company will adopt the new accounting standards approved
by the Canadian Institute of Chartered Accountants dealing with accounting for
income taxes. These new standards are substantially identical to U.S. GAAP as
contained in FASB Statement No. 109.

CURRENCY TRANSLATION
Under Canadian GAAP, unrealized exchange gains and losses on translation of
long-term monetary items are deferred and amortized over the life of those
items, whereas, under U.S. GAAP, such gains and losses are absorbed in income
immediately.


                                       46
<PAGE>   47
RECONCILIATION OF CANADIAN AND U.S. GAAP

<TABLE>
<CAPTION>
                                 1997               1996             1995
                               As      U.S.      As      U.S.     As       U.S.
                            Reported   GAAP   Reported   GAAP   Reported   GAAP
<S>                         <C>        <C>    <C>        <C>    <C>        <C>
Net income from
  continuing operations
  before extraordinary
  item                       $  468  $  504    $  410   $  420   $  543  $  561
Extraordinary gain (loss)        17      17        --       --     (280)   (295)
Net income*                  $  485  $  521    $  410   $  420   $  263  $  266
Net income attributable
  to common
  shareholders               $  475  $  511    $  394   $  404   $  239  $  242
Extraordinary gain (loss)
  per common share           $ 0.07  $ 0.07    $   --   $   --   $(1.24) $(1.31)
Net income per
  common share
  (basic and diluted)        $ 2.09  $ 2.25    $ 1.74   $ 1.79   $ 1.06  $ 1.07
Deferred income taxes
  - December 31              $  969  $  684    $  996   $  755   $  979  $  762
Retained earnings
  - December 31              $3,556  $3,895    $3,217   $3,520   $2,959  $3,252
Deferred translation
  adjustments (DTA)
  - December 31              $   64  $    3    $  209   $  141   $  304  $  214
</TABLE>

* In 1997, $37 ($2 in 1996 and $1 in 1995) of the net difference between
  "As Reported" and "U.S. GAAP" relates to accounting for deferred income
  taxes. In 1997, $23 of this difference arises from changes in tax rates and
  regulations enacted during the year.

The principal items included in Deferred income taxes under U.S. GAAP are:

<TABLE>
<CAPTION>
                                                December 31
                                         1997      1996      1995
<S> <C>
Liabilities:
Depreciation                           $  767    $  810    $  844
Undistributed earnings of equity
  companies                                29        60        86
Inventory valuation                        52        43        48
Other                                      64        77        57
                                          912       990     1,035

Assets:
Tax benefit carryovers                    114       121       184
Accounting provisions not currently
  deductible for tax                      164       180       199
Other                                      26        18         9
                                          304       319       392
Valuation allowance
(amount not likely to be recovered)        76        84       119
                                          228       235       273
Net deferred income
  tax liability                        $  684    $  755    $  762
</TABLE>


                                       47
<PAGE>   48
The difference between DTA under Canadian GAAP and U.S. GAAP arises
principally from the impact of FASB Statement No. 109 and 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.

Net income (Loss) from continuing operations, before cumulative effect on
prior years of accounting change, on a U.S. GAAP basis for the years 1994 and
1993 was $175 and $(89), respectively, compared to $96 and $(104),
respectively, as reported. Net income (Loss) from continuing operations,
before cumulative effect on prior years of accounting change, per common share
on a U.S. GAAP basis for the years 1994 and 1993 was $0.69 and $(0.47),
respectively, compared to $0.34 and $(0.54), respectively, as reported.


5. INCOME TAXES

<TABLE>
<CAPTION>
                                                        1997     1996    1995
<S>                                                      <C>      <C>     <C>
Income before income taxes and other items
Canada                                                 $ 360      235    $ 300
Other countries                                          403      412      582
                                                         763      647      882
Current income taxes
Canada                                                   251       87       29
Other countries                                           15      124      137
                                                         266      211      166
Deferred income taxes
Canada                                                   (28)      (5)     114
Other countries                                           20       20       60
                                                          (8)      15      174
Income tax provision                                   $ 258      226    $ 340

</TABLE>

The composite of the applicable statutory corporate income tax rates in
Canada is 40.3% (1996: 40.1%; 1995: 40.3%). The following is a reconciliation
of income taxes calculated at the above composite statutory rates with the
income tax provision:

<TABLE>
<CAPTION>
                                                        1997     1996    1995
<S>                                                     <C>      <C>     <C>
Income taxes at the composite statutory rate           $ 307    $ 259   $ 355
Differences attributable to:
  Exchange translation items                              13       11      17
  Unrecorded tax benefits on losses - net                (12)     (33)     (5)
  Investment and other allowances                        (32)     (24)    (24)
  Large corporations tax                                   3        3       6     
  Withholding taxes                                        5        6       6
  Reduced rate or tax exempt items                        (3)      17     (21)
  Foreign tax rate differences                             1       (9)     (6)
  Prior years' tax adjustments                           (31)     (11)     (6)
  Other - net                                              7        7      18
Income tax provision                                   $ 258    $ 226   $ 340

</TABLE>

In 1997 $19 ($7 in 1996; $2 in 1995) of benefits related to income tax loss
carryforwards were recorded in deferred income tax expense.

Based on rates of exchange at December 31, 1997, additional benefits of
approximately $60 relating to prior and current years' tax losses will only be
recognized in income when realized.


                                       48
<PAGE>   49
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 relate to transfer pricing issues and are recoverable in other
countries. Existing provisions are adequate to cover any amounts not
recoverable.

6.   JOINT VENTURES

The activities of the Company's major joint ventures are the procurement and
processing of raw materials in Australia, Brazil and Guinea, as well as aluminum
rolling operations in Germany and the United States.

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.

Because most of the activities of the Company's joint ventures relate to
supplying the Company's other operations, the portion of the Company's
third-party revenues, and related costs and expenses, conducted through joint
ventures is insignificant.

<TABLE>
<S>                                                <C>        <C>        <C>
                                                  1997       1996       1995
Financial position at December 31
Inventories                                     $  189     $  159     $  158
Property, plant and equipment - net                943      1,001      1,037
Other assets                                        60         95        114
Total assets                                    $1,192     $1,255     $1,309
Short-term debt                                 $   38     $   17     $   15
Debt not maturing within one year                  100        106        102
Other liabilities                                  156        152        145
Total liabilities                               $  294     $  275     $  262
Cash flow information for the year ended
  December 31
Cash from financing activities                  $   10     $   12     $   18
Cash used for investment activities             $  (78)    $  (76)    $  (28)

7.   INVESTMENTS

Companies accounted for under the equity method $  337     $  421     $  688
Other investments - at cost,
  less amounts written off                           6          7          7
                                                $  343     $  428     $  695
</TABLE>

The activities of the major equity-accounted companies are diversified aluminum
operations in Japan and India. On December 31, 1997, the quoted market value of
the Company's investments in Nippon Light Metal Company, Ltd. (NLM) and Indian
Aluminium Company, Limited (Indal) exceeds their book value by $36. Their
combined results of operations and financial position are included in the
summary below. In the third quarter of 1997, the Company recorded a special
after-tax charge of $30, included in equity loss, reflecting the Company's share
of construction contract losses and restructuring provisions in NLM. The 1996
information for NLM excludes, from the date of acquisition, the interest in
those subsidiaries acquired by the Company from NLM as a result of the
restructuring of the Company's holdings in Asia, explained in note 9.


