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10-K 1 d257313d10k.htm FORM 10-K

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UNITED STATES

SECURITIES AND EXCHANGECOMMISSION

WASHINGTON, D.C. 20549

FORM10-K

[ x] ANNUALREPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

For The Fiscal Year EndedDecember 31, 2011

OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number 1-3610

ALCOA INC.

(Exact name of registrant as specified in its charter)

Pennsylvania 25-0317820

(State of incorporation) (I.R.S. Employer Identification No.)

390 Park Avenue, NewYork, NewYork 10022-4608

(Address of principal executive offices) (Zip code)

Registrant’s telephone numbers:

Investor Relations------------— (212) 836-2674

Office of the Secretary-------—(212) 836-2732

Securities registeredpursuant to Section 12(b) of the Act:

Title of each class Name of each exchange on which registered

Common Stock, par value $1.00 New York Stock Exchange

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

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities

Act. Yes ü No .

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange

Act. Yes No ü.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90

days. Yes ü No .

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every

Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)

during the preceding 12 months. Yes ü No .

Indicate by check mark if disclosure of delinquent filers pursuant to Item405 of Regulation S-K is not contained herein, and will

not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference

in Part III of this Form10-K or any amendment to this Form10-K. [ ]

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller

reporting company. See the definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule

12b-2 of the Exchange Act.

Large accelerated filer [ü] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No ü.

The aggregate market value of the outstanding common stock, other than shares held by persons who may be deemed affiliates
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of the registrant, as of the last business day of the registrant’s most recently completed second fiscal quarter was

approximately $17 billion. As of February 10, 2012, there were 1,066,107,670 shares of common stock, par value $1.00 per share,

of the registrant outstanding.

Documents incorporatedby reference.

Part III of this Form10-K incorporates by reference certain information fromthe registrant’s definitive Proxy Statement for its

2012 Annual Meeting of Shareholders to be filed pursuant to Regulation 14A (Proxy Statement).
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TABLEOF CONTENTS

Page(s)

Part I

Item1. Business 3

Item1A. Risk Factors 23

Item1B. Unresolved Staff Comments 30

Item2. Properties 30

Item3. Legal Proceedings 31

Item4. Mine Safety Disclosures 41

Part II

Item5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

Securities 42

Item6. Selected Financial Data 45

Item7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 45

Item7A. Quantitative and Qualitative Disclosures About Market Risk 73

Item8. Financial Statements and Supplementary Data 74

Item9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 154

Item9A. Controls and Procedures 154

Item9B. Other Information 154

Part III

Item10. Directors, Executive Officers and Corporate Governance 155

Item11. Executive Compensation 155

Item12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 155

Item13. Certain Relationships and Related Transactions, and Director Independence 156

Item14. Principal Accounting Fees and Services 156

Part IV

Item15. Exhibits, Financial Statement Schedules 157

Signatures 167

Note on Incorporation by Reference

In this Form10-K, selected items of information and data are incorporated by reference to portions of the Proxy Statement.

Unless otherwise provided herein, any reference in this report to disclosures in the Proxy Statement shall constitute

incorporation by reference of only that specific disclosure into this Form10-K.
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PART I

Item 1. Business.

General

Formed in 1888, Alcoa Inc. is a Pennsylvania corporation with its principal office in New York, New York. In this report, unless

the context otherwise requires, “Alcoa” or the “company” means Alcoa Inc. and allsubsidiaries consolidated for the purposes

of its financialstatements.

The company’s Internet address is http://www.alcoa.com. Alcoa makes available free of charge on or through its website its

annual report on Form10-K, quarterly reports on Form10-Q, current reports on Form8-K, and amendments to those reports

filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable

after the company electronically files such material with, or furnishes it to, the Securities and Exchange Commission (SEC). The

SEC maintains an Internet site that contains these reports at http://www.sec.gov.

Forward-Looking Statements

This report contains (and oral communications made by Alcoa may contain) statements that relate to future events and

expectations and, as such, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform

Act of 1995. Forward-looking statements include those containing such words as “anticipates,” “believes,” “estimates,”

“expects,” “forecast,” “hopes,” “outlook,” “projects,” “should,” “targets,” “will,” “will likely result,” or other words of similar

meaning. Allstatements that reflect Alcoa’s expectations, assumptions or projections about the future other than statements of

historical fact are forward-looking statements, including, without limitation, forecasts concerning aluminumindustry growth or

other trend projections, anticipated financial results or operating performance, and statements about Alcoa’s strategies,

objectives, goals, targets, outlook, and business and financial prospects. Forward-looking statements are subject to a number

of known and unknown risks, uncertainties and other factors and are not guarantees of future performance. Actual results,

performance or outcomes may differ materially fromthose expressed in or implied by those forward-looking statements. For a

discussion of some of the specific factors that may cause Alcoa’s actual results to differ materially fromthose projected in any

forward-looking statements, see the following sections of this report: Part I, Item1A. (Risk Factors), Part II, Item7.

(Management’s Discussion and Analysis of Financial Condition and Results of Operations), including the disclosures under

Segment Information and Critical Accounting Policies and Estimates, and Note N and the Derivatives Section of Note X to the

Consolidated Financial Statements in Part II, Item8. (Financial Statements and Supplementary Data). Alcoa disclaims any

intention or obligation to update publicly any forward-looking statements, whether in response to new information, future

events or otherwise, except as required by applicable law.

Overview

Alcoa is the world leader in the production and management of primary aluminum, fabricated aluminum, and alumina combined,

through its active and growing participation in all major aspects of the industry: technology, mining, refining, smelting,

fabricating, and recycling. Aluminumis a commodity that is traded on the London Metal Exchange (LME) and priced daily

based on market supply and demand. Aluminumand alumina represent more than 80% of Alcoa’s revenues, and the price of

aluminuminfluences the operating results of Alcoa. Nonaluminumproducts include precision castings and aerospace and

industrial fasteners. Alcoa’s products are used worldwide in aircraft, automobiles, commercial transportation, packaging,

building and construction, oil and gas, defense, consumer electronics, and industrial applications.

Alcoa is a global company operating in 31 countries. Based upon the country where the point of sale occurred, the U.S. and

Europe generated 49% and 27%, respectively, of Alcoa’s sales in 2011. In addition, Alcoa has investments and operating

activities in, among others, Australia, Brazil, China, Guinea, Iceland, Russia, and Saudi Arabia, all of which

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present opportunities for substantial growth. Governmental policies, laws and regulations, and other economic factors,

including inflation and fluctuations in foreign currency exchange rates and interest rates, affect the results of operations in

these countries.

Alcoa’s operations consist of four worldwide reportable segments: Alumina, Primary Metals, Flat-Rolled Products, and

Engineered Products and Solutions.

Description of the Business

Information describing Alcoa’s businesses can be found on the indicated pages of this report:

Item Page(s)

Discussion of Recent Business Developments:

Management’s Discussion and Analysis of Financial Condition and Results of Operations:

Overview—Results of Operations (Earnings Summary) 47

Notes to Consolidated Financial Statements:

Note D. Restructuring and Other Charges 95

Note F. Acquisitions and Divestitures 100

Segment Information:

Business Descriptions, Principal Products, Principal Markets, Methods of Distribution, Seasonality and

Dependence Upon Customers:

Alumina 31

Primary Metals 31

Flat-Rolled Products 31

Engineered Products and Solutions 31

Financial Information about Segments and Financial Information about Geographic Areas:

Note Q. Segment and Geographic Area Information 120

The following charts and related discussion of the company’s Bauxite Interests, Alumina Refining and Primary Aluminum

Facilities and Capacities, Flat-Rolled Products, Engineered Products and Solutions and Corporate Facilities provide additional

description of Alcoa’s businesses. The Alumina segment primarily consists of a series of affiliated operating entities referred to

as Alcoa World Alumina and Chemicals (AWAC). Alcoa owns 60% and Alumina Limited owns 40% of these individual

entities. For more information on AWAC, see Exhibit Nos. 10(a) through 10(f)(1) to this report.

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Bauxite Interests

Aluminumis one of the most plentiful elements in the earth’s crust. Aluminumis produced primarily frombauxite, an ore

containing aluminumin the formof aluminumoxide, commonly referred to as alumina. Aluminumis made by extracting alumina

frombauxite and then removing oxygen fromthe alumina. Alcoa processes most of the bauxite that it mines into alumina. The

company obtains bauxite fromits own resources and fromthose belonging to the AWAC enterprise, located in the countries

listed in the chart below, as well as pursuant to both long-termand short-termcontracts and mining leases. In 2011, Alcoa

consumed 43.0 million metric tons (mt) of bauxite fromAWAC and its own resources, 6.4 million mt fromrelated third parties

and 1.1 million mt fromunrelated third parties. Alcoa’s present sources of bauxite are sufficient to meet the forecasted

requirements of its alumina refining operations for the foreseeable future. The following table provides information regarding

the company’s bauxite interests:

Alcoa Active Bauxite Interests

Country Project Owners’ Mining Rights (% Entitlement)

Expiration

Date of

Mining

Rights

Australia Darling Range Mines Alcoa of Australia Limited (AofA) (100%) 2045

Brazil Poços de Caldas Alcoa Alumínio S.A. (Alumínio) (100%) 2020

Trombetas Mineração Rio do Norte S.A. (MRN) (100%) 2046

Juruti Alcoa World Alumina Brasil Ltda. (AWA Brasil) (100%) 2100

Guinea Boké Compagnie des Bauxites de Guinée (CBG) (100%) 2038

Jamaica Clarendon/Manchester

Plateau

Alcoa Minerals of Jamaica, L.L.C. (55%)

Clarendon Alumina Production Ltd. (45%) 2042

Suriname Caramacca Suriname AluminumCompany, L.L.C. (Suralco) (55%)

N.V. Alcoa Minerals of Suriname (AMS) (45%) 2012

Coermotibo Suralco (55%)

AMS (45%) 2033

Kaimangrasi Suralco (55%)

AMS (45%) 2033

Klaverblad Suralco (55%)

AMS (45%) 2033

Alcoa also has interests at the following locations that are bauxite resources which do not currently produce bauxite: Cape

Bougainville and Mitchell Plateau in Australia; Az Zabirah in the Kingdomof Saudi Arabia (currently scheduled for

completion in 2014 and initially expected to produce 4 million mtpy); and Brownsberg, Coermotibo DS, Lely Mountains,

and Nassau, all in eastern Suriname.

This entity is part of the AWAC group of companies and is owned 60% by Alcoa and 40% by Alumina Limited.

Alumínio is owned 100% by Alcoa.

Brazilian mineral legislation does not establish the duration of mining concessions. The concession remains in force until

the exhaustion of the deposit. The company estimates that (i) the concessions at Poços de Caldas will last at least until

2020, (ii) the concessions at Trombetas will last until 2046 and (iii) the concessions at Juruti will last until 2100. Depending,

however, on actual and future needs, the rate at which the deposits are explored and government approval is obtained, the

concessions may be extended to (or expire at) a later (or an earlier) date.

Alumínio holds an 8.58% total interest, Alcoa World Alumina Brasil Ltda. (formerly Abalco S.A., which merged with Alcoa

World Alumina Brasil Ltda. in December 2008) (AWA Brasil) holds a 4.62% total interest and Alcoa World Alumina LLC

(AWA LLC) holds a 5% total interest in MRN. AWA Brasil and AWA LLC are both part of the AWAC group of

companies and are owned 60% by Alcoa and 40% by Alumina Limited. MRN is jointly owned with affiliates of Rio Tinto

Alcan Inc., Companhia Brasileira de Alumínio, Companhia Vale do Rio Doce, BHP Billiton Plc (BHP

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Billiton) and Norsk Hydro. Alumínio, AWA Brasil, and AWA LLC purchase bauxite fromMRN under long-termsupply

contracts.

In September 2009, development of a new bauxite mine was completed in Juruti, state of Para in northern Brazil. The mine is

fully operational and produced 2.6 million mt in 2010 and 3.8 million mt in 2011. In 2012 production is expected to rise to

4.4 million mt.

AWA LLC owns a 45% interest in Halco (Mining), Inc. Halco owns 100% of Boké Investment Company, a Delaware

company, which owns 51% of CBG. The Guinean Government owns 49% of CBG, which has the exclusive right through

2038 to develop and mine bauxite in certain areas within a 10,000 square-mile concession in northwestern Guinea.

AWA LLC has a bauxite purchase contract with CBGthat will provide Alcoa with bauxite through 2013.

Clarendon Alumina Production Ltd. is wholly-owned by the Government of Jamaica.

AWA LLC owns 100% of N.V. Alcoa Minerals of Suriname (AMS). AWA LLC is part of the AWAC group of companies

and is owned 60% by Alcoa and 40% by Alumina Limited.

Subject to Suriname government approval of a pending five-year extension request, mining rights at Caramacca will expire

this operating year 2012. Rights at the remaining Suriname locations all extend until 2033. It is likely that all Suriname

current bauxite resources will be exhausted within the next several years. Alcoa is actively exploring and evaluating

alternative sources of bauxite in Suriname. Approximately 1.6 million mt of bauxite was added to the reserves in 2011 from

greenfield exploration in the current concession, and the development of the Nassau Plateau bauxite is entering its final

phase.

Kingdom of Saudi Arabia Joint Venture

In December 2009, Alcoa and Saudi Arabian Mining Company (Ma’aden) entered into an agreement setting forth the terms of a

joint venture between themto develop a fully integrated aluminumcomplexin the Kingdomof Saudi Arabia. In its initial

phases, the complexwill include a bauxite mine with an initial capacity of 4 million mtpy; an alumina refinery with an initial

capacity of 1.8 million mtpy; an aluminumsmelter with an initial capacity of ingot, slab and billet of 740,000 mtpy; and a rolling

mill with initial capacity of 380,000 mtpy. The mill is expected to focus initially on the production of sheet, end and tab stock for

the manufacture of aluminumcans, and potentially other products to serve the construction, automotive, and other industries.

