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UNITED
    STATES SECURITIES AND EXCHANGE COMMISSIONWashington, D.C.
    20549
  Form 10-K
  þ

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
    OF THE SECURITIES EXCHANGE ACT OF 1934For the fiscal year ended
    December 31, 2006Oro

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the transition period
    from          to          .   Commission file number
    001-32312
  Novelis Inc.
 (Exact name of registrant as
    specified in its charter)
  Canada

98-0442987(State or other jurisdiction
    of

(I.R.S. Employerincorporation or
    organization)

Identification No.)3399 Peachtree Road NE;
    Suite 1500

30326Atlanta, Georgia

(Zip Code)(Address of principal executive
    offices)   (404) 814-4200
 (Registrants telephone
    number, including area code)
  Securities registered pursuant to Section 12(b) of the
    Securities Exchange Act of 1934:
  Title of Each Class

Name of Each Exchange on Which RegisteredCommon Shares, no par value

New York Stock ExchangeCommon Share Purchase Rights

New York Stock Exchange   Securities registered pursuant to Section 12(g) of the
    Securities Exchange Act of 1934:
 None
  o þ
  o þ
  þ o
  Regulation S-K Form 10-K Form 10-K. o
  Rule 12b-2
 þ o o
  Rule 12b-2 o þ




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##### 



TABLE OF
    CONTENTS
  
  SPECIAL
    NOTE REGARDING FORWARD-LOOKING STATEMENTS AND MARKET
    DATA


2PART IItem 1.


Business


4Item 1A.


Risk
    Factors


24Item 1B.


Unresolved Staff
    Comments


35Item 2.


Properties


36Item 3.


Legal
    Proceedings


39Item 4.


Submission of
    Matters to a Vote of Security Holders


42PART IIItem 5.


Market for
    Registrants Common Equity, Related Shareholder Matters and
    Issuer Purchases of Equity Securities


43Item 6.


Selected Financial
    Data


47Item 7.


Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations


49Item 7A.


Quantitative and
    Qualitative Disclosures About Market Risk


88Item 8.


Financial
    Statements and Supplementary Data


93Item 9.


Changes In and
    Disagreements With Accountants On Accounting and Financial
    Disclosure


185Item 9A.


Controls and
    Procedures


185Item 9B.


Other
    Information


190PART IIIItem 10.


Directors and
    Executive Officers of the Registrant


190Item 11.


Executive
    Compensation


190Item 12.


Security Ownership
    of Certain Beneficial Owners and Management and Related
    Stockholder Matters


190Item 13.


Certain
    Relationships and Related Transactions


190Item 14.


Principal
    Accountant Fees and Services


190PART IVItem 15.


Exhibits and
    Financial Statement Schedules


190EX-21.1 LIST OF SUBSIDIARIES OF NOVELIS, INC.EX-23.1 CONSENT OF PRICEWATERHOUSECOOPERS LLPEX-23.2 CONSENT OF PRICEWATERHOUSECOOPERS LLPEX-31.1 SECTION 302 CERTIFICATION OF PEOEX-31.2 SECTION 302 CERTIFICATION OF PFOEX-32.1 SECTION 906 CERTIFICATION OF PEOEX-32.2 SECTION 906 CERTIFICATION OF PFO   1




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SPECIAL
    NOTE REGARDING FORWARD-LOOKING STATEMENTS AND MARKET
    DATA  Form 10-K
    
    the level of our indebtedness and our ability to generate cash;
    changes in the prices and availability of aluminum (or premiums
    associated with such prices) or other materials and raw
    materials we use;
    the effect of metal price ceilings in certain of our sales
    contracts;
    the effectiveness of our metal hedging activities, including our
    internal used beverage can (UBC) and smelter hedges;
    relationships with, and financial and operating conditions of,
    our customers and suppliers;
    fluctuations in the supply of, and prices for, energy in the
    areas in which we maintain production facilities;
    our ability to access financing for future capital requirements;
    continuing obligations and other relationships resulting from
    our spin-off from Alcan;
    changes in the relative values of various currencies;
    factors affecting our operations, such as litigation,
    environmental remediation and
    clean-up
    costs, labor relations and negotiations, breakdown of equipment
    and other events;
    economic, regulatory and political factors within the countries
    in which we operate or sell our products, including changes in
    duties or tariffs;
    competition from other aluminum rolled products producers as
    well as from substitute materials such as steel, glass, plastic
    and composite materials;
    changes in general economic conditions; 2




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
    our ability to improve and maintain effective internal control
    over financial reporting and disclosure controls and procedures
    in the future;
    changes in the fair value of derivative instruments;
    cyclical demand and pricing within the principal markets for our
    products as well as seasonality in certain of our
    customers industries;
    changes in government regulations, particularly those affecting
    taxes, environmental, health or safety compliance; and
    changes in interest rates that have the effect of increasing the
    amounts we pay under our principal credit agreement and other
    financing agreements.    Form 10-K,
  Exchange
    Rate Data
    Year Ended December 31,

At Period End


Average Rate(1)


High


Low2001


1.5925



1.5519



1.6023



1.49332002


1.5800



1.5702



1.6128



1.51082003


1.2923



1.3916



1.5750



1.29232004


1.2034



1.2984



1.3970



1.17752005


1.1656



1.2083



1.2703



1.15072006


1.1652



1.1310



1.1726



1.0955     (1)
    
    The average of the noon buying rates on the last day of each
    month during the period.    Commonly
    Referenced Data
   3




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PART I  Item 1.
    Business  Overview
    Form 10-K
  Our
    History
    Potential
    Acquisition of our Company
         4




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Our
    Industry
      
    hot mills  that require sheet ingot, a
    rectangular slab of aluminum, as starter material; and
    continuous casting mills  that can convert
    molten metal directly into semi-finished sheet.            End-use
    Markets
   5




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Construction and Industrial. strength-to-weight
      Beverage and Food Cans.
    and/or
    Foil Products.
    Transportation.
 6




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Market
    Structure
        Competition
   7




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Key
    Factors Affecting Supply and Demand
    Production Capacity.
  Alternative Technology. year-over-year
  Trade.
    Economic Growth.
  Substitution Trends.
  Downgauging.
 8




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Seasonality.
  Our
    Business Strategy
    Generate
    stable and predictable earnings and cash flows
  
    Move towards a premium product conversion model to maximize the
    value of our assets.
    Effectively manage our significant risk exposures impacting cash
    flows and earnings, including price volatility for aluminum,
    foreign currency exchange rates, interest rates and energy
    prices.
    Dispose of non-core assets to reshape our existing portfolio of
    businesses.  Structurally
    advantaged asset position
  
    Maintain high asset utilization rates.
    Maintain or improve our cost position versus our competitors in
    all regions where we operate. We will continue implementing
    process improvement initiatives to focus on higher revenue per
    tonne products, with the goal of decreasing the cost per tonne.
    Focus on productivity improvements to increase our capacity.  Growth
    through product mix innovation and opportunistic
    acquisitions
  
    Optimize our portfolio of flat rolled products, improving our
    product mix and margins by leveraging our assets and technical
    capabilities into products and markets that have higher margins,
    stability, barriers to entry and growth. Supply these
    differentiated and demanding higher value flat rolled products
    in all regions in which we operate.  tm and/or tm
  
    Move towards more technologically advanced and profitable
    end-use markets by delivering proprietary products and processes
    that will be unique and attractive to our customers.
    Continuously review acquisition or partnership opportunities
    that would enhance both our value and geographical footprint. 9




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Flexible
    capital structure
  
    Continue to reduce our debt using our cash flows and proceeds
    from the sale of non-core assets, in order to provide
    flexibility in our capital structure and establish a solid
    financial platform from which we can take advantage of
    opportunities to increase shareholder value.  Our
    Operating Segments
      Disclosure About the Segments of
    an Enterprise and Related Information.
  Accounting for Derivative Instruments
    and Hedging Activities.
      10




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Operating Segment

2006


2005


2004(all amounts in $ millions, except shipments, which are in
    kt)North AmericaNet sales

$
3,691


$
3,265


$
2,964Regional Income


22



196



240Total assets


1,476



1,547



1,406Total shipments


1,229



1,194



1,175Rolled product shipments


1,156



1,119



1,115EuropeNet sales

$
3,620


$
3,093


$
3,081Regional Income


256



206



200Total assets


2,474



2,139



2,885Total shipments


1,073



1,081



1,089Rolled product shipments


1,055



1,009



984AsiaNet sales

$
1,692


$
1,391


$
1,194Regional Income


85



108



80Total assets


1,078



1,002



954Total shipments


516



524



491Rolled product shipments


471



483



452South AmericaNet sales

$
863


$
630


$
525Regional Income


164



110



134Total assets


821



790



779Total shipments


305



288



264Rolled product shipments


278



261



234     North
    America
       11




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Europe
            Asia
        South
    America
       12




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Raw
    Materials and Suppliers
    Aluminum
    Primary Aluminum Purchases.
  Primary Aluminum Production.
  Recycled Aluminum Products.
    Energy
     13




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Others
    Our
    Customers
    Coca-Cola
  Coca-Cola Coca-Cola Coca-Cola Coca-Cola
    Distribution
    and Backlog
    Direct
    Sales
     14




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Distributors
    Backlog
    Research
    and Development
       15




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Our
    Executive Officers
    Name

Age

PositionEdward A. Blechschmidt


54


Acting Chief Executive OfficerMartha Finn Brooks


46


Chief Operating OfficerRick Dobson


48


Senior Vice President and Chief
    Financial OfficerArnaud de Weert


43


Senior Vice President and
    President  EuropeKevin Greenawalt


50


Senior Vice President and
    President  North  AmericaThomas Walpole


52


Senior Vice President and
    President  AsiaAntonio Tadeu Coelho Nardocci


49


Senior Vice President and
    President  South AmericaSteven Fisher


36


Vice President, Strategic Planning
    and Corporate DevelopmentDavid Godsell


51


Vice President, Human Resources
    and Environment, Health and SafetyRobert M. Patterson


34


Vice President and ControllerOrville G. Lunking


51


Vice President and TreasurerLeslie J. Parrette, Jr.


45


General CounselBrenda D. Pulley


48


Vice President, Corporate Affairs
    and CommunicationsNichole A. Robinson


36


Corporate Secretary   Edward A. Blechschmidt
  Martha Finn Brooks
  Rick Dobson
 16




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Arnaud de Weert U.S.-based
  Kevin Greenawalt
  Antonio Tadeu Coelho Nardocci
  Steven Fisher
  David Godsell
  Robert M. Patterson
 17




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Orville G. Lunking
  Leslie J. Parrette, Jr. magna cum
    laude
  Brenda D. Pulley
  Thomas Walpole
  Nichole A. Robinson
  Our
    Employees
   18




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Intellectual
    Property
          Environment,
    Health and Safety
       19




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Arrangements
    Between Novelis and Alcan
    Separation
    Agreement
    Releases
    and Indemnification
      
    the contributed businesses, liabilities or contracts;
    liabilities or obligations associated with the contributed
    businesses, as defined in the separation agreement, or otherwise
    assumed by us pursuant to the separation agreement; and
    any breach by us of the separation agreement or any of the
    ancillary agreements we entered into with Alcan in connection
    with the spin-off.    
    liabilities of Alcan other than those of an entity forming part
    of our group or otherwise assumed by us pursuant to the
    separation agreement;
    any liability of Alcan or its subsidiaries, other than us,
    retained by Alcan under the separation agreement; and
    any breach by Alcan of the separation agreement or any of the
    ancillary agreements we entered into with Alcan in connection
    with the spin-off.   20




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Further
    Assurances
    Non-solicitation
    of Employees
    Non-competition
    Change of
    Control
      Ancillary
    Agreements
    Transitional Services and Similar
    Agreements. out-of-pocket
 21




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Metal Supply Agreements.
  Foil Supply Agreements.
  Alumina Supply Agreements.
  Intellectual Property Agreements.
  Sierre Agreements.
  
    Alcan transferred to us certain assets and liabilities of the
    automotive and other aluminum rolled products businesses
    relating to the sales and marketing output of the Sierre North
    Building, which comprises a portion of the Sierre facility in
    Switzerland. Pursuant to the terms of the separation and asset
    transfer agreements, the transfer price was determined by a
    valuation;
    Alcan leased to us the Sierre North Building and the machinery
    and equipment located in the Sierre North Building (including
    the hot and cold mills) for a term of 15 years, renewable
    at our option for additional five-year periods, at an annual
    base rent in an amount equal to 8.5% of the book value of the
    Sierre North Building, the leased machinery or equipment, as
    applicable, pursuant to the terms of the real estate lease and
    equipment lease agreements;
    We and Alcan have access to, and use of, property and assets
    that are common to each of our respective operations at the
    Sierre facility, pursuant to the terms of the access and
    easement agreement;
    Alcan agreed to supply us with all our requirements of aluminum
    rolling ingots for the production of aluminum rolled products at
    the Sierre facility for a term of ten years, subject to
    availability, and provided the aluminum rolling slabs meet
    applicable quality standards and are competitively priced,
    pursuant to the terms of the metal supply agreement;
    Alcan provides certain services to us at the Sierre facility,
    including services consisting of or relating to environmental
    testing, chemical laboratory services, utilities, waste
    disposal, facility safety and security, medical services,
    employee food service and rail transportation, and we provide
    certain services to Alcan at the Sierre facility, including
    services consisting of or relating 22




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to hydraulic and mechanical maintenance, roll grinding and
    recycled process material for a two-year renewable term,
    pursuant to the terms of the shared services agreement; and  
    Alcan retains access to all of the total plate production
    capacity of the Sierre facility, which represents a portion of
    Sierres total hot mill production capacity. The formula
    for the price to be charged to Alcan for products from the
    Sierre hot mill is based upon its proportionate share of the
    fixed production costs relating to the Sierre hot mill
    (determined by reference to actual production hours utilized by
    Alcan) and the variable production costs (determined by
    reference to the volume of product produced for Alcan). Under
    the tolling agreement, we have agreed to maintain the
    pre-spin-off standards of maintenance, management and operation
    of the Sierre hot mill.    Neuhausen Agreements. and/or
  Tax Sharing and Disaffiliation Agreement.
  Employee Matters Agreement.
  Technical Services Agreements.
 23




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Ohle Agreement.
  Foil Supply and Distribution
    Agreement.
  Metal Hedging Agreement.
  Available
    Information
  (http://www.sec.gov) 1-800-SEC-0330. Form 10-K.
  Item 1A.
    Risk
    Factors  Risks
    Related to our Business and the Market Environment
  Certain
    of our customers are significant to our revenues, and we could
    be adversely affected by changes in the business or financial
    condition of these significant customers or by the loss of their
    business.
   24




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Our
    profitability could be adversely affected by our inability to
    pass through metal price increases due to metal price ceilings
    in certain of our sales contracts.
    Our
    efforts to mitigate risk from our contracts with metal price
    ceilings may not be effective.
    and/or
  Our
    results can be negatively impacted by timing differences between
    the prices we pay under purchase contracts and metal prices we
    charge our customers.
    Our
    operations consume energy and our profitability may decline if
    energy costs were to rise, or if our energy supplies were
    interrupted.
    
    increases in costs of natural gas; 25




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
    significant increases in costs of supplied electricity or fuel
    oil related to transportation;
    interruptions in energy supply due to equipment failure or other
    causes; and
    the inability to extend energy supply contracts upon expiration
    on economical terms.    We may
    not have sufficient cash to pay future dividends and repay
    indebtedness and we may be limited in our ability to access
    financing for future capital requirements, which may prevent us
    from increasing our manufacturing capability, improving our
    technology or addressing any gaps in our product
    offerings.
    Our
    substantial indebtedness could adversely affect our business and
    therefore make it more difficult for us to fulfill our
    obligations under our senior secured credit facilities and our
    Senior Notes.
      
    limiting our ability to borrow additional amounts for working
    capital, capital expenditures, debt service requirements,
    execution of our growth strategy, or other general corporate
    purposes;
    limiting our ability to use operating cash flow in other areas
    of our business because we must dedicate a substantial portion
    of these funds to service the debt;
    increasing our vulnerability to general adverse economic and
    industry conditions;
    placing us at a competitive disadvantage as compared to our
    competitors that have less leverage;
    limiting our ability to capitalize on business opportunities and
    to react to competitive pressures and adverse changes in
    government regulation;
    limiting our ability or increasing the costs to refinance
    indebtedness; and
    limiting our ability to enter into marketing, hedging,
    optimization and trading transactions by reducing the number of
    counterparties with whom we can enter into such transactions as
    well as the volume of those transactions.   26




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The
    covenants in our senior secured credit facilities and the
    indenture governing our Senior Notes impose significant
    operating and financial restrictions on us.
    
    incur additional debt and provide additional guarantees;
    pay dividends beyond certain amounts and make other restricted
    payments;
    create or permit certain liens;
    make certain asset sales;
    use the proceeds from the sales of assets and subsidiary stock;
    create or permit restrictions on the ability of our restricted
    subsidiaries to pay dividends or make other distributions to us;
    engage in certain transactions with affiliates;
    enter into sale and leaseback transactions;
    designate subsidiaries as unrestricted subsidiaries; and
    consolidate, merge or transfer all or substantially all of our
    assets or the assets of our restricted subsidiaries.    and/or
  A
    deterioration of our financial position or a downgrade of our
    ratings by a credit rating agency could increase our borrowing
    costs and our business relationships could be adversely
    affected.
    Adverse
    changes in currency exchange rates could negatively affect our
    financial results and the competitiveness of our aluminum rolled
    products relative to other materials.
   27




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Most
    of our facilities are staffed by a unionized workforce, and
    union disputes and other employee relations issues could
    materially adversely affect our financial results.
    Our
    operations have been and will continue to be exposed to various
    business and other risks, changes in conditions and events
    beyond our control in countries where we have operations or sell
    products.
    We
    could be adversely affected by disruptions of our
    operations.
    We may
    not be able to successfully develop and implement new technology
    initiatives in a timely manner.
   28




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Loss
    of our key management and other personnel, or an inability to
    attract such management and other personnel, could impact our
    business.
    Past
    and future acquisitions or divestitures may adversely affect our
    financial condition.
    We
    could be required to make unexpected contributions to our
    defined benefit pension plans as a result of adverse changes in
    interest rates and the capital markets.
         29




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We
    could face additional adverse consequences as a result of our
    late SEC filings.
  Form S-3
  We
    face risks relating to certain joint ventures and subsidiaries
    that we do not entirely control. Our ability to generate cash
    from these entities may be more restricted than if such entities
    were wholly-owned subsidiaries.
    Risks
    Related to Operating Our Business Following Our Spin-off from
    Alcan
  Our
    agreements with Alcan do not reflect the same terms and
    conditions to which two unaffiliated parties might have
    agreed.
    We
    have supply agreements with Alcan for a portion of our raw
    materials requirements. If Alcan is unable to deliver sufficient
    quantities of these materials or if it terminates these
    agreements, our ability to manufacture products on a timely
    basis could be adversely affected.
     30




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We may
    lose key rights if a change in control of our voting shares were
    to occur.
    We
    could incur significant tax liability, or be liable to Alcan, if
    certain transactions occur which violate tax-free spin-off
    rules.
  and/or split-up split-up
  We may
    be required to satisfy certain indemnification obligations to
    Alcan, or may not be able to collect on indemnification rights
    from Alcan.
   31




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We may
    have potential business conflicts of interest with Alcan with
    respect to our past and ongoing relationships that could harm
    our business operations.
    Our
    agreement not to compete with Alcan in certain end-use markets
    may hinder our ability to take advantage of new business
    opportunities.
    Our
    historical financial information may not be representative of
    results we would have achieved as an independent company or our
    future results.
    Risks
    Related to Our Industry
  We
    face significant price and other forms of competition from other
    aluminum rolled products producers, which could hurt our results
    of operations.
        The
    end-use markets for certain of our products are highly
    competitive and customers are willing to accept substitutes for
    our products.
   32




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A
    downturn in the economy could have a material adverse effect on
    our financial results.
    The
    seasonal nature of some of our customers industries could
    have a material adverse effect on our financial
    results.
    We are
    subject to a broad range of environmental, health and safety
    laws and regulations in the jurisdictions in which we operate,
    and we may be exposed to substantial environmental, health and
    safety costs and liabilities.
       33




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health-related
  We may
    be exposed to significant legal proceedings or
    investigations.
    Product
    liability claims against us could result in significant costs or
    negatively impact our reputation and could adversely affect our
    business results and financial condition.
   34




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Risks
    Related to Ownership of Our Common Shares
  The
    market price and trading volume of our shares may be
    volatile.
    The
    terms of our spin-off from Alcan and our shareholder rights plan
    could delay or prevent a change of control that shareholders may
    consider favorable.
        We may
    not pay dividends in the future.
    Risks
    Related to the Sale of Our Company
  The
    pending transaction, pursuant to which Hindalco would acquire
    us, may be delayed or may not close.
  2 3 Hart-Scott-Rodino
  Item 1B.
    Unresolved
    Staff Comments   35




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Item 2.
    Properties        North
    America
  Location

Plant Processes

Major End-Use Markets/ApplicationsBerea, Kentucky

Recycling

Recycled ingotBurnaby, British Columbia

Finishing

Foil containersFairmont, West Virginia

Cold rolling, finishing

Foil, HVAC materialGreensboro, Georgia

Recycling

Recycled ingotKingston, Ontario

Cold rolling, finishing

Automotive, construction/industrialLogan, Kentucky(i)

Hot rolling, cold rolling,
    finishing

Can stockLouisville, Kentucky

Cold rolling, finishing

Foil, converter foilOswego, New York

Hot rolling, cold rolling,
    recycling, finishing

Can stock,
    construction/industrial, semi-finished coilSaguenay, Quebec

Continuous casting

Semi-finished coilTerre Haute, Indiana

Cold rolling, finishing

FoilToronto, Ontario

Finishing

Foil, foil containersWarren, Ohio

Coating

Can end stock     (i)
    
    We own 40% of the outstanding common shares of Logan Aluminum
    Inc., but we have made subsequent equipment investments such
    that we now have rights to approximately 65% of Logans
    total production capacity.  tm
   36




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on-site
          Europe
  Location

Plant Processes

Major End-Use Markets/ApplicationsAnnecy, France(i)

Hot rolling, cold rolling,
    finishing

Painted sheet, circlesBerlin, Germany

Converting

PackagingBorgofranco, Italy(ii)