                                       49
<PAGE>   50
<TABLE>

<CAPTION>
                                                              1997         1996         1995
                     <S>                                       <C>          <C>          <C>
Results of operations for the year ended December 31
Revenues                                                    $5,572       $6,483       7,896
Costs and expenses                                           5,622        6,457       7,816
Income (Loss) before income taxes                              (50)          26          80
Income taxes                                                    35           65          84
Net income (Loss)                                           $  (85)      $  (39)     $   (4)
Alcan's share of Net income (Loss)                          $  (33)      $  (10)     $   (3)
Dividends received by Alcan                                 $    6       $   11      $    9
Financial position at December 31
Current assets                                              $2,600       $3,013       3,842
Current liabilities                                          2,519        2,735       3,438
Working capital                                                 81          278         404
Property, plant and equipment                                1,737        1,916       2,347
Other assets - net                                             335          261         153
                                                             2,153        2,455       2,904
Debt not maturing within one year                            1,376        1,422       1,351
Net assets                                                  $  777       $1,033       1,553
Alcan's equity in net assets                                $  337       $  421      $  688

</TABLE>

8. PROPERTY, PLANT AND EQUIPMENT

<TABLE>
<CAPTION>
                                                              1997         1996        1995
                     <S>                                       <C>          <C>         <C>
Cost
Land and property rights                                   $   219      $   236      $   247
Buildings, machinery and equipment                          10,914       10,886       11,201
Construction work in progress                                  582          395          287
                                                           $11,715      $11,517      $11,735
</TABLE>

Accumulated depreciation relates primarily to Buildings, machinery and
equipment. Capital expenditures for maintaining the productive capacity of the
Company's existing assets are estimated at $450 to $500 per year. In addition,
the Company expects to spend approximately $150 in 1998 on the continuation of
its rolling mill expansion in Brazil.

                                       50
<PAGE>   51

9.   RESTRUCTURING OF HOLDINGS IN ASIA

In the third quarter of 1996, the Company sold its equity-accounted investment
in Toyo Aluminium K.K. (Toyal) to the Company's Japanese affiliate, Nippon Light
Metal Company, Ltd. (NLM), for cash proceeds of $207. The after-tax gain of
$128, including deferred translation adjustments, on this sale was deferred.
Approximately one half of the gain is being recognized over the period related
to the utilization of the underlying assets by Toyal, while the remainder will
be recognized if certain non-depreciable assets are sold by Toyal. In 1997, $7
of the gain was recognized ($3 in 1996).

In November 1996, the Company and NLM created a new company, Alcan Nikkei Asia
Holdings Ltd. (ANAH), owned 60% by Alcan and 40% by NLM. In exchange for shares
in ANAH, the Company contributed a portion of its holdings in NLM while NLM
contributed its shareholdings in a number of companies located in Malaysia,
Thailand and China. The Company's effective ownership of ANAH, including the
interests held through NLM, is 78.2% and the minority interest in ANAH's
subsidiaries is presented on this basis.

As a result of this transaction, Alcan's effective ownership in NLM fell from
47.4% to 45.6%. The gain on the partial sale of the Company's investment in NLM
was deferred and is being recognized over the period related to the utilization
or disposition of the underlying assets by ANAH's subsidiaries. In 1997, $1 of
the after-tax gain was recognized.

Included in the Company's balance sheet at the date of acquisition in 1996 were
the following assets and liabilities of ANAH's Asian subsidiaries:

<TABLE>
<S>                                       <C>
Working capital                         $ 49
Property, plant and equipment             99
Other assets                               9
                                         157
Long-term debt                             4
Minority interest                         71
Net assets                              $ 82
</TABLE>

10.  DEFERRED CREDITS AND OTHER LIABILITIES

Deferred credits and other liabilities comprise the following elements:

<TABLE>
<CAPTION>
                                             1997        1996        1995
<S>                                          <C>         <C>         <C>
Deferred revenues                            $ 56        $ 74        $ 87
Deferred profit on sale of investments        106         113           -
Post-retirement and post-employment benefits  390         405         426
Environmental liabilities                      37          32          38
Rationalization costs                          32          31          27
Claims                                         40          39          41
Other                                          54          76          82
                                             $715        $770        $701
</TABLE>


                                       51
<PAGE>   52
11. DEBT NOT MATURING WITHIN ONE YEAR

<TABLE>
<CAPTION>
                                                1997       1996       1995
<S>                                             <C>        <C>        <C>
Alcan Aluminium Limited
Deutschmark bank loans, due 1998/2005
  (DM381 million) (a)                         $  213      $  251      $  276
5.875% Debentures, due 2000 (b)                  150         150         150
5.375% Swiss franc bonds, due 2003 (c)           123         132         154
CARIFA loan, due 2006 (d)                         60          60          60
9.5% Debentures, due 2010 (e)                    100         100         100
9.625% Sinking fund debentures,
  due 2000/2019 (e)                              150         150         150
8.875% Debentures, due 2022 (f)                  150         150         150
Other debt, due 2001                               7           8           8
12.45% Canadian dollar debentures,
  due 1997 (c)(g)                                 --          --          92
9.1% Debentures, due 1998 (g)                     --          --         125
9.2% Debentures, due 2001 (g)                     --          --          --
Alcan Aluminum Aluminum Corporation                                             
7.25% Debentures, due 1999 (h)                   100         100         100
Other debt, due 1998/2004                          3           6           6
6.375% Debentures, due 1997 (g)(h)                --          --         150
British Alcan Aluminium plc and
  subsidiary companies
Other debt                                        --           7          --
Bank loans                                        --          --          54
Alcan Deutschland GmbH and subsidiary companies
6.78% Bank loans                                  --           2           4
5.65% Bank loans, due 2001 (DM15 million)          8          10           11
Bank loans, due 2000/2001 (DM101 million) (a)     56          65           38
Queensland Alumina Limited
Bank loans, due 2000/2003 (a)                     79          71           67
Other companies
Bank loans, due 1998/2011 (a)                     51          48           48
4% Eurodollar exchangeable debentures, 
  due 2003 (i)                                    24          24           24
Other debt, due 2002/2036                          3           4            6
                                               1,277       1,338        1,773
Debt maturing within one year included
in current liabilities                           (36)        (19)         (28)
                                              $1,241      $1,319       $1,745
</TABLE>

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

(b) Through an interest rate swap the Company had effectively converted the
interest on the debentures to a rate tied to U.S. LIBOR for the period to
October 1996.

(c) The Canadian dollar debentures were issued as CAN$125 million and the Swiss
franc bonds as SFr178 million. Both debts were swapped for $107 and $105 at
effective interest rates of 9.82% and 8.98%, respectively.

(d) The Caribbean Basin Projects Financing Authority (CARIFA) loan bears
interest at a rate related to U.S. LIBOR. The interest was swapped until April
1996 for a fixed rate of 6.74%. </FN>


                                       52
<PAGE>   53
(e) The Company can redeem the 9.5% debentures between the years 2000 and 2007
at amounts declining from 104% to 100% of the principal and can redeem the
9.625% debentures between the years 1999 and 2009 at amounts declining from 105%
to 100% of the principal. In certain circumstances prior to January 30, 2000,
for the 9.5% debentures, or prior to July 30, 1999, for the 9.625% debentures,
the holders may retract the debentures at 100%.

(f) The interest was swapped until 1995 at a rate tied to U.S. LIBOR. The
Company has the right to redeem the debentures during the years 2002 to 2012 at
amounts declining from 104% to 100% of the principal amount.

(g) The Canadian dollar 12.45% debentures due 1997, the 9.1% debentures due
1998, the 9.2% debentures due 2001 (callable in 1998) and the 6.375% debentures
due 1997 were effectively extinguished in February 1996, February 1996, December
1995 and September 1996, respectively, through transactions whereby the Company
placed government securities in trusts, the sole purpose of which was to fund
the repayment of the debentures and related interest.