The refinery, smelter and rolling mill will be established within the new industrial zone of Ras Al Khair (formerly Ras Az Zawr)

on the east coast of the Kingdomof Saudi Arabia. First production fromthe aluminumsmelter and rolling mill is anticipated in

2013, and first production fromthe mine and refinery is expected in 2014.

Total capital investment is expected to be approximately $10.8 billion (SAR 40.5 billion). Ma’aden owns a 74.9% interest in the

joint venture. Alcoa owns a 25.1% interest in the smelter and rolling mill, with the AWAC group having a 25.1% interest in the

mine and refinery. For additional information regarding the joint venture, see the Equity Investments section of Note I to the

Consolidated Financial Statements in Part II, Item8. (Financial Statements and Supplementary Data).

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Alumina Refining Facilities andCapacity

Alcoa is the world’s leading producer of alumina. Alcoa’s alumina refining facilities and its worldwide alumina capacity are

shown in the following table:

Alcoa Worldwide Alumina Refining Capacity

Country Facility

Owners

(% of Ownership)

Nameplate

Capacity

(000 MTPY)

Alcoa

Consolidated

Capacity

(000 MTPY)

Australia Kwinana AofA (100%) 2,190 2,190

Pinjarra AofA (100%) 4,234 4,234

Wagerup AofA (100%) 2,555 2,555

Brazil Poços de Caldas Alumínio (100%) 390 390

São Luís (Alumar) AWA Brasil (39%)

Rio Tinto Alcan Inc. (10%)

Alumínio (15%)

BHP Billiton (36%) 3,500 1,890

Jamaica Jamalco Alcoa Minerals of Jamaica, L.L.C.

(55%)

Clarendon Alumina Production Ltd.

(45%) 1,478 841

Spain San Ciprián Alúmina Española, S.A. (100%) 1,500 1,500

Suriname Suralco Suralco (55%)

AMS (45%) 2,207 2,207

United States Point Comfort, TX AWA LLC (100%) 2,305 2,305

TOTAL 20,359 18,112

Nameplate Capacity is an estimate based on design capacity and normal operating efficiencies and does not necessarily

represent maximumpossible production.

The figures in this column reflect Alcoa’s share of production fromthese facilities. For facilities wholly-owned by AWAC

entities, Alcoa takes 100% of the production.

This entity is part of the AWAC group of companies and is owned 60% by Alcoa and 40% by Alumina Limited.

This entity is owned 100% by Alcoa.

The named company or an affiliate holds this interest.

Clarendon Alumina Production Ltd. is wholly-owned by the Government of Jamaica.

AWA LLC owns 100% of N.V. Alcoa Minerals of Suriname (AMS). AWA LLC is part of the AWAC group of companies

and is owned 60% by Alcoa and 40% by Alumina Limited.

In May 2009, the Suralco alumina refinery announced curtailment of 870,000 mtpy. The decision was made to protect the

long-termviability of the industry in Suriname. The curtailment was aimed at deferring further bauxite extraction until

additional in-country bauxite resources are developed and market conditions for alumina improve. The refinery currently

has approximately 793,000 mtpy of idle capacity.

Reductions in production at Point Comfort resulted mostly fromthe effects of curtailments initiated in late 2008 through

early 2009, as a result of overall market conditions. The reductions included curtailments of approximately 1,500,000 mtpy.

Of that original amount, 384,000 mtpy remain curtailed.

As noted above, Alcoa and Ma’aden entered into an agreement that involves the development of an alumina refinery in the

Kingdomof Saudi Arabia. Initial capacity of the refinery is expected to be 1.8 million mtpy. First production is expected in 2014.

For additional information regarding the joint venture, see the Equity Investments section of Note I to the Consolidated

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Financial Statements in Part II, Item8. (Financial Statements and Supplementary Data).

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The 2.1 million mtpy expansion of the Alumar consortiumalumina refinery in São Luís, Maranhão, completed by the end of

2009, has increased the refinery’s nameplate capacity to approximately 3.5 million mtpy, with Alcoa’s share of such capacity

more than doubling to 1.89 million mtpy based on its 54% ownership stake through Alumínio and AWAC.

In November 2005, Alcoa World Alumina LLC (AWA LLC) and Rio Tinto Alcan Inc. signed a Basic Agreement with the

Government of Guinea that sets forth the framework for development of a 1.5 million mtpy alumina refinery in Guinea. In 2006,

the Basic Agreement was approved by the Guinean National Assembly and was promulgated into law. The Basic Agreement

was originally set to expire in November 2008, but has been extended to November 2012. Pre-feasibility studies were completed

in 2008. Additional feasibility study work was completed in 2011, and further activities are planned for 2012.

In September 2006, Alcoa received environmental approval fromthe Government of Western Australia for expansion of the

Wagerup alumina refinery to a maximumcapacity of 4.7 million mtpy, a potential increase of over 2 million mtpy. This approval

has a termof 5 years and included environmental conditions that must be satisfied before Alcoa can seek construction

approval for the project. The project was suspended in November 2008 due to global economic conditions and the

unavailability of a secure long-termenergy supply in Western Australia. These constraints continue and as such the project

remains under suspension. Alcoa is therefore seeking an extension of the 2006 environmental approval for the expansion for a

further 5 years, with a formal determination expected in spring of 2012.

In 2008, AWAC signed a cooperation agreement with VietnamNational Coal-Minerals Industries Group (Vinacomin) in which

they agreed to conduct a joint feasibility study of the Gia Nghia bauxite mine and alumina refinery project located in Dak Nong

Province in Vietnam’s Central Highlands, with first stage capacity expected to be between 1.0 and 1.5 million mtpy. The

cooperation between AWAC and Vinacomin on Gia Nghia is subject to approval by the Government of Vietnam. If established,

the Gia Nghia venture is expected to be 51% owned by Vinacomin, 40% by AWAC and 9% by others.

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Primary Aluminum Facilities andCapacity

The company’s primary aluminumsmelters and their respective capacities are shown in the following table:

Alcoa Worldwide Smelting Capacity

Country Facility

Owners

(% Of Ownership)

Nameplate

Capacity

(000 MTPY)

Alcoa

Consolidated

Capacity

(000 MTPY)

Australia Point Henry AofA (100%) 190 190

Portland AofA (55%)

CITIC (22.5%)

Marubeni (22.5%) 358

197

Brazil Poços de Caldas Alumínio (100%) 96 96

São Luís (Alumar) Alumínio (60%)

BHP Billiton (40%) 447 268

Canada Baie Comeau, Que. Alcoa (100%) 385 385

Bécancour, Que. Alcoa (74.95%)

Rio Tinto Alcan Inc. (25.05%) 413 310

Deschambault, Que. Alcoa (100%) 260 260

Iceland Fjarðaál Alcoa (100%) 344 344

Italy Fusina Alcoa (100%) 44 44

Portovesme Alcoa (100%) 150 150

Norway Lista Alcoa (100%) 94 94

Mosjøen Alcoa (100%) 188 188

Spain Avilés Alcoa (100%) 93 93

La Coruña Alcoa (100%) 87 87

San Ciprián Alcoa (100%) 228 228

United States Evansville, IN (Warrick) Alcoa (100%) 269 269

Massena East, NY Alcoa (100%) 125 125

Massena West, NY Alcoa (100%) 130 130

Mount Holly, SC Alcoa (50.33%)

Century AluminumCompany (49.67%) 229 115

Alcoa, TN Alcoa (100%) 215 215

Rockdale, TX Alcoa (100%) 267 267

Ferndale, WA (Intalco) Alcoa (100%) 279 279

Wenatchee, WA Alcoa (100%) 184 184

TOTAL 5,075 4,518

Nameplate Capacity is an estimate based on design capacity and normal operating efficiencies and does not necessarily

represent maximumpossible production.

The figures in this column reflect Alcoa’s share of production fromthese facilities.

Figures include the minority interest of Alumina Limited in facilities owned by AofA. Fromthese facilities, Alcoa takes

100% of the production allocated to AofA.

The named company or an affiliate holds this interest.

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In December 2008, approximately 15,000 mtpy annualized production was idled at the Portland facility due to overall market

conditions. In July 2009, an additional 15,000 mtpy annualized production was idled, again, due to overall market

conditions. This production remains idled.

Owned through Rio Tinto Alcan Inc.’s interest in Pechiney Reynolds Québec, Inc., which is owned by Rio Tinto Alcan

Inc. and Alcoa.

In May 2010, Alcoa and the Italian Government agreed to a temporary curtailment of the Fusina smelter. As of June 30,

2010, the Fusina smelter was fully curtailed. Additionally, in January 2012, as part of a restructuring of Alcoa’s global

smelting system, Alcoa announced that it has decided to curtail operations at the Portovesme smelter during the first half

of 2012. This action may lead to the permanent closure of the Portovesme smelter.

In January 2012, Alcoa announced that it will be temporarily idling a portion of the smelters in Avilés and La Coruña. The

company intends for this to be completed within the first half of 2012. Avilés and La Coruna will both be operating at

approximately 50% of capacity.

All production at the Tennessee smelter was idled in March 2009 due to economic conditions. In January 2012, Alcoa

announced that it will permanently shut down and demolish this facility as part of a larger strategy to improve its cost

position and competitiveness.

Between June and November 2008, three of Rockdale’s sixpotlines were idled as a result of uneconomical power prices.

The remaining three operating lines were idled in November 2008 due to uncompetitive power supply and overall market

conditions. In January 2012, Alcoa announced that it will permanently shut down and demolish two of the sixidled

potlines as part of a larger strategy to improve its cost position and competitiveness.

Approximately half of one potline at the Intalco smelter remains idled, or approximately 47,000 mtpy.

One potline at the Wenatchee smelter remains idled, or approximately 41,000 mtpy.

As of December 31, 2011, Alcoa had approximately 644,000 mtpy of idle capacity against total Alcoa Consolidated Capacity of

4,518,000 mtpy. These figures are prior to any changes noted above regarding Rockdale, Tennessee, Avilés, Portovesme and

La Coruña.

In January 2011, Alcoa and the China Power Investment Corporation (CPI) signed a Memorandumof Understanding (MOU) to

collaborate on a broad range of aluminumand energy projects in China and other locations. The projects under consideration

may range frommining, refining, smelting, aluminumfabrication to collaboration on energy projects. In September 2011, Alcoa

and CPI signed a Letter of Intent that provides a framework for the creation of a joint venture, which will focus on producing

high-end fabricated aluminumproducts in China and leverage Alcoa’s and CPI’s existing footprint and capabilities. The new

joint venture will target growth opportunities in the Chinese automotive, aerospace, packaging and consumer electronics

markets.

As noted above, at the end of 2009 Alcoa and Ma’aden entered into an agreement that involves development of an aluminum

smelter in the Kingdomof Saudi Arabia. In 2010, the joint venture entity, Ma’aden AluminiumCompany signed project

financing and broke ground on the construction of the smelter. The smelter is expected to have an initial capacity of ingot, slab

and billet of 740,000 mtpy. First production is expected in 2013.

In 2006, Alcoa and the Government of Iceland, together with the National Power Company (Landsvirkjun) and the National

Transmission Company (Landsnet) began detailed feasibility studies for the development of a 250,000 mtpy aluminumsmelter

at Bakki near Húsavík in north Iceland. In October 2011, Alcoa informed the Government of Iceland, Landsvirkjun and Landsnet

that the power availability and proposed pricing would not support an aluminumsmelter, and that the project would not

continue.

In December 2008, Alcoa and the Brunei Economic Development Board agreed to further extend an existing MOU to enable

more detailed studies into the feasibility of establishing a modern, gas-powered aluminumsmelter in Brunei Darussalam. The

MOU extends a memorandumsigned originally in 2003. Phase one of the feasibility study will determine scope and dimensions

of the proposed facility, power-delivery strategy, location, as well as an associated port and infrastructure. At completion of

phase one, the parties will determine whether a more detailed phase two study

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is warranted. If completed, it is expected that the smelter would have an initial operating capacity of 360,000 mtpy with the

potential for future increase. In 2011, the MOU was further extended to enable determination of feasibility.

In 2007, Alcoa and Greenland Home Rule Government entered into an MOU regarding cooperation on a feasibility study for an

aluminumsmelter with a 360,000 mtpy capacity in Greenland. The MOU also encompasses a hydroelectric power systemand

related infrastructure improvements, including a port. In 2008, Greenland’s parliament allocated funding to support the second

phase of joint studies with Alcoa and endorsed that the smelter be located at Maniitsoq. In 2010, Alcoa and the Greenland

Home Rule Government revised the completion dates for feasibility studies associated with development of the proposed

integrated hydro systemand aluminumsmelter at Maniitsoq to enable more detailed consideration of aspects of the project

related to construction and provision of energy and to allow the Greenland parliament sufficient time to deliberate and vote on

critical aspects of national legislation concerning the project. The feasibility studies were completed in the fourth quarter of

2011. A Greenland Parliamentary vote to allow continued studies for construction and provision of energy is scheduled for late

2012.

In the fourth quarter of 2011, Alcoa and the Government of Angola, through the ministries of Energy, Water & Geology, Mines

and Industry, entered into an exclusive MOU regarding cooperation on a feasibility study for an aluminumsmelter in Angola

with a 720,000 mtpy capacity. The MOU also encompasses a hydroelectric power systemand power transmission facilities to

be built by the Government and resulting long termpurchase power agreement.

Flat-RolledProducts Facilities

The principal business of the company’s Flat-Rolled Products segment is the production and sale of aluminumplate, sheet and

foil. This segment includes rigid container sheet, which is sold directly to customers in the packaging and consumer market.