Recycling

Recycled ingotBresso, Italy

Finishing

Painted sheetBridgnorth, United Kingdom

Cold rolling, finishing, converting

Foil, packagingDudelange, Luxembourg

Continuous casting, cold rolling,
    finishing

FoilGöttingen, Germany

Cold rolling, finishing

Can end, lithographic, painted
    sheetLatchford, United Kingdom

Recycling

Sheet ingot from recycled metalLudenscheid, Germany(iii)

Cold rolling, finishing, converting

Foil, packagingNachterstedt, Germany

Cold rolling, finishing

Automotive, industrialNorf, Germany(iv)

Hot rolling, cold rolling

Can stock, foilstock, rerollOhle, Germany(iii)

Cold rolling, finishing, converting

Foil, packagingPieve, Italy

Continuous casting, cold rolling

Paintstock, industrialRogerstone, United Kingdom

Hot rolling, cold rolling

Foilstock, paintstock, reroll,
    industrialRugles, France

Continuous casting, cold rolling,
    finishing

FoilSierre, Switzerland(v)

Hot rolling, cold rolling

Automotive sheet, industrial  37




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(i)
    
    We sold our aluminum rolling mill in Annecy, France to a third
    party in March 2006.(ii)
    
    We closed our operations in Borgofranco, Italy in March 2006.(iii)
    
    We reorganized our plants in Ohle and Ludenscheid, Germany,
    including the closure of two non-core business lines located
    within those facilities as of May 2006.(iv)
    
    Operated as a 50/50 joint venture between us and Hydro Aluminium
    Deutschland GmbH (Hydro).(v)
    
    We have entered into an agreement with Alcan pursuant to which
    Alcan, following the spin-off, retains access to the plate
    production capacity utilized prior to spin-off at the Sierre
    facility, which represents a portion of the total production
    capacity of the Sierre hot mill.            Asia
  Location

Plant Processes

Major End-Use Markets/ApplicationsBukit Raja, Malaysia(i)

Continuous casting, cold rolling

Construction/industrial, foilstock
    foil, finstockUlsan, Korea(ii)

Hot rolling, cold rolling,
    recycling

Can stock,
    construction/industrial, foilstock, recycled ingotYeongju, Korea(iii)

Hot rolling, cold rolling

Can stock,
    construction/industrial, foilstock     (i)
    
    Ownership of the Bukit Raja plant corresponds to our 58% equity
    interest in Aluminium Company of Malaysia Berhad.(ii)
    
    We hold a 68% equity interest in the Ulsan plant.(iii)
    
    We hold a 68% equity interest in the Yeongju plant. 38




---



##### Table of Contents



South
    America
  Location

Plant Processes

Major End-Use Markets/ApplicationsPindamonhangaba, Brazil

Hot rolling, cold rolling,
    recycling

Construction/industrial, can
    stock, foilstock, recycled ingot, foundry ingot, forge stockUtinga, Brazil

Finishing

FoilOuro Preto, Brazil

Alumina refining, Smelting

Primary aluminum (sheet ingot and
    billets)Aratu, Brazil

Smelting

Primary aluminum (sheet ingot and
    billets)Petrocoque, Brazil(i)

Refining calcined coke

Carbon products for smelter anodes     (i)
    
    In November 2006, we sold our interest in our calcined coke
    manufacturing facility in Petrocoque, and transferred our rights
    to develop a power generation facility at Cacu and Barra dos
    Coqueiros, both located in Brazil.            Item 3.
    Legal
    Proceedings   39




---



##### Table of Contents



Environmental
    Matters
    clean-up
    Oswego North Ponds.
 40




---



##### Table of Contents



clean-up
  Other
    Legal Proceedings
  Reynolds Boat Case. C04-0175RJB.
       41




---



##### Table of Contents



Item 4.
    Submission
    of Matters to a Vote of Security Holders    
    the election of thirteen directors;
    the appointment of PricewaterhouseCoopers LLP as the independent
    registered public accounting firm for the fiscal year ending
    December 31, 2006, and to authorize the directors to fix
    the independent registered public accounting firms
    remuneration; and
    the approval of the Novelis Inc. 2006 Incentive Plan.    Director

Votes For


Votes WithheldEdward A. Blechschmidt


57,624,314



2,098,934Charles G. Cavell


57,572,191



2,151,057Clarence J. Chandran


57,585,226



2,138,022C. Roberto Cordaro


57,590,222



2,133,026Helmut Eschwey


57,570,297



2,152,951David J. FitzPatrick


57,678,558



2,044,690Suzanne Labarge


57,661,747



2,061,501William T. Monahan


57,671,067



2,052,181Rudolf Rupprecht


57,669,944



2,053,304Kevin M. Twomey


57,670,431



2,052,817John D. Watson


57,676,579



2,046,669Edward V. Yang


57,596,786



2,126,462     Votes For


Votes Withheld57,530,288



2,160,416     Votes For


Votes Against


Abstentions


Broker Non-Votes36,983,161



5,981,172



1,237,646



15,521,269  42




---



##### Table of Contents



PART II  Item 5.
    Market
    for Registrants Common Equity, Related Shareholder Matters
    and Issuer Purchases of Equity Securities  Market
    Information
  intra-day
  2006

High


LowFirst Quarter

$
CAN 24.67


$
CAN 20.12Second Quarter

$
CAN 27.78


$
CAN 22.08Third Quarter

$
CAN 28.77


$
CAN 20.60Fourth Quarter

$
CAN 32.80


$
CAN 25.63   2005

High


LowFirst Quarter (beginning
    January 6, 2005)

$
CAN 34.00


$
CAN 25.00Second Quarter

$
CAN 31.38


$
CAN 26.00Third Quarter

$
CAN 34.88


$
CAN 24.84Fourth Quarter

$
CAN 25.30


$
CAN 18.57   intra-day
  2006

High


LowFirst Quarter

$
21.13


$
17.89Second Quarter

$
24.74


$
20.07Third Quarter

$
25.77


$
18.60Fourth Quarter

$
28.45


$
22.48   2005

High


LowFirst Quarter (beginning
    January 6, 2005)

$
26.45


$
20.75Second Quarter

$
25.68


$
21.08Third Quarter

$
28.78


$
21.12Fourth Quarter

$
21.55


$
15.70  43




---



##### Table of Contents



Company
    Performance
    COMPARISON
    OF CUMULATIVE TOTAL RETURNS
 
   ANNUAL
    RETURN PERCENTAGE
  Year EndedCompany/Index

12/31/2005


12/31/2006Novelis Inc.


(13.21
)


34.56S&P Industrial Composite Index


6.31



14.78   INDEXED
    RETURNS
  BasePeriod


Year EndedCompany/Index

1/6/2005


12/31/2005


12/31/2006Novelis Inc.


100



86.79



116.78S&P Industrial Composite Index


100



106.31



122.02  44




---



##### Table of Contents



Trading
    Price and Volume
    Volume ofMonth

High


Low


Shares Traded(in thousands)January

$
24.25


$
20.75



5,292February

$
22.77


$
20.12



3,662March

$
24.10


$
20.55



4,179April

$
27.78


$
23.58



3,666May

$
27.45


$
22.85



4,847June

$
24.70


$
22.08



3,284July

$
23.98


$
22.00



2,142August

$
24.20


$
20.60



3,417September

$
28.77


$
23.00



4,787October

$
29.50


$
25.63



8,170November

$
31.42


$
27.51



5,346December

$
32.80


$
29.81



2,695     Volume ofMonth

High


Low


Shares Traded(in thousands)January

$
21.13


$
18.91



4,819February

$
19.89


$
17.89



3,937March

$
20.65


$
18.12



5,553April

$
24.71


$
20.31



10,245May

$
24.66


$
20.32



13,445June

$
22.40


$
20.07



8,508July

$
21.88


$
19.47



5,045August

$
21.53


$
18.60



13,586September

$
25.77


$
20.82



15,654October

$
26.16


$
22.48



12,419November

$
27.43


$
24.37



9,056December

$
28.45


$
25.80



6,406   Holders
   45




---



##### Table of Contents



Dividends
    Declaration Date

Record Date

Dividend/Share


Payment DateMarch 1, 2005

March 11, 2005

$
0.09


March 24, 2005April 22, 2005

May 20, 2005

$
0.09


June 20, 2005July 27, 2005

August 22, 2005

$
0.09


September 20, 2005October 28, 2005

November 21, 2005

$
0.09


December 20, 2005February 23, 2006

March 8, 2006

$
0.09


March 23, 2006April 27, 2006

May 20, 2006

$
0.09


June 20, 2006August 28, 2006

September 7, 2006

$
0.01


September 25, 2006October 26, 2006

November 20, 2006

$
0.01


December 20, 2006   Form 10-K
  Canadian
    Federal Income Tax Considerations  Non-Residents of
    Canada
    (Canada-United Canada-United
  (Mark-to-Market Mark-to-Market Mark-to-Market
   46




---



##### Table of Contents



Taxation
    of Dividends
  Canada-United Canada-United
  Disposition
    of Shares
  Canada-United
  Sales of
    Unregistered Equity Securities
    Item 6.
    Selected
    Financial Data    Form 10-K,
  
    our combined statements of operations for the years ended
    December 31, 2003 and 2002; and
    our combined balance sheets as of December 31, 2004, 2003
    and 2002, none of which are included in this Annual Report on
    Form 10-K,
    and which were prepared using historical financial information
    based on Alcans accounting records. 47




---



##### Table of Contents



mark-to-market
    As of and for the Year Ended December 31,2006


2005


2004


2003


2002($ in millions, except per share data)Net sales

$
9,849


$
8,363


$
7,755


$
6,221


$
5,893Net income (loss)


(275
)


90



55



157



(9
)Total assets


5,792



5,476



5,954



6,316



4,558Long-term debt (including current
    portion)


2,302



2,603



2,737



1,659



623Other debt


133



27



541



964



366Cash and cash equivalents


73



100



31



27



31Shareholders/invested equity


195



433



555



1,974



2,181Earnings (loss) per share:Basic:Income (loss) before cumulative
    effect of accounting change

$
(3.71
)

$
1.29


$
0.74


$
2.12


$
1.01Cumulative effect of accounting
    change  net of tax






(0.08
)










(1.13
)Net income (loss) per
    share  basic

$
(3.71
)

$
1.21


$
0.74


$
2.12


$
(0.12
)Diluted:Income (loss) before cumulative
    effect of accounting change

$
(3.71
)

$
1.29


$
0.74


$
2.11


$
1.00Cumulative effect of accounting
    change  net of tax






(0.08
)










(1.13
)Net income (loss) per
    share  diluted

$
(3.71
)

$
1.21


$
0.74


$
2.11


$
(0.13
)Dividends per common share

$
0.20


$
0.36


$



$



$
  48




---



##### Table of Contents



Accounting for Conditional Asset Retirement Obligations
    Goodwill and Other Intangible Assets.
    Year Ended December 31,2006


2005


2004


2003


2002Restructuring charges

$
19


$
10


$
20


$
8


$
7Impairment charges on long-lived
    assets






7



75



4



18Total

$
19


$
17


$
95


$
12


$
25   Item 7.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  OVERVIEW
  Form 10-K
  
    General;
    Highlights;
    Our Business:  
    Potential Acquisition of our Company
    Business Model and Key Concepts;
    Challenges;
    Key Trends and Business Outlook; and
    Spin-off from Alcan, Inc. (Alcan) (our former parent, a Canadian
    public company traded on the Toronto Stock Exchange (TSX) under
    the symbol AL); 49




---



##### Table of Contents




    Operations and Segment Review  an analysis of our
    consolidated and combined results of operations, on both a
    consolidated and segment basis for the three years presented in
    our financial statements;
    Liquidity and Capital Resources  an analysis of the
    effect of our operating, financing and investing activities on
    our liquidity and capital resources;
    Off-Balance Sheet Arrangements  a discussion of such
    commitments and arrangements;
    Contractual Obligations  a summary of our aggregate
    contractual obligations;
    Dividends  our dividend history;
    Environment, Health and Safety  our mission and
    commitment to environment, health and safety management;
    Critical Accounting Policies and Estimates  a
    discussion of accounting policies that require significant
    judgments and estimates; and
    Recent Accounting Standards  a summary and discussion
    of our plans for the adoption of new accounting standards
    relevant to us.  The following discussion contains forward-looking statements
    that reflect our plans, estimates and beliefs. Our actual
    results could differ materially from those discussed in these
    forward-looking statements. Factors that could cause or
    contribute to these differences include, but are not limited to,
    those discussed below and elsewhere in this Annual Report on
    Form 10-K,
    particularly in Special Note Regarding
    Forward-Looking Statements and Market Data and Risk
    Factors.
    GENERAL
   50




---



##### Table of Contents



HIGHLIGHTS
    
    Shipments and selected financial information are as follows:  Year Ended December 31,2006


2005


2004(In kilotonnes(A))Shipments:Rolled products


2,960



2,873



2,785Ingot products(B)


163



214



234Total shipments


3,123



3,087



3,019($ In millions)Net Sales

$
9,849


$
8,363


$
7,755Net Income (Loss)


(275
)


90



55Total Debt Reduction(C)


195



321



N/A     (A)
    
    One kilotonne (kt) is 1,000 metric tonnes. One metric tonne is
    equivalent to 2,204.6 pounds.(B)
    
    Ingot products shipments include primary ingot in Brazil,
    foundry products sold in Korea and Europe, secondary ingot in
    Europe and other miscellaneous recyclable aluminum sales.(C)
    
    Total Debt Reduction for the year ended December 31, 2006
    is measured comparing the year-end amounts of our total
    outstanding debt as shown in our consolidated balance sheets,
    and for the year ended December 31, 2005, it is measured as
    the reduction from our total debt of $2.951 billion as of
    January 6, 2005, the date of our spin-off from Alcan.  
    Rolled products shipments increased in 2006 primarily due to
    increased shipments in the can market in North and South America
    and Europe as well as increased shipments of hot and cold rolled
    intermediate products in Europe. Ingot product shipments
    declined during this same time due to the closure of our
    Borgofranco, Italy facility and lower re-melt shipments in
    Europe. The 2005 increase in shipments is also explained by
    higher shipments in the can markets in North America, South
    America and Europe while Asia experienced increased shipments of
    foil, can and industrial products. Ingot product shipments
    declined during this time due to lower sales of primary ingot in
    Europe.
    London Metal Exchange (LME) pricing for aluminum (metal) was an
    average of 35% higher during the year ended December 31,
    2006 than in 2005 and 10% higher in 2005 than 2004.
    Net sales for the years ended December 31, 2006 and 2005
    increased from the prior years primarily due to the rise in LME
    prices and increased shipments. However, the benefit of higher
    LME prices was limited by metal price ceilings in sales
    contracts representing approximately 20% of our shipments in
    2006 and 2005. These metal price ceilings prevent us from
    passing metal price increases above a specified level through to
    certain customers. In 2006 and 2005, we were unable to pass
    through approximately $475 million and $75 million,
    respectively, of metal price increases associated with sales
    under these contracts. The metal price ceilings are described in
    more detail below.
    Despite a challenging metal price environment, we have reduced
    total debt by over $500 million since our inception. We
    were able to accomplish this as a result of (1) reductions
    in working capital, (2) gains on the settlement of
    derivative instruments purchased to offset the exposure to
    higher metal prices, (3) disciplined capital expenditures
    and (4) the sale of non-core assets.
    During the years ended December 31, 2006 and 2005, we
    recognized pre-tax gains of $63 million and
    $269 million, respectively, related to the change in fair
    value of derivative instruments. These amounts are included in
    Other (income) expenses  net. For segment reporting
    purposes, Regional Income 51




---



##### Table of Contents



includes approximately $248 million and $84 million of
    cash-settled derivative gains for these same time periods,
    respectively.  
    We restated our consolidated and combined financial statements
    for our quarters ended March 31, 2005 and June 30,
    2005 and delayed the filing of our Quarterly Reports on
    Form 10-Q
    for the periods ended September 30, 2005, March 31,
    2006 and June 30, 2006, and our Annual Report on
    Form 10-K
    for the year ended December 31, 2005. As a result of our
    restatement and review process, delayed filings and continued
    reliance on third party consultants, we incurred higher
    corporate costs and interest expense in 2006 than in 2005. For
    the year ended December 31, 2006, these expenses
    approximated $47 million. We completed the offer to
    exchange new 7.25% senior unsecured debt securities due
    2015 (Senior Notes) for our old 7.25% senior notes due 2015
    (old notes) on January 4, 2007. As a result, we are no
    longer incurring penalty interest on our Notes as of
    January 5, 2007. However, we may continue to incur higher
    consulting costs until our accounting and finance functions are
    permanently staffed.  OUR
    BUSINESS
  Potential
    Acquisition of our Company
      Hart-Scott-Rodino
        Business
    Model and Key Concepts
   52




---



##### Table of Contents



Metal
    Price Ceilings
      Metal
    Price Lag
        Risk
    Mitigation
   53




---



##### Table of Contents



and/or
    Accounting for Derivative
    Instruments and Hedging Activities.
  Challenges
           54




---



##### Table of Contents



Key
    Trends and Business Outlook
         55




---



##### Table of Contents



Spin-off
    from Alcan
    Post-Transaction
    Adjustments
      Agreements
    between Novelis and Alcan
  Business Form 10-K.
  Basis
    of Presentation
  Form 10-K.
 56




---



##### Table of Contents



OPERATIONS
    AND SEGMENT REVIEW
      Percent Change2006


2005Year Ended December 31,


versus


versus2006


2005


2004


2005


2004(Shipments in kilotonnes)ShipmentsRolled products, including tolling
    (the conversion of customer-owned metal)


2,960



2,873



2,785



3
%


3
%Ingot products, including primary
    and secondary ingot and recyclable aluminum


163



214



234



(24
)%


(9
)%Total shipments


3,123



3,087



3,019



1
%


2
%  57




---



##### Table of Contents



Percent Change2006


2005Year Ended December 31,


versus


versus2006


2005


2004


2005


2004($ in millions)Results of OperationsNet sales

$
9,849


$
8,363


$
7,755



18
%


8
%Cost and expensesCost of goods sold (exclusive of
    depreciation and amortization)


9,317



7,570



6,856



23
%


10
%Selling, general and
    administrative expenses


410



352



289



16
%


22
%Litigation settlement 
    net of insurance recoveries






40







(100
)%



%Depreciation and amortization


233



230



246



1
%


(7
)%Research and development expenses


40



41



58



(2
)%


(29
)%Restructuring charges 
    net


19



10



20



90
%


(50
)%Impairment charges on long-lived
    assets






7



75



(100
)%


(91
)%Interest expense and amortization
    of debt issuance costs  net


206



194



48



6
%


304
%Equity in net income of
    non-consolidated affiliates


(16
)


(6
)


(6
)


167
%



%Other income  net


(82
)


(299
)


(62
)


(73
)%


382
%10,127



8,139



7,524



24
%


8
%Income (loss) before provision
    (benefit) for taxes on income (loss), minority interests
    share and cumulative effect of accounting change


(278
)


224



231



(224
)%


(3
)%Provision (benefit) for taxes on
    income (loss)


(4
)


107



166



(104
)%


(36
)%Income (loss) before minority
    interests share and cumulative effect of accounting change


(274
)


117



65



(334
)%


80
%Less: Minority interests share


(1
)


(21
)


(10
)


(95
)%


110
%Net income (loss) before
    cumulative effect of accounting change


(275
)


96



55



(386
)%


75
%Cumulative effect of accounting
    change  net of tax






(6
)






100
%



%Net income (loss)

$
(275
)

$
90


$
55



(406
)%


64
%   Percent Change2006


2005versus


versus2006


2005


2004


2005


2004London Metal Exchange
    PricesAluminum (per metric tonne, and
    presented in U.S. dollars)Closing cash price as of
    December 31,

$
2,850


$
2,285


$
1,964



25
%


16
%Average cash price during the year
    ended December 31,

$
2,567


$
1,897


$
1,717



35
%


10
%   Dollar Strengthen / (Weaken)2006


2005Year Ended December 31,


versus


versus2006


2005


2004


2005


2004Federal Reserve Bank of New
    York Exchange RatesAverage of the month end rates:U.S. dollar per Euro


1.266



1.240



1.248



(2
)%


1
%Brazilian real per U.S. dollar


2.164



2.407



2.915



(10
)%


(17
)%South Korean won per
    U.S. dollar


950



1,023



1,139



(7
)%


(10
)%Canadian dollar per
    U.S. dollar


1.131



1.209



1.298



(6
)%


(7
)%  58




---



##### Table of Contents



Percent Change2006


2005Year Ended December 31,


versus


versus2006


2005


2004


2005


2004New York Mercantile
    Exchange  Energy Price
    QuotationsLight Sweet Crude 
    Average settlement price (per barrel)

$
65.28


$
50.03


$
37.41



30
%


34
%Natural Gas  Average
    Henry Hub contract settlement price (per MMBTU)(A)

$
7.23


$
8.62


$
6.14



(16
)%


40
%     (A)
    
    One MMBTU is the equivalent of one decatherm, or one million
    British Thermal Units (BTUs).  RESULTS
    OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2006
    COMPARED TO THE YEAR ENDED DECEMBER 31, 2005
  Shipments
    Net
    sales
    Costs
    and expenses
    Year Ended December 31,2006


2005$ in


% of


$ in


% ofmillions


net sales


millions


net salesCost of goods sold (exclusive of
    depreciation and amortization)

$
9,317



94.6
%

$
7,570



90.5
%Selling, general and
    administrative expenses


410



4.1
%


352



4.2
%Litigation settlement 
    net of insurance recoveries










40



0.5
%Depreciation and amortization


233



2.4
%


230



2.8
%Research and development expenses


40



0.4
%


41



0.5
%Restructuring charges 
    net


19



0.2
%


10



0.1
%Impairment charges on long-lived
    assets










7



0.1
%Interest expense and amortization
    of debt issuance costs  net


206



2.1
%


194



2.3
%Equity in net income of
    non-consolidated affiliates


(16
)


(0.2
)%


(6
)


(0.1
)%Other income  net


(82
)


(0.8
)%


(299
)


(3.6
)%$
10,127



102.8
%

$
8,139



97.3
%  59




---



##### Table of Contents



Cost of goods sold.
  Selling, general and administrative expenses
    (SG&A). Form 10-K
  Litigation settlement  net of insurance
    recoveries. Form 10-K.
  Restructuring charges  net. Form 10-K
  Impairment of long-lived assets. form 10-K
  Interest expense and amortization of debt issuance
    costs  net.
 60




---



##### Table of Contents



Other income  net.
  OtherIncome  NetOther income  net
    for the year ended December 31, 2005

$
(299
)Gains of $63 million on the
    change in fair value of derivative instruments in 2006, compared
    to gains of $269 million in 2005