(h) The following is summarized consolidated financial information for Alcan
Aluminum Corporation, a wholly-owned subsidiary which consolidates virtually all
of the Company's operations in the United States:

<TABLE>
<CAPTION>
                                                        1997     1996     1995
 <S>                                                     <C>      <C>      <C>
 Results of operations for the year ended December 31
 Revenues                                              $3,624   $3,389   $3,937
 Costs and expenses                                     3,438    3,242    3,708
 Income before income taxes                               186      147      229
 Income taxes                                              81       55       86
 Net income                                            $  105   $   92   $  143

 Financial position at December 31
 Current assets                                        $  801   $  868   $  615
 Current liabilities                                      376      578      353
 Working capital                                          425      290      262
 Property, plant and equipment - net                      736      756      795
 Other liabilities - net                                 (199)    (186)    (138)
                                                          962      860      919
 Debt not maturing within one year                        102      105      256
 Net assets                                            $  860   $  755   $  663

</TABLE>

The above figures are prepared using the accounting principles followed by the
Company (see note 2), except that inventories have been valued principally by
the last-in, first-out (LIFO) method. Results of operations in 1995 included net
afzter-tax gains on disposals of businesses of $24.

(i) Debenture holders are entitled to receive at their option 1,772 common
shares held by the Company in NLM, a related company, in exchange for each ten
thousand dollar principal amount of debentures. The Company can redeem the
debentures between the years 1998 and 1999 at amounts declining from 100.5% to
100% of the principal.z

The Company has swapped, to 1998, the interest payments on $100 of its floating
rate debt in exchange for fixed interest payments.

Based on rates of exchange at year-end, debt repayment requirements over the
next five years amount to $36 in 1998, $128 in 1999, $216 in 2000, $102 in 2001
and $79 in 2002.



                                       53
<PAGE>   54
12. 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 1997, 1996 and 1995, there were authorized and outstanding
5,700,000 series C, 1,700,000 series D, and 3,000,000 series E, redeemable non-
retractable preference shares with stated values of $106, $43 and $54,
respectively.

The 300 series G redeemable non-retractable preference shares with stated value
of $150, authorized and outstanding throughout 1995, were redeemed in August
1996.

Outstanding shares are eligible for quarterly dividends as follows:

- Preference, series C, D and E - An amount related to the average of the
Canadian prime interest rates for series C and E, and the average of the U.S.
prime interest rates for series D, quoted by two major Canadian banks for stated
periods.

Outstanding shares may be called for redemption at the option of the Company on
30 days' notice as follows:

- Preference, series C and E (denominated in Canadian dollars) and D
(denominated in U.S. dollars) - At $25.00 per share.

Any partial redemption must be made on a pro rata basis or by lot.


13. 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:

<TABLE>
<CAPTION>
                                             Number (in thousands)                         Stated Value
                                         1997        1996        1995        1997        1996        1995
              <S>                         <C>         <C>         <C>         <C>         <C>         <C>
Outstanding -- beginning of year      226,620     225,913     224,685      $1,235      $1,219      $1,195
Issued for cash:
Executive share option plan               550         549       1,039          11          11          18
Dividend reinvestment and
     share purchase plans                 174         158         189           5           5           6
Outstanding - end of year             227,344     226,620     225,913      $1,251      $1,235      $1,219
</TABLE>

                                       54
<PAGE>   55
Under the executive share option plan, certain employees may purchase common
shares at market value on the effective date of the grant of each option. The
average price of the shares covered by the outstanding options is CAN$38.64 per
share. These options vest generally over a 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 are summarized below:

<TABLE>
<CAPTION>
Number (in thousands)                         1997         1996          1995
<S>                                           <C>          <C>           <C>
Outstanding - beginning of year              3,715        3,473         3,934
Granted                                      1,100          853           752
Exercised                                     (550)        (549)       (1,039)
Cancelled                                      (72)         (62)         (174)
Outstanding - end of year                    4,193        3,715         3,473
</TABLE>

At December 31, 1997, the Company had reserved for issue under the executive
share option plan 19,401,061 shares.

The Company does not recognize compensation expense for options granted under
the executive share option plan. If the Company had elected to recognize
compensation expense for these options in accordance with the methodology
prescribed by Statement No. 123 of the U.S. Financial Accounting Standards
Board, net income would have been lower by $10, or $0.04 per share, ($8, or
$0.04 per share in 1996 and $7, or $0.03 per share, in 1995).

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. 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 rights expire in 1999, but may be redeemed earlier by the Board, with the
prior consent of the holders of rights or common shares, for 1 cent 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 1 cent per right.


14.  RETAINED EARNINGS

Consolidated retained earnings at December 31, 1997, includes $138 of
undistributed earnings of companies accounted for under the equity method and
$2,124 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 because these
earnings are reinvested in the business.


                                       55
<PAGE>   56

15. CURRENCY GAINS AND LOSSES

The following are the amounts recognized in the financial statements:

<TABLE>
<CAPTION>
                                                        1997     1996     1995
 <S>                                                     <C>      <C>      <C>
Currency gains (losses) excluding realized
 deferred translation adjustments:
Forward exchange contracts and currency options        $  22    $  40    $ (56)
Other                                                      1       (4)      (1)
                                                       $  23    $  36    $ (57)
Deferred translation adjustments:
Balance - beginning of year                            $ 209    $ 304    $ 292
Effect of exchange rate changes                         (143)     (94)      12
Gains realized                                            (2)      (1)       -
Balance - end of year                                  $  64    $ 209    $ 304

</TABLE>


16. FINANCIAL INSTRUMENTS AND COMMODITY CONTRACTS

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

FINANCIAL INSTRUMENTS - CURRENCY
The Company seeks to manage the risks arising from movements in exchange rates
on identifiable firm cost commitments (principally Canadian dollar) and certain
foreign currency denominated revenues. A combination of forward exchange
contracts and options, covering periods of up to three years, are used to manage
these risks.

At December 31, 1997, the contract amount of forward exchange contracts
outstanding used to hedge future firm cost commitments was $1,296 ($1,791 in
1996 and $2,017 in 1995) while the contract amount of purchased options (range
forward contracts) outstanding used to hedge future firm cost commitments was
$1,512 ($614 in 1996 and $550 in 1995). At December 31, 1997, the contract
amount of outstanding forward exchange contracts used to hedge future revenues
was $268 ($387 in 1996 and $256 in 1995).

The market value of outstanding forward exchange contracts related to hedges of
costs or revenues at December 31, 1997, was such that if these contracts had
been closed out, the Company would have paid $24 (received $17 in 1996 and
received $37 in 1995). Based on prevailing market prices, if the currency option
contracts (range forward contracts) had been closed out on December 31, 1997,
the Company would have paid $36 (received $1 in 1996 and paid $2 in 1995).
Unrealized gains and losses on outstanding forward contracts and options are not
recorded in the financial statements until maturity of the underlying
transactions.

In addition, certain intercompany foreign currency denominated loans are hedged
through the use of forward exchange contracts. At December 31, 1997, the
contract amount of such forward contracts was $220 ($231 in 1996 and $236 in
1995) and the market value was such that if these contracts had been closed out,
the Company would have received $16 (received $2 in 1996 and received $4 in
1995).


                                       56
<PAGE>   57
Included in Deferred charges and other assets was an amount of $2 in 1996 and
$3 in 1995 consisting of net losses on terminated forward exchange contracts and
options used to hedge future costs. These deferred charges were included in Cost
of sales and operating expenses at the same time as the underlying transactions
being hedged were recognized.

FINANCIAL INSTRUMENTS - DEBT NOT MATURING WITHIN ONE YEAR
As explained in note 11, the 5.375% swiss franc bonds of
principal amount sfr178 have been swapped for $105 at an effective interest rate
of 8.98%. if the swap had been closed out at December 31, 1997, the Company
would have received a net amount of $15 ($32 in 1996 and $47 in 1995) of which
an amount of $18 related to the swap of the principal ($27 in 1996 and $49 in
1995) has been recorded in Deferred charges and other assets.