This segment also includes sheet and plate used in the aerospace, automotive, commercial transportation, and building and

construction markets.

As noted above, Alcoa and Ma’aden entered into an agreement that involves development of a rolling mill in the Kingdomof

Saudi Arabia. In 2010, the joint venture entity, Ma’aden Rolling Company signed project financing for its rolling mill and broke

ground on the construction of the mill. Initial capacity is approximately 380,000 mtpy. First production is expected in 2013.

As discussed above, in 2011, Alcoa and the CPI signed an MOU followed by a Letter of Intent that provides a framework for

the creation of a joint venture which includes a focus on producing high-end fabricated aluminumproducts in China. This

venture will leverage Alcoa’s and CPI’s existing footprint and capabilities.

Although the company completed the sale of substantially all of its Global Foil Business in 2009, the company continues to

manufacture foil for the end-user market in Itapissuma, Brazil.

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Flat-RolledProducts Principal Facilities

COUNTRY LOCATION

OWNERS

(% Of Ownership) PRODUCTS

Australia Point Henry Alcoa (100%) Sheet

Yennora Alcoa (100%) Sheet

Brazil Itapissuma Alcoa (100%) Foil Products/Sheet and Plate

China Kunshan Alcoa (70%)

Shanxi Yuncheng Engraving Group

(30%)

Sheet and Plate

Qinhuangdao Alcoa (100%) Sheet and Plate

France Castelsarrasin Alcoa (100%) Sheet and Plate

Hungary Székesfehérvár Alcoa (100%) Sheet and Plate/Slabs and Billets

Italy Fusina Alcoa (100%) Sheet and Plate

Russia Belaya Kalitva Alcoa (100%) Sheet and Plate

Samara Alcoa (100%) Sheet and Plate

Spain Alicante Alcoa (100%) Sheet and Plate

Amorebieta Alcoa (100%) Sheet and Plate

United Kingdom Birmingham Alcoa (100%) Plate

United States Davenport, IA Alcoa (100%) Sheet and Plate

Danville, IL Alcoa (100%) Sheet and Plate

Newburgh, IN Alcoa (100%) Sheet and Plate

Hutchinson, KS Alcoa (100%) Sheet and Plate

Lancaster, PA Alcoa (100%) Sheet and Plate

Alcoa, TN Alcoa (100%) Sheet and Plate

San Antonio, TX Alcoa (100%) Sheet

Texarkana, TX Alcoa (100%) Sheet and Plate

Facilities with ownership described as “Alcoa (100%)” are either leased or owned by the company.

Alcoa Bohai AluminumProducts Company Ltd. (Bohai), a wholly owned subsidiary of Alcoa, operates an aluminum

rolling facility in Qinhuangdao. It has completed its expansion and has ramped up production to 60% of capacity in 2011.

The Texarkana rolling mill facility has been idle since September of 2009 due to a continued weak outlook in common alloy

markets.

EngineeredProducts andSolutions Facilities

This segment represents Alcoa’s downstreamoperations and includes titanium, aluminum, and super alloy investment

castings; forgings and fasteners; aluminumwheels; integrated aluminumstructuralsystems; and architectural extrusions used

in the aerospace, automotive, building and construction, commercial transportation, and power generation markets. These

products are sold directly to customers and through distributors. Additionally, hard alloy extrusions products, which are also

sold directly to customers and through distributors, serve the aerospace, automotive, commercial transportation, and industrial

products markets.

On March 9, 2011, Alcoa completed the acquisition of the aerospace fastener business of TransDigmGroup Inc. for

approximately $240 million. The business includes Valley-Todeco Inc., with a facility in Sylmar, California, and

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Linread Ltd., with facilities in Redditch and Leicester, both in the United Kingdom. The new business is part of Alcoa Fastening

Systems, which is an Alcoa business unit specializing in the design and manufacture of specialty fastening systems,

components, and installation tools for aerospace and industrial applications.

EngineeredProducts andSolutions Principal Facilities

COUNTRY FACILITY

OWNERS

(% Of Ownership) PRODUCTS

Australia Oakleigh Alcoa (100%) Fasteners

Canada Georgetown, Ontario Alcoa (100%) Aerospace Castings

Laval, Québec Alcoa (100%) Aerospace Castings

Lethbridge, Alberta Alcoa (100%) Architectural Products

Pointe Claire, Alcoa (100%) Architectural Products

Québec Vaughan, Ontario Alcoa (100%) Architectural Products

China Suzhou Alcoa (100%) Fasteners

France Dives sur Mer Alcoa (100%) Aerospace and Industrial Gas Turbine Castings

Evron Alcoa (100%) Aerospace and Specialty Castings

Gennenvilliers Alcoa (100%) Aerospace and Industrial Turbine Castings

Guérande Alcoa (100%) Architectural Products

Lézat-Sur-Lèze Alcoa (100%) Architectural Products

Merxheim Alcoa (100%) Architectural Products

Montbrison Alcoa (100%) Fasteners

St. Cosme-en-Vairais Alcoa (100%) Fasteners

Toulouse Alcoa (100%) Fasteners

Us ‘par Vigny Alcoa (100%) Fasteners

Vendargues Alcoa (100%) Architectural Products

Germany Hannover Alcoa (100%) Extrusions

Hildesheim-Bavenstedt Alcoa (100%) Fasteners

Iserlohn Alcoa (100%) Architectural Products

Kelkheim Alcoa (100%) Fasteners

Hungary Nemesvámos Alcoa (100%) Fasteners

Székesfehérvár Alcoa (100%) Aerospace and Industrial Gas Turbine

Castings/Forgings

Japan Joetsu City Alcoa (100%) Forgings

Nomi Alcoa (100%) Aerospace and Industrial Gas Turbine Castings

Netherlands Harderwijk Alcoa (100%) Architectural Products

Mexico Ciudad Acuña Alcoa (100%) Aerospace Castings/Fasteners

Monterrey Alcoa (100%) Forgings

Morocco Casablanca Alcoa (100%) Fasteners

Russia Belaya Kalitva Alcoa (100%) Extrusions and Forgings

Samara Alcoa (100%) Extrusions and Forgings

South Korea Kyoungnam Alcoa (100%) Extrusions

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COUNTRY FACILITY

OWNERS

(% Of Ownership) PRODUCTS

Spain Irutzun Alcoa (100%) Architectural Products

United Kingdom Exeter Alcoa (100%) Aerospace and Industrial Gas Turbine Castings/Alloy

Leicester Alcoa (100%) Fasteners

Redditch Alcoa (100%) Fasteners

Runcorn Alcoa (100%) Architectural Products

Telford Alcoa (100%) Fasteners

United States Springdale, AR Alcoa (100%) Architectural Products

Chandler, AZ Alcoa (100%) Extrusions

Tucson, AZ Alcoa (100%) Fasteners

Carson, CA Alcoa (100%) Fasteners

City of Industry, CA Alcoa (100%) Fasteners

Fullerton, CA Alcoa (100%) Fasteners

Newbury Park, CA Alcoa (100%) Fasteners

Sylmar, CA Alcoa (100%) Fasteners

Torrance, CA Alcoa (100%) Fasteners

Visalia, CA Alcoa (100%) Architectural Products

Branford, CT Alcoa (100%) Aerospace Coatings

Winsted, CT Alcoa (100%) Aerospace Machining

Eastman, GA Alcoa (100%) Architectural Products

Auburn, IN Alcoa (100%) Extrusions

Lafayette, IN Alcoa (100%) Extrusions

LaPorte, IN Alcoa (100%) Aerospace and Industrial Gas Turbine Castings

Baltimore, MD Alcoa (100%) Extrusions

Whitehall, MI Alcoa (100%) Aerospace, Industrial Gas Turbine Castings,

Coatings, Ti Alloy and Specialty Products

Dover, NJ Alcoa (100%) Aerospace and Industrial Gas Turbine Castings and

Alloy

Kingston, NY Alcoa (100%) Fasteners

Massena, NY Alcoa (100%) Extrusions

Barberton, OH Alcoa (100%) Forgings

Chillicothe, OH Alcoa (100%) Forgings

Cleveland, OH Alcoa (100%) Forgings

Bloomsburg, PA Alcoa (100%) Architectural Products

Cranberry, PA Alcoa (100%) Architectural Products

Morristown, TN Alcoa (100%) Aerospace Ceramic Products

Waco, TX Alcoa (100%) Fasteners

Wichita Falls, TX Alcoa (100%) Aerospace and Industrial Gas Turbine Castings

Hampton, VA Alcoa (100%) Aerospace and Industrial Gas Turbine Castings

Facilities with ownership described as “Alcoa (100%)” are either leased or owned by the company.

The operating results of this facility are reported in the Flat-Rolled Products segment.

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Corporate Facilities

The Latin American soft alloy extrusions business is reported in Corporate Facilities. For more information, see Note Q to the

Consolidated Financial Statements in Part II, Item8. (Financial Statements and Supplementary Data).

Latin American Extrusions Facilities

COUNTRY FACILITY

OWNERS

(% Of Ownership) PRODUCTS

Brazil Itapissuma Alcoa (100%) Extrusions

Utinga Alcoa (100%) Extrusions

Sorocaba Alcoa (100%) Extrusions

Tubarão Alcoa (100%) Extrusions

Facilities with ownership described as “Alcoa (100%)” are owned by the company, except in the case of the Sorocaba

facility, which is a facility leased by the company.

Sources andAvailability of RawMaterials

The major raw materials purchased in 2011 for each of the company’s reportable segments are listed below.

Alumina Flat-RolledProducts

Bauxite Alloying materials

Caustic soda Aluminumscrap

Electricity Coatings

Fuel oil Electricity

Natural gas Natural gas

Nitrogen

Primary aluminum(ingot, billet, P1020 , high purity )

Steam

Primary Metals EngineeredProducts andSolutions

Alloying materials Alloying materials

Alumina Cobalt

Aluminumfluoride Electricity

Calcined petroleumcoke Natural gas

Cathode blocks Nickel

Electricity Primary aluminum(ingot, billet, P1020 , high purity )

Liquid pitch Resin

Natural gas Stainless Steel

Steel

Titanium

Generally, other materials are purchased fromthird party suppliers under competitively-priced supply contracts or bidding

arrangements. The company believes that the raw materials necessary to its business are and will continue to be available.

Energy

Employing the Bayer process, Alcoa refines alumina frombauxite ore. Alcoa then produces aluminumfromthe alumina by an

electrolytic process requiring large amounts of electric power. Energy and electricity account for

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approximately 25% of the company’s total alumina refining production costs. Electric power accounts for approximately 26% of

the company’s primary aluminumproduction costs. Alcoa generates approximately 22% of the power used at its smelters

worldwide and generally purchases the remainder under long-termarrangements. The paragraphs below summarize the sources

of power and the long-termpower arrangements for Alcoa’s smelters and refineries.

North America – Electricity

The Deschambault, Baie Comeau, and Bécancour smelters in Québec purchase electricity under existing contracts that run

through 2015, which will be followed by long-termcontracts with Hydro-Québec first executed in December 2008, revised in

2011 and expiring in 2040, provided that Alcoa completes the modernization of the Baie Comeau smelter by early 2016. The

smelter located in Baie Comeau, Québec has historically purchased approximately 65% of its power needs under the HydroQuébec contract, receiving the remainder froma 40% owned hydroelectric generating company, Manicouagan Power Limited

Partnership (MPLP). Beginning on January 1, 2011, these percentages changed such that approximately 80% is sourced from

Hydro-Québec, with the remaining 20% fromMPLP.

The company’s wholly-owned subsidiary, Alcoa Power Generating Inc. (APGI), generates approximately 38% of the power

requirements for Alcoa’s smelters operating in the U.S. The company generally purchases the remainder under long-term

contracts. APGI owns and operates two hydroelectric projects, Tapoco and Yadkin, consisting of eight dams.

New power contracts with Tennessee Valley Authority (TVA) were executed in June 2011 replacing the previous contracts

which were set to expire on June 30, 2011. These three-year contracts cover the sale of APGI Tapoco energy, capacity and

renewable energy credits to TVA and the purchase of supplemental energy fromTVA to assist APGI in serving Tennessee’s

rolling operations. APGI also executed an Interconnection Agreement, a Hydro-Coordination Agreement and a Reliability

Coordination Agreement pursuant to the unbundling of previous APGI and TVA agreements which provided for coordinated

operation of the hydroelectric and transmission facilities owned by TVA and APGI, as well as the sale of power between APGI

and TVA. As part of its long termgoal of lowering Alcoa’s position on the world aluminumproduction cost curve, in January

of 2012, Alcoa announced the permanent closure of its Alcoa, Tennessee smelter, which has been curtailed since 2009.

Demolition and remediation activities related to these actions will begin in the first half of 2012 and are expected to be

completed in 2015.

APGI received a renewed forty-year Federal Energy Regulatory Commission (FERC) license for the Tapoco project in 2005. The

relicensing process continues for the Yadkin hydroelectric project license. In 2007, APGI filed with FERC a Relicensing

Settlement Agreement with the majority of the interested stakeholders that broadly resolved open issues. The National

Environmental Policy Act process is complete, with a final environmental impact statement having been issued in April 2008.

The remaining requirement for the relicensing was the issuance by North Carolina of the required water quality certification

under Section 401 of the Clean Water Act. The Section 401 water quality certification was issued on May 7, 2009, but was

appealed, and has been stayed since late May 2009 pending substantive determination on the appeal. On December 1, 2010,

APGI received notice fromNorth Carolina of its revocation of the Section 401 water quality certification. APGI has appealed the

revocation and a hearing has been scheduled. APGI received a year-to-year license renewal fromFERC in May 2008, and will

continue to operate under annual licenses until a new Section 401 certification is issued and the FERC relicensing process is

complete. Since the first quarter of 2010 when Alcoa announced the permanent closure of the Badin, North Carolina smelter,

power generated fromAPGI’s Yadkin systemis largely being sold to an affiliate, Alcoa Power Marketing LLC, and then sold

into the wholesale market. Proceeds fromsales to the wholesale market are used to offset higher priced power contracts at other

U.S. operations.