206Gains of $6 million on the
    disposals of fixed assets and businesses and the sale of certain
    rights and an equity interest in 2006, compared to gains of
    $17 million in 2005


11Other  net


Other income  net
    for the year ended December 31, 2006

$
(82
)   Provision
    (Benefit) for Taxes on Income (Loss)
  out-of-period
  Net
    Income (Loss)
  mark-to-market
  RESULTS
    OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 2005
    COMPARED TO THE YEAR ENDED DECEMBER 31, 2004
  Shipments
      Net
    sales
   61




---



##### Table of Contents



Costs
    and expenses
    Year Ended December 31,2005


2004$ in


% of


$ in


% ofmillions


net sales


millions


net salesCost of goods sold (exclusive of
    depreciation and amortization)

$
7,570



90.5
%

$
6,856



88.4
%Selling, general and
    administrative expenses


352



4.2
%


289



3.7
%Litigation settlement 
    net of insurance recoveries


40



0.5
%







%Depreciation and amortization


230



2.8
%


246



3.2
%Research and development expenses


41



0.5
%


58



0.7
%Restructuring charges 
    net


10



0.1
%


20



0.3
%Impairment charges on long-lived
    assets


7



0.1
%


75



1.0
%Interest expense and amortization
    of debt issuance costs  net


194



2.3
%


48



0.6
%Equity in net income of
    non-consolidated affiliates


(6
)


(0.1
)%


(6
)


(0.1
)%Other income  net


(299
)


(3.6
)%


(62
)


(0.8
)%$
8,139



97.3
%

$
7,524



97.0
%   Cost of goods sold.
  Selling, general and administrative expenses
    (SG&A).
  Litigation settlement  net of insurance
    recoveries.
  Depreciation and amortization.
  Research and development expenses.
 62




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##### Table of Contents



Restructuring charges 
    net.
  Impairment of long-lived assets.
  Interest expense and amortization of debt issuance
    costs  net.
  Other income  net.
  OtherIncome  NetOther income  net
    for the year ended December 31, 2004

$
(62
)Gains of $269 million on the
    change in fair value of derivative instruments in 2005, compared
    to gains of $69 million in 2004


(200
)Service fee income earned in 2004
    only


17Gains of $17 million on the
    disposals of fixed assets in 2005, compared to gains of
    $5 million in 2004


(12
)Other  net


(42
)Other income  net
    for the year ended December 31, 2005

$
(299
)   Provision
    for Taxes on Income
     63




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##### Table of Contents



Net
    Income
  mark-to-market
  OPERATING
    SEGMENT REVIEW FOR THE YEAR ENDED DECEMBER 31, 2006
    COMPARED TO THE YEAR ENDED DECEMBER 31, 2005 AND FOR THE
    YEAR ENDED DECEMBER 31, 2005 COMPARED TO THE YEAR ENDED
    DECEMBER 31, 2004
  Regional
    Income
      Disclosure About the Segments of
    an Enterprise and Related Information.
     64




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##### Table of Contents



Reconciliation
    Year Ended December 31,2006


2005


2004($ in millions)Regional IncomeNorth America

$
22


$
196


$
240Europe


256



206



200Asia


85



108



80South America


164



110



134Total Regional Income


527



620



654Interest expense and amortization
    of debt issuance costs


(221
)


(203
)


(74
)(Gains) losses on cash settlement
    of derivative instruments  net, included in Regional
    Income


(248
)


(84
)


8Gains on change in fair value of
    derivative instruments  net


63



269



69Depreciation and amortization


(233
)


(230
)


(246
)Impairment charges on long-lived
    assets






(7
)


(75
)Minority interests share


(1
)


(21
)


(10
)Adjustment to eliminate
    proportional consolidation(A)


(39
)


(36
)


(41
)Restructuring charges 
    net


(19
)


(10
)


(20
)Gain on disposals of property,
    plant and equipment and businesses  net


6



17



5Corporate selling, general and
    administrative expenses


(127
)


(78
)


(39
)Other corporate costs 
    net


13



6



(10
)Litigation settlement 
    net of insurance recoveries






(40
)


(Provision) benefit for taxes on
    income (loss)


4



(107
)


(166
)Net income (loss) before
    cumulative effect of accounting change


(275
)


96



55Cumulative effect of accounting
    change  net of tax






(6
)


Net income (loss)

$
(275
)

$
90


$
55     (A)
    
    Our financial information for our segments (including Regional
    Income) includes the results of our non-consolidated affiliates
    on a proportionately consolidated basis, which is consistent
    with the way we manage our business segments. However, under
    GAAP, these non-consolidated affiliates are accounted for using
    the equity method of accounting. Therefore, in order to
    reconcile Total Regional Income to Net income (loss), the
    proportional Regional Income of these non-consolidated
    affiliates is removed from Total Regional Income, net of our
    share of their net after-tax results, which is reported as
    Equity in net income of non-consolidated affiliates in our
    consolidated and combined statements of operations. See
    Note 8  Investment in and Advances to
    Non-Consolidated Affiliates and Related Party Transactions to
    our consolidated and combined financial statements for further
    information about these non-consolidated affiliates.  Operating
    Segment Results
  North
    America
   65




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##### Table of Contents



Percent Change2006


2005Year Ended December 31,


versus


versus2006


2005


2004


2005


2004($ in millions)North AmericaShipments(kt)Rolled products


1,156



1,119



1,115



3
%



%Ingot products


73



75



60



(3
)%


25
%Total shipments


1,229



1,194



1,175



3
%


2
%Net sales

$
3,691


$
3,265


$
2,964



13
%


10
%Regional Income

$
22


$
196


$
240



(89
)%


(18
)%Total assets

$
1,476


$
1,547


$
1,406



(5
)%


10
%   2006
    versus 2005
  Shipments
    Net
    sales
    Regional
    Income
    2005
    versus 2004
  Shipments
   66




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##### Table of Contents



Net
    sales
    Regional
    Income
      Total
    assets
    Europe
      Percent Change2006


2005Year Ended December 31,


versus


versus2006


2005


2004


2005


2004($ in millions)EuropeShipments(kt)Rolled products


1,055



1,009



984



5
%


3
%Ingot products


18



72



105



(75
)%


(31
)%Total shipments


1,073



1,081



1,089



(1
)%


(1
)%Net sales

$
3,620


$
3,093


$
3,081



17
%



%Regional Income

$
256


$
206


$
200



24
%


3
%Total assets

$
2,474


$
2,139


$
2,885



16
%


(26
)%   2006
    versus 2005
  Shipments
   67




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##### Table of Contents



Net
    sales
    Regional
    Income
  back-to-back start-up
  Total
    assets
    2005
    versus 2004
  Shipments
    Net
    sales
    Regional
    Income
    Total
    assets
    Asia
   68




---



##### Table of Contents



Percent Change2006


2005Year Ended December 31,


versus


versus2006


2005


2004


2005


2004($ in millions)AsiaShipments(kt)Rolled products


471



483



452



(2
)%


7
%Ingot products


45



41



39



10
%


5
%Total shipments


516



524



491



(2
)%


7
%Net sales

$
1,692


$
1,391


$
1,194



22
%


16
%Regional Income

$
85


$
108


$
80



(21
)%


35
%Total assets

$
1,078


$
1,002


$
954



8
%


5
%   2006
    versus 2005
  Shipments
    Net
    sales
    Regional
    Income
    2005
    versus 2004
  Shipments
    Net
    sales
    Regional
    Income
   69




---



##### Table of Contents



South
    America
      Percent Change2006


2005Year Ended December 31,


versus


versus2006


2005


2004


2005


2004($ in millions)South AmericaShipments(kt)Rolled products


278



261



234



7
%


12
%Ingot products


27



27



30




%


(10
)%Total shipments


305



288



264



6
%


9
%Net sales

$
863


$
630


$
525



37
%


20
%Regional Income

$
164


$
110


$
134



49
%


(18
)%Total assets

$
821


$
790


$
779



4
%


1
%   2006
    versus 2005
  Shipments
    Net
    sales
    Regional
    Income
   70




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##### Table of Contents



2005
    versus 2004
  Shipments
    Net
    sales
    Regional
    Income
      LIQUIDITY
    AND CAPITAL RESOURCES
    Operating
    Activities
     71




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##### Table of Contents



2006


2005Year Ended December 31,


versus


versus2006


2005


2004


2005


2004($ in millions)Net cash provided by operating
    activities

$
16


$
449


$
208


$
(433
)

$
241Dividends(A)


(30
)


(34
)


(4
)


4



(30
)Capital expenditures


(116
)


(178
)


(165
)


62



(13
)Premiums paid to purchase
    derivative instruments


(4
)


(57
)






53



(57
)Net proceeds from settlement of
    derivative instruments


242



148







94



148Free cash flow

$
108


$
328


$
39


$
(220
)

$
289Ending cash and cash equivalents

$
73


$
100


$
31


$
(27
)

$
69     (A)
    
    Dividends for the year ended December 31, 2004 include only
    those paid by our less than wholly-owned subsidiaries to their
    minority shareholders.  2006
    versus 2005
      Accounting for Derivative Instruments and Hedging
    Activities.
   72




---



##### Table of Contents



2005
    versus 2004
    Financing
    Activities
  Overview
      Senior
    Secured Credit Facilities
     73




---



##### Table of Contents



7.25% Senior
    Notes
          Korean
    Bank Loans
           74




---



##### Table of Contents



Interest
    Rate Swaps
  3-month
  Capital
    Lease Obligations
      Debt and
    Capital Lease Repayments
    Commitment
    Letter
   75




---



##### Table of Contents



Investing
    Activities
    2006


2005Year Ended December 31,


versus


versus2006


2005


2004


2005


2004($ in millions)Proceeds from settlement of
    derivative instruments, less premiums paid to purchase
    derivative instruments

$
238


$
91


$



$
147


$
91Capital expenditures


(116
)


(178
)


(165
)


62



(13
)Proceeds from loans
    receivable  net


37



393



874



(356
)


(481
)Proceeds from sales of assets


38



19



17



19



2Payments related to disposal of
    business


(7
)










(7
)


Changes in investment in and
    advances to non-consolidated affiliates


3











3



Net cash provided by investing
    activities

$
193


$
325


$
726


$
(132
)

$
(401
)             OFF-BALANCE
    SHEET ARRANGEMENTS
    
    any obligation under certain guarantees or contracts;
    a retained or contingent interest in assets transferred to an
    unconsolidated entity or similar entity or similar arrangement
    that serves as credit, liquidity or market risk support to that
    entity for such assets; 76




---



##### Table of Contents




    any obligation under certain derivative instruments; and
    any obligation under a material variable interest held by the
    registrant in an unconsolidated entity that provides financing,
    liquidity, market risk or credit risk support to the registrant,
    or engages in leasing, hedging or research and development
    services with the registrant.    Derivative
    Instruments
  Form 10-K.
        Maturity







Net FairAs of December 31, 2006

Dates

Assets


Liabilities


ValueForeign exchange forward contracts

2007 through 2011

$
12


$
(20
)

$
(8
)Interest rate swaps

2007 through 2008


2







2Cross-currency swaps

2007 through 2015


4



(95
)


(91
)Aluminum forward contracts

2007 through 2009


67



(12
)


55Aluminum options

2007


2







2Electricity swap

2016


47







47Embedded derivative instruments

2007


16







16Natural gas swaps

2007






(2
)


(2
)Total fair value




150



(129
)


21Less: current portion




106



(42
)


64Noncurrent portion



$
44


$
(87
)

$
(43
)  77




---



##### Table of Contents



Maturity







Net FairAs of December 31, 2005

Dates

Assets


Liabilities


ValueForeign exchange forward contracts

2006 through 2011

$
15


$
(9
)

$
6Interest rate swaps

2006 through 2008


5







5Cross-currency swaps

2006 through 2015






(24
)


(24
)Aluminum forward contracts

2006 through 2009


87



(7
)


80Aluminum call options

Matures in 2006


109







109Electricity swap

Matures in 2016


68







68Total fair value




284



(40
)


244Less: current portion




194



(22
)


172Noncurrent portion



$
90


$
(18
)

$
72   Guarantees
    of Indebtedness
    
    certain of our wholly-owned and majority-owned
    subsidiaries; and
    Aluminium Norf GmbH, which is a fifty percent (50%) owned joint
    venture that does not meet the requirements for consolidation
    under FASB Interpretation No. 46 (Revised),
    Consolidation of Variable Interest Entities.        Maximum


LiabilityPotential Future


CarryingType of Entity

Payment


ValueWholly-owned Subsidiaries

$
44


$
26Majority-owned Subsidiaries


2



Aluminium Norf GmbH


13



   deposit-and-guarantee
   78




---



##### Table of Contents



Other
    Arrangements
  Forfaiting
    of Trade Receivables
    Factoring
    of Trade Receivables
    Summary
    Disclosures of Forfaited and Factored Financial
    Amounts
    Year Ended December 31,2006


2005


2004Receivables forfaited

$
424


$
285


$
190Receivables factored

$
71


$
94


$
27   As of December 31,2006


2005Forfaited receivables outstanding

$
80


$
59Factored receivables outstanding

$
3


$
12   Other
   79




---



##### Table of Contents



CONTRACTUAL
    OBLIGATIONS
    2008-


2010-


2012 andTotal


2007


2009


2011


Thereafter($ in millions)Long-term debt(A)

$
2,384


$
274


$
1


$
532


$
1,577Interest on long-term debt(B)


1,114



163



310



282



359Capital leases(C)


77



6



13



13



45Operating leases(D)


96



19



27



21



29Purchase obligations(E)


9,408



3,433



3,180



1,387



1,408Unfunded pension plan benefits(F)


453



35



72



81



265Other post-employment benefits(F)


80



8



16



16



40Funded pension plans(F)


33



33











Total

$
13,645


$
3,971


$
3,619


$
2,332


$
3,723     (A)
    
    Includes only principal payments on our Senior Notes, term
    loans, revolving credit facilities and notes payable to banks
    and others. These amounts exclude payments under capital lease
    obligations.(B)
    
    Interest on our fixed rate debt is estimated using the stated
    interest rate. Interest on our variable rate debt is estimated
    using the rate in effect as of December 31, 2006 and
    includes the effect of current interest rate swap agreements.
    Actual future interest payments may differ from these amounts
    based on changes in floating interest rates or other factors or
    events. These amounts include an estimate for unused commitment
    fees. Excluded from these amounts are interest related to
    capital lease obligations, the amortization of debt issuance and
    other costs related to indebtedness.(C)
    
    Includes both principal and interest components of future
    minimum capital lease payments. Excluded from these amounts are
    insurance, taxes and maintenance associated with the property.(D)
    
    Includes the minimum lease payments for non-cancelable leases
    for property and equipment used in our operations. We do not
    have any operating leases with contingent rents. Excluded from
    these amounts are insurance, taxes and maintenance associated
    with the property.(E)
    
    Include agreements to purchase goods (including raw materials
    and capital expenditures) and services that are enforceable and
    legally binding on us, and that specify all significant terms.
    Some of our raw material purchase contracts have minimum annual
    volume requirements. In these cases, we estimate our future
    purchase obligations using annual minimum volumes and costs per
    unit that are in effect as of December 31, 2006. Due to
    volatility in the cost of our raw materials, actual amounts paid
    in the future may differ from these amounts. Excluded from these
    amounts are the impact of any derivative instruments and any
    early contract termination fees, such as those typically present
    in energy contracts.(F)
    
    Obligations for postretirement benefit plans are estimated based
    on actuarial estimates using benefit assumptions for, among
    other factors, discount rates, expected long-term rates of
    return on assets, rates of compensation increases, and
    healthcare cost trends. Payments for unfunded pension plan
    benefits and other post-employment benefits are estimated
    through 2016. For funded pension plans, estimating the
    requirements beyond 2007 is not practical, as it depends on the
    performance of the plans investments, among other factors. 80




---



##### Table of Contents



DIVIDENDS
    Declaration Date

Record Date

Dividend/Share


Payment DateMarch 1, 2005

March 11, 2005

$
0.09


March 24, 2005April 22, 2005

May 20, 2005

$
0.09


June 20, 2005July 27, 2005

August 22, 2005

$
0.09


September 20, 2005October 28, 2005

November 21, 2005

$
0.09


December 20, 2005February 23, 2006

March 8, 2006

$
0.09


March 23, 2006April 27, 2006

May 20, 2006

$
0.09


June 20, 2006August 28, 2006

September 7, 2006

$
0.01


September 25, 2006October 26, 2006

November 20, 2006

$
0.01


December 20, 2006     ENVIRONMENT,
    HEALTH AND SAFETY
      CRITICAL
    ACCOUNTING POLICIES AND ESTIMATES
     81




---



##### Table of Contents



82




---



##### Table of Contents



Effect if Actual ResultsDescription

Judgments and Uncertainties

Differ from AssumptionsDerivative Financial
    InstrumentsOur operations and cash flows are
    subject to fluctuations due to changes in commodity prices,
    foreign currency exchange rates, energy prices and interest
    rates. We use derivative financial instruments to manage
    commodity prices, foreign currency exchange rates and interest
    rate exposures, though not for speculative purposes. Derivative
    instruments we use are primarily commodity forward and option
    contracts, foreign currency forward contracts and interest
    swaps.

We are exposed to changes in
    aluminum prices through arrangements where the customer has
    received a fixed price commitment from us. We attempt to manage
    this risk by hedging future purchases of metal required for
    these firm commitments. In addition, we hedge a portion of our
    future production.
     Short-term exposures to changing foreign currency exchange
    rates occur due to operating cash flows denominated in foreign
    currencies. We manage this risk with forward currency swap
    contracts and currency exchange options. Our most significant
    foreign currency exposures relate to the euro, Brazilian real
    and the Korean won. We assess market conditions and determine an
    appropriate amount to hedge based on pre-determined policies.

To the extent that these exposures
    are not fully hedged, we are exposed to gains and losses when
    changes occur in the market price of aluminum. Hedges of
    specific arrangements and future production increase or decrease
    the fair value by approximately $44 million for a 10%
    change in the market value of aluminum as of December 31,
    2006.
     To the extent that operating cash flows are not fully hedged,
    we are exposed to foreign exchange gains and losses. In the
    event that we choose not to hedge a cash flow, an adverse
    movement in rates could impact our earnings and cash flows. The
    change in the fair value of the foreign currency hedge portfolio
    as of December 31, 2006 that would result from a 10%
    instantaneous appreciation or depreciation in foreign exchange
    rates would result in an increase or decrease of approximately
    $117 million.We are exposed to changes in
    interest rates due to our financing, investing and cash
    management activities. We may enter into interest rate swap
    contracts to protect against our exposure to changes in future
    interest rates, which requires deciding how much of the exposure
    to hedge based on our sensitivity to variable rate
    fluctuations.
     The majority of our derivative financial instruments are valued
    using quoted market prices. The remaining derivative instruments
    are valued using industry standard pricing models. These pricing
    models require us to make a variety of assumptions including,
    but not limited to, market data of similar financial
    instruments, interest rates, forward curves, volatilities and
    financial instruments cash flows.

To the extent that we choose to
    hedge our interest costs, we are able to avoid the impacts of
    changing interest rates on our interest costs. In the event that
    we do not hedge a floating rate debt an adverse movement in
    market interest rates could impact our interest cost. As of
    December 31, 2006, a 10% change in the market interest rate
    would increase or decrease the fair value of our interest rate
    hedges by $1 million. A 12.5 basis point change in
    market interest rates as of December 31, 2006 would
    increase or decrease our unhedged interest cost on floating rate
    debt by approximately $1 million. 83




---



##### Table of Contents



Effect if Actual ResultsDescription

Judgments and Uncertainties

Differ from AssumptionsImpairment of long-lived
    assetsLong-lived assets, such as
    property and equipment, are reviewed for impairment when events
    or changes in circumstances indicate that the carrying value of
    the assets contained in our financial statements may not be
    recoverable.
     When evaluating long-lived assets for potential impairment, we
    first compare the carrying value of the asset to the
    assets estimated, future net cash flows (undiscounted and
    without interest charges). If the estimated future cash flows
    are less than the carrying value of the asset, we calculate and
    recognize an impairment loss. If we recognize an impairment
    loss, the adjusted carrying amount of the asset will be its new
    cost basis. For a depreciable long-lived asset, the new cost
    basis will be depreciated over the remaining useful life of that
    asset. Restoration of a previously recognized impairment loss is
    prohibited.

Our impairment loss calculations
    require management to apply judgments in estimating future cash
    flows and asset fair values, including forecasting useful lives
    of the assets and selecting the discount rate that represents
    the risk inherent in future cash flows.

Using the impairment review
    methodology described herein, we recorded impairment charges on
    long-lived assets of $7 million during the year ended
    December 31, 2005. We had no impairment charges on
    long-lived assets during the year ended December 31,
    2006.
     If actual results are not consistent with our assumptions and
    judgments used in estimating future cash flows and asset fair
    values, we may be exposed to additional impairment losses that
    could be material to our results of operations.Goodwill and Intangible
    AssetsGoodwill represents the excess of
    the purchase price over the fair value of the net assets of
    acquired companies. We follow the guidance in FASB Statement
    No. 142, Goodwill and Intangible Assets, and test
    goodwill for impairment using a fair value approach, at the
    reporting unit level. We are required to test for impairment at
    least annually, absent some triggering event that would
    accelerate an impairment assessment. On an ongoing basis, absent
    any impairment indicators, we perform our goodwill impairment
    testing as of October 31 of each year. Our intangible
    assets consist of acquired trademarks and both patented and
    non-patented technology and are amortized over 15 years. As
    of December 31, 2006, we do not have any intangible assets
    with indefinite useful lives.

We have recognized goodwill in our
    Europe operating segment, which is also our reporting unit for
    purposes of performing our goodwill impairment testing. We
    determine the fair value of our reporting units using the
    discounted cash flow valuation technique, which requires us to
    make assumptions and estimates regarding industry economic
    factors and the profitability of future business strategies.