FINANCIAL INSTRUMENTS - INTEREST RATES
As stated in note 11, the Company sometimes enters into interest rate swaps to
manage funding costs as well as the volatility of interest rates. Net cash flows
related to swaps are recorded in interest concurrently with the interest expense
on the underlying debt.

Changes in the fair value of the interest rate swaps are not recognized on a
mark to market basis since these relate specifically to interest costs on
identifiable debt.

If all interest rate swap agreements had been closed out on December 31, 1997,
the Company would have paid $2 ($6 in 1996 and $12 in 1995), based on prevailing
interest rates.

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 whilst retaining most of the benefit from
higher metal prices.

At December 31, 1997, the Company had outstanding forward purchase contracts
covering 418,800 tonnes (474,300 tonnes in 1996 and 472,400 tonnes at December
31, 1995), maturing at various dates in 1998, 1999 and 2000 (1997, 1998 and 1999
at December 31, 1996 and 1996 and 1997 at December 31, 1995). in addition, the
Company held call options outstanding for 657,800 tonnes (591,300 tonnes at
December 31, 1996 and 146,500 tonnes at December 31, 1995) maturing at various
dates in 1998 and 1999 (1997 and 1998 at December 31, 1996 and 1996 and 1997 at
December 31, 1995).

At December 31, 1997, the Company held put options, maturing in 1998 and 1999,
which establish a minimum price for the metal component of 60,000 tonnes of the
Company's future sales.


                                       57
<PAGE>   58
Included in Receivables or Deferred charges and other assets is $33 ($25 in 1996
and $7 in 1995) representing the net cost of outstanding options.

The option premiums paid and received, together with the realized gains or
losses on the contracts, are included in Sales and operating revenues or Cost of
sales and operating expenses, as applicable, concurrently with recognition of
the underlying items being hedged.

Based on metal prices prevailing on December 31, 1997, if all commodity forward
purchase contracts and options had been closed out, the Company would have paid
$9 (received $20 in 1996 and received $5 in 1995).

COUNTERPARTY RISK
As exchange rates, interest rates and metal 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 controls on credit exposures.

FINANCIAL INSTRUMENTS - MARKET VALUE
On December 31, 1997, the fair value of the Company's long-term debt totalling
$1,277 ($1,338 in 1996 and $1,773 in 1995) was $1,321 ($1,363 in 1996 and $1,868
in 1995), based on market prices for the Company's fixed rate securities and the
book value of variable rate debt. The market values of all other financial
assets and liabilities and preference shares are approximately equal to their
carrying values.

17.  COMMITMENTS AND CONTINGENCIES

The company has guaranteed the repayment of approximately $10 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 $52 in 1998, $41 in 1999, $26 in
2000, $23 in 2001, $23 in 2002, and $99 thereafter. Total fixed charges from
these entities were $9 in 1997, $14 in 1996 and $62 in 1995.

Minimum rental obligations are estimated at $55 in 1998, $52 in 1999, $27 in
2000, $16 in 2001, $16 in 2002 and $26 thereafter. Total rental expenses
amounted to $70 in 1997, $80 in 1996 and $94 in 1995.

Alcan, in the course of its operations, is subject to environmental and other
claims, lawsuits and contingencies. Accruals have been made in specific
instances where it is probable that liabilities will be incurred and where such
liabilities can be reasonably estimated. Although 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 5, capital expenditures in
note 8, debt repayments in note 11, and financial instruments and commodity
contracts in note 16.


                                       58
<PAGE>   59
18. SUPPLEMENTARY INFORMATION

<TABLE>
<CAPTION>
                                                  1997        1996       1995
<S>                                               <C>         <C>        <C>
Income statement
Interest on long-term debt                        $ 91       $109        $175
Capitalized interest                                (2)        --          (2)
Balance sheet
Payables
  Accrued employment costs                        $170       $167        $150
Short-term borrowings (principally from banks)     238        178         212
At December 31, 1997, the weighted average
  interest rate on short-term borrowings was
  5.3% (4.8% in 1996 and 7.3% in 1995).
Statement of cash flows
Interest paid                                     $101       $133        $218
Income taxes paid                                  261        214          71
All time deposits qualify as cash equivalents.
</TABLE>


                                       59
<PAGE>   60
19. POST-RETIREMENT BENEFITS

PENSION PLANS
Alcan and its subsidiaries have established pension plans in the principal
countries where they operate, for the greater part contributory and generally
open to all employees. Most plans provide pension benefits that are based on the
employee's highest average eligible compensation during any consecutive 36-month
period before retirement. 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.

<TABLE>
<CAPTION>
                                                      1997      1996      1995
<S>                                                   <C>       <C>       <C>
Service cost for the year                            $   73    $   69    $   76
Interest cost on projected benefit obligation           231       225       215
Actual return on assets                                (607)     (505)     (483)
Variance of actual return from expected long-term
  rate of 7.3% (7.3% in 1996 and 7.5% in 1995)
  being deferred, and amortization of gains and
  losses and of prior service costs                     327       241       221
Net cost for the year                                $   24    $   30    $   29
Included in the net cost for 1996 are $27
  of settlement gains ($16 in 1995)
  and $22 of curtailment losses ($1 in 1995)
  related to the disposal of certain businesses.
The plans' funded status at December 31 was:
Actuarial accumulated benefit obligation,
  which is substantially vested*                     $3,156    $3,136    $2,818
Plan assets at market value                          $4,231    $3,986    $3,447
Actuarial projected benefit obligation based
  on average compensation growth of 4.9%
  (4.9% in 1996 and 4.8% in 1995) and
  discount rate of 6.8% (7.2% in 1996
  and 7.1% in 1995)                                   3,550     3,506     3,210
Plan assets in excess of projected benefit
  obligation                                            681       480       237
Unamortized actuarial gains - net**                    (943)     (779)     (495)
Unamortized prior service cost**                        276       313       287
Unamortized portion of net surplus
  at January 1, 1986**                                  (48)      (71)      (93)
Net pension liability in balance sheet               $  (34)   $  (57)   $  (64)
</TABLE>

 * Includes commitments for which the actuarial accumulated benefit
   obligation exceeds plan assets by $135 in 1997 ($147 in 1996 and $108 in
   1995). These have been fully provided in the Company's accounts
   (see note 10).

** Being amortized over expected average remaining service of employees,
   generally 15 years.



                                       60
<PAGE>   61
OTHER

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 not funded.

<TABLE>
<CAPTION>
                                                                1997         1996         1995
                       <S>                                       <C>          <C>          <C>
Service cost for the year                                        $ 4          $ 4          $ 4
Interest cost on accumulated benefit obligation                   12           12           13
Amortization of gains and losses                                  (6)          (5)         (15)
Total cost for the year                                          $10          $11          $ 2
</TABLE>

Included in the total cost for 1996 is $1 of curtailment gains ($12 in 1995)
related to the disposal of certain businesses.

Accumulated benefit obligation (ABO) based on average compensation growth of
4.9% (5.2% in 1996 and 5.2% in 1995) and discount rate of 6.7% (7.0% in 1996 and
7.0% in 1995):

<TABLE>
<CAPTION>
                                                                1997         1996         1995
                       <S>                                       <C>          <C>          <C>
Active employees
     - not fully eligible                                       $ 58         $ 61         $ 66
     - fully eligible                                             28           29           28
Retired employees                                                 86           88           97
Total ABO                                                        172          178          191
Unamortized gains - net                                           31           24           11
ABO in balance sheet                                            $203         $202         $202
</TABLE>

The assumed health care cost trend rate used in calculating the ABO was 8.5% in
1997 (8.5% in 1996 and 11% in 1995), decreasing gradually to 4.5% (5.0% in 1996
and 5.0% in 1995) in 2006. If the average of such rate was increased by 1%, the
ABO would increase by approximately $8 and the periodic cost of post-retirement
benefits other than pensions would increase by approximately $1 per year.