APGI generates substantially all of the power used at the company’s Warrick smelter using nearby coal reserves. Since May

2005, Alcoa has owned the nearby Friendsville, Illinois coal reserves, with the mine being operated by Vigo Coal Company, Inc.

The mine is producing approximately one million tons of coal per year. In June 2011, the Red Brush West Mine, owned by

Alcoa and operated by Vigo Coal, was opened and will produce approximately 60,000 tons per month over an eighteen-month

period. In 2011, the two owned mines provided approximately 61% of the Warrick power plant’s requirements. The balance of

the coal used is purchased principally fromlocal Illinois Basin coal producers pursuant to termcontracts of varying duration.

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In the northwest, Alcoa operated under a contract with Chelan County Public Utility District (Chelan PUD) located in the State

of Washington that was sufficient to supply about half of the capacity of the Wenatchee smelter through October 2011. In

November 2011, a new contract executed between Alcoa and Chelan PUD became effective, under which Alcoa receives

approximately 26% of the hydropower output of Chelan PUD’s Rocky Reach and Rock Island dams, which will continue to

supply about half of the capacity of the Wenatchee smelter.

Following the invalidation by the 9 Circuit Court of Appeals of the 2006-2011 contract with the Bonneville Power

Administration (BPA) under which Alcoa was receiving financial benefits to reduce the cost of power purchased fromthe

market to partially operate the Intalco smelter, Alcoa and BPA signed a new contract providing for the sale of physical power at

the Northwest Power Act mandated industrial firmpower (IP) rate, for the period fromDecember 22, 2009 – May 26, 2011 (17

months). That “initial period” has been extended through May 26, 2012. The contract also contains a provision for a five-year

extension if certain financial tests can be met.

Prior to 2007, power for the Rockdale smelter in Texas was historically supplied fromcompany-owned generating units and

units owned by Luminant Generation Company LLC (formerly TXU Generation Company LP) (Luminant), both of which used

lignite supplied by the company’s Sandow Mine. Upon completion of lignite mining in the Sandow Mine in 2005, lignite supply

transitioned to the formerly Alcoa-owned Three Oaks Mine. The company retired its three wholly-owned generating units at

Rockdale (Sandow Units 1, 2 and 3) in late 2006, and transitioned to an arrangement under which Luminant is to supply all of

the Rockdale smelter’s electricity requirements under a long-termpower contract that does not expire until at least the end of

2038, with the parties having the right to terminate the contract after 2013 if there has been an unfavorable change in law or

after 2025 if the cost of the electricity exceeds the market price. In August 2007, Luminant and Alcoa closed on the definitive

agreements under which Luminant has constructed and operates a new circulating fluidized bed power plant (Sandow Unit 5)

adjacent to the existing Sandow Unit 4 and, in September 2007, on the sale of the Three Oaks Mine to Luminant. Concurrent

with entering into the agreements under which Luminant constructed and operates Sandow Unit 5, Alcoa and Luminant entered

into a power purchase agreement whereby Alcoa purchased power fromLuminant. That Unit 5 power purchase agreement was

terminated by Alcoa, effective December 1, 2010. In June 2008, Alcoa temporarily idled half of the capacity at the Rockdale

smelter and in November 2008 curtailed the remainder of Rockdale’s smelting capacity. In January 2012, Alcoa announced that

it will permanently close two of the sixidled potlines at its Rockdale, Texas smelter. Demolition and remediation activities

related to these actions will begin in the first half of 2012 and are expected to be completed in 2013.

In the northeast, the purchased power contracts for both the Massena East and Massena West smelters in New York expire

December 31, 2013, subject to their terms and conditions. In December 2007, Alcoa and The New York Power Authority (NYPA)

reached agreement in principle on a new energy contract to supply the Massena East and Massena West smelters for 30 years,

beginning on January 1, 2014, following an amendment in January 2011. The definitive agreement implementing this

arrangement became effective February 24, 2009. A subsequent amendment, providing Alcoa additional time to complete the

design and engineering work for its Massena East modernization plan, and providing for the return of 256 megawatts (MW) of

power to NYPA while Massena East was idled, was entered into effective April 16, 2009 and was superseded by the January

2011 amendment. Implementation of the Massena East modernization plan is subject to further approval of the Alcoa Board of

Directors. Alcoa restarted production at Massena East in the first quarter of 2011.

The Mt. Holly smelter in South Carolina purchases electricity fromSantee Cooper under a contract that was amended and

restated in 2010, and expires December 31, 2015. The contract includes a provision for follow-on service at the then current rate

schedule for industrial customers.

Australia – Electricity

Power is generated fromextensive brown coal deposits covered by a long-termmineral lease held by Alcoa of Australia Limited

(AofA), and that power currently provides approximately 40% of the electricity for the company’s smelter in Point Henry,

Victoria. The State Electricity Commission of Victoria provides the remaining power for this smelter, and all power for the

Portland smelter, under contracts with AofA and Eastern Aluminium(Portland) Pty Ltd,

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a wholly-owned subsidiary of AofA, in respect of its interest in Portland, that extend to 2014 and 2016, respectively. Upon the

expiry of these contracts both smelters will purchase power fromthe Australian National Energy Market (NEM) variable spot

market. In March 2010, AofA and Eastern Aluminium(Portland) Pty Ltd (in respect of the Portland Smelter only) separately

entered into fixed for floating swap contracts with Loy Yang Power in order to manage exposure to variable energy rates from

the NEM fromthe date of expiry of the current contracts with the State Electricity Commission of Victoria until December 2036.

Brazil – Electricity

The Alumar smelter is supplied by Eletronorte (Centrais Elétricas do Norte do Brasil S.A.) under a long-termpower purchase

agreement expiring in December 2024. Eletronorte has supplied the Alumar smelter fromthe beginning of its operations in 1984.

Since 2006, Alcoa Alumínio S.A.’s (Alumínio) remaining power needs for the smelter are supplied fromself-generated energy.

Beginning in March 2012, the Eletronorte supply will be reduced by the amount of 160 MW that will be supplied through power

self-generation.

Alumínio owns a 30.99% stake in Maesa – Machadinho Energética S.A., which is the owner of 83.06% of the Machadinho

hydroelectric power plant located in southern Brazil. Alumínio’s share of the plant’s output is supplied to the Poços de Caldas

smelter, and is sufficient to cover 55% of its operating needs.

Alumínio has a 42.18% interest in Energética Barra Grande S.A. – BAESA, which built the Barra Grande hydroelectric power

plant in southern Brazil. Alumínio’s share of the power generated by BAESA covers the remaining power needs of the Poços

de Caldas smelter and, as noted above, a portion of the power needs of Alumínio’s interest in the Alumar smelter.

Alumínio also has 34.97% share in Serra do Facão in the southeast of Brazil, which began commercial generation in August

2010. Alumínio’s share of the Serra do Facão output is currently being sold in the market.

Alumínio is also participating in the Estreito hydropower project in northern Brazil, holding a 25.49% share. Four out of its eight

generation units began commercial operation in 2011. The remaining four generation units are expected to begin commercial

operation in 2012.

With Machadinho, Barra Grande, Serra do Facão and Estreito, Alumínio’s current power self-sufficiency is approximately 65%,

to meet a total energy demand of approximately 690 MW fromBrazilian primary aluminumplants.

FromMarch 26, 2012, Estreito power willsupply the Alumar smelter replacing 160MW of power under the Eletronorte contract,

reducing it from423MW to 263MW. Power fromSerra do Facão will also replace Eletronorte starting January 1, 2014. Until then,

power fromSerra do Facão will be sold externally.

Consortia in which Alumínio participates have received concessions for the Pai Querê hydropower project in southern Brazil

(Alumínio’s share is 35%) and the Santa Isabel hydropower project in northern Brazil (Alumínio’s share is 20%). Development

of these concessions has not yet begun.

Europe – Electricity

Until December 31, 2005, the company purchased electricity for its smelters at Portovesme and Fusina, Italy under a power

supply structure approved by the European Commission (EC) in 1996. That measure provided a competitive power supply to

the primary aluminumindustry and was not considered state aid fromthe Italian Government. In 2005, Italy granted an

extension of the regulated electricity tariff that was in force until December 31, 2005 through November 19, 2009. (The extension

was originally through 2010, but the date was changed by legislation adopted by the Italian Parliament effective on August 15,

2009.) In July 2006, the EC announced that it had opened an investigation to establish whether the extension of the regulated

electricity tariff granted by Italy complied with

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European Union (EU) state aid rules. On November 19, 2009, the EC announced a decision in its investigation, stating that the

extension of the tariff by Italy constituted unlawfulstate aid, in part, and ordered the Italian government to recover a portion of

the benefit Alcoa received since January 2006 (including interest). On April 19, 2010, Alcoa filed an appeal against the decision

of the EC with the European General Court. Additionally on May 22, 2010, Alcoa filed an application for interimmeasures

(suspension of decision) in connection with the EC at the European General Court. On July 12, 2010, the European General

Court dismissed the request for interimmeasures due to lack of urgency. Alcoa appealed this ruling on September 10, 2010.

This appeal was dismissed by the European Court of Justice on December 16, 2011. On February 25, 2010, the Italian

government issued a decree law (No.3 2010) implementing a request fromthe electrical transmission systemoperator to

reinforce the level of systemsecurity on the islands of Sicily and Sardinia. The decree law provides the means for endconsumers to provide and, be paid for, interruptible services up to December 31, 2012. On May 26, 2010, the EC ruled that

scheme introduced by the decree law to be a “non-aid.” Alcoa applied for and gained rights to sell this service in Sardinia from

the Portovesme smelter. Additional details about this matter are in Part I, Item3 (Legal Proceedings) of this report. On July 29,

2010, Alcoa reached agreement with a power supplier to enter into a new contract expiring on December 31, 2012. This

arrangement would have enabled operation of the Portovesme smelter through December 31, 2012. In January 2012, Alcoa

announced that it decided to curtail operations at its Portovesme smelter. This curtailment is expected to be completed in the

first half of 2012. This curtailment may lead to the permanent closure of the facility. Additionally, in 2010, the Fusina smelter

was temporarily curtailed due to high energy costs. As of June 30, 2010, the Fusina smelter was fully curtailed.

Alcoa’s smelters at San Ciprián, La Coruña and Avilés, Spain purchase electricity under bilateral power contracts that

commenced in May 2009 and are due to expire on December 31, 2012. Prior to the establishment of power supply under the

bilateral contracts, Alcoa was supplied under a regulated power tariff. On January 25, 2007, the EC announced that it has

opened an investigation to establish whether the regulated electricity tariffs granted by Spain comply with EU state aid rules.

Alcoa operated in Spain for more than ten years under a power supply structure approved by the Spanish Government in 1986,

an equivalent tariff having been granted in 1983. The investigation is limited to the year 2005 and it is focused both on the

energy-intensive consumers and the distribution companies. It is Alcoa’s understanding that the Spanish tariff systemfor

electricity is in conformity with all applicable laws and regulations, and therefore no state aid is present in that tariff system. A

decision by the EC has not yet been made. If the EC’s investigation concludes that the regulated electricity tariffs for industries

are unlawful, Alcoa will have an opportunity to challenge the decision in the EU courts. Due to an uncompetitive energy

position, combined with rising raw material costs and falling aluminumprices, in early January 2012, Alcoa announced its

intentions to partially and temporarily curtail its La Coruña and Avilés, Spain smelters. The curtailments are expected to be

complete by the first half of 2012.

In March 2009, Alcoa and Orkla ASA exchanged respective stakes in the Sapa AB and ElkemAluminiumANS companies.

Pursuant to the exchange, Alcoa assumed 100% ownership of the two smelters in Norway, Lista and Mosjøen, at the end of the

first quarter of 2009. These smelters have long-termpower arrangements in place which continue until at least 2019.

Iceland – Electricity

Alcoa’s Fjarðaálsmelter in eastern Iceland began operation in 2007. Central to those operations is a 40-year power contract

under which Landsvirkjun, the Icelandic national power company, built the Kárahnjúkar damand hydro-power project, and

supplies competitively priced electricity to the smelter. In late 2009, Iceland imposed two new taxes on power intensive

industries, both for a period of three years, from2010 through 2012. One taxis based on energy consumption; the other is a prepayment of certain other charges, and will be recoverable from2013 through 2015.

North America – Natural Gas

In order to supply its refineries and smelters in the U.S. and Canada, Alcoa generally procures natural gas on a competitive bid

basis froma variety of sources including producers in the gas production areas and independent gas marketers. For Alcoa’s

larger consuming locations in Canada and the U.S., the gas commodity and the interstate

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pipeline transportation are procured to provide increased flexibility and reliability. Contract pricing for gas is typically based on

a published industry indexor New York Mercantile Exchange (NYMEX) price. The company may choose to reduce its exposure

to NYMEX pricing by hedging a portion of required natural gas consumption.

Australia – Natural Gas

Alcoa of Australia (AofA) holds a 20% equity interest in a consortiumthat bought the Dampier-to-Bunbury natural gas

pipeline in October 2004. This pipeline transports gas fromthe northwest gas fields to Alcoa’s alumina refineries and other

users in the Southwest of Western Australia. AofA uses gas to co-generate steamand electricity for its alumina refining

processes at the Kwinana, Pinjarra and Wagerup refineries. Approximately 85% of AofA’s gas supplies are under long-term

contract out to 2020. AofA is progressing multiple supply options to replace expiring contracts, including investing directly in

projects that have the potential to deliver cost-based gas.