We performed our annual testing
    for goodwill impairment as of October 31, 2006, using the
    methodology described herein, and determined that no goodwill
    impairment existed.
     If actual results are not consistent with our assumptions and
    estimates, we may be exposed to additional goodwill impairment
    charges.We continue to review the carrying
    values of amortizable intangible assets whenever facts and
    circumstances change in a manner that indicates their carrying
    values may not be recoverable. 84




---



##### Table of Contents



Effect if Actual ResultsDescription

Judgments and Uncertainties

Differ from AssumptionsRetirement and Pension
    PlansWe account for our defined benefit pension plans and non-pension postretirement benefit plans in accordance with FASB Statements No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans, No.   87, Employers Accounting for Pensions, and No.   106, Employers Accounting for Postretirement Benefits
Other Than Pensions.    The actuarial models use an attribution approach that generally spreads the financial impact of changes to the plan and actuarial assumptions over the average remaining service lives of the employees in the plan. Changes in liability due to changes in actuarial assumptions such as discount rate, rate of compensation increases and mortality, as well as annual deviations
between what was assumed and what was experienced by the plan are treated as gains or losses. Additionally, gains and losses are amortized over the groups service lifetime. The average remaining service lives of the employee plan is 14.0   years. The principle underlying the required attribution approach is that employees render service over their average remaining service lives on a relatively
smooth basis and, therefore, the accounting for benefits earned under the pension or non-pension postretirement benefits plans should follow the same relatively smooth pattern. Our pension obligations relate to funded defined benefit pension plans we have established in the United States, Canada and the United Kingdom, unfunded pension benefits primarily in Germany, and lump sum indemnities
payable upon retirement to employees of businesses in France, Korea, Malaysia and Italy. Pension benefits are generally based on the employees service and either on a flat dollar rate or on the highest average eligible compensation before retirement.

All net actuarial gains and losses
    are amortized over the expected average remaining service life
    of the employees. The costs and obligations of pension and other
    postretirement benefits are calculated based on assumptions
    including the long-term rate of return on pension assets,
    discount rates for pension and other postretirement benefit
    obligations, expected service period, salary increases,
    retirement ages of employees and healthcare cost trend rates.
    These assumptions bear the risk of change as they require
    significant judgment and they have inherent uncertainties that
    management may not be able to control. The two most significant
    assumptions used to calculate the obligations in respect of the
    net employee benefit plans are the discount rates for pension
    and other postretirement benefits, and the expected return on
    assets. The discount rate for pension and other postretirement
    benefits is the interest rate used to determine the present
    value of benefits. It is based on spot rate yield curves and
    individual bond matching models for pension plans in Canada and
    the United States, and on published long-term high quality
    corporate bond indices for pension plans in other countries, at
    the end of each fiscal year. In light of the average long
    duration of pension plans in other countries, no adjustments
    were made to the index rates. The weighted average discount rate
    used to determine the benefit obligation was 5.4% as of
    December 31, 2006, compared to 5.1% for 2005 and 5.4% for
    2004. The weighted average discount rate used to determine the
    net periodic benefit cost is the rate used to determine the
    benefit obligation in the previous year.

As of December 31, 2006, an
    increase in the discount rate of 0.5%, assuming inflation
    remains unchanged, would result in a decrease of
    $79 million in the pension and other postretirement
    obligations and in a decrease of $11 million in the net
    periodic benefit cost. A decrease in the discount rate of 0.5%
    as of December 31, 2006, assuming inflation remains
    unchanged, would result in an increase of $86 million in
    the pension and other postretirement obligations and in an
    increase of $12 million in the net periodic benefit cost.
    The calculation of the estimate of the expected return on assets
    is described in Note 15  Postretirement Benefit
    Plans to our consolidated and combined financial statements. The
    weighted average expected return on assets was 7.3% for 2006,
    7.4% for 2005 and 8.3% for 2004. The expected return on assets
    is a long-term assumption whose accuracy can only be measured
    over a long period based on past experience. A variation in the
    expected return on assets by 0.5% as of December 31, 2006
    would result in a variation of approximately $3 million in
    the net periodic benefit cost. 85




---



##### Table of Contents



Effect if Actual ResultsDescription

Judgments and Uncertainties

Differ from AssumptionsIncome
    TaxesWe account for income taxes using
    the asset and liability method. Under the asset and liability
    method, deferred tax assets and liabilities are recognized for
    the estimated future tax consequences attributable to
    differences between the financial statement carrying amounts of
    existing assets and liabilities and their respective tax bases.
    In addition, deferred tax assets are also recorded with respect
    to net operating losses and other tax attribute carryforwards.
    Deferred tax assets and liabilities are measured using enacted
    tax rates in effect for the year in which those temporary
    differences are expected to be recovered or settled. Valuation
    allowances are established when realization of the benefit of
    deferred tax assets is not deemed to be more likely than not.
    The effect on deferred tax assets and liabilities of a change in
    tax rates is recognized in income in the period that includes
    the enactment date.

The ultimate recovery of certain
    of our deferred tax assets is dependent on the amount and timing
    of taxable income that we will ultimately generate in the future
    and other factors such as the interpretation of tax laws. This
    means that significant estimates and judgments are required to
    determine the extent that valuation allowances should be
    provided against deferred tax assets. We have provided valuation
    allowances as of December 31, 2006 aggregating
    $123 million against such assets based on our current
    assessment of future operating results and these other factors.

Although management believes that
    the estimates and judgments discussed herein are reasonable,
    actual results could differ, which could result in gains or
    losses that could be materialContingent tax liabilities must be
    accounted for separately from deferred tax assets and
    liabilities. FASB Statement No. 5, Accounting for
    Contingenciesis the governing standard for
    contingent liabilities. It must be probable that a contingent
    tax benefit will be sustained before the contingent benefit is
    recognized for financial reporting purposes. 86




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##### Table of Contents



Effect if Actual ResultsDescription

Judgments and Uncertainties

Differ from AssumptionsAssessment of Loss
    ContingenciesWe have legal and other contingencies, including environmental liabilities, which could result in significant losses upon the ultimate resolution of such contingencies.  Environmental liabilities that are not legal asset retirement obligations are accrued on an undiscounted basis when it is probable that a liability exists for past events.

We have provided for losses in
    situations where we have concluded that it is probable that a
    loss has been or will be incurred and the amount of the loss is
    reasonably estimable. A significant amount of judgment is
    involved in determining whether a loss is probable and
    reasonably estimable due to the uncertainty involved in
    determining the likelihood of future events and estimating the
    financial statement impact of such events.

If further developments or
    resolution of a contingent matter are not consistent with our
    assumptions and judgments, we may need to recognize a
    significant charge in a future period related to an existing
    contingency.   RECENTLY
    ISSUED ACCOUNTING STANDARDS
  The Fair Value Option for Financial Assets and Financial
    Liabilities Fair Value Measurements Disclosures
    about Fair Value of Financial Instruments.
  Considering the Effects of
    Prior-Year Misstatements when Quantifying Misstatements in
    Current Year Financial
    Statements.
  Employers Accounting for Defined Benefit Pension and
    Other Postretirement Plans
 87




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##### Table of Contents



Fair Value Measurements
  Accounting for Uncertainty in Income Taxes
    Item 7A.
    Quantitative
    and Qualitative Disclosures About Market Risk    marked-to-market
      Commodity
    Price Risks
    Aluminum
   88




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##### Table of Contents



and/or
      Sensitivities
    Change in


Change inRate/Price


Fair Value(In millions)Aluminum Put Options


10
%

$
(1
)Aluminum Forward Contracts


10
%


45  89




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##### Table of Contents



Electricity
    and Natural Gas
        Sensitivities
    Change in


Change inRate/Price


Fair Value(In millions)Electricity


10
%

$
12Natural Gas


10
%


1   Foreign
    Currency Exchange Risks
    non-U.S. dollar
   90




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##### Table of Contents



Sensitivities
    Change in


Change inRate


Fair Value(In millions)Currency measured against the
    U.S. dollarEuro


10
%

$
71Korean won


10
%


16Brazilian real


10
%


24Canadian dollar


10
%


6       Change in


Change inRate


Fair Value(In millions)Currency measured against the
    U.S. dollarEuro


10
%

$
53   Interest
    Rate Risks
     91




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##### Table of Contents



Sensitivities
    Change in


Change inRate


Fair Value(In millions)Interest Rate Swap
    ContractsNorth America


10
%

$
1Asia


10
%


  92




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##### Table of Contents



Item 8.
    Financial
    Statements and Supplementary Data  TABLE OF
    CONTENTS
  Managements
    Responsibility Report


94Report of
    Independent Registered Public Accounting Firm


95Report of
    Independent Registered Public Accounting Firm


97Consolidated and
    Combined Statements of Operations and Comprehensive Income
    (Loss)


98Consolidated
    Balance Sheets


99Consolidated and
    Combined Statements of Cash Flows


100Consolidated and
    Combined Statements of Shareholders/Invested
    Equity


102Notes to
    Consolidated and Combined Financial Statements


103  93




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##### Table of Contents



Managements
    Responsibility Report        /s/  Edward
    A. Blechschmidt

/s/  Rick
    DobsonEDWARD A. BLECHSCHMIDTActing Chief Executive
    Officer

RICK DOBSONSenior Vice President
    and Chief Financial Officer    94




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##### Table of Contents



Report of
    Independent Registered Public Accounting Firm      Consolidated
    and combined financial statements
      Internal
    control over financial reporting
  Internal Control  Integrated Framework
     95




---



##### Table of Contents



Internal
    Control  Integrated Framework Internal Control  Integrated Framework
  
    96




---



##### Table of Contents



Report of
    Independent Registered Public Accounting Firm      
     97




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##### Table of Contents



Novelis
    Inc.
  CONSOLIDATED
    AND COMBINED STATEMENTS OF OPERATIONS AND
 COMPREHENSIVE
    INCOME (LOSS)
 (In millions, except per share amounts)
  Year Ended December 31,2006


2005


2004Net sales

$
9,849


$
8,363


$
7,755Cost of goods sold (exclusive of
    depreciation and amortization shown below)


9,317



7,570



6,856Selling, general and
    administrative expenses


410



352



289Litigation settlement 
    net of insurance recoveries






40



Depreciation and amortization


233



230



246Research and development expenses


40



41



58Restructuring charges 
    net


19



10



20Impairment charges on long-lived
    assets






7



75Interest expense and amortization
    of debt issuance costs  net


206



194



48Equity in net income of
    non-consolidated affiliates


(16
)


(6
)


(6
)Other income  net


(82
)


(299
)


(62
)10,127



8,139



7,524Income (loss) before provision
    (benefit) for taxes on income (loss), minority interests
    share and cumulative effect of accounting change


(278
)


224



231Provision (benefit) for taxes on
    income (loss)


(4
)


107



166Income (loss) before minority
    interests share and cumulative effect of accounting change


(274
)


117



65Minority interests share


(1
)


(21
)


(10
)Net income (loss) before
    cumulative effect of accounting change


(275
)


96



55Cumulative effect of accounting
    change  net of tax






(6
)


Net income (loss)


(275
)


90



55Other comprehensive income
    (loss)  net of taxCurrency translation adjustment


168



(155
)


30Change in fair value of effective
    portion of hedges  net


(46
)






Change in minimum pension liability


12



(17
)


(26
)Other comprehensive income
    (loss)  net of tax


134



(172
)


4Comprehensive income
    (loss)

$
(141
)

$
(82
)

$
59Earnings (loss) per
    share: Basic:Net income (loss) before
    cumulative effect of accounting change

$
(3.71
)

$
1.29


$
0.74Cumulative effect of accounting
    change  net of tax






(0.08
)


Net income (loss) per
    share  basic

$
(3.71
)

$
1.21


$
0.74 Diluted:Net income (loss) before
    cumulative effect of accounting change

$
(3.71
)

$
1.29


$
0.74Cumulative effect of accounting
    change  net of tax






(0.08
)


Net income (loss) per
    share  diluted

$
(3.71
)

$
1.21


$
0.74Dividends per common
    share

$
0.20


$
0.36


$
Supplemental information for
    2005 only:Net income attributable to the
    consolidated and combined results of Novelis from January 6 to
    December 31, 2005  increase to Retained earnings





$
119Net loss attributable to the
    combined results of Novelis from January 1 to January 5,
    2005  decrease to Owners net investment






(29
)Net income





$
90   
 98




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##### Table of Contents



Novelis
    Inc.
  CONSOLIDATED
    BALANCE SHEETS
 (In millions, except number of shares)
  As of December 31,2006


2005ASSETSCurrent assetsCash and cash equivalents

$
73


$
100Accounts receivable (net of
    allowances of $29 in 2006 and $26 in 2005) third parties


1,321



1,098 related parties


21



33Inventories


1,391



1,128Prepaid expenses and other current
    assets


42



66Current portion of fair value of
    derivative instruments


106



194Deferred income tax assets


9



8Total current assets


2,963



2,627Property, plant and
    equipment  net


2,143



2,160Goodwill


236



211Intangible assets  net


20



21Investment in and advances to
    non-consolidated affiliates


150



144Fair value of derivative
    instruments  net of current portion


44



90Deferred income tax assets


76



45Other long-term assets third parties


101



107 related parties


59



71Total assets

$
5,792


$
5,476LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt

$
144


$
3Short-term borrowings


133



27Accounts payable third parties


1,542



964 related parties


44



38Accrued expenses and other current
    liabilities


508



543Deferred income tax liabilities


61



26Total current
    liabilities


2,432



1,601Long-term debt  net of
    current portion


2,158



2,600Deferred income tax liabilities


81



186Accrued postretirement benefits


425



305Other long-term liabilities


343



1925,439



4,884Commitments and contingenciesMinority interests in equity of
    consolidated affiliates


158



159Shareholders
    equityPreferred stock, no par value;
    unlimited number of first preferred and second preferred shares
    authorized; none issued and outstanding






Common stock, no par value;
    unlimited number of shares authorized; 74,140,335 and
    74,005,649 shares issued and outstanding as of
    December 31, 2006 and 2005, respectively






Additional paid-in capital


398



425Retained earnings (Accumulated
    deficit)


(198
)


92Accumulated other comprehensive loss


(5
)


(84
)Total shareholders
    equity


195



433Total liabilities and
    shareholders equity

$
5,792


$
5,476   
 99




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##### Table of Contents



Novelis
    Inc.
  CONSOLIDATED
    AND COMBINED STATEMENTS OF CASH FLOWS
 (In millions)
  Year Ended December 31,2006


2005


2004OPERATING ACTIVITIESNet income (loss)

$
(275
)

$
90


$
55Adjustments to determine net cash
    provided by operating activities:Cumulative effect of accounting
    change  net of tax






6



Depreciation and amortization


233



230



246Net gain on change in fair value
    of derivative instruments


(63
)


(269
)


(69
)Litigation settlement 
    net of insurance reserves






40



Deferred income taxes


(77
)


30



97Amortization of debt issuance costs


13



17



Provision for uncollectible
    accounts receivable


4



3



6Equity in net income of
    non-consolidated affiliates


(16
)


(6
)


(6
)Dividends from non-consolidated
    affiliates


5







Minority interests share


1



21



10Impairment charges on long-lived
    assets






7



75Share-based compensation


9



3



2Gain on sales of businesses,
    investments and assets  net


(6
)


(17
)


(5
)Changes in assets and liabilities
    (net of effects from acquisitions and divestitures):Accounts receivable third parties


(142
)


(91
)


(94
) related parties


1



(1
)


72Inventories


(206
)


52



(144
)Prepaid expenses and other current
    assets


25



18



(4
)Other long-term assets


6



(13
)


(7
)Accounts payable third parties


519



181



10 related parties


4



2



40Accrued expenses and other current
    liabilities


(64
)


130



(31
)Accrued postretirement benefits


(24
)


13



(42
)Other long-term liabilities


69



(1
)


29Other  net






4



(32
)Net cash provided by operating
    activities


16



449



208INVESTING ACTIVITIESCapital expenditures


(116
)


(178
)


(165
)Disposal of business 
    net


(7
)






Proceeds from sales of assets


38



19



17Changes to investment in and
    advances to non-consolidated affiliates


3







Proceeds from loans
    receivable  net third parties






19



 related parties


37



374



874Premiums paid to purchase
    derivative instruments


(4
)


(57
)


Net proceeds from settlement of
    derivative instruments


242



148



Net cash provided by investing
    activities


193



325



726  100




---



##### Table of Contents



Novelis
    Inc.
  CONSOLIDATED
    AND COMBINED STATEMENTS OF CASH
    FLOWS  (Continued)
 (In millions)
  Year Ended December 31,2006


2005


2004FINANCING ACTIVITIESProceeds from issuance of debt third parties


41



2,779



575 related parties










1,561Principal repayments third parties


(353
)


(1,822
)


(993
) related parties






(1,180
)


(5
)Short-term borrowings 
    net third parties


103



(145
)


(774
) related parties






(302
)


221Dividends common shareholders


(15
)


(27
)


 minority interests


(15
)


(7
)


(4
)Net receipts from (payments to)
    Alcan


5



72



(1,512
)Debt issuance costs


(11
)


(71
)


Proceeds from issuance of common
    stock in connection with stock plans


2







Net cash used in financing
    activities


(243
)


(703
)


(931
)Net increase (decrease) in cash
    and cash equivalents


(34
)


71



3Effect of exchange rate changes
    on cash balances held in foreign currencies


7



(2
)


1Cash and cash
    equivalents  beginning of year


100



31



27Cash and cash
    equivalents  end of year

$
73


$
100


$
31Supplemental disclosures of
    cash flow information:Interest paid

$
201


$
153


$
76Income taxes paid


68



39



70Principal payments on capital
    lease obligations (included in principal repayments 
    third parties)


3



3



Supplemental schedule of
    non-cash investing and financing activities relating to the
    spin-off transaction and post-closing adjustments:Other receivables





$
433Short-term borrowings 
    related parties






(57
)Long-term debt  related
    parties






32Capital lease obligation






52Additional paid-in capital

$
(43
)


(109
)Supplemental schedule of
    non-cash transaction  Pechiney acquisition (2005 and
    2004 only):Assets





$
8


$
(197
)Liabilities










28Net assets allocated to us from
    Alcan





$
8


$
(169
)   
  101




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##### Table of Contents



Novelis
    Inc.
  CONSOLIDATED
    AND COMBINED STATEMENTS OF SHAREHOLDERS/INVESTED
    EQUITY
 (In millions, except number of common shares, which is in
    thousands)
  Retained


AccumulatedAdditional


Earnings


Other


OwnersCommon Stock


Paid-in


(Accumulated


Comprehensive


NetShares


Amount


Capital


Deficit)


Income (Loss)


Investment


TotalBalance as of December 31, 2003





$



$



$



$
84


$
1,890


$
1,9742004 Activity:Net income






















55



55Transfers (to) / from
    Alcan  net






















(1,478
)


(1,478
)Currency translation
    adjustment  net of tax


















30







30Change in minimum pension liability


















(26
)






(26
)Balance as of December 31, 2004


















88



467



5552005 Activity:January 1 to January 5,
    2005  Net loss






















(29
)


(29
)Adjusted Invested equity at
    spin-off date  January 6, 2005


















88



438



526Issuance of common stock in
    connection with the spin-off


73,989







438











(438
)


Spin-off settlement and
    post-closing adjustments










(6
)














(6
)Issuance of common stock in
    connection with stock plans


17























January 6 to December 31,
    2005  Net income














119











119Currency translation
    adjustment  net of tax


















(155
)






(155
)Change in minimum pension liability


















(17
)






(17
)Dividends on common shares
    ($0.36 per share)














(27
)










(27
)Dividends on preferred shares of
    consolidated affiliates










(7
)














(7
)Balance as of December 31, 2005


74,006







425



92



(84
)






4332006 Activity:Net loss














(275
)










(275
)Issuance of common stock in
    connection with stock plans


134







2















2Spin-off settlement and
    post-closing adjustments










(38
)














(38
)Share-based compensation










9















9Currency translation
    adjustment  net of tax


















168







168Change in fair value of effective
    portion of hedges  net


















(46
)






(46
)Change in minimum pension liability


















12







12Initial impact of adopting
    Financial Accounting Standards Board Statement No. 158


















(55
)






(55
)Dividends on common shares
    ($0.20 per share)














(15
)










(15
)Balance as of December 31, 2006


74,140


$



$
398


$
(198
)

$
(5
)

$



$
195   
  102




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##### Table of Contents



Novelis
    Inc.
  NOTES
    TO THE CONSOLIDATED AND COMBINED FINANCIAL
    STATEMENTS
  1.
    BUSINESS
    AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES  Organization
    and Description of Business
            Related Party Disclosures
  Post-Transaction
    Adjustments
    103




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  Additional paid-in capital
  Additional paid-in capital
  Agreements
    between Novelis and Alcan
    Basis
    of Presentation and Combination: Pre-Spin-off
  Owners net investment
      General
    Corporate Expenses
    104




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
   Total assets Total current liabilities Accrued postretirement benefits Other
    long-term liabilities. Selling, general and administrative expenses
    Interest
    Expense and Amortization of Debt Issuance Costs 
    net
    Interest expense and amortization of debt
    issuance costs  net
  Basis
    of Presentation and Consolidation: Post Spin-off
      78-9, Accounting for Investments in Real Estate Ventures No. 98-6, Investors Accounting for an Investment in a Limited
    Partnership When the Investor Is the Sole General Partner and
    the Limited Partners Have Certain Approval or Veto Rights
  No. 04-5, Investors Accounting for an Investment in a Limited
    Partnership When the Investor Is the Sole General Partner and
    the
  105




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  Limited Partners Have Certain Rights
  Consolidation of Variable Interest Entities,
  Consolidation of All Majority-Owned
    Subsidiaries No. 96-16, Investors Accounting for an Investee When the Investor
    Has a Majority of the Voting Interest but the Minority
    Shareholder or Shareholders Have Certain Approval or Veto
    Rights.
        .
  Cumulative
    Effect of Accounting Change
  Accounting for Conditional Asset Retirement
    Obligations.
  Use of
    Estimates and Assumptions
    106




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
    Risks
    and Uncertainties
    Laws
    and regulations
        107




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
        Materials
    and labor
      108




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
     Geographic
    markets
      Revenue
    Recognition
  Revenue Recognition.
    109




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
   Net sales.
  Net sales Cost of sales.
  Cash
    and Cash Equivalents
  Cash and cash equivalents
    Accounts
    Receivable
        Derivative
    Instruments
  Accumulated other
    comprehensive income Accounting for Derivative Instruments and Hedging Activities,
    110




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  Other
    income  net
  Other
    income  net. Net
    cash provided by operating activities Net cash provided by investing activities.
  Inventories
  first-in
  Property,
    Plant and Equipment
    YearsBuildings


30 to 40Leasehold improvements


7 to 20Machinery and equipment


5 to 25Furniture, fixtures and equipment


3 to 7Equipment under capital lease
    obligations


6 to 15     Other
    income  net
  Accounting for Leases, Bulletin No. 85-3, Accounting for Operating Leases with Scheduled Rent
    Increases.
  111