                                       61
<PAGE>   62
20. INFORMATION BY GEOGRAPHIC AREAS

<TABLE>
<CAPTION>
                                    Location                         1997          1996          1995
       <S>                             <C>                            <C>           <C>           <C>
                                    Canada                         $1,926        $2,169        $2,740

Sales and operating   
revenues - subsidiaries             United States                     541           499           552
                                    South America                      41            25            41
                                    Europe                            226           216           222
                                    Asia and Pacific                   68            78            96
                                    All other                         350           349           338
                                    Sub-total                       3,152         3,336         3,989
                                    Consolidation eliminations     (3,152)       (3,336)       (3,989)
                                    Total                              $-         $   -           $ -



Sales to subsidiary companies                                                                      
are made at fair market prices
recognizing volume, continuing
of supply and other factors.        Canada                         $1,169        $1,210        $1,258



Sales and operating
revenues - third parties            United States                   3,063         2,871         3,306
                                    South America                     395           579           719
                                    Europe                          2,609         2,633         3,632
                                    Asia and Pacific                  515           290           326
                                    All other                          26            31            46
                                    Total                          $7,777        $7,614        $9,287
Net income*                         Canada                         $  245        $  175        $  216
                                    United States                     136            70           123
                                    South America                      27            42            15
                                    Europe                             55            21           161
                                    Asia and Pacific                   (1)           13            43
                                    All other                          35            31            39
                                    Consolidation eliminations        (29)           58           (54)
                                    Net income before
                                      extraordinary item              468           410           543
                                    Extraordinary gain (loss)
                                      - Canada                         17             -          (280)
               
                                    Total                          $  485        $  410        $  263

Total Assets
at December 31                      Canada                         $4,077        $4,159        $4,033
                                    United States                   1,848         1,820         1,679
                                    South America                     729           739           854
                                    Europe                          3,162         3,189         3,520
                                    Asia and Pacific                  833           983         1,078
                                    All other                         498           477           463
                                    Consolidation eliminations     (1,681)       (2,042)       (1,891)
              
                                    Total                          $9,466        $9,325        $9,736

Capital expenditures
and investments                     Canada                         $  186        $  143        $   99
                                    United States                      71            55            63
                                    South America                     118            43            45
                                    Europe                            206           185           196
                                    Asia and Pacific                   21             7             3
                                    All other                          39            49            35
                                    Total                          $  641        $  482        $  441
</TABLE>

                                       62
<PAGE>   63

<TABLE>
                                   <S>                   <C>     <C>    <C>
Average number                     Canada                11      11     11
of employees                       United States          4       4      4
(in thousands)                     South America          3       4      6
                                   Europe                11      12     15
                                   Asia and Pacific       2       1      -
                                   All other              2       2      3
                                   Total                 33      34     39

</TABLE>

* If presented to reflect the effect of prior years' income tax reassessments
described in note 5, net income in Canada in 1997 would be reduced by $109 and
increased by $93 in the United States and $16 in Europe.

21. INFORMATION BY PRODUCT SECTORS

The following presents selected information by major product sector, viewed on a
stand- alone basis. Transactions between product sectors are conducted on an
arm's length basis and reflect market prices. Thus, profit on all alumina
produced by the Company, whether sold to third parties or used in the Company's
smelters, is included in the raw materials and chemicals sector. Similarly,
income from primary metal operations is mainly profit on metal produced by the
Company, whether sold to third parties or used in the Company's fabricating
operations. Income from fabricated products businesses represents only the
fabricating profit on rolled products and downstream businesses.

The information presented below is consistent with recently approved accounting
standards in Canada and the U.S. that take effect in 1998 and deal with
segmented information. The Company will adopt all provisions of the new
standards in 1998.

<TABLE>

<CAPTION>

Sales and operating revenues                                               
                                Intersector                Third parties            Operating income
                          1997      1996     1995      1997    1996     1995    1997      1996      1995
 <S>                       <C>       <C>      <C>       <C>     <C>      <C>     <C>       <C>       <C>
Raw materials
  and chemicals         $  520    $  507   $  555    $  536  $  529   $  618   $ 125     $  95     $ 203
Primary metal            1,530     1,653    2,286     1,531   1,472    1,612     589       519       701
Fabricated products          -         -        -     5,693   5,593    6,983     290       127       346
Intersector and
 other items            (2,050)   (2,160)  (2,841)       17      20       74     (18)      147       (49)
                        $    -     $   -   $    -    $7,777  $7,614   $9,287   $ 986     $ 888    $1,201
Reconciliation to net income
before extraordinary item
Equity loss                                                                      (33)      (10)       (3)
Corporate offices                                                               (126)     (117)     (111)
Interest                                                                        (101)     (125)     (204)
Income taxes                                                                    (258)     (226)     (340)
Net income before extraordinary item                                          $  468    $  410    $  543

Total Assets at December 31                                                     1997      1996      1995
Raw materials and chemicals                                                   $1,409     1,357    $1,354
Primary metal                                                                  2,880     2,795     2,971
Fabricated products                                                            4,318     4,198     4,737
Cash, equity companies and other items                                           859      9 75       674
                                                                              $9,466    $9,325    $9,736

</TABLE>


                                       63
<PAGE>   64
22. SUBSEQUENT EVENT

On February 19, 1998, the Company announced it was proceeding with the
construction of a 375,000-tonne smelter at Alma, Quebec. Total cost is
estimated at $1,600, most of which will be incurred over the next three
years. Approximately $220 is expected to be spent in 1998.



                                       64
<PAGE>   65
QUARTERLY FINANCIAL DATA
(in millions of US$, except where indicated)

<TABLE>
<CAPTION>
                                    First    Second    Third    Fourth    Year
                                                    (unaudited)
<S>                                 <C>      <C>       <C>      <C>       <C>
1997
Revenues                          $1,898    $2,030    $1,965    $1,972  $7,865
Cost of sales and operating
  expenses                         1,450     1,552     1,504     1,489   5,995
Depreciation                         107       110       106       113     436
Income taxes                          45        72        78        63     258
Other items                          153       180       197       178     708
Net income before 
  extraordinary item                 143       116        80       129     468
Extraordinary gain                    --        --        --        17      17
Net income(1)                     $  143    $  116    $   80    $  146  $  485
Dividends on preference shares         3         2         2         3      10
Net income attributable to
  common shareholders             $  140    $  114    $   78    $  143  $  475
Net income before extraordinary 
  item per common share
  (in US$)(2)                     $ 0.62    $ 0.50    $ 0.34    $ 0.56  $ 2.02
Extraordinary gain per
  common share (in US$)               --        --        --      0.07    0.07
Net income per common
  share (in US$)(2)               $ 0.62    $ 0.50    $ 0.34    $ 0.63  $ 2.09
Net income before extraordinary
  item under U.S. GAAP(3)         $  142    $  141    $   90    $  131  $  504
Net income under U.S. GAAP(3)     $  142    $  141    $   90    $  148  $  521

1996
Revenues                          $2,015    $1,972    $1,881    $1,821  $7,689
Cost of sales and operating
expenses                           1,528     1,501     1,460     1,416   5,905
Depreciation                         110       108       108       105     431
Income taxes                          69        74        57        26     226
Other items                          183       177       155       202     717
Net income(1)                     $  125    $  112    $  101    $   72  $  410
Dividends on preference shares         5         5         4         2      16
Net income attributable to
  common shareholders             $  120    $  107    $   97    $   70  $  394
Net income per common share
  (in US$)(2)                     $ 0.53    $ 0.47    $ 0.43    $ 0.31  $ 1.74
Net income under U.S. GAAP(3)     $  120    $  118    $  111    $   71  $  420
</TABLE>