Patents, Trade Secrets andTrademarks

The company believes that its domestic and international patent, trade secret and trademark assets provide it with a significant

competitive advantage. The company’s rights under its patents, as well as the products made and sold under them, are

important to the company as a whole and, to varying degrees, important to each business segment. The patents owned by

Alcoa generally concern particular products or manufacturing equipment or techniques. Alcoa’s business as a whole is not,

however, materially dependent on any single patent, trade secret or trademark.

The company has a number of trade secrets, mostly regarding manufacturing processes and material compositions that give

many of its businesses important advantages in their markets. The company continues to strive to improve those processes

and generate new material compositions that provide additional benefits.

The company also has a number of domestic and international registered trademarks that have significant recognition within

the markets that are served. Examples include the name “Alcoa” and the Alcoa symbol for aluminumproducts, Howmet metal

castings, Huck fasteners, Kawneer building panels and Dura-Bright wheels with easy-clean surface treatments. The

company’s rights under its trademarks are important to the company as a whole and, to varying degrees, important to each

business segment.

Competitive Conditions

Alcoa is subject to highly competitive conditions in all aspects of its aluminumand non-aluminumbusinesses. Competitors

include a variety of both U.S. and non-U.S. companies in all major markets. Price, quality, and service are the principal

competitive factors in Alcoa’s markets. Where aluminumproducts compete with other materials – such as steel and plastics for

automotive and building applications; magnesium, titanium, composites, and plastics for aerospace and defense applications –

aluminum’s diverse characteristics, particularly its light weight, recyclability, and flexibility are also significant factors. For

Alcoa’s segments that market products under Alcoa’s brand names, brand recognition, and brand loyalty also play a role. In

addition Alcoa’s competitive position depends, in part, on the company’s access to an economical power supply to sustain its

operations in various countries.

Research andDevelopment

Alcoa, a technology leader in the aluminumindustry, engages in research and development programs that include process and

product development, and basic and applied research. Expenditures for research and development (R&D) activities were $184

million in 2011, $174 million in 2010, and $169 million in 2009.

Most of the major process areas within the company have a Technology Management Review Board (TMRB) or Center of

Excellence (CoE) consisting of members fromvarious worldwide locations. Each TMRB or CoE is responsible for formulating

and communicating a technology strategy for the corresponding process area, developing and managing the technology

portfolio and ensuring the global transfer of technology. Alternatively, certain business

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units conduct these activities and research and development programs within the worldwide business unit, supported by the

Alcoa Technical Center (ATC). Technical personnel fromthe TMRBs, ATC and such business units also participate in the

corresponding Market Sector Teams. In this manner, research and development activities are aligned with corporate and

business unit goals.

During 2011, the company continued to work on new developments for a number of strategic projects in all business segments.

In Primary Metals, progress was made on inert anode technology with tests carried out on a pilot scale. Progress has been

successful in many respects as a result of full pot testing of anode assemblies, although there remain technical and cost targets

to achieve. If the technology proves to be commercially feasible, the company believes that it would result in significant

operating cost savings, and generate environmental benefits by reducing certain emissions and eliminating carbon dioxide. No

timetable has been established for commercial use. The company is also continuing to develop the carbothermic aluminum

process, which is in the research and development phase. The technology holds the potential to produce aluminumat a lower

cost, driven by reduced conversion costs, lower energy requirements and lower emissions at a lower capital cost than

traditionalsmelting.

The company continued its progress leveraging new science and technologies in 2011. For example, riblets that reduce

aerodynamic drag have been analyzed and produced on a test basis. Self-cleaning nano coatings have been demonstrated on

building products (an example of such was commercialized in 2011 as EcoClean, which is the world’s first coil-coated aluminum

architectural panel that helps clean itself and the air around it). Energy saving sensing devices are being integrated in company

manufacturing plants. Integrated thermal management products for consumer electronics have been developed and are being

validated by our customers.

A number of products were commercialized in 2011 including new fasteners, new aerospace alloy products for reducing

structural weight, cost and production risk, self-cleaning EcoClean coated building panels, and new armor plate alloy

solutions. The company continues to develop its MicromillTM technology. Scale-up to full commercial width has been

successful. Product development continues, and commercialization has commenced. In addition, previously developed

products such as Alcoa’s LvL ONE wide base aluminumwheel continue to receive accolades, such as being selected as a

“Top 5” Product of 2010 by Heavy Duty Aftermarket Journal.

Alcoa’s research and development focus is on product development to support sustainable, profitable growth; manufacturing

technologies to improve efficiencies and reduce costs; and on environmental risk reductions. Environmental technologies

continue to be an area of focus for the company, with projects underway that address emissions reductions, the reduction of

spent pot lining, advanced recycling, and the beneficial use of bauxite residue.

As a result of product development and technological advancement, the company continues to pursue patent protection in

jurisdictions throughout the world. At the end of 2011, the company’s worldwide patent portfolio consisted of 870 pending

patent applications and 1,895 granted patents.

Environmental Matters

Information relating to environmental matters is included in Note N to the Consolidated Financial Statements under the caption

“Environmental Matters” on pages 114-117.

Employees

Total worldwide employment at the end of 2011 was approximately 61,000 employees in 31 countries. About 31,000 of these

employees are represented by labor unions. The company believes that relations with its employees and any applicable union

representatives generally are good.

In the U.S., approximately 9,500 employees are represented by various labor unions. The largest of these is the master collective

bargaining agreement between Alcoa and the United Steelworkers (USW). This agreement covers 10 locations and

approximately 6,100 U.S. employees. It expires on May 15, 2014. There are 16 other collective

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bargaining agreements in the U.S. with varying expiration dates. Collective bargaining agreements with varying expiration dates

also cover about 6,300 employees in Europe, 3,900 employees in Russia, 4,000 employees in Central and South America, 3,800

employees in Australia, 1,100 employees in China and 2,200 employees in Canada.

Executive Officers of the Registrant

The names, ages, positions and areas of responsibility of the executive officers of the company as of February 16, 2012 are

listed below.

Nicholas J. Ashooh, 57, Vice President, Corporate Affairs. Mr. Ashooh was elected to his current position upon joining Alcoa

in January 2010. Before joining Alcoa, he was Senior Vice President – Communications of American International Group, Inc.

(AIG), a leading international insurance organization, fromSeptember 2006 to January 2010. Prior to AIG, he held executive

communication positions in the electric utility industry as Senior Vice President, Corporate Communications of American

Electric Power Service Corporation (2000 to 2006); Vice President, Public Affairs and Corporate Communications of Niagara

Mohawk Power Corporation (1992 to 2000); and Director, Corporate Communications of Public Service of New Hampshire (1978

to 1990). From1990 to 1992, he was Vice President, Corporate Communications of Paramount Communications Inc., a global

entertainment and publishing company.

Chris L. Ayers, 45, Executive Vice President – Alcoa and Group President, Global Primary Products. Mr. Ayers was elected an

Alcoa Executive Vice President in August 2010 and was named Group President, Global Primary Products effective May 18,

2011. He served as Chief Operating Officer of Global Primary Products fromAugust 2010 to May 18, 2011. He was elected a Vice

President of Alcoa in April 2010. Mr. Ayers joined Alcoa in February 2010 as Chief Operating Officer, Alcoa Cast, Forged and

Extruded Products. Before joining Alcoa, from1999 through December 2008, Mr. Ayers served in various management roles at

Precision Castparts Corp., including as Executive Vice President fromMay 2006 to July 2008, President – PCC Forgings

Division fromDecember 2006 to July 2008, President – Wyman Gordon Forgings from2004 to December 2006, and Vice

President/General Manager from2003 to 2004.

John D. Bergen, 69, Vice President, Human Resources. Mr. Bergen was named to his current position effective February 1,

2010. He joined Alcoa in November 2008 as Vice President, Communications and fromthat time to his most recent appointment

had responsibility for global external and internal communications, government affairs and e-business for Alcoa. Mr. Bergen

was Senior Vice President, Corporate Affairs and Marketing, of Siemens Corporation, the U.S. armof Siemens AG, from2001 to

2008. Before that, he held senior communication positions for CBS Corporation and Westinghouse Electric Corporation (1996 to

1998). From1991 to 1996, he was President and Chief Executive Officer of GCI Group, an international public relations and

government affairs firm.

Graeme W. Bottger, 53, Vice President and Controller. Mr. Bottger was elected to his current position effective August 1, 2010.

He joined Alcoa in 1980 as a product accountant trainee at Alcoa’s Point Henry facility in Australia and fromthat time to his

most recent appointment held a series of accounting and financial management positions in Alcoa’s Australian smelting,

rolling, extrusion, foil and alumina businesses and Alcoa’s corporate office. Mr. Bottger was Chief Financial Officer of Alcoa’s

Engineered Products and Solutions business group from2005 to August 2010. From2003 to 2005, he was Vice President, Sales,

for Alcoa Home Exteriors. From2001 to 2003, Mr. Bottger was Vice President, Finance for Alcoa Home Exteriors. Before his

move to the United States in 1999 to accept an assignment in Alcoa’s financial analysis and planning department, Mr. Bottger

held the position of Chief Financial Officer for Alcoa’s joint venture with Kobe Steel, Ltd. in Australia (Kaal Australia Pty. Ltd.).

Olivier M. Jarrault, 50, Executive Vice President – Alcoa and Group President, Engineered Products and Solutions. Mr. Jarrault

was elected an Alcoa Executive Vice President effective January 21, 2011 and was named Group President of Engineered

Products and Solutions effective January 1, 2011. He served as Chief Operating Officer of Engineered Products and Solutions

fromFebruary 2010 to January 1, 2011. Mr. Jarrault joined Alcoa in 2002 when Alcoa acquired Fairchild Fasteners fromThe

Fairchild Corporation. He served as President of Alcoa Fastening Systems from2002 to February 2010. He was elected a Vice

President of Alcoa in November 2006.

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Klaus Kleinfeld, 54, Director, Chairman of the Board and Chief Executive Officer. Mr. Kleinfeld was elected to Alcoa’s Board of

Directors in November 2003 and became Chairman on April 23, 2010. He has been Chief Executive Officer of Alcoa since May 8,

2008. He was President and Chief Executive Officer fromMay 8, 2008 to April 23, 2010. He was President and Chief Operating

Officer of Alcoa fromOctober 1, 2007 to May 8, 2008. Mr. Kleinfeld was President and Chief Executive Officer of Siemens AG,

the global electronics and industrial conglomerate, fromJanuary 2005 to June 2007. He served as Deputy Chairman of the

Managing Board and Executive Vice President of Siemens AGfrom2004 to January 2005. He was President and Chief Executive

Officer of Siemens Corporation, the U.S. armof Siemens AG, from2002 to 2004.

Charles D. McLane, Jr., 58, Executive Vice President and Chief Financial Officer. Mr. McLane was elected an Alcoa Executive

Vice President in September 2007 and was elected Vice President and Chief Financial Officer of Alcoa in January 2007. He was

elected Vice President and Corporate Controller in October 2002. He joined Alcoa in May 2000 as director of investor relations,

following Alcoa’s merger with Reynolds Metals Company. He became Assistant Treasurer of Reynolds in 1999 and Assistant

Controller of that company in 1995.

Kay H. Meggers, 47, Executive Vice President – Alcoa and Group President, Global Rolled Products. Mr. Meggers was elected

an Alcoa Executive Vice President in December 2011. He was named Group President, Global Rolled Products effective

November 14, 2011. Before his most recent appointment, he led Alcoa’s Business Excellence/Corporate Strategy resource unit

and was also responsible for overseeing Alcoa’s Asia-Pacific region. He joined Alcoa in February 2010 as Vice President,

Corporate Initiatives, a position responsible for planning and coordinating major strategic initiatives fromenhancing

technology and innovation as part of the Alcoa Technology Advantage programto spearheading growth strategies for China

and Brazil. He was elected a Vice President of Alcoa in June 2011. Before joining Alcoa, Mr. Meggers was Senior Vice President

at Siemens U.S. Building Technologies Division and served for three years as Business Unit Head of Building Automation. In

2006 he served for nine months as Division Head of Fire Safety, also part of Siemens U.S. Building Technologies Division.

Between 2002 and 2005, he served as Vice President of Strategic Planning at Siemens U.S.

Kurt R. Waldo, 56, Executive Vice President, Chief Legal and Compliance Officer. Mr. Waldo was elected to his current position

effective January 20, 2012. He joined Alcoa’s Legal Department in 1980 and served in a series of positions of increasing

responsibility in the Legal Department fromthat time to his most recent appointment. He was elected Vice President and

General Counsel of Alcoa in September 2008; Deputy General Counsel in April 2007; and Assistant General Counsel in August

1999. He served as Senior Counsel from1991 to August 1999; and as European Regional Counsel from1987 to 1991, based in

Lausanne, Switzerland.

Item 1A. Risk Factors.

Alcoa’s business, financial condition or results of operations may be impacted by a number of factors. In addition to the

factors discussed separately in this report, the following are the most significant factors that could cause Alcoa’s actual results

to differ materially fromthose projected in any forward-looking statements:

The aluminum industry generally remains highly cyclical andis influencedby a number of factors including global economic

conditions.

The aluminumindustry generally is highly cyclical. Alcoa is subject to cyclical fluctuations in global economic conditions and

aluminumend-use markets. Demand for our products is sensitive to these fluctuations. For example, 2011 was a turbulent year

in the world economy, characterized by an uneven recovery in many regions and prolonged volatility and crisis in others,

namely Europe. Demand for aluminumstarted strong at the beginning of the year but weakened in the second half. While Alcoa

believes that the long-termprospects for aluminumremain bright, the company is unable to predict the future course of

industry variables or the strength, pace or sustainability of the economic recovery and the effects of government intervention.

Another major economic downturn, a prolonged recovery period, or disruptions in the financial markets could have a material,

adverse effect on Alcoa’s business or financial condition or results of operations.