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
   Goodwill
    and Other Intangible Assets
  Business
    Combinations Goodwill and
    Other Intangible Assets Accounting for the Impairment or Disposal of Long-Lived
    Assets.
  reporting unit
  Impairment charges on
    long-lived assets,
      Impairment
    of Long-Lived Assets and Other Intangible Assets
  Impairment charges on
    long-lived assets
    Investment
    in and Advances to Non-consolidated Affiliates
    112




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
    other-than-temporary
    Guarantees
  Guarantors Accounting and
    Disclosure Requirements for Guarantees, Including Indirect
    Guarantees of Indebtedness of Others.
  Financing
    Costs and Interest Income
  Interest expense and amortization of debt issuance
    costs  net
  Interest expense and amortization of debt
    issuance costs  net
  Fair
    Value of Financial Instruments
  Disclosures about Fair Value of
    Financial Instruments,
    113




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
    Pensions
    and Postretirement Benefits
  Employers
    Accounting for Defined Benefit Pension and Other Postretirement
    Plans, Employers Accounting for
    Pensions Employers Accounting
    for Postretirement Benefits Other than Pensions.
          Minority
    Interests in Consolidated Affiliates
    114




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
    and/or
  Environmental
    Liabilities
  Accrued
    expenses and other current liabilities Other
    long-term liabilities Prepaid expenses and other current assets.
  clean-up
  Litigation
    Reserves
  Accounting for Contingencies,
  Income
    Taxes
  Accounting for
    Income Taxes.
    115




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
      Owners net investment.
  Comprehensive
    Income (Loss)
  Comprehensive income (loss) Accumulated other
    comprehensive income (loss) Shareholders equity
  Dividends
    Stock-Based
    Compensation
  Accounting for
    Stock-Based Compensation Accounting
    for Stock-Based Compensation  Transition and
    Disclosure.
    Share-Based Payment
      116




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
      Accounting for Stock Issued
    to Employees Accounting for Stock Appreciation Rights and Other Variable
    Stock Option or Award Plans.
  Foreign
    Currency Translation
  Foreign
    Currency Translation Accumulated other comprehensive income
    (loss). Other income  net.
  Research
    and Development
    Restructuring
    Activities
  Accounting for Costs
    Associated with Exit or Disposal Activities,
    117




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
    Earnings
    (Loss) Per Share
      Recently
    Issued Accounting Standards
  The Fair Value Option for Financial Assets and Financial
    Liabilities, Fair Value Measurements, Disclosures
    about Fair Value of Financial Instruments.
  Considering the Effects of Prior-Year
    Misstatements when Quantifying Misstatements in Current Year
    Financial Statements.
    118




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  .
    Fair Value Measurements
  Accounting for Uncertainty in Income Taxes,
    2.
    DISPOSALS
    OF BUSINESSES AND INVESTMENTS  Other
    income  net
  Other
    income  net
  3.
    RESTRUCTURING
    PROGRAMS  Restructuring charges  net
  119




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
    Other ExitSeverance Reserves


Related


TotalNorth


Corporate


Total


Reserves


RestructuringEurope


America


and Other


Severance


Europe


ReservesBalance as of December 31,
    2004

$
35


$
2


$



$
37


$
20


$
57Provisions
    (recoveries)  net


















10



10Cash payments


(18
)


(1
)






(19
)


(8
)


(27
)Adjustments to goodwill


(5
)










(5
)






(5
)Adjustments  other


(3
)










(3
)


(3
)


(6
)Balance as of December 31,
    2005


9



1







10



19



29Provisions
    (recoveries)  net


16







1



17



2



19Cash payments


(8
)


(1
)






(9
)


(8
)


(17
)Adjustments  other


(3
)










(3
)


6



3Balance as of December 31,
    2006

$
14


$



$
1


$
15


$
19


$
34   2006
    Restructuring Activities
            120




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
   2005
    Restructuring Activities
    2004
    Restructuring Activities
        Other
    income  net
  2001
    Restructuring Activities
      4.
    ACCOUNTS
    RECEIVABLE     121




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  As of December 31,2006


2005Customer accounts
    receivable  all with third parties

$
1,249


$
993Other accounts receivable:Third parties


101



131Related parties


21



33122



164Total accounts
    receivable  gross


1,371



1,157Allowance for doubtful
    accounts  all with third parties


(29
)


(26
)Accounts receivable 
    net of allowances

$
1,342


$
1,131   Allowance
    for Doubtful Accounts
    Balance at


Additions


AccountsBeginning


Charged to


Recovered/


Foreign Exchange


Balance atYear Ended December 31,

of Year


Expense


Written-Off


and Other


End of Year2006

$
26


$
4


$
(4
)

$
3


$
292005


33



3



(8
)


(2
)


262004


30



6



(3
)






33   Sales,
    Forfaiting and Factoring of Trade Receivables
  Sales of
    Trade Receivables
    Forfaiting
    of Trade Receivables
  Selling, general and administrative
    expenses
  122




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
   Factoring
    of Trade Receivables
  Selling, general and administrative
    expenses
  Summary
    Disclosures of Financial Amounts
    Year Ended December 31,2006


2005


2004Receivables forfaited

$
424


$
285


$
190Receivables factored

$
71


$
94


$
27   As of December 31,2006


2005Forfaited receivables outstanding

$
80


$
59Factored receivables outstanding

$
3


$
12   5.
    INVENTORIES    As ofDecember 31,2006


2005Finished goods

$
404


$
313Work in process


283



234Raw materials


626



498Supplies


126



1231,439



1,168Reserves


(48
)


(40
)Inventories

$
1,391


$
1,128   Inventory Cost,
  123




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
    6.
    PROPERTY,
    PLANT AND EQUIPMENT    As ofDecember 31,2006


2005Land and property rights

$
97


$
90Buildings


894



845Machinery and equipment


4,673



4,4075,664



5,342Accumulated depreciation and
    amortization


(3,608
)


(3,319
)2,056



2,023Construction in progress


87



137Property, plant and
    equipment  net

$
2,143


$
2,160       Year Ended December 31,2006


2005


2004Depreciation expense

$
231


$
228


$
244Amortization expense (related to
    intangible assets)

$
2


$
2


$
2Interest capitalized on
    construction projects

$



$



$
1   Asset
    impairments
    Impairment charges on long-lived ass
      124




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
   Leases
  15-year
    Operating


Capital LeaseYear Ending December 31,

Leases


Obligations2007

$
19


$
62008


15



72009


12



62010


11



72011


10



6Thereafter


29



45Total payments

$
96



77Less: interest portion on capital
    leases






(26
)Principal obligation on capital
    leases





$
51     As of December 31,2006


2005Assets under capital lease
    obligationsLand

$
1


$
1Buildings


10



9Machinery and equipment


44



4155



51Accumulated amortization


(13
)


(7
)$
42


$
44   Sale
    of assets
  Other income  net.
  Other
    income  net.
  125




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
   Asset
    Retirement Obligations
  Accounting for Conditional Asset Retirement
    Obligations. Accounting for Asset Retirement
    Obligations, and/or
  Cumulative effect of
    accounting change  net of tax
    Other long-term liabilities
  AmountAsset retirement obligation as of
    January 1, 2005

$
Liability accrued upon adoption


11Liability settled


Accretion


Asset retirement obligation as of
    December 31, 2005

$
11Liability settled


Accretion


2Asset retirement obligation as of
    December 31, 2006

$
13   126




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  7.
    GOODWILL
    AND INTANGIBLE ASSETS  Goodwill
  Goodwill
  TotalBalance as of December 31,
    2004

$
256Cumulative translation adjustment


(32
)Adjustments


(13
)Balance as of December 31,
    2005


211Cumulative translation adjustment


25Balance as of December 31,
    2006

$
236       Intangible
    Assets with Finite Lives
    Gross





NetCarrying


Accumulated


CarryingAmount


Amortization


AmountTrademarks2006

$
14


$
6


$
82005


12



4



8Patented and non-patented
    technology2006

$
20


$
8


$
122005


19



6



13Total intangible
    assets2006

$
34


$
14


$
202005


31



10



21       127




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
   8.
    INVESTMENT
    IN AND ADVANCES TO NON-CONSOLIDATED AFFILIATES AND RELATED PARTY
    TRANSACTIONS    OwnershipAffiliate Name

Ownership Structure

PercentageAluminium Norf GmbH

Corporation


50
%Consorcio Candonga

Unincorporated Joint Venture


50
%EuroNorca Partners

General Partnership


50
%Deutsche Aluminium Verpackung
    Recycling GmbH

Corporation


30
%France Aluminum Recyclage SA

Public Limited Company


20
%   Other
    income  net
      As of December 31,2006


2005AssetsCurrent

$
243


$
228Non-current


646



605Total assets

$
889


$
833Liabilities and equityCurrent liabilities

$
335


$
349Non-current liabilities


254



188Total liabilities


589



537Partners capital and
    shareholders equityNovelis


150



144Third parties


150



152Total liabilities and equity

$
889


$
833   128




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
    Year Ended December 31,2006


2005


2004Net sales

$
558


$
497


$
451Costs, expenses and provision for
    taxes on income


521



479



434Net income

$
37


$
18


$
17     Year Ended December 31,2006


2005


2004Net salesAlcan(A)

$



$



$
450Cost of salesAlcan(A)

$



$



$
403Research and development
    expensesAlcan(B)

$



$



$
38Interest expense and
    amortization of debt issuance costs  netAlcan(C)

$



$



$
33Other (income)
    expenses  netAlcan:Service fee income(D)

$



$



$
(42
)Service fee expense(E)










25Interest income(F)










(22
)Gain on change in fair value of
    derivative instruments  net(G)










(23
)Other










8Total Other income 
    net, with Alcan










(54
)Aluminium Norf GmbH:Interest expense (income)


(1
)


1



(2
)Total Other income 
    net, with all related parties

$
(1
)

$
1


$
(56
)Purchases of tolling services,
    electricity and inventoriesAluminium Norf GmbH(H)

$
227


$
205


$
203Alcan(I)










1,739Consorcio Candonga(J)


14



8



2Petrocoque S.A. Industria e
    Comercio(K)


2



2



2Total purchases from related
    parties

$
243


$
215


$
1,946   129




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
    (A)
    
    We purchase from and sell materials to Alcan in the ordinary
    course of business.(B)
    
    These expenses represent an allocation of research and
    development expenses incurred by Alcan on behalf of Novelis.(C)
    
    During 2004, we had various short-term borrowings and long-term
    debt payable to Alcan where interest was charged on both a fixed
    and floating rate basis.(D)
    
    Service fee income arose from sales of research and development
    and other corporate services to Alcan.(E)
    
    Service fee expense arose from the purchase of corporate
    services from Alcan.(F)
    
    Represents interest income earned on outstanding advances and
    loans to Alcan.(G)
    
    Alcan was the counterparty to most of our metal and currency
    derivative instruments.(H)
    
    We purchase tolling services (the conversion of customer-owned
    metal) from Aluminium Norf GmbH.(I)
    
    Alcan is our primary third party supplier of prime and sheet
    ingot. Refer to Note 20  Commitments and
    Contingencies.(J)
    
    We purchase electricity from Consorcio Candonga for our
    operations in South America.(K)
    
    We purchase calcined-coke from Petrocoque S.A. Industria e
    Comercio for use in our smelting operations in South America.    As of December 31,2006


2005Accounts receivable(A)

$
21


$
33Other long-term receivables(A)


59



71Accounts payable(B)


44



38     (A)
    
    The balances represent current and non-current portions of a
    loan due from Aluminium Norf GmbH.(B)
    
    We purchase tolling services from Aluminium Norf GmbH and
    electricity from Consorcio Candonga.  9.
    ACCRUED
    EXPENSES AND OTHER CURRENT LIABILITIES    As of December 31,2006


2005Accrued compensation and benefits

$
130


$
121Accrued settlement of legal claim


39



71Accrued interest payable


56



51Accrued income taxes


17



55Current portion of fair value of
    derivative instruments


42



22Other current liabilities


224



223Accrued expenses and other current
    liabilities

$
508


$
543   130




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  10.
    LONG-TERM
    DEBT    Interest


As of December 31,Rates(A)


2006


2005Novelis Inc.Floating rate Term Loan B,
    due 2012


7.62
%(B)

$
259


$
3427.25% Senior Notes, due 2015


7.25
%(C)


1,400



1,400Novelis CorporationFloating rate Term Loan B,
    due 2012


7.62
%(B)


449



593Novelis Switzerland
    S.A.Capital lease obligation, due 2020
    (Swiss francs (CHF) 57 million)


7.50
%


47



45Capital lease obligation, due 2011
    (CHF 4 million)


2.49
%


4



4Novelis Korea LimitedBank loan, due 2008










50Bank loan, due 2008 (Korean won
    (KRW) 30 billion)










30Bank loan, due 2007


4.55
%


70



70Bank loan, due 2007 (KRW
    40 billion)


4.80
%


43



40Bank loan, due 2007 (KRW
    25 billion)


4.45
%


27



25Bank loans, due 2008 through 2011
    (KRW 1 billion)


4.04
%(D)


1



1OtherOther debt, due 2007 through 2012


2.50
%(D)


2



3Total debt






2,302



2,603Less: current portion






(144
)


(3
)Long-term debt  net
    of current portion





$
2,158


$
2,600     (A)
    
    Interest rates are as of December 31, 2006 and exclude the
    effects of amortization of debt issuance costs.(B)
    
    The interest rate for the Floating rate Term Loan B
    includes an increased applicable margin in effect through
    March 31, 2008 and excludes the effect of any related
    interest rate swaps, as discussed below.(C)
    
    The interest rate for the Senior Notes does not include
    additional special interest discussed below.(D)
    
    Weighted average interest rate.  131




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
     Year Ending December 31,

Amount2007

$
1442008


42009


42010


42011


535Thereafter


1,611Total

$
2,302   Senior
    Secured Credit Facilities
            132




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
    Other long-term assets Interest expense and amortization of debt
    issuance costs  net
  7.25% Senior
    Notes
  Other long-term assets Interest expense and
    amortization of debt issuance costs  net
    90-day
  Korean
    Bank Loans
        133




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
         Other
    Agreements
  deposit-and-guarantee
  Interest
    Rate Swaps
  3-month
  Capital
    Lease Obligations
      Impact
    of Late SEC Filings on our Debt Agreements
  Form 10-Q Form 10-K Form 10-Q
  134




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  Form 10-Q
  Interest expense and amortization of
    debt issuance costs  net Other long-term assets
  Interest
    expense and amortization of debt issuance costs  net
  Lines
    of Credit/Short-Term Borrowings
        11.
    PREFERRED
    AND COMMON SHARES  Authorization
    of Shares
    Preferred
    Shares
    135




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
    Common
    Shares
          Shareholder
    Rights Plan
        136




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
    12.
    OTHER
    COMPREHENSIVE INCOME (LOSS)    Year Ended December 31,2006


2005


2004Net change in foreign currency
    translation adjustments

$
172


$
(169
)

$
30Net change in fair value of
    effective portion of hedges


(46
)






Net change in minimum pension
    liability


16



(14
)


(41
)Net other comprehensive income
    (loss) adjustments, before income tax effect


142



(183
)


(11
)Income tax effect


(8
)


11



15Other comprehensive income (loss)

$
134


$
(172
)

$
4     As of December 31,2006


2005Foreign currency translation
    adjustments

$
133


$
(35
)Fair value of effective portion of
    hedges  net


(46
)


Minimum pension liability






(49
)Net actuarial loss


(83
)


Net prior service cost


(8
)


Net transition obligation


(1
)


Accumulated other comprehensive
    loss

$
(5
)

$
(84
)   137




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  13.
    FAIR
    VALUE OF FINANCIAL INSTRUMENTS    Year Ended December 31,2006


2005Carrying


Estimated


Carrying


EstimatedValue


Fair Value


Value


Fair ValueAssetsLong-term receivables from related
    parties

$
59


$
59


$
71


$
71LiabilitiesLong-term debtNovelis Inc.Floating rate Term Loan B,
    due 2012


259



259



342



3427.25% Senior Notes, due 2015


1,400



1,348



1,400



1,306Novelis CorporationFloating rate Term Loan B,
    due 2012


449



449



593



593Novelis Switzerland
    S.A.Capital lease obligation, due 2020
    (CHF 57 million)


47



43



45



44Capital lease obligation, due 2011
    (CHF 4 million)


4



3



4



4Novelis Korea LimitedBank loan, due 2008










50



45Bank loan, due 2008 (KRW
    30 billion)










30



25Bank loan, due 2007


70



67



70



64Bank loan, due 2007 (KRW
    40 billion)


43



41



40



36Bank loan, due 2007 (KRW
    25 billion)


27



26



25



22Bank loans, due 2008 through 2011
    (KRW 1 billion)


1



1



1



1OtherOther debt, due 2007 through 2012


2



2



3



2Financial commitmentsLetters of credit






83







2     14.
    SHARE-BASED
    COMPENSATION    138




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  Selling, general and administrative expenses
  Compensation
    to be Settled in Stock
  Novelis
    2006 Incentive Plan
    2006
    Stock Options
    139




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
     WeightedAverageWeighted


RemainingAverage


Contractual


AggregateNumber


Exercise


Term


Intrinsicof Options


Price


(In years)


ValueOptions outstanding as of
    December 31, 2005






Granted


885,170


$
25.53Exercised






Forfeited/Cancelled


(26,670
)

$
25.53Expired






Options outstanding as of
    December 31, 2006


858,500


$
25.53



6.8


$
1,991,720Options exercisable as of
    December 31, 2006





$







$
       Share-Based Payment
    2006Expected volatility

42.20 to 46.40%Weighted average volatility

44.30%Dividend yield

0.16%Risk-free interest rate

4.68 to 4.71%Expected life

1.00 to 4.75 years   140




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
    Novelis
    Conversion Plan of 2005
        WeightedAverageWeighted


RemainingAverage


Contractual


AggregateNumber


Exercise


Term


Intrinsicof Options


Price


(In years)


ValueOptions outstanding as of
    December 31, 2005


2,704,790


$
21.60Granted






Exercised


(134,686
)

$
17.37Forfeited/Cancelled


(55,827
)

$
20.90Expired






Options outstanding as of
    December 31, 2006


2,514,277


$
21.84



6.4


$
15,103,628Options exercisable as of
    December 31, 2006


1,562,176


$
21.87



6.1


$
9,336,856     141




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
     2005

2004Expected volatility

30.30%

27.87 to 29.16%Weighted-average volatility

30.30%

27.87%Dividend yield

1.56%

1.85 to 1.88%Risk-free interest rate

2.88 to 3.73%

3.39 to 4.56%Expected life

0.70 to 5.70 years

6.00 years           Recognition
    Awards
      142




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
     WeightedAverageNumber


Grant Dateof Shares


Fair ValueRecognition Awards as of
    December 31, 2005






Granted


145,800


$
23.15Vested






Forfeited






Recognition Awards as of
    December 31, 2006


145,800


$
23.15       Compensation
    to be Settled in Cash
  Stock
    Appreciation Rights
    143




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
     WeightedAverageRemainingWeighted


Contractual


AggregateNumber of


Average


Term


IntrinsicSARs


Exercise Price


(In years)


ValueSARs outstanding as of
    December 31, 2005






Granted


381,090


$
25.53Exercised






Forfeited/Cancelled






Expired






SARs outstanding as of
    December 31, 2006


381,090


$
25.53



6.8


$
884,128SARs exercisable as of
    December 31, 2006





$







$
     Share-Based Payment.
    Expected volatility

40.80 to 45.40%Weighted average volatility

43.10%Dividend yield

0.14%Risk-free interest rate

4.67 to 4.71%Expected life

0.83 to 4.57 years     144




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
   Stock
    Price Appreciation Unit Plan
        WeightedAverageRemainingWeighted


Contractual


AggregateNumber of


Average


Term


IntrinsicSPAUs


Exercise Price


(In years)


ValueSPAUs outstanding as of
    December 31, 2005


418,777


$
22.04Granted






Exercised


(372
)

$
21.49Forfeited/Cancelled






Expired






SPAUs outstanding as of
    December 31, 2006


418,405


$
22.04



7.1


$
2,432,385SPAUs exercisable as of
    December 31, 2006


115,047


$
21.53



6.9


$
727,141   .
  145




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
     Expected volatility

36.20 to 40.30%Weighted average volatility

39.32%Dividend yield

0.14%Risk-free interest rate

4.67 to 4.80%Expected life

2.37 to 4.37 years       Total
    Shareholder Returns Performance Plan
        AggregateNumber of


Redemption


IntrinsicRSUs


Price


ValueRSUs outstanding as of
    December 31, 2005


119,842


$
20.89Granted/Dividends


1,107Exercised


(120,949
)Forfeited/Cancelled


RSUs outstanding as of
    December 31, 2006





$



$
   Deferred
    Share Unit Plan for Non-Executive Directors
    146




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
    and/or
    AggregateNumber of


Redemption


IntrinsicDDSUs


Price


ValueDDSUs outstanding as of
    December 31, 2005


57,051


$
20.94Granted


54,988Exercised


Forfeited


Expired/Cancelled


DDSUs outstanding as of
    December 31, 2006


112,039


$
27.11


$
3,037,707   Novelis
    Founders Performance Awards
        147




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
      Expected volatility

37.00%Weighted average expected
    volatility

37.00%Dividend yield

0.14%Risk-free interest rate

4.75%Expected life (derived service
    periods)

0.93 to 1.23 years       Deferred
    Share Agreements
    148




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
   Compensation
    Cost
  Selling,
    general and administrative expenses
  Year Ended December 31,2006


2005


2004Compensation Settled in
    Stock:Novelis 2006 Incentive Plan

$
0.7


$



$
Novelis Conversion Plan of 2005


7.3



3.1



1.7Recognition Awards


0.5







8.5



3.1



1.7Compensation Settled in
    Cash:Novelis 2006 Incentive Plan (Stock
    Appreciation Rights)


0.4







Stock Price Appreciation Unit Plan


4.5







Total Shareholder Returns
    Performance Plan


0.2



(0.4
)


3.4Deferred Share Unit Plan for
    Non-Executive Directors


1.8



1.8



Novelis Founders Performance Awards


2.7



1.9



Deferred Share Agreements






0.5



0.89.6



3.8



4.2Total Share-Based Compensation
    Expense

$
18.1


$
6.9


$
5.9   15.
    POSTRETIREMENT
    BENEFIT PLANS            149




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
        Novelis Pension Plan (Canada)
  Pension Plan for Officers
          150




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
          Results
    of Adopting FASB Statement No. 158
  Accumulated other comprehensive loss Shareholders equity.
  Before Application