                                       65
<PAGE>   66
<TABLE>
<CAPTION>
1995
<S>                                      <C>     <C>     <C>     <C>     <C>
Revenues                              $2,455  $2,449  $2,288  $2,195  $9,387
Cost of sales and operating expenses   1,874   1,843   1,750   1,766   7,233
Depreciation                             109     113     115     110     447
Income taxes                             102      99      86      53     340
Other items                              196     214     194     220     824
Net income before extraordinary item     174     180     143      46     543
Extraordinary loss                         -       -     280       -     280
Net income (Loss)(1)                   $ 174   $ 180  $ (137)  $  46  $  263
Dividends on preference shares             6       6       5       7      24
Net income (Loss) attributable to
   common shareholders                 $ 168   $ 174  $ (142)  $  39  $  239
Net income before extraordinary item
   per common share (in US$)(2)        $0.75   $0.77  $ 0.61   $0.17  $ 2.30
Extraordinary loss per common share
   (in US$)                                -       -    1.24       -    1.24
Net income (Loss) per common share
   (in US$)(2)                         $0.75   $0.77  $(0.63)  $0.17  $ 1.06
Net income before extraordinary
   item under U.S. GAAP(3)             $ 176   $ 172  $  119   $  94  $  561
Net income (Loss) under U.S. GAAP(3)   $ 176   $ 172  $ (176)  $  94  $  266
</TABLE>

[FN]
(1)  The first quarter of 1997 included an after-tax gain of $10 from the sale
of a business and $26 from a favourable tax adjustment related to prior years.
The third quarter of 1997 included a special charge of $30 after tax related to
Alcan's share of contract losses and restructuring provisions at 45.6% owned
Nippon Light Metal Company, Ltd., in Japan.

(1)  The first quarter of 1996 included an after-tax charge of $12 on the in-
substance defeasance of debentures. The third quarter of 1996 included an after-
tax gain of $8 from the sale of businesses. (1)  The first quarter of 1995
included an after-tax gain of $24 from the sale of Alcan's metal distribution
business in the U.S. The second, third and fourth quarters of 1995 included
after-tax charges of $3, $4 and $8 respectively on the in-substance defeasance
of debentures.

(2)  Net income (Loss) per common share calculations are based on the average
number of common shares outstanding in each period.

(3)  See note 4 to the consolidated financial statements for explanation of
differences between Canadian and U.S. GAAP.
</FN>


                                       66
<PAGE>   67
ELEVEN-YEAR SUMMARY
<TABLE>
<CAPTION>
                                        1997    1996    1995    1994    1993    1992    1991    1990    1989     1988     1987
<S>                                     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>     <C>      <C>      <C> 
CONSOLIDATED INCOME STATEMENT ITEMS
  (in millions of US$)
REVENUES
  Sales and operating revenues         7,777   7,614   9,287   8,216   7,232   7,596   7,748   8,757   8,839    8,529    6,797
  Other income                            88      75     100     109      75      69      82     162     208       97       81
Total revenues                         7,865   7,689   9,387   8,325   7,307   7,665   7,830   8,919   9,047    8,626    6,878

COSTS AND EXPENSES
  Cost of sales and operating
    expenses                           5,995   5,905   7,233   6,740   6,002   6,300   6,455   6,996   6,682    6,072    5,117
  Depreciation                           436     431     447     431     443     449     429     393     333      316      296
  Selling, administrative and
    general expenses                     444     422     484     528     551     596     635     659     600      525      447
  Research and development expenses       72      71      76      72      99     125     131     150     136      132       95
  Interest                               101     125     204     219     212     254     246     197     130      137      177
  Other expenses                          54      88      61      95     106     118     163      65      62       91      113
  Income taxes                           258     226     340     112     (13)    (17)   (104)    126     350      497      230
Equity income (loss)                     (33)    (10)     (3)    (29)    (12)     53      89     211      97       97       35
Minority interests                        (4)     (1)      4      (3)      1      (5)     --      (1)    (16)     (22)      (5)
Net income (Loss) before
  extraordinary item                     468     410     543      96    (104)   (112)    (36)    543     835       931     433
  Extraordinary gain (loss)               17      --    (280)     --      --      --      --      --      --        --      -- 
Net income (Loss)                        485     410     263      96    (104)   (112)    (36)    543     835       931     433
Preference dividends                      10      16      24      21      18      23      20      22      21        30      36
Net income (Loss) attributable to
 common shareholders                     475     394     239      75    (122)   (135)    (56)    521     814       901     397

CONSOLIDATED BALANCE SHEET ITEMS
  (in millions of US$)
Operating working capital              1,483    1,461   1,731  1,675   1,314   1,460   1,717   1,842   1,774     1,764   1,735
Property, plant and equipment - net    5,458    5,470   5,672  5,534   6,005   6,256   6,525   6,167   5,260     4,280   3,965
Total assets                           9,466    9,325   9,736 10,003   9,812  10,154  10,843  10,681   9,518     8,627   7,693
Total debt                             1,515    1,516   1,985  2,485   2,652   2,794   3,024   2,648   1,734     1,530   1,558
Deferred income taxes                    969      996     979    914     888     955   1,126   1,092   1,044     1,006     754
Preference shares                        203      203     353    353     353     353     212     212     212       211     405
Common shareholders' equity            4,871    4,661   4,482  4,308   4,096   4,266   4,730   4,942   4,610     4,109   3,565

PER COMMON SHARE (in US$)
Net income (Loss) before
  extraordinary item                    2.02     1.74    2.30   0.34   (0.54)  (0.60)  (0.25)   2.33    3.58      3.85    1.68
Net income (Loss)                       2.09     1.74    1.06   0.34   (0.54)  (0.60)  (0.25)   2.33    3.58      3.85    1.68
Dividends paid                          0.60     0.60    0.45   0.30    0.30    0.45    0.86    1.12    1.12      0.59    0.39
Common shareholders' equity            21.43    20.57   19.84  19.17   18.28   19.06   21.17   22.19   20.30     18.06   15.05
Market price - NYSE close              27.69    33.63   31.13  25.38   20.75   17.63   20.00   19.50   22.88     21.75   17.92
</TABLE>


                                       67
<PAGE>   68
<TABLE>                                       
<CAPTION>
<S>                                                    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>    <C>
OPERATING DATA
(in thousands of tonnes)