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Market-driven balancing of global aluminum supply anddemandmay be disruptedby non-market forces or other

impediments to production closures.

Alcoa and certain other aluminumproducers have recently announced independent plans to cut aluminumproduction capacity.

For Alcoa these decisions were a function of market-driven factors. However, the existence of non-market forces on global

aluminumindustry capacity, such as political pressures in certain countries to keep jobs or to maintain or further develop

industry self-sufficiency, may prevent or delay the closure or curtailment of certain producers’ smelters, irrespective of their

position on the industry cost curve. Other production cuts may be impeded by long-termcontracts to buy power or raw

materials. Persistent industry overcapacity may result in a weak pricing environment and margin compression for aluminum

producers, including Alcoa.

A reduction in demand(or a lack of increaseddemand) for aluminum by China, Europe or a combinednumber of other

countries may negatively impact Alcoa’s results.

The aluminumindustry’s demand is highly correlated to economic growth. The Chinese market is a significant source of global

demand for commodities, including aluminum. A sustained slowdown in China’s economic and aluminumdemand growth that

is not offset by increased aluminumdemand growth in other emerging economies such as India, Brazil, and several South East

Asian countries, or the combined slowdown in other markets, could have an adverse effect on the globalsupply and demand

for aluminumand aluminumprices. The European sovereign debt crisis could have an adverse effect on European supply and

demand for aluminumand aluminumproducts.

Alcoa couldbe materially adversely affectedby declines in aluminum prices.

The price of aluminumis frequently volatile and changes in response to general economic conditions, expectations for supply

and demand growth or contraction, and the level of global inventories. The influence of hedge funds and other financial

institutions participating in commodity markets has also increased in recent years, contributing to higher levels of price

volatility. In 2011, the LME price reached a high in excess of $2,700 per metric ton and by the end of the year declined to below

$2,000 per metric ton. This decline had a negative impact on Alcoa’s results in the second half of the year. Continued high LME

inventories could lead to a reduction in the price of aluminum. A sustained weak aluminumpricing environment or a

deterioration in aluminumprices could have a material, adverse effect on Alcoa’s business, financial condition, results of

operations or cash flow.

Alcoa’s operations consume substantial amounts of energy; profitability may decline if energy costs rise or if energy

supplies are interrupted.

Alcoa’s operations consume substantial amounts of energy. Although Alcoa generally expects to meet the energy

requirements for its alumina refineries and primary aluminumsmelters frominternalsources or fromlong-termcontracts, the

following factors could affect Alcoa’s results of operations:

• significant increases in electricity costs rendering smelter operations uneconomic;

• significant increases in fuel oil or natural gas prices;

• unavailability of electrical power or other energy sources due to droughts, hurricanes or other natural causes;

• unavailability of energy due to energy shortages resulting in insufficient supplies to serve consumers;

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

• curtailment of one or more refineries or smelters due to inability to extend energy contracts upon expiration or

negotiate new arrangements on cost-effective terms or unavailability of energy at competitive rates.

Alcoa’s profitability couldbe adversely affectedby increases in the cost of rawmaterials or by significant lag effects for

decreases in commodity or LME-linkedcosts.

Alcoa’s results of operations are affected by changes in the cost of raw materials, including energy, carbon products, caustic

soda and other key inputs, as well as freight costs associated with transportation of raw materials to refining and

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smelting locations. Higher than expected input costs could lead to underperformance. Alcoa may not be able to offset fully the

effects of higher raw material costs or energy costs through price increases, productivity improvements or cost reduction

programs. Similarly, Alcoa’s operating results are affected by significant lag effects for declines in key costs of production that

are commodity or LME-linked. For example, declines in LME-linked costs of alumina and power during a particular period may

not be adequate to offset sharp declines in metal price in that period.

Alcoa is exposedto fluctuations in foreign currency exchange rates andinterest rates, as well as inflation, andother

economic factors in the countries in which it operates.

Economic factors, including inflation and fluctuations in foreign currency exchange rates and interest rates, competitive factors

in the countries in which Alcoa operates, and continued volatility or deterioration in the global economic and financial

environment could affect Alcoa’s revenues, expenses and results of operations. Changes in the valuation of the U.S. dollar

against other currencies, particularly the Australian dollar, Brazilian real, Canadian dollar, Euro and Norwegian kroner, may

affect profitability as some important raw materials are purchased in other currencies, whereas products are generally sold in

U.S. dollars.

Alcoa may not be able to realize expectedbenefits from its growth projects or streamlining portfolio strategy.

Alcoa’s growth projects include the Ma’aden joint venture, the now-completed São Luís refinery expansion, the greenfield

Juruti bauxite mine, the ongoing Estreito hydroelectric power project in Brazil and the China and Russia growth projects.

Management believes that these projects will be beneficial to Alcoa; however, there is no assurance that these benefits will be

realized, whether due to unfavorable global economic conditions, currency fluctuations, or other factors, or that the remaining

construction, start-up activities and testing on the Estreito project will be completed as planned by the targeted completion

date.

Alcoa has made and may continue to plan and execute acquisitions and divestitures and take other actions to streamline and

grow its portfolio. There can be no assurance that such actions will be undertaken or completed in their entirety as planned or

beneficial to Alcoa or that targeted completion dates will be met. In addition, acquisitions present significant challenges and

risks relating to the integration of the business into the company, and there can be no assurances that the company will

manage acquisitions successfully. Alcoa may face barriers to exit fromunprofitable businesses or operations, including high

exit costs or objections fromvarious stakeholders.

Alcoa may not be able to successfully realize goals establishedin each of its four business segments or by the dates targeted

for such goals.

Alcoa has announced targets for each of its four major business segments, including the following:

• by 2015, driving the alumina business down into the first quartile of the industry cost curve and realizing profit levels

(per mt) that are beyond its recent historic norms;

• by 2015, driving the smelting business down into the second quartile of the industry cost curve and increasing

profitability (per mt) beyond the company’s past ten-year average;

• by 2013, increasing the revenues of the Flat-Rolled Products segment by $2.5 billion by growing 50% faster than the

market and achieving performance levels above its historic norms; and

• by 2013, increasing the revenues of the Engineered Products and Solutions segment by $1.6 billion, through market

growth, new product introductions, and share gains.

There can be no assurance that all of these initiatives will be completed as anticipated or that Alcoa will be able to successfully

realize these goals at the targeted levels or by the projected dates.

Joint ventures andother strategic alliances may not be successful.

Alcoa participates in joint ventures and has formed strategic alliances and may enter into other similar arrangements in the

future. For example, in December 2009, Alcoa announced that it formed a joint venture with Ma’aden, the Saudi Arabian Mining

Company, to develop a fully integrated aluminumcomplex(including a bauxite mine, alumina
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refinery, aluminumsmelter and rolling mill) in the Kingdomof Saudi Arabia. In 2011, Alcoa entered into a Memorandumof

Understanding followed by a Letter of Intent with China Power Investment Corporation (CPI) which provides a framework for

the creation of a joint venture entity with plans to target growth in the Chinese automotive, aerospace, packaging, and

consumer electronic markets. Although the company has, in relation to the Ma’aden joint venture and its other existing joint

ventures and strategic alliances, sought to protect its interests, joint ventures and strategic alliances necessarily involve

special risks. Whether or not Alcoa holds majority interests or maintains operational control in such arrangements, its partners

may:

• have economic or business interests or goals that are inconsistent with or opposed to those of the company;

• exercise veto rights so as to block actions that Alcoa believes to be in its or the joint venture’s or strategic alliance’s

best interests;

• take action contrary to Alcoa’s policies or objectives with respect to its investments; or

• as a result of financial or other difficulties, be unable or unwilling to fulfill their obligations under the joint venture,

strategic alliance or other agreements, such as contributing capital to expansion or maintenance projects.

In addition, the joint venture with Ma’aden is subject to risks associated with large infrastructure construction projects,

including the consequences of non-compliance with the timeline and other requirements under the gas supply arrangements for

the joint venture. Also, while financing is in place for the project, there can be no guaranteed assurance that the project as a

whole will be completed within budget or that the project phases will be completed by their targeted completion dates, or that it

or Alcoa’s other joint ventures or strategic alliances will be beneficial to Alcoa, whether due to the above-described risks,

unfavorable global economic conditions, increases in construction costs, currency fluctuations, political risks, or other factors.

Alcoa faces significant competition.

As discussed in Part I, Item1. (Business – Competitive Conditions) of this report, the markets for most aluminumproducts are

highly competitive. Alcoa’s competitors include a variety of both U.S. and non-U.S. companies in all major markets, including

some that are subsidized. In addition, aluminumcompetes with other materials, such as steel, plastics, composites, and glass,

among others, for various applications in Alcoa’s key markets. The willingness of customers to accept substitutions for the

products sold by Alcoa, the ability of large customers to exert leverage in the marketplace to affect the pricing for fabricated

aluminumproducts, or other developments by or affecting Alcoa’s competitors or customers could affect Alcoa’s results of

operations. In addition, Alcoa’s competitive position depends, in part, on the company’s access to an economical power

supply to sustain its operations in various countries.

Further metals industry consolidation couldimpact Alcoa’s business.

The metals industry has experienced consolidation over the past several years, and there may be further industry consolidation

in the future. Although current industry consolidation has not negatively impacted Alcoa’s business, further consolidation in

the aluminumindustry could possibly have negative impacts that we cannot reliably predict.

Failure to maintain investment grade credit ratings couldlimit Alcoa’s ability to obtain future financing, increase its

borrowing costs, adversely affect the market price of its existing securities, or otherwise impair its business, financial

condition andresults of operations.

Currently, Alcoa’s long-termdebt is rated BBB- with stable outlook by Standard and Poor’s Ratings Services; Baa3 with stable

outlook by Moody’s Investors Services; and BBB- with stable outlook by Fitch Ratings. There can be no assurance that any

rating assigned will remain in effect for any given period of time or that a rating will not be lowered, suspended or withdrawn

entirely by a rating agency, if, in that rating agency’s judgment, circumstances so warrant. Maintaining an investment-grade

credit rating is an important element of Alcoa’s financialstrategy. A downgrade of Alcoa’s credit ratings could adversely affect

the market price of its securities, adversely affect existing financing, limit access to the capital or credit markets or otherwise

adversely affect the availability of other new financing on favorable terms, if at all, result in more restrictive covenants in

agreements governing the terms of any future indebtedness that the company incurs, increase the cost of borrowing, or impair

its business, financial condition and results of operations.

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In addition, under the project financings for the joint venture project in the Kingdomof Saudi Arabia, a downgrade of Alcoa’s

credit ratings below investment grade by at least two rating agencies would require Alcoa to provide a letter of credit or fund

an escrow account for a portion or all of Alcoa’s remaining equity commitment to the joint venture. For additional information

regarding the project financings, see Note I to the Consolidated Financial Statements in Part II, Item8 (Financial Statements and

Supplementary Data) of this report.

Alcoa couldbe adversely affectedby the failure of financial institutions to fulfill their commitments under committedcredit

facilities.

As discussed in Part II, Item7. (Management’s Discussion and Analysis of Financial Condition and Results of Operations –

Liquidity and Capital Resources) of this report, Alcoa has a committed revolving credit facility with financial institutions

available for its use, for which the company pays commitment fees. The facility is provided by a syndicate of several financial

institutions, with each institution agreeing severally (and not jointly) to make revolving credit loans to Alcoa in accordance

with the terms of the credit agreement. If one or more of the financial institutions providing the committed credit facility were to

default on its obligation to fund its commitment, the portion of the committed facility provided by such defaulting financial

institution would not be available to the company.

Alcoa may not be able to realize expectedbenefits from the change to index pricing of alumina.

Alcoa has implemented a move to a pricing mechanismfor alumina based on an indexof alumina prices rather than a percentage

of the LME-based aluminumprice. Alcoa believes that this change, expected to affect approximately 20% of annual contracts

coming up for renewal each year, will more fairly reflect the fundamentals of alumina including raw materials and other input

costs involved. There can be no assurance that such indexpricing ultimately will be accepted or that such indexpricing will

result in consistently greater profitability fromsales of alumina.

Alcoa’s global operations are exposedto political andeconomic risks, commercial instability andevents beyondits control in

the countries in which it operates.

Alcoa has operations or activities in numerous countries and regions outside the U.S. having varying degrees of political and

economic risk, including China, Europe, Guinea, Russia, and the Kingdomof Saudi Arabia, among others. Risks include those

associated with sovereign and private debt default, political instability, civil unrest, expropriation, nationalization, renegotiation

or nullification of existing agreements, mining leases and permits, commercial instability caused by corruption, and changes in

local government laws, regulations and policies, including those related to tariffs and trade barriers, taxation, exchange

controls, employment regulations and repatriation of earnings. While the impact of these factors is difficult to predict, any one

or more of themcould adversely affect Alcoa’s business, financial condition or operating results.

Alcoa couldbe adversely affectedby changes in the business or financial condition of a significant customer or customers.

A significant downturn or further deterioration in the business or financial condition of a key customer or customers supplied

by Alcoa could affect Alcoa’s results of operations in a particular period. Alcoa’s customers may experience delays in the

launch of new products, labor strikes, diminished liquidity or credit unavailability, weak demand for their products, or other

difficulties in their businesses. If Alcoa is not successful in replacing business lost fromsuch customers, profitability may be

adversely affected.

Alcoa may be exposedto significant legal proceedings, investigations or changes in U.S. federal, state or foreign law,

regulation or policy.

Alcoa’s results of operations or liquidity in a particular period could be affected by new or increasingly stringent laws,

regulatory requirements or interpretations, or outcomes of significant legal proceedings or investigations adverse to Alcoa.