After Applicationof FASB Statement





of FASB StatementNo. 158


Adjustments


No. 158Investment in and advances to
    non-consolidated affiliates

$
158


$
(8
)

$
150Total assets


5,800



(8
)


5,792Accrued postretirement benefits


351



74



425Deferred income tax liabilities


169



(27
)


142Total liabilities


5,392



47



5,439Accumulated other comprehensive
    income (loss)


50



(55
)


(5
)Total shareholders equity


250



(55
)


195   Employer
    Contributions to Pension Plans
         151




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  Year Ended December 31,2006


2005Novelis


Alcan





Novelis


AlcanPlans


Plans


Total


Plans


Plans


TotalFunded pension plans

$
36


$
3


$
39


$
16


$
11


$
27Unfunded pension plans


15



7



22



12



4



16Savings and defined contribution
    pension plans


11



1



12



9







9Total contributions

$
62


$
11


$
73


$
37


$
15


$
52     Investment
    Policy and Asset Allocation
      Allocation inTarget


Aggregate as ofAllocation


December 31,Category of Asset

Ranges


2006


2005Equity securities


50 - 70
%


57
%


54
%Debt securities


30 - 50
%


41
%


41
%Real estate


0 - 3
%


2
%


3
%Other


0 - 5
%



%


2
%   152




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  Benefit
    Obligations, Fair Value of Plan Assets, Funded Status and
    Amounts Recognized in Financial Statements
    Pension Benefits


Other Benefits2006


2005


2006


2005Change in benefit
    obligationBenefit obligation as of
    January 1,

$
575


$
550


$
122


$
115Service cost


42



23



5



4Interest cost


44



29



7



7Members contributions


4



2







Benefits paid


(30
)


(26
)


(8
)


(7
)Amendments


1



2







(3
)Transfers/mergers


209



(3
)


1



Curtailments/settlements/termination
    benefits


(5
)










Actuarial (gains) losses


(10
)


40



12



6Currency (gains) losses


47



(42
)






Benefit obligation as of
    December 31,

$
877


$
575


$
139


$
122Benefit obligation of funded plans

$
690


$
414


$




Benefit obligation of unfunded
    plans


187



161



139


$
122Benefit obligation as of
    December 31,

$
877


$
575


$
139


$
122  153




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  Pension Benefits


Other Benefits2006


2005


2006


2005Change in fair value of plan
    assetsFair value of plan assets as of
    January 1,

$
301


$
290


$



$
Actual return on plan assets


41



23







Members contributions


4



2







Benefits paid


(30
)


(26
)






Company contributions


51



28







Transfers/mergers


178











Currency gains (losses)


23



(16
)






Fair value of plan assets as of
    December 31,

$
568


$
301


$



$
Funded StatusAssets less than benefit
    obligation of funded plans

$
(122
)

$
(113
)






Benefit obligation of unfunded
    plans


(187
)


(161
)

$
(139
)

$
(122
)Funded Status as of
    December 31,

$
(309
)

$
(274
)

$
(139
)

$
(122
)Unamortized-actuarial losses


N/A


$
92



N/A


$
23-prior service cost


N/A



15



N/A



(1
)Minimum pension liability


N/A



(62
)


N/A



Intangible assets


N/A



11



N/A



Accumulated other comprehensive
    income


N/A



51



N/A



Net amounts recognized in
    consolidated balance sheets


N/A


$
(167
)


N/A


$
(100
)Amount recognized for funded plans


N/A


$
(44
)


N/A


$
Amount recognized for unfunded
    plans


N/A



(123
)


N/A



(100
)Net amounts recognized in
    consolidated balance sheets


N/A


$
(167
)


N/A


$
(100
)     Pension Benefits


Other BenefitsAs of December 31,2006


2005


2006


2005Other long-term assets 
    third parties

$
2



N/A


$




N/AAccrued expenses and other current
    liabilities


(18
)


N/A



(7
)


N/AAccrued post retirement benefits


(293
)


N/A



(132
)


N/ANet amounts recognized in
    consolidated balance sheets

$
(309
)


N/A


$
(139
)


N/A   154




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  Accumulated other
    comprehensive loss
  Pension Benefits


Other BenefitsAs of December 31,2006


2005


2006


2005Net actuarial loss

$
84



N/A


$
34



N/APrior service cost (credit)


16



N/A



(3
)


N/ANet transition obligation






N/A



1



N/ATotal postretirement amounts
    recognized in Accumulated other comprehensive loss

$
100



N/A


$
32



N/A   Accumulated
    Benefit Obligation in Excess of Plan Assets
    As of December 31,2006


2005Projected benefit obligation

$
599


$
541Accumulated benefit obligation

$
531


$
479Fair value of plan assets

$
323


$
265   Future
    Benefit Payments
    Pension


OtherBenefits


Benefits2007

$
35


$
82008


35



82009


37



82010


39



82011


42



82012 through 2016


265



40Total

$
453


$
80   155




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  Components
    of Net Periodic Benefit Cost
    Pension Benefits


Other Benefits2006


2005


2004


2006


2005


2004Net periodic benefit
    costService cost

$
42


$
23


$
27


$
5


$
4


$
4Interest cost


44



29



37



7



7



6Expected return on assets


(38
)


(20
)


(28
)










Amortization actuarial losses


6



5



4



1



1



1 prior service cost


2



2



4











Curtailment/settlement losses


(4
)






(19
)










Net periodic benefit
    cost


52



39



25



13



12



11Proportionate share of
    non-consolidated affiliates deferred pension costs, net of
    $2 million of tax in 2006


4



















Total net periodic costs
    recognized

$
56


$
39


$
25


$
13


$
12


$
11   Accumulated
    other comprehensive loss Accumulated
    other comprehensive loss
  Actuarial
    Assumptions and Sensitivity Analysis
    Pension Benefits


Other Benefits2006


2005


2004


2006


2005


2004Weighted average assumptions
    used to determine benefit obligations as of
    December 31,Discount rate


5.4
%


5.1
%


5.4
%


5.7
%


5.7
%


5.8
%Average compensation growth


3.8
%


4.0
%


3.6
%


3.9
%


3.9
%


4.0
%Weighted average assumptions
    used to determine net periodic benefit cost for the year ended
    December 31,Discount rate


5.1
%


5.4
%


5.8
%


5.7
%


5.8
%


6.2
%Average compensation growth


3.9
%


4.2
%


3.3
%


3.9
%


4.0
%


3.7
%Expected return on plan assets


7.3
%


7.4
%


8.3
%










     156




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
        Other Benefits1% Increase


1% DecreaseSensitivity AnalysisEffect on service and interest
    costs

$
2


$
(1
)Effect on benefit obligation

$
11


$
(10
)   Employers Accounting for Postemployment Benefits. Other long-term liabilities
  16.
    CURRENCY
    GAINS (LOSSES)  Other
    income  net
  Year Ended December 31,2006


2005


2004Net gain (loss) on change in fair
    value of currency derivative instruments

$
(24
)

$
96


$
(23
)Net gain (loss) on translation of
    monetary assets and liabilities


8



6



(4
)$
(16
)

$
102


$
(27
)   Accumulated other comprehensive income (loss).
  Year Ended December 31,2006


2005


2004Cumulative currency translation
    adjustment  beginning of year

$
(35
)

$
120


$
90Effect of changes in exchange rates


168



(155
)


30Cumulative currency translation
    adjustment  end of year

$
133


$
(35
)

$
120   17.
    FINANCIAL
    INSTRUMENTS AND COMMODITY CONTRACTS    157




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
        Accumulated other comprehensive loss Shareholders equity Accumulated other
    comprehensive loss
      Maturity







Net FairAs of December 31, 2006

Dates

Assets


Liabilities


ValueForeign exchange forward contracts

2007 through 2011

$
12


$
(20
)

$
(8
)Interest rate swaps

2007 through 2008


2







2Cross-currency swaps

2007 through 2015


4



(95
)


(91
)Aluminum forward contracts

2007 through 2009


67



(12
)


55Aluminum options

2007


2







2Electricity swap

2016


47







47Embedded derivative instruments

2007


16







16Natural gas swaps

2007






(2
)


(2
)Total fair value




150



(129
)


21Less: current portion(A)




106



(42
)


64Noncurrent portion(A)



$
44


$
(87
)

$
(43
)     (A)
    
    The amounts of the current and noncurrent portions of fair
    values under assets are each presented in the accompanying
    consolidated balance sheets. The amounts of the current and
    noncurrent portions of fair values under liabilities are
    included in Accrued expenses and other current liabilitiesand Other long-term liabilities, respectively, in the
    accompanying consolidated balance sheets.  158




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
     Maturity







Net FairAs of December 31, 2005

Dates

Assets


Liabilities


ValueForeign exchange forward contracts

2006 through 2011

$
15


$
(9
)

$
6Interest rate swaps

2006 through 2008


5







5Cross-currency swaps

2006 through 2015






(24
)


(24
)Aluminum forward contracts

2006 through 2009


87



(7
)


80Aluminum options

2006


109







109Electricity swap

2016


68







68Total fair value




284



(40
)


244Less: current portion(A)




194



(22
)


172Noncurrent portion(A)



$
90


$
(18
)

$
72     (A)
    
    The amounts of the current and noncurrent portions of fair
    values under assets are each presented in the accompanying
    consolidated balance sheets. The amounts of the current and
    noncurrent portions of fair values under liabilities are
    included in Accrued expenses and other current liabilitiesand Other long-term liabilities, respectively, in the
    accompanying consolidated balance sheets.  18.
    INCOME
    TAXES  Accounting for
    Income Taxes.
  Income (loss)
    before provision (benefit) for taxes on income (loss), minority
    interests share and cumulative effect of accounting change Equity in net income of
    non-consolidated affiliates
  Year Ended December 31,2006


2005


2004Domestic (Canada)

$
(100
)

$
(40
)

$
(25
)Foreign (all other countries)


(194
)


258



250Income (loss) before provision
    (benefit) for taxes on income (loss), minority interests
    share, cumulative effect of accounting change and equity in net
    income of non-consolidated affiliates

$
(294
)

$
218


$
225   159




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  Provision (benefit) for
    taxes on income (loss)
  Year Ended December 31,2006


2005


2004Current income taxes (benefit)Canada

$
1


$
11


$
(11
)Foreign (all other countries)


72



66



80Total current


73



77



69Deferred income taxes (benefit)Canada


4



(15
)


2Foreign (all other countries)


(81
)


45



95Total deferred


(77
)


30



97Total provision (benefit) for
    taxes on income (loss)

$
(4
)

$
107


$
166     Year Ended December 31,2006


2005


2004Canadian Statutory tax rate


33.0
%


33.0
%


33.0
%Income taxes (benefit) at the
    Canadian statutory rate

$
(97
)

$
72


$
74Increase (decrease) in tax rate
    resulting from:Exchange translation items


15



23



13Exchange remeasurement of deferred
    income taxes


3



1



2Change in valuation allowances


71



5



42Tax credits and other allowances






(2
)


(3
)Expense/income items with no tax
    effect  net


13



7



(2
)Tax rate differences on foreign
    earnings


(15
)


5



10Withholding tax in connection with
    the spin-off










21Other  net


6



(4
)


9Provision (benefit) for taxes on
    income (loss)

$
(4
)

$
107


$
166Effective tax rate


1.4
%


49.1
%


73.8
%       160




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
      As of December 31,2006


2005Deferred income tax assetsProvisions not currently
    deductible for tax purposes

$
219


$
183Tax losses/benefit carryforwards


238



101Other assets


46



20Total deferred income tax assets


503



304Less: valuation allowance


(123
)


(73
)Net deferred income tax assets

$
380


$
231Deferred income tax liabilitiesProperty, plant and equipment

$
223


$
239Inventory valuation


103



48Other liabilities


111



127Total deferred income tax
    liabilities

$
437


$
414Total deferred income tax
    liabilities

$
437


$
414Less: Net deferred income tax
    assets


380



231Net deferred income tax liabilities

$
57


$
183     Additional paid-in capital.
    161




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
              162




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
   19.
    EARNINGS
    (LOSS) PER SHARE    Year Ended December 31,2006


2005


2004Numerator:Net income (loss) before
    cumulative effect of accounting change

$
(275
)

$
96


$
55Cumulative effect of accounting
    change  net of tax






(6
)


Net income (loss)

$
(275
)

$
90


$
55Denominator:Weighted average number of
    outstanding shares  basic


74,013,619



73,996,752



73,988,932Effect of dilutive shares






236,856



443,351Weighted average number of
    outstanding shares  diluted


74,013,619



74,233,608



74,432,283Earnings (loss) per
    share:Basic Net income (loss) before
    cumulative effect of accounting change

$
(3.71
)

$
1.29


$
0.74Cumulative effect of accounting
    change  net of tax






(0.08
)


Net income (loss)

$
(3.71
)

$
1.21


$
0.74Diluted Net income (loss) before
    cumulative effect of accounting change

$
(3.71
)

$
1.29


$
0.74Cumulative effect of accounting
    change  net of tax






(0.08
)


Net income (loss)

$
(3.71
)

$
1.21


$
0.74         163




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
      20.
    COMMITMENTS
    AND CONTINGENCIES      Separation
    from Alcan
    Legal
    Proceedings
  Reynolds Boat Case.
  164




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
      Accrued expenses
    and other current liabilities Prepaid expenses and other current assets
  Accrued expenses and other current
    liabilities
    Environmental
    Matters
      165




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
    clean-up Other
    long-term liabilities Accrued expenses and other current liabilities
    Oswego North Ponds.
    166




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  clean-up
  Borgofranco.
  Brazil
    Tax Matters
  Other long-term assets Other long-term liabilities
  Guarantees
    of Indebtedness
    
    certain of our wholly-owned and majority-owned
    subsidiaries; and
    Aluminium Norf GmbH, which is a fifty percent (50%) owned joint
    venture that does not meet the requirements for consolidation
    under FASB Interpretation No. 46 (Revised).      167




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
     Maximum


LiabilityPotential


CarryingType of Entity

Future Payment


ValueWholly-owned Subsidiaries

$
44


$
26Majority-owned Subsidiaries


2



Aluminium Norf GmbH


13



   21.
    OTHER
    INCOME  NET    Year Ended December 31,2006


2005


2004Gains on change in fair value of
    derivative instruments  net(A)

$
(63
)

$
(269
)

$
(69
)Loss on disposal of business


15







Gain on sale of equity interest in
    non-consolidated affiliate


(15
)






Gain on sale of rights to develop
    and operate hydroelectric power plants


(11
)






Exchange (gains)
    losses  net


(8
)


(6
)


2(Gains) losses on disposals of
    property, plant and equipment  net


5



(17
)


(5
)Service fee income  net










(17
)Other (income) losses 
    net


(5
)


(7
)


27$
(82
)

$
(299
)

$
(62
)     (A)
    
    Included in the year ended December 31, 2005 amount is
    $43 million in pre-tax unrealized losses ($29 million
    net of tax) on the change in fair value of derivative
    instruments, primarily with Alcan, for the period from January 1
    to January 5, 2005, as described in Note 1 
    Business and Summary of Significant Accounting
    Policies  Basis of Combination: Pre-Spin-off.  22.  SEGMENT,
    GEOGRAPHICAL AREA AND MAJOR CUSTOMER INFORMATION
    Disclosure About the Segments of
    an Enterprise and Related Information.
  168




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
     Other (income)
    expenses  net.
      
    North America.  Headquartered in Cleveland,
    Ohio, this segment manufactures aluminum sheet and light gauge
    products and operates 12 plants, including two fully dedicated
    recycling facilities, in two countries.
    Europe.  Headquartered in Zurich, Switzerland,
    this segment manufactures aluminum sheet and light gauge
    products and operates 14 plants, including one recycling
    facility, in six countries.
    Asia.  Headquartered in Seoul, South Korea,
    this segment manufactures aluminum sheet and light gauge
    products and operates three plants in two countries.
    South America.  Headquartered in Sao Paulo,
    Brazil, this segment comprises bauxite mining, alumina refining,
    smelting operations, power generation, carbon products, aluminum
    sheet and light gauge products and operates four plants in
    Brazil.  Adjustment to Eliminate Proportional
    Consolidation.
  169




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
   Corporate and Other
  Selected
    Segment Financial Information
  Adjustment toEliminateNorth








South


Proportional


CorporateYear Ended December 31, 2006

America


Europe


Asia


America


Consolidation


and Other


TotalNet sales (to third parties)

$
3,691


$
3,620


$
1,692


$
863


$
(17
)

$



$
9,849Intersegment sales


2



5



15



50







(72
)


Regional Income


22



256



85



164











527Interest income


2



3



3



2







5



15Interest expense and amortization
    of debt issuance costs


50



11



10



6







144



221Depreciation and amortization


70



92



55



44



(32
)


4



233Restructuring charges






18















1



19Equity in net income of
    non-consolidated affiliates






8







8











16Provision (benefit) for taxes on
    income (loss)


(111
)


29



11



63



(5
)


9



(4
)Total assets


1,476



2,474



1,078



821



(117
)


60



5,792Investment in and advances to
    Non-consolidated affiliates


2



98







50











150Capital expenditures


39



45



21



26



(18
)


3



116    170




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  Adjustment toEliminateNorth








South


Proportional


CorporateYear Ended December 31, 2005

America


Europe


Asia


America


Consolidation


and Other


TotalNet sales (to third parties)

$
3,265


$
3,093


$
1,391


$
630


$
(16
)

$



$
8,363Intersegment sales


2



31



8



41







(82
)


Regional Income


196



206



108



110











620Interest income


1



3



1



1







3



9Interest expense and amortization
    of debt issuance costs


44



10



11



3







135



203Depreciation and amortization


72



96



51



44



(34
)


1



230Restructuring charges






10



















10Impairment charges on long-lived
    assets






7



















7Equity in net income of
    non-consolidated affiliates






4







2











6Provision (benefit) for taxes on
    income


33



59



(8
)


26



(4
)


1



107Total assets


1,547



2,139



1,002



790



(85
)


83



5,476Investment in and advances to
    Non-consolidated affiliates


2



90







52











144Capital expenditures


61



80



21



24



(20
)


12



178   Adjustment toEliminateNorth








South


Proportional


CorporateYear Ended December 31, 2004

America


Europe


Asia


America


Consolidation


and Other


TotalNet sales (to third parties)

$
2,964


$
3,081


$
1,194


$
525


$
(9
)

$



$
7,755Intersegment sales


8



30



9



57







(104
)


Regional Income


240



200



80



134











654Interest income






3



1











22



26Interest expense and amortization
    of debt issuance costs






5



15











54



74Depreciation and amortization


69



115



46



47



(37
)


6



246Restructuring charges






20



















20Impairment charges on long-lived
    assets






75



















75Equity in net income of
    non-consolidated affiliates






4















2



6Provision for taxes on income


75



43



1



40



(4
)


11



166Total assets


1,406



2,885



954



779



(60
)


(10
)


5,954Investment in and advances to
    non-consolidated affiliates






117















5



122Capital expenditures


41



84



31



23



(16
)


2



165   171




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
    Year Ended December 31,2006


2005


2004Total Regional
    Income

$
527


$
620


$
654Interest expense and amortization
    of debt issuance costs


(221
)


(203
)


(74
)(Gains) losses on cash settlement
    of derivative instruments  net, included in Regional
    Income


(248
)


(84
)


8Gains on change in fair value of
    derivative instruments  net


63



269



69Depreciation and amortization


(233
)


(230
)


(246
)Impairment charges on long-lived
    assets






(7
)


(75
)Minority interests share


(1
)


(21
)


(10
)Adjustment to eliminate
    proportional consolidation(A)


(39
)


(36
)


(41
)Restructuring charges 
    net


(19
)


(10
)


(20
)Gain on disposals of property,
    plant and equipment and businesses  net


6



17



5Corporate selling, general and
    administrative expenses


(127
)


(78
)


(39
)Other corporate costs 
    net


13



6



(10
)Litigation settlement 
    net of insurance recoveries






(40
)


(Provision) benefit for taxes on
    income (loss)


4



(107
)


(166
)Net income (loss) before
    cumulative effect of accounting change


(275
)


96



55Cumulative effect of accounting
    change  net of tax






(6
)


Net income (loss)

$
(275
)

$
90


$
55   _
    _
  (A)
    
    Our financial information for our segments (including Regional
    Income) includes the results of our non-consolidated affiliates
    on a proportionately consolidated basis, which is consistent
    with the way we manage our business segments. However, under
    GAAP, these non-consolidated affiliates are accounted for using
    the equity method of accounting. Therefore, in order to
    reconcile Total Regional Income to Net income (loss), the
    proportional Regional Income of these non-consolidated
    affiliates is removed from Total Regional Income, net of our
    share of their net after-tax results, which is reported as
    Equity in net income of non-consolidated affiliateson
    our consolidated and combined statements of operations. See
    Note 8  Investment in and Advances to
    Non-Consolidated Affiliates and Related Party Transactions to
    our consolidated and combined financial statements for further
    information about these
    non-consolidated
    affiliates.  172




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
   Geographical
    Area Information
    Year Ended December 31,2006


2005


2004Net sales:United States

$
3,474


$
3,029


$
2,795Asia and Other Pacific


1,691



1,391



1,194Brazil


847



616



515Canada


217



234



182Germany


2,263



1,850



1,865United Kingdom


428



339



382Other Europe


929



904



822Total net sales

$
9,849


$
8,363


$
7,755   As of December 31,2006


2005


2004Long-lived assets:United States

$
405


$
431


$
437Asia and Other Pacific


618



605



622Brazil


447



472



544Canada


113



121



111Germany


211



211



268United Kingdom


173



159



167Other Europe


432



393



481Total long-lived assets

$
2,399


$
2,392


$
2,630   Information
    about Major Customers
    Year Ended December 31,2006


2005


2004Sales to Rexam (in millions)

$
1,392


$
1,048


$
861Percentage of total net sales


14.1
%


12.5
%


11.1
%   173




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  23.
    SUBSEQUENT
    EVENT  Potential
    Acquisition of Novelis Common Stock
      Hart-Scott-Rodino
      174




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
   24.
    QUARTERLY
    RESULTS (UNAUDITED)  .
  Year Ended December 31, 2006First


Second


Third


Fourth


FullQuarter


Quarter


Quarter


Quarter


Year($ in millions, except per share data)Net sales

$
2,319


$
2,564


$
2,494


$
2,472


$
9,849Cost of goods sold (exclusive of
    depreciation and amortization shown below)