Consolidated aluminum shipments
   Ingot products*                                     858    810    801    897    887    870    866    857    743    832    787
   Fabricated products                               1,694  1,539  1,733  1,763  1,560  1,389  1,333  1,488  1,518  1,446  1,410
   Fabrication of customer-mowned metal                276    258    225    189     91    206    145     81     75     80     99
Total aluminum shipments                             2,828  2,607  2,759  2,849  2,538  2,465  2,344  2,426  2,336  2,358  2,296
Consolidated primary aluminum
   production                                        1,429  1,407  1,278  1,435  1,631  1,612  1,695  1,651  1,643  1,619  1,587
Consolidated aluminum purchases                      1,254  1,003  1,365  1,350    865    675    591    646    718    716    593
Consolidated aluminum inventories
   (end of year)                                       451    408    449    435    403    418    463    447    539    480    496
Primary aluminum capacity **
   Consolidated subsidiaries                         1,558  1,561  1,561  1,561  1,711  1,711  1,676  1,685  1,685  1,680  1,680
   Total consolidated subsidiaries and
   related companies                                 1,695  1,698  1,712  1,712  1,862  1,862  1,827  1,836  1,836  1,831  1,861
OTHER STATISTICS
Cash from operating activities
   (in millions of US$)                                719    981  1,044     65    444    465    659    760    970  1,370    879
Capital expenditures
   (in millions of US$)                                641    482    441    356    370    474    880  1,367  1,466    676    415
Ratio of total borrowings to equity (%)              23:77  23:77  29:71  35:65  37:63  37:63  37:63  33:67  26:74  26:74  27:73
Average number of employees
   (in thousands)                                       33     34     39     42     46     49     54     57     57     56     63
Common shareholders - registered
   (in thousands at end of year)                        21     22     23     26     28     32     34     38     40     41     46
Common shares outstanding
   (in millions at end of year)                        227    227    226    225    224    224    223    223    227    228    237
   Registered in Canada (%)                             61     61     61     55     59     69     68     54     44     54     44
   Registered in the United States (%)                  39     39     38     44     40     30     31     44     54     43     53
   Registered in other countries (%)                     -      -      1      1      1      1      1      2      2      3      3
Return on average common
   shareholders' equity (%)                             10      9      5      2     (3)    (3)    (1)     11     19    24     12
   Before extraordinary item (%)                        10     11
</TABLE>

[FN]

** Includes primary and secondary ingot and scrap. All per-share amounts reflect
the three-for-two share splits on May 5, 1987, and May 9, 1989.

** Primary aluminum capacity has been restated to reflect better the actual
production levels achieved over a period of time. See note 4 to the consolidated
financial statements for U.S. GAAP information.

** Includes primary and secondary ingot and scrap. All per-share amounts reflect
the three-for-two share splits on May 5, 1987, and May 9, 1989.

** Primary aluminum capacity has been restated to reflect better the actual
production levels achieved over a period of time. See note 4 to the consolidated
financial statements for U.S. GAAP information.

</FN>

                                       68
<PAGE>   69
CORPORATE GOVERNANCE

The business and affairs of Alcan are managed by its Board of Directors
acting through the Management of the Company. The Directors and Officers of
Alcan are named on the opposite page. In discharging its duties and
obligations, the Alcan Board acts in accordance with the provisions of the
Canada Business Corporations Act, the Company's constituting documents and
by-laws and other applicable legislation and Alcan policies.

Alcan does not have a controlling shareholder nor do any of the Directors
represent the investment of any minority shareholder.

Corporate governance has traditionally received the active attention of Alcan's
Board. For instance, an intensive review of the guiding principles of Alcan
conducted by the Board in the 1970s led to the publication in 1978 of a policy
statement entitled Alcan, Its Purpose, Objectives and Policies, which has
remained fundamentally unchanged. This statement represents the basic business
principles that guide Alcan employees in conducting a widespread international
enterprise and has helped Alcan achieve public understanding and trust. To that
original document, a Code of Conduct has been added to reinforce it with more
detailed guidelines for Alcan employees as well as consultants and contractors
engaged by Alcan.

The Montreal and Toronto stock exchanges now require a formal description of
corporate governance practices by all listed companies. Alcan's disclosure in
this regard is published in the Management Proxy Circular issued in connection
with the forthcoming Annual Meeting; a copy is available from Shareholder
Services at the address on page 65.

Committees of the Board (described briefly below) assist the Board in carrying
out its functions and make recommendations to it on various matters. Membership
of these Committees is indicated on the opposite page.

The Corporate Governance Committee has the responsibility for reviewing Board
practices and performance, candidates for directorship and Board Committee
membership. It also considers recommendations from the Personnel Committee
regarding Board compensation and the appointments of the Chairman of the Board
and the Chief Executive Officer.

The Audit Committee assists the Board in fulfilling its functions relating to
corporate accounting and reporting practices as well as financial and accounting
controls, in order to provide effective oversight of the financial reporting
process; it also reviews financial statements as well as proposals for issues of
securities.

The Environment Committee has the responsibility for reviewing policy,
management practices and performance of Alcan in environmental matters.

The Personnel Committee has the responsibility for reviewing all personnel
policy and employee relations matters (including compensation), and for making
recommendations to the Corporate Governance Committee on Board compensation and
on the appointments of the Chairman of the Board and the Chief Executive
Officer. All matters relating to the Chief Executive Officer are dealt with by
non-executive members of the Committee.

A special committee composed of members of the Personnel Committee, ezxcept the
Chief Executive Officer, administers the Alcan Executive Share Option Plan.


                                       69
<PAGE>   70
DIRECTORS AND OFFICERS (AS AT FEBRUARY 12, 1998)

DIRECTORS
DR. JOHN R. EVANS, C.C.1, 3, 8
Chairman of the Board
of Alcan Aluminium Limited,
Montreal
Age 68, director since 1986

SONJA I. BATA, O.C.5, 7
Director of Bata Limited,
Toronto
Age 71, director since 1979

W. R. C. BLUNDELL, O.C.2, 7
Director of various companies,
Toronto
Age 70, director since 1987

JACQUES BOUGIE, O.C.3, 5
President and Chief Executive Officer
of Alcan Aluminium Limited,
Montreal
Age 50, director since 1989

WARREN CHIPPINDALE, F.C.A., C.M.1, 4, 7
Director of various companies,
Montreal
Age 69, director since 1986

D. TRAVIS ENGEN1, 5, 7
Chairman, President and Chief Executive Officer of ITT Industries, Inc.,
New York
Age 53, director since 1996

ALLAN E. GOTLIEB, C.C.3, 5, 7
Director of various companies,
Toronto
Age 69, director since 1989

J. E. NEWALL, O.C.3, 6, 7
Vice Chairman and Chief Executive Officer of NOVA Corporation,
Calgary
Age 62, director since 1985

DR. PETER H. PEARSE, C.M.5, 7
President of Pearse Ventures Limited,
Vancouver
Age 65, director since 1989

                                       70
<PAGE>   71
SIR GEORGE RUSSELL, C.B.E.1, 3, 7
Chairman of 3i Group plc,
London
Age 62, director since 1987

GUY SAINT-PIERRE, O.C.1, 7
Chairman of SNC-Lavalin Group Inc.,
Montreal
Age 63, director since 1994

GERHARD SCHULMEYER1, 7
President and Chief Executive Officer
of Siemens Nixdorf Informations systeme AG,
Munich
Age 59, director since 1996

OFFICERS
JACQUES BOUGIE
President and Chief Executive Officer

ROBERT L. BALL
Executive Vice President,
Corporate Development and Technology

CLAUDE CHAMBERLAND
Executive Vice President,
Smelting and Power

JEAN-PIERRE M. ERGAS
Executive Vice President,
Europe

RICHARD B. EVANS
Executive Vice President,
Fabricated Products - North America

EMERY P. LEBLANC
Executive Vice President,
Raw Materials and Chemicals

EVERALDO N. SANTOS
Executive Vice President,
South America

BRIAN W. STURGELL
Executive Vice President,
Asia/Pacific

                                       71
<PAGE>   72
DANIEL GAGNIER
Vice President, Corporate and
Environmental Affairs

GASTON OUELLET
Vice President, Human Resources,
Occupational Health and Safety

P. K. PAL
Vice President, Chief Legal Officer
and Secretary

SURESH THADHANI
Vice President and Chief Financial Officer

GEOFFREY P. BATT
Treasurer

DENIS G. O'BRIEN
Controller

1 Member of Audit Committee
2 Chairman of Audit Committee
3 Member of Personnel Committee
4 Chairman of Personnel Committee
5 Member of Environment Committee
6 Chairman of Environment Committee
7 Member of Corporate Governance Committee
8 Chairman of Corporate Governance Committee

                                       72
<PAGE>   73
SHAREHOLDER INFORMATION

COMMON SHARES

The principal markets for trading in Alcan's common shares are the New York and
Toronto stock exchanges. The common shares are also traded on the Montreal,
Vancouver, Chicago, Pacific, London, Paris, Brussels, Amsterdam, Frankfurt and
Swiss stock exchanges.