The company may experience a change in effective taxrates or become subject to unexpected or rising costs

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associated with business operations or provision of health or welfare benefits to employees due to changes in laws,

regulations or policies. The company is also subject to a variety of legal compliance risks. These risks include, among other

things, potential claims relating to product liability, health and safety, environmental matters, intellectual property rights,

government contracts, taxes, and compliance with U.S. and foreign export laws, anti-bribery laws, competition laws and sales

and trading practices. Alcoa could be subject to fines, penalties, damages (in certain cases, treble damages), or suspension or

debarment fromgovernment contracts. While Alcoa believes it has adopted appropriate risk management and compliance

programs to address and reduce these risks, the global and diverse nature of its operations means that these risks will continue

to exist and additional legal proceedings and contingencies may arise fromtime to time. In addition, various factors or

developments can lead the company to change current estimates of liabilities or make such estimates for matters previously not

susceptible of reasonable estimates, such as a significant judicial ruling or judgment, a significant settlement, significant

regulatory developments or changes in applicable law. A future adverse ruling or settlement or unfavorable changes in laws,

regulations or policies, or other contingencies that the company cannot predict with certainty could have a material adverse

effect on the company’s results of operations or cash flows in a particular period. For additional information regarding the legal

proceedings involving the company, see the discussion in Part I, Item3. (Legal Proceedings), of this report and in Note N to the

Consolidated Financial Statements in Part II, Item8. (Financial Statements and Supplementary Data).

Alcoa is subject to a broadrange of health, safety andenvironmental laws andregulations in the jurisdictions in which it

operates andmay be exposedto substantial costs andliabilities associatedwith such laws andregulations.

Alcoa’s operations worldwide are subject to numerous complexand increasingly stringent health, safety and environmental

laws and regulations. The costs of complying with such laws and regulations, including participation in assessments and

cleanups of sites, as well as internal voluntary programs, are significant and will continue to be so for the foreseeable future.

Environmental matters for which we may be liable may arise in the future at our present sites, where no problemis currently

known, at previously owned sites, sites previously operated by us, sites owned by our predecessors or sites that we may

acquire in the future. Alcoa’s results of operations or liquidity in a particular period could be affected by certain health, safety

or environmental matters, including remediation costs and damages related to severalsites. Additionally, evolving regulatory

standards and expectations can result in increased litigation and/or increased costs, all of which can have a material and

adverse effect on earnings and cash flows.

Climate change, climate change legislation or regulations andgreenhouse effects may adversely impact Alcoa’s operations

andmarkets.

Energy is a significant input in a number of Alcoa’s operations. There is growing recognition that consumption of energy

derived fromfossil fuels is a contributor to global warming.

A number of governments or governmental bodies have introduced or are contemplating legislative and regulatory change in

response to the potential impacts of climate change. There is also current and emerging regulation, such as the mandatory

renewable energy target in Australia, Australia’s carbon taxeffective in 2012, Quebec’s transition to a “cap and trade” system

with compliance required in 2013 and European direct emission regulations expected by 2013. Alcoa will likely see changes in

the margins of greenhouse gas-intensive assets and energy-intensive assets as a result of regulatory impacts in the countries

in which the company operates. These regulatory mechanisms may be either voluntary or legislated and may impact Alcoa’s

operations directly or indirectly through customers or Alcoa’s supply chain. Inconsistency of regulations may also change the

attractiveness of the locations of some of the company’s assets. Assessments of the potential impact of future climate change

legislation, regulation and international treaties and accords are uncertain, given the wide scope of potential regulatory change

in countries in which Alcoa operates. The company may realize increased capital expenditures resulting fromrequired

compliance with revised or new legislation or regulations, costs to purchase or profits fromsales of, allowances or credits

under a “cap and trade” system, increased insurance premiums and deductibles as new actuarial tables are developed to

reshape coverage, a change in competitive position relative to industry peers and changes to profit or loss arising from

increased or decreased demand for goods produced by the company and indirectly, fromchanges in costs of goods sold.

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The potential physical impacts of climate change on the company’s operations are highly uncertain, and will be particular to the

geographic circumstances. These may include changes in rainfall patterns, shortages of water or other natural resources,

changing sea levels, changing stormpatterns and intensities, and changing temperature levels. These effects may adversely

impact the cost, production and financial performance of Alcoa’s operations.

Adverse changes in discount rates, lower-than-expectedinvestment return on pension assets andother factors couldaffect

Alcoa’s results of operations or level of pension funding contributions in future periods.

Alcoa’s results of operations may be negatively affected by the amount of expense Alcoa records for its pension and other

postretirement benefit plans. U.S. generally accepted accounting principles (GAAP) require that Alcoa calculate income or

expense for the plans using actuarial valuations. These valuations reflect assumptions about financial market and other

economic conditions, which may change based on changes in key economic indicators. The most significant year-end

assumptions used by Alcoa to estimate pension or other postretirement benefit income or expense for the following year are

the discount rate and the expected long-termrate of return on plan assets. The large decline in our funded status in 2008 due to

the financial crisis generated significant unrecognized actuarial losses. We anticipate that expense in future years will continue

to be affected as the unrecognized losses are recognized in earnings. In addition, Alcoa is required to make an annual

measurement of plan assets and liabilities, which may result in a significant charge to shareholders’ equity. For a discussion

regarding how Alcoa’s financialstatements can be affected by pension and other postretirement benefits accounting policies,

see Part II, Item7. (Management’s Discussion and Analysis of Financial Condition and Results of Operations) under the

caption “Critical Accounting Policies and Estimates—Pension and Other Postretirement Benefits,” and Part II, Item8. (Financial

Statements and Supplementary Data) under Note W to the Consolidated Financial Statements—Pension and Other

Postretirement Benefits. Although GAAP expense and pension funding contributions are not directly related, the key economic

factors that affect GAAP expense would also likely affect the amount of cash or securities Alcoa would contribute to the

pension plans. Potential pension contributions include both mandatory amounts required under federal law and discretionary

contributions to improve the plans’ funded status. Higher than expected potential contributions due to a further decline in our

funded status either by an additional decline in discount rates or a lower than expected investment return on plan assets could

adversely affect our cash flows.

Union disputes andother employee relations issues couldadversely affect Alcoa’s financial results.

A significant portion of Alcoa’s employees are represented by labor unions in a number of countries under various collective

bargaining agreements with varying durations and expiration dates. While Alcoa was successful in renegotiating the master

collective bargaining agreement with the United Steelworkers in June 2010, Alcoa may not be able to satisfactorily renegotiate

other collective bargaining agreements in the U.S. and other countries when they expire. In addition, existing collective

bargaining agreements may not prevent a strike or work stoppage at Alcoa’s facilities in the future. Alcoa may also be subject

to general country strikes or work stoppages unrelated to its business or collective bargaining agreements. Any such work

stoppages (or potential work stoppages) could have a material adverse effect on Alcoa’s financial results.

Alcoa’s human resource talent pool may not be adequate to support the company’s growth.

Alcoa’s existing operations and development projects require highly skilled executives, and staff with relevant industry and

technical experience. The inability of the company and industry to attract and retain such people may adversely impact Alcoa’s

ability to adequately meet project demands and fill roles in existing operations. Skills shortages in engineering, technical

service, construction and maintenance contractors and other labor market inadequacies may also impact activities. These

shortages may adversely impact the cost and schedule of development projects and the cost and efficiency of existing

operations.

Alcoa may not realize expectedlong-term benefits from its productivity andcost-reduction initiatives.

Alcoa has undertaken, and may continue to undertake, productivity and cost-reduction initiatives to improve performance and

conserve cash, including new procurement strategies for raw materials, such as backward integration and non-traditional

sourcing fromnumerous geographies, and deployment of company-wide business process models, such as the Alcoa Business

Systemand the Alcoa Enterprise Business Solution (an initiative designed to build a

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common global infrastructure across Alcoa for data, processes and supporting software). There is no assurance that these

initiatives will all be completed or beneficial to Alcoa or that estimated cost savings fromsuch activities will be realized.

Alcoa may not be able to successfully developandimplement technology initiatives.

Alcoa is working on developments in advanced smelting process technologies, including inert anode and carbothermic

technology, in addition to multi-alloy casting processes. There can be no assurance that such technologies will be

commercially feasible or beneficial to Alcoa.

Alcoa’s business andgrowth prospects may be negatively impactedby reductions in its capital expenditures.

Alcoa requires substantial capital to invest in greenfield and brownfield projects and to maintain and prolong the life and

capacity of its existing facilities. For 2012, Alcoa has targeted generating positive cash flow fromoperations that will exceed

capitalspending. Insufficient cash generation may negatively impact Alcoa’s ability to fund as planned its sustaining and

growth capital projects. Over the long term, Alcoa’s ability to take advantage of forecasted global demand growth for aluminum

may be constrained by earlier capital expenditure restrictions, and the long-termvalue of its business could be adversely

impacted. The company’s position in relation to its competitors may also deteriorate.

Alcoa may also need to address commercial and political issues in relation to its reductions in capital expenditures in certain of

the jurisdictions in which it operates. If Alcoa’s interest in its joint ventures is diluted or it loses key concessions, its growth

could be constrained. Any of the foregoing could have a material adverse effect on the company’s business, results of

operations, financial condition and prospects.

Unexpectedevents may increase Alcoa’s cost of doing business or disrupt Alcoa’s operations.

Unexpected events, including fires or explosions at facilities, natural disasters, war or terrorist activities, unplanned outages,

supply disruptions, or failure of equipment or processes to meet specifications may increase the cost of doing business or

otherwise impact Alcoa’s financial performance. Further, existing insurance arrangements may not provide protection for all of

the costs that may arise fromsuch events.

Cyber attacks may threaten the integrity of Alcoa’s trade secrets andsensitive intellectual property.

The company has identified attempts to gain unauthorized access through the Internet to our information systems. The

purpose of these attempts appears to have been to establish command and control and then export company-sensitive data. To

our knowledge, no such attack was ultimately successful. However, the success of such attacks and the resulting damage may

only be clear over time and after intensive analysis. Should such an attack succeed, the impact may be material to the company

in terms of lost intellectual property, trade secrets, product development data, and other business development data.

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

Item 1B. UnresolvedStaff Comments.

None.

Item 2. Properties.

Alcoa’s principal office is located at 390 Park Avenue, New York, New York 10022-4608. Alcoa’s corporate center is located at

201 Isabella Street, Pittsburgh, Pennsylvania 15212-5858. The Alcoa Technical Center for research and development is located

at 100 Technical Drive, Alcoa Center, Pennsylvania 15069.

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Alcoa leases some of its facilities; however, it is the opinion of management that the leases do not materially affect the

continued use of the properties or the properties’ values.

Alcoa believes that its facilities are suitable and adequate for its operations. Although no title examination of properties owned

by Alcoa has been made for the purpose of this report, the company knows of no material defects in title to any such

properties. See Notes A and H to the financialstatements for information on properties, plants and equipment.

Alcoa has active plants and holdings under the following segments and in the following geographic areas:

ALUMINA

Bauxite: See the table and related text in the Bauxite Interests section on pages 5-6 of this report.

Alumina: See the table and related text in the Alumina Refining Facilities andCapacity section on pages 7-8 of this

report.

PRIMARYMETALS

See the table and related text in the Primary Aluminum Facilities andCapacity section on pages 9-11 of this report.

FLAT-ROLLED PRODUCTS

See the table and related text in the Flat-RolledProducts Facilities section on pages 11-12 of this report.

ENGINEERED PRODUCTS AND SOLUTIONS

See the table and related text in the EngineeredProducts andSolutions Facilities section on pages 12-14 of this report.

CORPORATE

See the table and related text in the Corporate Facilities section on page 15 of this report.

Item 3. Legal Proceedings.

In the ordinary course of its business, Alcoa is involved in a number of lawsuits and claims, both actual and potential.

Litigation

As previously reported, along with various asbestos manufacturers and distributors, Alcoa and its subsidiaries as premises

owners are defendants in several hundred active lawsuits filed on behalf of persons alleging injury predominantly as a result of

occupational exposure to asbestos at various company facilities. In addition, an Alcoa subsidiary company has been named,

along with a large common group of industrial companies, in a pattern complaint where the company’s involvement is not

evident. Since 1999, several thousand such complaints have been filed. To date, the subsidiary has been dismissed fromalmost

every case that was actually placed in line for trial. Alcoa, its subsidiaries and acquired companies, all have had numerous

insurance policies over the years that provide coverage for asbestos based claims. Many of these policies provide layers of

coverage for varying periods of time and for varying locations. Alcoa has significant insurance coverage and believes that its

reserves are adequate for its known asbestos exposure related liabilities. The costs of defense and settlement have not been

and are not expected to be material to the results of operations, cash flows, and financial position of the company.