2,135



2,407



2,389



2,386



9,317Selling, general and
    administrative expenses


92



98



103



117



410Depreciation and amortization


58



59



57



59



233Research and development expenses


9



10



10



11



40Restructuring charges 
    net


1



2



10



6



19Interest expense and amortization
    of debt issuance costs  net


48



49



52



57



206Equity in net income of
    non-consolidated affiliates


(3
)


(4
)


(5
)


(4
)


(16
)Other (income)
    expenses  net


(49
)


(47
)


34



(20
)


(82
)Provision (benefit) for taxes on
    income (loss)


102



(20
)


(52
)


(34
)


(4
)Minority interests share






4



(2
)


(1
)


1Net income (loss)

$
(74
)

$
6


$
(102
)

$
(105
)

$
(275
)Earnings (loss) per share:Basic 

$
(1.00
)

$
0.08


$
(1.38
)

$
(1.41
)

$
(3.71
)Diluted 

$
(1.00
)

$
0.08


$
(1.38
)

$
(1.41
)

$
(3.71
)Dividends per common share

$
0.09


$
0.09


$
0.01


$
0.01


$
0.20    175




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  Year Ended December 31, 2005First


Second


Third


Fourth


FullQuarter


Quarter


Quarter


Quarter


Year($ in millions, except per share data)Net sales

$
2,112


$
2,172


$
2,053


$
2,026


$
8,363Cost of goods sold (exclusive of
    depreciation and amortization shown below)


1,884



1,960



1,834



1,892



7,570Selling, general and
    administrative expenses


88



82



90



92



352Litigation settlement 
    net of insurance recoveries














40



40Depreciation and amortization


59



58



56



57



230Research and development expenses


8



11



10



12



41Restructuring charges
    (recoveries)  net


(2
)


(1
)


7



6



10Impairment charges on long-lived
    assets






1



4



2



7Interest expense and amortization
    of debt issuance costs  net


54



48



46



46



194Equity in net income of
    non-consolidated affiliates


(2
)


(2
)


(2
)






(6
)Other (income)
    expenses  net


(34
)


10



(48
)


(227
)


(299
)Provision for taxes on income


30







37



40



107Minority interests share


5



5



9



2



21Net income before cumulative
    effect of accounting change


22







10



64



96Cumulative effect of accounting
    change  net of tax














(6
)


(6
)Net income

$
22


$



$
10


$
58


$
90Earnings per share:Basic Net income before cumulative
    effect of accounting change

$
0.30


$



$
0.14


$
0.86


$
1.29Cumulative effect of accounting
    change  net of tax














(0.08
)


(0.08
)Net earnings per share 
    basic

$
0.30


$



$
0.14


$
0.78


$
1.21Diluted Net income before cumulative
    effect of accounting change

$
0.30


$



$
0.14


$
0.86


$
1.29Cumulative effect of accounting
    change  net of tax














(0.08
)


(0.08
)Net earnings per share 
    diluted

$
0.30


$



$
0.14


$
0.78


$
1.21Dividends per common share

$
0.09


$
0.09


$
0.09


$
0.09


$
0.36   25.
    SUPPLEMENTAL
    GUARANTOR INFORMATION    176




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
      NOVELIS
    INC.
  CONDENSED
    CONSOLIDATING STATEMENT OF OPERATIONS
  Year Ended December 31, 2006Non-Parent


Guarantors


Guarantors


Eliminations


Consolidated(In millions)Net sales

$
1,572


$
8,340


$
2,822


$
(2,885
)

$
9,849Cost of goods sold (exclusive of
    depreciation and amortization shown below)


1,522



8,010



2,670



(2,885
)


9,317Selling, general and
    administrative expenses


72



269



69







410Depreciation and amortization


15



153



65







233Research and development expenses


28



12











40Restructuring charges 
    net






16



3







19Interest expense and amortization
    of debt issuance costs  net


48



140



18







206Equity in net income of affiliates


115



(16
)






(115
)


(16
)Other (income)
    expenses  net


38



(124
)


4







(82
)1,838



8,460



2,829



(3,000
)


10,127Loss before provision (benefit)
    for taxes on loss and minority interests share


(266
)


(120
)


(7
)


115



(278
)Provision (benefit) for taxes on
    loss


9



(28
)


15







(4
)Loss before minority
    interests share


(275
)


(92
)


(22
)


115



(274
)Minority interests share










(1
)






(1
)Net loss

$
(275
)

$
(92
)

$
(23
)

$
115


$
(275
)   177




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  NOVELIS
    INC.
  CONDENSED
    CONSOLIDATING AND COMBINING STATEMENT OF OPERATIONS
  Year Ended December 31, 2005Non-





Consolidated andParent


Guarantors


Guarantors


Eliminations


Combined(In millions)Net sales

$
1,284


$
6,872


$
2,479


$
(2,272
)

$
8,363Cost of goods sold (exclusive of
    depreciation and amortization shown below)


1,245



6,283



2,314



(2,272
)


7,570Selling, general and
    administrative expenses


43



242



67







352Litigation settlement 
    net of insurance recoveries






40











40Depreciation and amortization


11



158



61







230Research and development expenses


28



12



1







41Restructuring charges 
    net






(1
)


11







10Impairment charges on long-lived
    assets






1



6







7Interest expense and amortization
    of debt issuance costs  net


55



119



20







194Equity in net income of affiliates


(139
)


(6
)






139



(6
)Other income  net


(58
)


(222
)


(19
)






(299
)1,185



6,626



2,461



(2,133
)


8,139Income before provision (benefit)
    for taxes on income, minority interests share and
    cumulative effect of accounting change


99



246



18



(139
)


224Provision (benefit) for taxes on
    income


3



107



(3
)






107Income before minority
    interests share


96



139



21



(139
)


117Minority interests share










(21
)






(21
)Net income before cumulative
    effect of accounting change


96



139







(139
)


96Cumulative effect of accounting
    change  net of tax


(6
)


(6
)






6



(6
)Net income

$
90


$
133


$



$
(133
)

$
90   178




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  NOVELIS
    INC.
  CONDENSED
    COMBINING STATEMENT OF OPERATIONS
  Year Ended December 31, 2004Non-Parent


Guarantors


Guarantors


Eliminations


Combined(In millions)Net sales

$
1,152


$
6,428


$
2,101


$
(1,926
)

$
7,755Cost of goods sold (exclusive of
    depreciation and amortization shown below)


1,106



5,721



1,955



(1,926
)


6,856Selling, general and
    administrative expenses


44



178



67







289Depreciation and amortization


10



165



71







246Research and development expenses






58











58Restructuring charges 
    net






20











20Impairment charges on long-lived
    assets






8



67







75Interest expense and amortization
    of debt issuance costs  net






30



18







48Equity in net income of affiliates


(82
)


(6
)






82



(6
)Other (income) expense 
    net


8



(63
)


(7
)






(62
)1,086



6,111



2,171



(1,844
)


7,524Income (loss) before provision for
    taxes on income and minority interests share


66



317



(70
)


(82
)


231Provision for taxes on income


11



153



2







166Income (loss) before minority
    interests share


55



164



(72
)


(82
)


65Minority interests share










(10
)






(10
)Net income (loss)

$
55


$
164


$
(82
)

$
(82
)

$
55   179




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  NOVELIS
    INC.
  CONDENSED
    CONSOLIDATING BALANCE SHEET
  As of December 31, 2006Non-Parent


Guarantors


Guarantors


Eliminations


Consolidated(In millions)ASSETSCurrent assetsCash and cash equivalents

$
3


$
37


$
33


$



$
73Accounts receivable  net
    of allowances third parties


40



864



417







1,321 related parties


399



414



52



(844
)


21Inventories


56



963



372







1,391Prepaid expenses and other current
    assets


2



30



10







42Current portion of fair value of
    derivative instruments






102



4







106Deferred income tax assets


2



1



6







9Total current assets


502



2,411



894



(844
)


2,963Property, plant and
    equipment  net


114



1,253



776







2,143Goodwill






28



208







236Intangible assets  net






18



2







20Investments


409



150







(409
)


150Fair value of derivative
    instruments  net of current portion






44











44Deferred income tax assets


17



22



37







76Other long-term assets


1,224



161



129



(1,354
)


160Total assets

$
2,266


$
4,087


$
2,046


$
(2,607
)

$
5,792LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt

$



$
3


$
141


$



$
144Short-term borrowings third parties






129



4







133 related parties


7



502



63



(572
)


Accounts payable third parties


108



914



520







1,542 related parties


47



207



62



(272
)


44Accrued expenses and other current
    liabilities


96



320



92







508Deferred income tax liabilities






60



1







61Total current
    liabilities


258



2,135



883



(844
)


2,432Long-term debt  net of
    current portion third parties


1,659



497



2







2,158 related parties






1,107



247



(1,354
)


Deferred income tax liabilities


16



49



16







81Accrued postretirement benefits


21



296



108







425Other long-term liabilities


117



204



22







3432,071



4,288



1,278



(2,198
)


5,439Commitments and contingenciesMinority interests in equity of
    consolidated affiliates










158







158Shareholders
    equity














Preferred stock


















Common stock


















Additional paid-in capital


398















398Retained earnings/(accumulated
    deficit)/owners net investment


(198
)


(410
)


585



(175
)


(198
)Accumulated other comprehensive
    income (loss)


(5
)


209



25



(234
)


(5
)Total shareholders
    equity


195



(201
)


610



(409
)


195Total liabilities and
    shareholders equity

$
2,266


$
4,087


$
2,046


$
(2,607
)

$
5,792   180




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  NOVELIS
    INC.
  CONDENSED
    CONSOLIDATING BALANCE SHEET
  As of December 31, 2005Non-Parent


Guarantors


Guarantors


Eliminations


Consolidated(In millions)ASSETSCurrent assetsCash and cash equivalents

$
2


$
34


$
64


$



$
100Accounts receivable  net
    of allowances third parties


67



689



342







1,098 related parties


381



318



22



(688
)


33Inventories


49



769



310







1,128Prepaid expenses and other current
    assets


2



55



9







66Current portion of fair value of
    derivative instruments






186



8







194Deferred income tax assets










8







8Total current assets


501



2,051



763



(688
)


2,627Property, plant and
    equipment  net


121



1,297



742







2,160Goodwill






25



186







211Intangible assets  net






18



3







21Investments


729



144







(729
)


144Fair value of derivative
    instruments  net of current portion






90











90Deferred income tax assets


8



5



32







45Other long-term assets


1,129



173



119



(1,243
)


178Total assets

$
2,488


$
3,803


$
1,845


$
(2,660
)

$
5,476LIABILITIES AND
    SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt

$



$
2


$
1


$



$
3Short-term borrowings third parties






23



4







27 related parties


45



409



17



(471
)


Accounts payable third parties


78



521



365







964 related parties


62



152



41



(217
)


38Accrued expenses and other current
    liabilities


103



332



108







543Deferred income tax liabilities






26











26Total current
    liabilities


288



1,465



536



(688
)


1,601Long-term debt  net of
    current portion third parties


1,742



640



218







2,600 related parties






1,017



226



(1,243
)


Deferred income tax liabilities






176



10







186Accrued postretirement benefits


9



213



83







305Other long-term liabilities


16



163



13







1922,055



3,674



1,086



(1,931
)


4,884Commitments and contingenciesMinority interests in equity of
    consolidated affiliates










159







159Shareholders
    equityPreferred stock


















Common stock


















Additional paid-in capital


425















425Retained earnings/(accumulated
    deficit)/owners net investment


92



(2
)


621



(619
)


92Accumulated other comprehensive
    income (loss)


(84
)


131



(21
)


(110
)


(84
)Total shareholders
    equity


433



129



600



(729
)


433Total liabilities and
    shareholders equity

$
2,488


$
3,803


$
1,845


$
(2,660
)

$
5,476   181




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  NOVELIS
    INC.
  CONDENSED
    CONSOLIDATING STATEMENT OF CASH FLOWS
  Year Ended December 31, 2006Non-Parent


Guarantors


Guarantors


Eliminations


Consolidated(In millions)OPERATING ACTIVITIESNet cash provided by (used in)
    operating activities

$
104


$
(9
)

$
87


$
(166
)

$
16INVESTING ACTIVITIESCapital expenditures


(8
)


(72
)


(36
)






(116
)Disposal of business  net


(7
)














(7
)Proceeds from sales of assets






38











38Proceeds from loans
    receivable  net related parties


48



(60
)


(28
)


77



37Changes in investment in and
    advances to non-consolidated affiliates






3











3Premiums paid to purchase
    derivative instruments






(4
)










(4
)Net proceeds from settlement of
    derivative instruments


(34
)


283



(7
)






242Net cash provided by (used in)
    investing activities


(1
)


188



(71
)


77



193FINANCING ACTIVITIESProceeds from issuance of debt third parties










41







41 related parties






1,300



460



(1,760
)


Principal repayments third parties


(83
)


(147
)


(123
)






(353
) related parties






(1,247
)


(397
)


1,644



Short-term borrowings 
    net third parties






103











103Dividends preference shares






(12
)






12



 common shareholders


(15
)


(175
)


(18
)


193



(15
) minority interests










(15
)






(15
)Net receipts from Alcan


5















5Debt issuance costs


(11
)














(11
)Proceeds from issuance of common
    stock in connection with stock plans


2















2Net cash provided by (used in)
    financing activities


(102
)


(178
)


(52
)


89



(243
)Net increase (decrease) in cash and
    cash equivalents


1



1



(36
)






(34
)Effect of exchange rate changes
    on cash balances held in foreign currencies






2



5







7Cash and cash
    equivalents  beginning of year


2



34



64







100Cash and cash
    equivalents  end of year

$
3


$
37


$
33


$



$
73   182




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  NOVELIS
    INC.
  CONDENSED
    CONSOLIDATING AND COMBINING STATEMENT OF CASH FLOWS
  Year Ended December 31, 2005ConsolidatedNon-





andParent


Guarantors


Guarantors


Eliminations


Combined(In millions)OPERATING ACTIVITIESNet cash provided by (used in)
    operating activities

$
181


$
407


$
39


$
(178
)

$
449INVESTING ACTIVITIESCapital expenditures


(19
)


(120
)


(39
)






(178
)Proceeds from sales of assets






10



9







19Proceeds from (advances on) loans
    receivable  net third parties






4



15







19 related parties


(1,171
)


(156
)


(118
)


1,819



374Share repurchase 
    intercompany


400











(400
)


Premiums paid to purchase
    derivative instruments






(57
)










(57
)Net proceeds from settlement of
    derivative instruments


45



94



9







148Net cash provided by (used in)
    investing activities


(745
)


(225
)


(124
)


1,419



325FINANCING ACTIVITIESProceeds from issuance of debt third parties


1,875



825



79







2,779 related parties


40



1,526



253



(1,819
)


Principal repayments third parties


(1,153
)


(574
)


(95
)






(1,822
) related parties


(192
)


(988
)










(1,180
)Short-term borrowings 
    net third parties


2



(47
)


(100
)






(145
) related parties


(30
)


(281
)


9







(302
)Share repurchase 
    intercompany






(400
)






400



Dividends common shareholders


(27
)


(176
)


(2
)


178



(27
) minority interests










(7
)






(7
)Net receipts from (payments to)
    Alcan


100



(21
)


(7
)






72Debt issuance costs


(49
)


(22
)










(71
)Net cash provided by (used in)
    financing activities


566



(158
)


130



(1,241
)


(703
)Net increase in cash and cash
    equivalents


2



24



45







71Effect of exchange rate changes
    on cash balances held in foreign currencies






(2
)










(2
)Cash and cash
    equivalents  beginning of year






12



19







31Cash and cash
    equivalents  end of year

$
2


$
34


$
64


$



$
100   183




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONSOLIDATED AND
 COMBINED
    FINANCIAL STATEMENTS  (Continued)
  NOVELIS
    INC.
  CONDENSED COMBINING STATEMENT OF CASH FLOWS
  Year Ended December 31, 2004Non-Parent


Guarantors


Guarantors


Eliminations


Combined(In millions)OPERATING ACTIVITIESNet cash provided by (used in)
    operating activities

$
(60
)

$
255


$
19


$
(6
)

$
208INVESTING ACTIVITIESCapital expenditures


(6
)


(93
)


(66
)






(165
)Proceeds from sales of assets






15



2







17Business acquisitions 
    net of cash and cash equivalents acquired






1



(1
)






Proceeds from (advances on) loans
    receivable  net


(259
)


895



5



233



874Net cash provided by (used in)
    investing activities


(265
)


818



(60
)


233



726FINANCING ACTIVITIESProceeds from issuance of debt


1,039



1,173



134



(210
)


2,136Principal repayments






(935
)


(63
)






(998
)Short-term borrowings 
    net third parties






(614
)


(160
)






(774
) related parties






166



78



(23
)


221Issuance of preference shares






(32
)


32







Dividends  minority
    interests










(10
)


6



(4
)Net receipts from (payments to)
    Alcan


(714
)


(828
)


30







(1,512
)Net cash provided by (used in)
    financing activities


325



(1,070
)


41



(227
)


(931
)Net increase in cash and cash
    equivalents






3











3Effect of exchange rate changes
    on cash balances held in foreign currencies






1











1Cash and cash
    equivalents  beginning of year






8



19







27Cash and cash
    equivalents  end of year

$



$
12


$
19


$



$
31   184




---



##### Table of Contents



Item 9.
    Changes
    In and Disagreements with Accountants on Accounting and
    Financial Disclosure    Item 9A.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
    Form 10-K Rule 13a-15(e)
  Changes
    in Internal Control Over Financial Reporting and Remediation of
    Previously Disclosed Material Weaknesses
  Form 10-K
    Lack of sufficient resources in our accounting and
    finance organization.
  Inadequate monitoring of non-routine and
    non-systematic transactions.
  Accounting for accrued expenses.
  Accounting for income taxes.
  185




---



##### Table of Contents



Accounting for derivative
    transactions.
  Internal Control-Integrated Framework
  Lack of sufficient resources in our accounting and
    finance organization.
      sub-part Form 10-Q Form 10-K,
  out-of-period and/or
  on-site follow-up
  Inadequate monitoring of non-routine and
    non-systematic transactions.
    186




---



##### Table of Contents



and/or Form 10-Q Form 10-K. and/or
  bi-weekly
  and/or
  Accounting for accrued expenses.
            187




---



##### Table of Contents



Accounting for derivative transactions.
  mark-to-market
  mark-to-market
  mark-to-market
    Remediation
    Plan for Material Weakness Existing as of December 31,
    2006
        on-site
      188




---



##### Table of Contents



Managements
    Report on Internal Control Over Financial Reporting
  Rule 13a-15(f)
  
    Pertain to the maintenance of records that in reasonable detail
    accurately and fairly reflect the transactions and dispositions
    of the assets of the company,
    Provide reasonable assurance that transactions are recorded as
    necessary to permit preparation of financial statements in
    accordance with GAAP, and that receipts and expenditures of the
    company are being made only in accordance with authorizations of
    management and directors of the company, and;
    Provide reasonable assurance regarding prevention or timely
    detection of unauthorized acquisition, use or disposition of the
    companys assets that could have a material effect on the
    companys consolidated financial statements.          189




---



##### Table of Contents



Item 9B.
    Other
    Information   PART III  Item 10.
    Directors
    and Executive Officers of the Registrant  Item 11.
    Executive
    Compensation  Item 12.
    Security
    Ownership of Certain Beneficial Owners and Management and
    Related Stockholder Matters  Item 13.
    Certain
    Relationships and Related Transactions  Item 14.
    Principal
    Accountant Fees and Services  Form 10-K.
 PART IV  Item 15.
    Exhibits
    and Financial Statement Schedules  1.
    Financial
    Statement Schedules    2.
    Exhibits  ExhibitNo.

Description3
.1

Restated Certificate and Articles
    of Incorporation of Novelis Inc. (incorporated by reference to
    Exhibit 3.1 to our
    Form 8-K
    filed on January 7, 2005 (File
    No. 001-32312))3
.2

By-law No. 1 of Novelis Inc.
    (incorporated by reference to Exhibit 3.2 to our
    Form 10 filed on November 17, 2004 (File
    No. 001-32312))4
.1

Shareholder Rights Agreement
    between Novelis Inc. and CIBC Mellon Trust Company (incorporated
    by reference to Exhibit 4.1 to our
    Form 10-K
    filed on March 30, 2005 (File
    No. 001-32312))4
.2

Specimen Certificate of Novelis
    Inc. Common Shares (incorporated by reference to
    Exhibit 4.2 to our Form 10 filed on December 27,
    2004 (File
    No. 001-32312))4
.3

Indenture, relating to the Notes,
    dated as of February 3, 2005, between the Company, the
    guarantors named on the signature pages thereto and The Bank of
    New York Trust Company, N.A., as trustee (incorporated by
    reference to Exhibit 4.1 to our
    Form 8-K
    filed on February 3, 2005 (File
    No. 001-32312))4
.4

Registration Rights Agreement,
    dated as of February 3, 2005, among the Company, the
    guarantors named on the signature pages thereto, Citigroup
    Global Markets Inc., Morgan Stanley & Co. Incorporated
    and UBS Securities LLC, as Representatives of the Initial
    Purchasers (incorporated by reference to Exhibit 4.2 to our
    Form 8-K
    filed on February 3, 2005 (File
    No. 001-32312))4
.5

Form of Note for
    71/4% Senior
    Notes due 2015 (incorporated by reference to Exhibit 4.1 to
    our
    Form S-4
    filed on August 3, 2005 (File
    No. 333-127139))  190




---



##### Table of Contents



ExhibitNo.