The transfer agents for the common shares are CIBC Mellon Trust Company in
Montreal, Toronto, Winnipeg, Regina, Calgary and Vancouver, Chase Mellon
Shareholder Services, L.L.C. in New York, and CIBC Mellon Trust Company in
England.

Common share dividends are paid quarterly on or about the 20th of March, June,
September and December to shareholders of record on or about the 20th of
February, May, August and November, respectively.

PREFERENCE SHARES
The preference shares are listed on the Montreal, Toronto and Vancouver stock
exchanges. The transfer agent for the preference shares is CIBC Mellon Trust
Company.

INVESTMENT PLANS
The Company offers holders of common shares two convenient ways of buying
additional Alcan common shares without payment of brokerage commissions. These
are known as the Dividend Reinvestment Plan and the Share Purchase Plan. Copies
of the prospectus describing these Plans may be obtained from Shareholder
Services at the address on page 65.

SECURITIES REPORTS FOR 1997
The Company's annual information form, to be filed with the Canadian securities
commissions, and the annual 10-K report, to be filed with the Securities and
Exchange Commission in the United States, will be available to shareholders
after April 1, 1998. Copies of both may be obtained from Shareholder Services at
the address on page 65.

<TABLE>
<CAPTION>
     Dividend                               Prices* and Average Daily Trading Volumes
                                    New York Stock Exchange (US$) Toronto Stock Exchange (CAN$)
1997       US$       High       Low       Close       Avg. Daily       High       Low      Close        Avg. Daily
Quarter                                                 Volume                                            Volume
<S>        <C>        <C>       <C>        <C>           <C>           <C>        <C>       <C>             <C>
First     0.150      381/4     333/8      337/8         562,300       52.25      45.70     46.75          641,900
Second    0.150      377/8     301/2    3411/16         430,900       52.10      42.65     47.10          587,800
Third     0.150     405/16     331/2      343/4         470,600       55.70      46.65     48.40          547,600
Fourth    0.150    3513/16    261/16      275/8         499,133       49.25      37.10     39.40          679,694
Year      0.600
1996
Quarter
First     0.150      337/8     283/8      321/4         398,500       46         383/4     44             709,100
Second    0.150      341/8     301/8      301/2         367,400       46.40      40.75     41.55          468,100
Third     0.150      323/8     285/8      30            327,200       44.45      39.35     40.70          406,500
Fourth    0.150      361/8     293/4      335/8         435,200       48.50      40.10     46.25          664,500
Year      0.600
</TABLE>

[FN]
* The share prices are those reported as New York Stock Exchange -- Consolidated
Trading and reported by the Toronto Stock Exchange. Since April 15, 1996, share
prices on the Toronto Stock Exchange are expressed in decimals. </FN>

                                       73
<PAGE>   74
FURTHER INFORMATION
Contact for shareholder account inquiries:
Linda Burton
Manager, Shareholder Services
Telephone: (514) 848-8050
or 1-888-252-5226 (toll free)
shareholder.services@alcan.com

Investor contact:
Alan G. Brown
Director, Investor and Media Relations
Telephone: (514) 848-8368
investor.relations@alcan.com

Media contact:
Alain Bergeron
Manager, Investor and Media Relations
Telephone: (514) 848-8232
media.relations@alcan.com

                                       74
<PAGE>   75
THE ALCAN GROUP WORLDWIDE

PARENT COMPANY AND WORLD HEADQUARTERS
Alcan Aluminium Limited
1188 Sherbrooke Street West
Montreal, Quebec, Canada
H3A 3G2

Mailing Address:
P.O. Box 6090
Montreal, Quebec, Canada
H3C 3A7
Telephone: (514) 848-8000
Telecopier: (514) 848-8115
www.alcan.com

NORTH AMERICA
Bermuda
Alcan (Bermuda) Limited
Alcan Nikkei Asia Holdings Ltd. (78.2%)1

Canada
Alcan Aluminium Limited
Alcan Cable
Alcan Chemicals
Alcan Foil Products
Alcan International Limited
Alcan Smelters and Chemicals Limited

Jamaica
Alcan Jamaica Company

United States
Alcan Aluminum Corporation
Alcan Automotive Products
Alcan Cable
Alcan Chemicals
Alcan Foil Products
Alcan Ingot
Alcan Light Gauge Products
Alcan Sheet Products

SOUTH AMERICA
Brazil
Alcan Aluminio do Brasil Ltda.
Consorcio Aluminio do Maranhao
     (Alumar Consortium) (10%)
Mineracao Rio do Norte S.A. (12.5%)
Petrocoque S.A. - Indusria & Comercio (25%)

                                       75
<PAGE>   76

AFRICA
Ghana
Ghana Bauxite Company Limited (45%)

Guinea
Compagnie des Bauxites de Guinee (16.8%)
Friguia (10.2%)

EUROPE
France
Alcan France (Technal)

Germany
Alcan Deutschland GmbH
Aluminium Norf GmbH (50%)

Ireland
Aughinish Alumina Limited

Italy
Alcan Alluminio S.p.A.

Norway
Vigeland Metal Refinery A/S (50%)

Spain
Alcan Palco S.A.

Switzerland
Alcan Aluminium AG
Alcan Rorschach AG

United Kingdom
British Alcan Aluminium plc

PACIFIC
Australia
Alcan South Pacific Pty Ltd.
Queensland Alumina Limited (21.4%)

China
Alcan Asia Limited
Alcan Asia Pacific Limited
Alcan Nikkei China Limited (72.3 %)2
Alcan Nikkei Korea Limited (72.3 %)2
Nonfemet International (China-Canada-Japan)
     Aluminium Company Limited (35.2%)3

India
Indian Aluminium Company, Limited (34.6%)

                                       76
<PAGE>   77

Japan
Alcan Asia Limited (Tokyo Branch)
Nippon Light Metal Company, Ltd. (NLM) (45.6%)

Korea
Alcan Nikkei Korea Limited (Seoul Branch)

Malaysia
Alcan Nikkei Asia Company Ltd. (78.2%)1
Aluminium Company of Malaysia Berhad (46.3%)3
Alcom Nikkei Specialty Coatings Sdn Bhd (62.2%)4

Thailand
Alcan Nikkei Siam Limited (54.8%)3
Alcan Nikkei Thai Limited (60.7%)3

* This list names only the principal businesses of the Alcan Group. A complete
list is contained in the Company's 10-K Report, available from Alcan's
headquarters in Montreal.

1 Alcan's direct interest is 60%, the remaining interest is held through Nippon
Light Metal Company, Ltd. (NLM).
2 Alcan's direct interest is 49%, the remaining interest is held through NLM.
3 Interest held through Alcan Nikkei Asia Holdings Ltd., which is 78.2% owned by
Alcan.
4 Interest held through Aluminium Company of Malaysia Berhad and Alcan Nikkei
Asia Holdings Ltd.

Visit Alcan's Web Site: www.alcan.com
Further information on Alcan and its activities is available on Alcan's World
Wide Web site and contained in various Company publications. These publications,
such as A Commitment to Continual Environmental Improvement, published in 1996,
are available by writing to the address shown at upper left.

VERSION FRANCAISE
Pour obtenir la version francaise de ce rapport, veuillez ecrire aux Services
aux actionnaires dont l'adresse figure dans le coin superieur gauche.

This report was printed using vegetable-based inks and is recyclable.

                                       77