Description4
.6

Supplemental Indenture, between
    the Company, Novelis Finances USA LLC, Novelis South America
    Holdings LLC, Aluminum Upstream Holdings LLC and the Bank of New
    York Trust Company, N.A. (incorporated by reference to
    Exhibit 4.6 to our Post-Effective Amendment No. 1 to
    our
    Form S-4
    Registration Statement filed on December 1, 2006 (File
    No. 333-127139))10
.1

Second Waiver, dated as of
    February 9, 2006, under the Credit Agreement dated
    January 7, 2005 among Novelis Inc., Novelis Corporation,
    Novelis Deutschland GmbH, Novelis UK Ltd., Novelis AG, Citigroup
    North America, Inc. and the issuers and lenders a party thereto
    (incorporated by reference to Exhibit 10.1 to our
    Form 8-K
    filed on February 14, 2006 (File
    No. 001-32312))10
.2*

Employment Agreement of Arnaud de
    Weert (incorporated by reference to Exhibit 10.1 to our
    Form 8-K
    filed on April 3, 2006 (File
    No. 001-32312))10
.3*

Agreement Concerning Transition
    from Employment between Novelis and Geoff Batt dated
    March 31, 2006 (incorporated by reference to
    Exhibit 10.1 to our
    Form 8-K
    filed on April 6, 2006 (File
    No. 001-32312))10
.4

Novelis Founders Performance Award
    Notification for Brian Sturgell dated March 31, 2005, as
    amended and restated as of March 14, 2006 (incorporated by
    reference to Exhibit 10.1 to our
    Form 8-K
    filed on March 20, 2006 (File
    No. 001-32312))10
.5

Novelis Founders Performance Award
    Notification for Martha Brooks dated March 31, 2005
    (incorporated by reference to Exhibit 10.2 to our
    Form 8-K
    filed on March 20, 2006 (File
    No. 001-32312))10
.6

Novelis Founders Performance Award
    Notification for Chris Bark-Jones dated March 31,
    2005(incorporated by reference to Exhibit 10.3 to our
    Form 8-K
    filed on March 20, 2006 (File
    No. 001-32312))10
.7

Novelis Founders Performance Award
    Notification for Jack Morrison dated March 31,
    2005(incorporated by reference to Exhibit 10.4 to our
    Form 8-K
    filed on March 20, 2006 (File
    No. 001-32312))10
.8

Novelis Founders Performance Award
    Notification for Pierre Arseneault dated March 31,
    2005(incorporated by reference to Exhibit 10.5 to our
    Form 8-K
    filed on March 20, 2006 (File
    No. 001-32312))10
.9

Novelis Founders Performance Award
    Notification for Geoff Batt dated March 31,
    2005(incorporated by reference to Exhibit 10.6 to our
    Form 8-K
    filed on March 20, 2006 (File
    No. 001-32312))10
.10

Novelis Founders Performance
    Awards Plan, as amended and restated as of March 14,
    2006(incorporated by reference to Exhibit 10.7 to our
    Form 8-K
    filed on March 20, 2006 (File
    No. 001-32312))10
.11*

Description of Retention Payment
    for Geoff Batt (incorporated by reference to Exhibit 10.8
    to our
    Form 8-K
    filed on March 20, 2006 (File
    No. 001-32312))10
.12*

Third Waiver, dated as of
    April 12, 2006, under the Credit Agreement dated
    January 7, 2005 among Novelis Inc., Novelis Corporation,
    Novelis Deutschland GmbH, Novelis UK Ltd., Novelis AG, Citigroup
    North America, Inc. and the issuers and lenders a party thereto
    (incorporated by reference to Exhibit 10.1 to our
    Form 8-K
    filed on April 18, 2006 (File
    No. 001-32312))10
.13

Fourth Waiver, dated as of
    May 10, 2006, under the Credit Agreement dated
    January 7, 2005 among Novelis Inc., Novelis Corporation,
    Novelis Deutschland GmbH, Novelis UK Ltd., Novelis AG, Citigroup
    North America, Inc. and the issuers and lenders a party thereto
    (incorporated by reference to Exhibit 10.1 to our
    Form 8-K
    filed on May 16, 2006 (File
    No. 001-32312))10
.14*

Transition Agreement, dated
    June 15, 2006, by and between Jo-Ann Longworth and Novelis
    Inc. (incorporated by reference to Exhibit 10.45 to our
    Annual Report on
    Form 10-K
    filed on August 25, 2006 (File
    No. 001-32312))10
.15*

Release and Separation Agreement,
    dated June 15, 2006, by and between Jo-Ann Longworth and
    Novelis Corp. (incorporated by reference to Exhibit 10.46
    to our Annual Report on
    Form 10-K
    filed on August 25, 2006 (File
    No. 001-32312))  191




---



##### Table of Contents



ExhibitNo.

Description10
.16*

Transition Agreement, dated
    June 28, 2006, by and between Geoff Batt and Novelis Inc.
    (incorporated by reference to Exhibit 10.47 to our Annual
    Report on
    Form 10-K
    filed on August 25, 2006 (File
    No. 001-32312))10
.17*

Release and Separation Agreement,
    dated June 28, 2006, by and between Geoff Batt and Novelis
    Corp. (incorporated by reference to Exhibit 10.48 to our
    Annual Report on
    Form 10-K
    filed on August 25, 2006 (File
    No. 001-32312))10
.18*

Offer Letter, dated
    February 23, 2006, by and between Robert M. Patterson and
    Novelis Inc. (incorporated by reference to Exhibit 10.49 to
    our Annual Report on
    Form 10-K
    filed on August 25, 2006 (File
    No. 001-32312))10
.19*

Offer Letter, dated June 23,
    2006, by and between Rick Dobson and Novelis Inc. (incorporated
    by reference to Exhibit 10.50 to our Annual Report on
    Form 10-K
    filed on August 25, 2006 (File
    No. 001-32312))10
.20*

Addendum to Rick Dobson Offer
    Letter, dated June 20, 2006, by and between Rick Dobson and
    Novelis Inc. (incorporated by reference to Exhibit 10.51 to
    our Annual Report on
    Form 10-K
    filed on August 25, 2006 (File
    No. 001-32312))10
.21

Fifth Waiver, dated as of
    August 11, 2006, under the Credit Agreement dated
    January 7, 2005 among Novelis Inc., Novelis Corporation,
    Novelis Deutschland GmbH, Novelis UK Ltd., Novelis AG, Citigroup
    North America, Inc. and the issuers and lenders a party thereto
    (incorporated by reference to Exhibit 10.1 to our
    Form 8-K
    filed on August 17, 2006 (File
    No. 001-32312))10
.22*

Form of Change in Control
    Agreement between Novelis Inc. and certain executive officers
    (incorporated by reference to Exhibit 99.1 to our
    Form 8-K
    filed on September 27, 2006 (File
    No. 001-32312))10
.23*

Form of Change in Control
    Agreement between Novelis Inc. and certain executive officers
    and key employees (incorporated by reference to
    Exhibit 99.2 to our
    Form 8-K
    filed on September 27, 2006 (File
    No. 001-32312))10
.24*

Form of Recognition Agreement
    between Novelis Inc. and certain executive officers and key
    employees (incorporated by reference to Exhibit 99.3 to our
    Form 8-K
    filed on September 27, 2006 (File
    No. 001-32312))10
.25*

Letter Agreement between Novelis
    Inc. and William T. Monahan dated as of October 11, 2006
    (incorporated by reference to Exhibit 10.1 to our
    Form 8-K
    filed on October 17, 2006 (File
    No. 001-32312))10
.26

Amendment No. 2 to Credit
    Agreement, dated October 16, 2006 (incorporated by
    reference to Exhibit 10.1 to our
    Form 8-K
    filed on October 19, 2006 (File
    No. 001-32312))10
.27*

Novelis Conversion Plan of 2005,
    as amended on October 19, 2006 (incorporated by reference
    to Exhibit 10.1 to our
    Form 8-K
    filed on October 25, 2006 (File
    No. 001-32312))10
.28*

Letter Agreement between Novelis
    Inc. and David Godsell dated as of November 10, 2004
    (incorporated by reference to Exhibit 10.1 to our
    Form 8-K
    filed on October 26, 2006 (File
    No. 001-32312))10
.29*

Letter Agreement, dated
    October 20, 2006, by and between Novelis Inc. and Thomas
    Walpole (incorporated by reference to Exhibit 10.1 to our
    Form 8-K
    filed on October 26, 2006 (File
    No. 001-32312))10
.30*

Form of SAR Award (incorporated by
    reference to Exhibit 10.3 to our
    Form 8-K
    filed on November 1, 2006 (File
    No. 001-32312))10
.31*

Novelis Inc. 2006 Incentive Plan,
    as amended (incorporated by reference to Exhibit 10.1 to
    our
    Form 8-K
    filed on November 1, 2006 (File
    No. 001-32312))10
.32*

Form of Non-Qualified Stock Option
    Award (incorporated by reference to Exhibit 10.2 to our
    Form 8-K
    filed on November 1, 2006 (File
    No. 001-32312))10
.33*

Separation and Release Agreement
    between Novelis Inc. and Brian Sturgell dated October 26,
    2006 (incorporated by reference to Exhibit 10.60.1 to our
    Post-Effective Amendment No. 1 to our
    Form S-4
    Registration Statement filed on December 1, 2006 (File
    No. 333-127139))  192




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##### Table of Contents



ExhibitNo.

Description11
.1

Statement regarding computation of
    per share earnings (incorporated by reference to Item 8.
    Financial Statements and Supplementary Data 
    Note 19  Earnings per Share to the Consolidated
    and Combined Financial Statements.)21
.1

List of subsidiaries of Novelis
    Inc.23
.1

Consent of PricewaterhouseCoopers
    LLP23
.2

Consent of PricewaterhouseCoopers
    LLP31
.1

Section 302 Certification of
    Principal Executive Officer31
.2

Section 302 Certification of
    Principal Financial Officer32
.1

Section 906 Certification of
    Principal Executive Officer32
.2

Section 906 Certification of
    Principal Financial Officer     *
    
    Indicates a management contract or compensatory plan or
    arrangement.  193




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##### Table of Contents



SIGNATURES
      By
    /s/  Edward
    A. Blechschmidt   Title:
    Acting Chief Executive Officer      /s/  Edward
    A. BlechschmidtEdward
    A. Blechschmidt

(Director and Acting Principal
    Executive Officer)

Date: March 1, 2007/s/  Rick
    DobsonRick
    Dobson

(Principal Financial Officer)

Date: March 1, 2007/s/  Robert
    M. PattersonRobert
    M. Patterson

(Principal Accounting Officer)

Date: March 1, 2007/s/  William
    T. MonahanWilliam
    T. Monahan

(Chairman of the Board of
    Directors)

Date: March 1, 2007/s/  Charles
    G. CavellCharles
    G. Cavell

(Director)

Date: March 1, 2007/s/  Clarence
    J. ChandranClarence
    J. Chandran

(Director)

Date: March 1, 2007/s/  C.
    Roberto CordaroC.
    Roberto Cordaro

(Director)

Date: March 1, 2007/s/  Helmut
    EschweyHelmut
    Eschwey

(Director)

Date: March 1, 2007/s/  David
    J. FitzPatrickDavid
    J. FitzPatrick

(Director)

Date: March 1, 2007/s/  Suzanne
    LabargeSuzanne
    Labarge

(Director)

Date: March 1, 2007/s/  Patrick
    J. MonahanPatrick
    J. Monahan

(Director)

Date: March 1, 2007  194




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##### Table of Contents



/s/  Sheldon
    PlenerSheldon
    Plener

(Director)

Date: March 1, 2007/s/  Rudolf
    RupprechtRudolf
    Rupprecht

(Director)

Date: March 1, 2007/s/  Kevin
    M. TwomeyKevin
    M. Twomey

(Director)

Date: March 1, 2007/s/  Edward
    V. YangEdward
    V. Yang

(Director)

Date: March 1, 2007   195




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNo.

Description3
.1

Restated Certificate and Articles
    of Incorporation of Novelis Inc. (incorporated by reference to
    Exhibit 3.1 to our
    Form 8-K
    filed on January 7, 2005 (File
    No. 001-32312))3
.2

By-law No. 1 of Novelis Inc.
    (incorporated by reference to Exhibit 3.2 to our
    Form 10 filed on November 17, 2004 (File
    No. 001-32312))4
.1

Shareholder Rights Agreement
    between Novelis Inc. and CIBC Mellon Trust Company (incorporated
    by reference to Exhibit 4.1 to our
    Form 10-K
    filed on March 30, 2005 (File
    No. 001-32312))4
.2

Specimen Certificate of Novelis
    Inc. Common Shares (incorporated by reference to
    Exhibit 4.2 to our Form 10 filed on December 27,
    2004 (File
    No. 001-32312))4
.3

Indenture, relating to the Notes,
    dated as of February 3, 2005, between the Company, the
    guarantors named on the signature pages thereto and The Bank of
    New York Trust Company, N.A., as trustee (incorporated by
    reference to Exhibit 4.1 to our
    Form 8-K
    filed on February 3, 2005 (File
    No. 001-32312))4
.4

Registration Rights Agreement,
    dated as of February 3, 2005, among the Company, the
    guarantors named on the signature pages thereto, Citigroup
    Global Markets Inc., Morgan Stanley & Co. Incorporated
    and UBS Securities LLC, as Representatives of the Initial
    Purchasers (incorporated by reference to Exhibit 4.2 to our
    Form 8-K
    filed on February 3, 2005 (File
    No. 001-32312))4
.5

Form of Note for
    71/4% Senior
    Notes due 2015 (incorporated by reference to Exhibit 4.1 to
    our
    Form S-4
    filed on August 3, 2005 (File
    No. 333-127139))4
.6

Supplemental Indenture, between
    the Company, Novelis Finances USA LLC, Novelis South America
    Holdings LLC, Aluminum Upstream Holdings LLC and the Bank of New
    York Trust Company, N.A. (incorporated by reference to
    Exhibit 4.6 to our Post-Effective Amendment No. 1 to
    our
    Form S-4
    Registration Statement filed on December 1, 2006 (File
    No. 333-127139))10
.1

Second Waiver, dated as of
    February 9, 2006, under the Credit Agreement dated
    January 7, 2005 among Novelis Inc., Novelis Corporation,
    Novelis Deutschland GmbH, Novelis UK Ltd., Novelis AG, Citigroup
    North America, Inc. and the issuers and lenders a party thereto
    (incorporated by reference to Exhibit 10.1 to our
    Form 8-K
    filed on February 14, 2006 (File
    No. 001-32312))10
.2*

Employment Agreement of Arnaud de
    Weert (incorporated by reference to Exhibit 10.1 to our
    Form 8-K
    filed on April 3, 2006 (File
    No. 001-32312))10
.3*

Agreement Concerning Transition
    from Employment between Novelis and Geoff Batt dated
    March 31, 2006 (incorporated by reference to
    Exhibit 10.1 to our
    Form 8-K
    filed on April 6, 2006 (File
    No. 001-32312))10
.4

Novelis Founders Performance Award
    Notification for Brian Sturgell dated March 31, 2005, as
    amended and restated as of March 14, 2006 (incorporated by
    reference to Exhibit 10.1 to our
    Form 8-K
    filed on March 20, 2006 (File
    No. 001-32312))10
.5

Novelis Founders Performance Award
    Notification for Martha Brooks dated March 31, 2005
    (incorporated by reference to Exhibit 10.2 to our
    Form 8-K
    filed on March 20, 2006 (File
    No. 001-32312))10
.6

Novelis Founders Performance Award
    Notification for Chris Bark-Jones dated March 31,
    2005(incorporated by reference to Exhibit 10.3 to our
    Form 8-K
    filed on March 20, 2006 (File
    No. 001-32312))10
.7

Novelis Founders Performance Award
    Notification for Jack Morrison dated March 31,
    2005(incorporated by reference to Exhibit 10.4 to our
    Form 8-K
    filed on March 20, 2006 (File
    No. 001-32312))10
.8

Novelis Founders Performance Award
    Notification for Pierre Arseneault dated March 31,
    2005(incorporated by reference to Exhibit 10.5 to our
    Form 8-K
    filed on March 20, 2006 (File
    No. 001-32312))10
.9

Novelis Founders Performance Award
    Notification for Geoff Batt dated March 31,
    2005(incorporated by reference to Exhibit 10.6 to our
    Form 8-K
    filed on March 20, 2006 (File
    No. 001-32312))  196




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##### Table of Contents



ExhibitNo.

Description10
.10

Novelis Founders Performance
    Awards Plan, as amended and restated as of March 14,
    2006(incorporated by reference to Exhibit 10.7 to our
    Form 8-K
    filed on March 20, 2006 (File
    No. 001-32312))10
.11*

Description of Retention Payment
    for Geoff Batt (incorporated by reference to Exhibit 10.8
    to our
    Form 8-K
    filed on March 20, 2006 (File
    No. 001-32312))10
.12*

Third Waiver, dated as of
    April 12, 2006, under the Credit Agreement dated
    January 7, 2005 among Novelis Inc., Novelis Corporation,
    Novelis Deutschland GmbH, Novelis UK Ltd., Novelis AG, Citigroup
    North America, Inc. and the issuers and lenders a party thereto
    (incorporated by reference to Exhibit 10.1 to our
    Form 8-K
    filed on April 18, 2006 (File
    No. 001-32312))10
.13

Fourth Waiver, dated as of
    May 10, 2006, under the Credit Agreement dated
    January 7, 2005 among Novelis Inc., Novelis Corporation,
    Novelis Deutschland GmbH, Novelis UK Ltd., Novelis AG, Citigroup
    North America, Inc. and the issuers and lenders a party thereto
    (incorporated by reference to Exhibit 10.1 to our
    Form 8-K
    filed on May 16, 2006 (File
    No. 001-32312))10
.14*

Transition Agreement, dated
    June 15, 2006, by and between Jo-Ann Longworth and Novelis
    Inc. (incorporated by reference to Exhibit 10.45 to our
    Annual Report on
    Form 10-K
    filed on August 25, 2006 (File
    No. 001-32312))10
.15*

Release and Separation Agreement,
    dated June 15, 2006, by and between Jo-Ann Longworth and
    Novelis Corp. (incorporated by reference to Exhibit 10.46
    to our Annual Report on
    Form 10-K
    filed on August 25, 2006 (File
    No. 001-32312))10
.16*

Transition Agreement, dated
    June 28, 2006, by and between Geoff Batt and Novelis Inc.
    (incorporated by reference to Exhibit 10.47 to our Annual
    Report on
    Form 10-K
    filed on August 25, 2006 (File
    No. 001-32312))10
.17*

Release and Separation Agreement,
    dated June 28, 2006, by and between Geoff Batt and Novelis
    Corp. (incorporated by reference to Exhibit 10.48 to our
    Annual Report on
    Form 10-K
    filed on August 25, 2006 (File
    No. 001-32312))10
.18*

Offer Letter, dated
    February 23, 2006, by and between Robert M. Patterson and
    Novelis Inc. (incorporated by reference to Exhibit 10.49 to
    our Annual Report on
    Form 10-K
    filed on August 25, 2006 (File
    No. 001-32312))10
.19*

Offer Letter, dated June 23,
    2006, by and between Rick Dobson and Novelis Inc. (incorporated
    by reference to Exhibit 10.50 to our Annual Report on
    Form 10-K
    filed on August 25, 2006 (File
    No. 001-32312))10
.20*

Addendum to Rick Dobson Offer
    Letter, dated June 20, 2006, by and between Rick Dobson and
    Novelis Inc. (incorporated by reference to Exhibit 10.51 to
    our Annual Report on
    Form 10-K
    filed on August 25, 2006 (File
    No. 001-32312))10
.21

Fifth Waiver, dated as of
    August 11, 2006, under the Credit Agreement dated
    January 7, 2005 among Novelis Inc., Novelis Corporation,
    Novelis Deutschland GmbH, Novelis UK Ltd., Novelis AG, Citigroup
    North America, Inc. and the issuers and lenders a party thereto
    (incorporated by reference to Exhibit 10.1 to our
    Form 8-K
    filed on August 17, 2006 (File
    No. 001-32312))10
.22*

Form of Change in Control
    Agreement between Novelis Inc. and certain executive officers
    (incorporated by reference to Exhibit 99.1 to our
    Form 8-K
    filed on September 27, 2006 (File
    No. 001-32312))10
.23*

Form of Change in Control
    Agreement between Novelis Inc. and certain executive officers
    and key employees (incorporated by reference to
    Exhibit 99.2 to our
    Form 8-K
    filed on September 27, 2006 (File
    No. 001-32312))10
.24*

Form of Recognition Agreement
    between Novelis Inc. and certain executive officers and key
    employees (incorporated by reference to Exhibit 99.3 to our
    Form 8-K
    filed on September 27, 2006 (File
    No. 001-32312))10
.25*

Letter Agreement between Novelis
    Inc. and William T. Monahan dated as of October 11, 2006
    (incorporated by reference to Exhibit 10.1 to our
    Form 8-K
    filed on October 17, 2006 (File
    No. 001-32312))  197




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##### Table of Contents



ExhibitNo.

Description10
.26

Amendment No. 2 to Credit
    Agreement, dated October 16, 2006 (incorporated by
    reference to Exhibit 10.1 to our
    Form 8-K
    filed on October 19, 2006 (File
    No. 001-32312))10
.27*

Novelis Conversion Plan of 2005,
    as amended on October 19, 2006 (incorporated by reference
    to Exhibit 10.1 to our
    Form 8-K
    filed on October 25, 2006 (File
    No. 001-32312))10
.28*

Letter Agreement between Novelis
    Inc. and David Godsell dated as of November 10, 2004
    (incorporated by reference to Exhibit 10.1 to our
    Form 8-K
    filed on October 26, 2006 (File
    No. 001-32312))10
.29*

Letter Agreement, dated
    October 20, 2006, by and between Novelis Inc. and Thomas
    Walpole (incorporated by reference to Exhibit 10.1 to our
    Form 8-K
    filed on October 26, 2006 (File
    No. 001-32312))10
.30*

Form of SAR Award (incorporated by
    reference to Exhibit 10.3 to our
    Form 8-K
    filed on November 1, 2006 (File
    No. 001-32312))10
.31*

Novelis Inc. 2006 Incentive Plan,
    as amended (incorporated by reference to Exhibit 10.1 to
    our
    Form 8-K
    filed on November 1, 2006 (File
    No. 001-32312))10
.32*

Form of Non-Qualified Stock Option
    Award (incorporated by reference to Exhibit 10.2 to our
    Form 8-K
    filed on November 1, 2006 (File
    No. 001-32312))10
.33*

Separation and Release Agreement
    between Novelis Inc. and Brian Sturgell dated October 26,
    2006 (incorporated by reference to Exhibit 10.60.1 to our
    Post-Effective Amendment No. 1 to our
    Form S-4
    Registration Statement filed on December 1, 2006 (File
    No. 333-127139))11
.1

Statement regarding computation of
    per share earnings (incorporated by reference to Item 8.
    Financial Statements and Supplementary Data 
    Note 19  Earnings per Share to the Consolidated
    and Combined Financial Statements.)21
.1

List of subsidiaries of Novelis
    Inc.23
.1

Consent of PricewaterhouseCoopers
    LLP23
.2

Consent of PricewaterhouseCoopers
    LLP31
.1

Section 302 Certification of
    Principal Executive Officer31
.2

Section 302 Certification of
    Principal Financial Officer32
.1

Section 906 Certification of
    Principal Executive Officer32
.2

Section 906 Certification of
    Principal Financial Officer     *
    
    Indicates a management contract or compensatory plan or
    arrangement.  198