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As previously reported, in November 2006, in Curtis v. Alcoa Inc., Civil Action No. 3:06cv448 (E.D. Tenn.), a class action was

filed by plaintiffs representing approximately 13,000 retired former employees of Alcoa or Reynolds Metals Company and

spouses and dependants of such retirees alleging violation of the Employee Retirement Income Security Act (ERISA) and the

Labor-Management Relations Act by requiring plaintiffs, beginning January 1, 2007, to pay health insurance premiums and

increased co-payments and co-insurance for certain medical procedures and prescription drugs. Plaintiffs alleged these

changes to their retiree health care plans violated their rights to vested health care benefits. Plaintiffs additionally alleged that

Alcoa had breached its fiduciary duty to plaintiffs under ERISA by misrepresenting to themthat their health benefits would

never change. Plaintiffs sought injunctive and declaratory relief, back payment of benefits, and attorneys’ fees. Alcoa had

consented to treatment of plaintiffs’ claims as a class action. During the fourth quarter of 2007, following briefing and argument,

the court ordered consolidation of the plaintiffs’ motion for preliminary injunction with trial, certified a plaintiff class, bifurcated

and stayed the plaintiffs’ breach of fiduciary duty claims, struck the plaintiffs’ jury demand, but indicated it would use an

advisory jury, and set a trial date of September 17, 2008. In August 2008, the court set a new trial date of March 24, 2009 and,

subsequently, the trial date was moved to September 22, 2009. In June 2009, the court indicated that it would not use an

advisory jury at trial. Trial in the matter was held over eight days commencing September 22, 2009 and ending on October 1,

2009 in federal court in Knoxville, TN before the Honorable Thomas Phillips, U.S. District Court Judge. At the conclusion of

evidence, the court set a post-hearing briefing schedule for submission of proposed findings of fact and conclusions of law by

the parties and for replies to the same. Post trial briefing was submitted on December 4, 2009. On March 9, 2011, the court

issued a judgment order dismissing plaintiffs’ lawsuit in its entirety with prejudice for the reasons stated in its Findings of Fact

and Conclusions of Law. On March 23, 2011, plaintiffs filed a motion for clarification and/or amendment of the judgment order,

which seeks, among other things, a declaration that plaintiffs’ retiree benefits are vested subject to an annual cap and an

injunction preventing Alcoa, prior to 2017, frommodifying the plan design to which plaintiffs are subject or changing the

premiums and deductibles that plaintiffs must pay. Also on March 23, 2011, plaintiffs filed a motion for award of attorney’s fees

and expenses. Alcoa filed its opposition to both motions on April 11, 2011. The time for plaintiffs to appeal fromthe court’s

March 9, 2011 judgment will not begin until the court disposes of these motions.

As previously reported, on February 27, 2008, Alcoa Inc. received notice that AluminiumBahrain B.S.C. (Alba) had filed suit

against Alcoa Inc. and Alcoa World Alumina LLC (collectively, “Alcoa”), and others, in the U.S. District Court for the Western

District of Pennsylvania (the “Court”), Civil Action number 08-299, styled AluminiumBahrain B.S.C. v. Alcoa Inc., Alcoa World

Alumina LLC, WilliamRice, and Victor Phillip Dahdaleh. The complaint alleges that certain Alcoa entities and their agents,

including Victor Phillip Dahdaleh, have engaged in a conspiracy over a period of 15 years to defraud Alba. The complaint

further alleges that Alcoa and its employees or agents (1) illegally bribed officials of the government of Bahrain and (or) officers

of Alba in order to force Alba to purchase alumina at excessively high prices, (2) illegally bribed officials of the government of

Bahrain and (or) officers of Alba and issued threats in order to pressure Alba to enter into an agreement by which Alcoa would

purchase an equity interest in Alba, and (3) assigned portions of existing supply contracts between Alcoa and Alba for the

sole purpose of facilitating alleged bribes and unlawful commissions. The complaint alleges that Alcoa and the other

defendants violated the Racketeer Influenced and Corrupt Organizations Act (RICO) and committed fraud. Alba’s complaint

seeks compensatory, consequential, exemplary, and punitive damages, rescission of the 2005 alumina supply contract, and

attorneys’ fees and costs. Alba seeks treble damages with respect to its RICO claims.

On February 26, 2008, Alcoa Inc. had advised the U.S. Department of Justice (DOJ) and the Securities and Exchange

Commission (SEC) that it had recently become aware of these claims, had already begun an internal investigation, and intended

to cooperate fully in any investigation that the DOJ or the SEC may commence. On March 17, 2008, the DOJ notified Alcoa that

it had opened a formal investigation and Alcoa has been cooperating with the government.

In response to a motion filed by the DOJ on March 27, 2008, the Court ordered the suit filed by Alba to be administratively

closed and that all discovery be stayed to allow the DOJ to fully conduct an investigation without the interference and

distraction of ongoing civil litigation. The Court further ordered that the case will be reopened at the close of the DOJ’s

investigation. On November 8, 2011, at Alcoa’s request, the Court removed the case fromadministrative stay and ordered Alba

to file an Amended Complaint by November 28, 2011 and a RICO case statement

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30 days thereafter for the limited purpose of allowing Alcoa to move to dismiss Alba’s lawsuit. Pursuant to the November 8,

2011 order, briefing on the motion to dismiss is to be completed by March 2012. Separately, the DOJ’s and SEC’s investigations

are ongoing. While Alcoa has been engaged in dialogue with both the DOJ and SEC, it is unable to reasonably predict an

outcome or to estimate a range of reasonably possible loss with regard to any of the governmental or private party matters

discussed above, but such losses may be material in a particular period to Alcoa’s results of operations.

As previously reported, on July 21, 2008, the Teamsters Local #500 Severance Fund and the Southeastern Pennsylvania

Transportation Authority filed a shareholder derivative suit in the civil division of the Court of Common Pleas of Allegheny

County, Pennsylvania against certain officers and directors of Alcoa claiming breach of fiduciary duty, gross mismanagement,

and other violations. This derivative action stems fromthe civil litigation brought by Alba against Alcoa, AWA, Victor Phillip

Dahdaleh, and others, and the subsequent investigation of Alcoa by the DOJ and the SEC with respect to Alba’s claims. This

derivative action claims that the defendants caused or failed to prevent the matters alleged in the Alba lawsuit. The director

defendants filed a motion to dismiss on November 21, 2008. On September 3, 2009, a hearing was held on Alcoa’s motion and,

on October 12, 2009, the court issued its order denying Alcoa’s motion to dismiss but finding that a derivative action during

the conduct of the DOJ investigation and pendency of the underlying complaint by Alba would be contrary to the interest of

shareholders and, therefore, stayed the case until further order of the court. This derivative action is in its preliminary stages

and the company is unable to reasonably predict an outcome or to estimate a range of reasonably possible loss.

As previously reported, on March 6, 2009, the Philadelphia Gas Works Retirement Fund filed a shareholder derivative suit in

the civil division of the Court of Common Pleas of Philadelphia County, Pennsylvania. This action was brought against certain

officers and directors of Alcoa claiming breach of fiduciary duty and other violations and is based on the allegations made in

the previously disclosed civil litigation brought by Alba against Alcoa, AWA, Victor Phillip Dahdaleh, and others, and the

subsequent investigation of Alcoa by the DOJ and the SEC with respect to Alba’s claims. This derivative action claims that the

defendants caused or failed to prevent the conduct alleged in the Alba lawsuit. On August 7, 2009, the director and officer

defendants filed an unopposed motion to coordinate the case with the Teamsters Local #500 suit, described immediately above,

in the Allegheny County Common Pleas Court. The Allegheny County court issued its order consolidating the case on

September 18, 2009. Thereafter, on October 31, 2009, the court assigned this action to the Commerce and ComplexLitigation

division of the Allegheny Court of Common Pleas and on November 20, 2009, the court granted defendants’ motion to stay all

proceedings in the Philadelphia Gas action until the earlier of the court lifting the stay in the Teamsters derivative action or

further order of the court in this action. This derivative action is in its preliminary stages and the company is unable to

reasonably predict an outcome or to estimate a range of reasonably possible loss.

Before 2002, Alcoa purchased power in Italy in the regulated energy market and received a drawback of a portion of the price of

power under a special tariff in an amount calculated in accordance with a published resolution of the Italian Energy Authority,

Energy Authority Resolution n. 204/1999. In 2001, the Energy Authority published another resolution, which clarified that the

drawback would be calculated in the same manner, and in the same amount, in either the regulated or unregulated market. At

the beginning of 2002, Alcoa left the regulated energy market to purchase energy in the unregulated market. Subsequently, in

2004, the Energy Authority introduced regulation no. 148/2004 which set forth a different method for calculating the special

tariff that would result in a different drawback for the regulated and unregulated markets. Alcoa challenged the new regulation

in the Administrative Court of Milan and received a favorable judgment in 2006. Following this ruling, Alcoa continued to

receive the power price drawback in accordance with the original calculation method, through 2009, when the European

Commission declared allsuch special tariffs to be impermissible “state aid.” In 2010 the Energy Authority appealed the 2006

ruling to the Consiglio di Stato (final court of appeal). On December 2, 2011, the Consiglio di Stato ruled in favor of the Energy

Authority and against Alcoa, thus presenting the opportunity for the energy regulators to seek reimbursement fromAlcoa of

an amount equal to the difference between the actual drawback amounts received over the relevant time period, and the

drawback as it would have been calculated in accordance with regulation 148/2004. Any such reimbursement would have to be

made by way of a separate claimto Alcoa fromthe energy authorities and, thus far, no such claimhas been presented. At this

time, the company is unable to reasonably predict an outcome for this matter.

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European Commission Matters

As previously reported, in July 2006, the European Commission (EC) announced that it had opened an investigation to

establish whether an extension of the regulated electricity tariff granted by Italy to some energy-intensive industries complies

with European Union (EU) state aid rules. The Italian power tariff extended the tariff that was in force until December 31, 2005

through November 19, 2009 (Alcoa has been incurring higher power costs at its smelters in Italy subsequent to the tariff end

date). The extension was originally through 2010, but the date was changed by legislation adopted by the Italian Parliament

effective on August 15, 2009. Prior to expiration of the tariff in 2005, Alcoa had been operating in Italy for more than 10 years

under a power supply structure approved by the EC in 1996. That measure provided a competitive power supply to the primary

aluminumindustry and was not considered state aid fromthe Italian Government. The EC’s announcement expressed concerns

about whether Italy’s extension of the tariff beyond 2005 was compatible with EU legislation and potentially distorted

competition in the European market of primary aluminum, where energy is an important part of the production costs.

On November 19, 2009, the EC announced a decision in this matter stating that the extension of the tariff by Italy constituted

unlawfulstate aid, in part, and, therefore, the Italian Government is to recover a portion of the benefit Alcoa received since

January 2006 (including interest). The amount of this recovery will be based on a calculation that is being prepared by the

Italian Government. Pending formal notification fromthe Italian Government, Alcoa estimates that a payment in the range of

$300 to $500 million will be required (the timing of such payment is uncertain). In late 2009, after discussions with legal counsel

and reviewing the bases on which the EC decided, including the different considerations cited in the EC decision regarding

Alcoa’s two smelters in Italy, Alcoa recorded a charge of $250 million, including $20 million to write off a receivable fromthe

Italian Government for amounts due under the now expired tariff structure. On April 19, 2010, Alcoa filed an appeal of this

decision with the General Court of the EU. Alcoa will pursue allsubstantive and procedural legalsteps available to annul the

EC’s decision. On May 22, 2010, Alcoa also filed with the General Court a request for injunctive relief to suspend the

effectiveness of the decision, but, on July 12, 2010, the General Court denied such request. On September 10, 2010, Alcoa

appealed the July 12, 2010 decision to the European Court of Justice (ECJ); this appeal was dismissed on December 16, 2011.

On March 23, 2011, the EC announced that it has decided to refer the Italian Government to the ECJ for failure to comply with

the EC’s November 19, 2009 decision.

Separately, on November 29, 2006, Alcoa filed an appeal before the General Court (formerly the European Court of First

Instance) seeking the annulment of the EC’s decision to open an investigation alleging that such decision did not follow the

applicable procedural rules. On March 25, 2009, the General Court denied Alcoa’s appeal. On May 29, 2009, Alcoa appealed the

March 25, 2009 ruling before the ECJ. The hearing of the May 29, 2009 appeal was held on June 24, 2010. On July 21, 2011, the

ECJ denied Alcoa’s appeal.

As previously reported, in January 2007, the EC announced that it had opened an investigation to establish whether the

regulated electricity tariffs granted by Spain comply with EU state aid rules. At the time the EC opened its investigation, Alcoa

had been operating in Spain for more than nine years under a power supply structure approved by the Spanish Government in

1986, an equivalent tariff having been granted in 1983. The investigation is limited to the year 2005 and is focused both on the

energy-intensive consumers and the distribution companies. The investigation provided 30 days to any interested party to

submit observations and comments to the EC. With respect to the energy-intensive consumers, the EC opened the

investigation on the assumption that prices paid under the tariff in 2005 were lower than a pool price mechanism, therefore

being, in principle, artificially below market conditions. Alcoa submitted comments in which the company provided evidence

that prices paid by energy-intensive consumers were in line with the market, in addition to various legal arguments defending

the legality of the Spanish tariff system. It is Alcoa’s understanding that the Spanish tariff systemfor electricity is in

conformity with all applicable laws and regulations, and therefore no state aid is present in the tariff system. While Alcoa does

not believe that an unfavorable decision is probable, management has estimated that the total potential impact froman

unfavorable decision could be approximately $90 million (€70 million) pretax. Also, while Alcoa believes that any additional cost

would only be

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assessed for the year 2005, it is possible that the EC could extend its investigation to later years. If the EC’s investigation

concludes that the regulated electricity tariffs for industries are unlawful, Alcoa will have an opportunity to challenge the

decision in the EU courts.

Environmental Matters

Alcoa is involved in proceedings under the Comprehensive Environmental Response, Compensation and Liability Act, also

known as Superfund (CERCLA) or analogous state provisions regarding the usage, disposal, storage or treatment of hazardous

substances at a number of sites in the U.S. The company has committed to participate, or is engaged in negotiations with

federal or state authorities relative to its alleged liability for participation, in clean-up efforts at severalsuch sites. The most

significant of these matters, including the remediation of the Grasse River in Massena, NY, are discussed in the Environmental

Matters section of Note N to the Consolidated Financial Statements under the caption “Environmental Matters” on pages 114-

117.

As previously reported, representatives of various U.S. federal and state agencies and a Native American tribe, acting in their

capacities as trustees for natural resources (Trustees), have asserted that Alcoa and Reynolds Metals Company (Reynolds)

may be liable for loss or damage to such resources under federal and state law based on Alcoa’s and Reynolds’ operations at

their Massena, New York and St. Lawrence, New York facilities. While formal proceedings have not been instituted, the

company has continued to actively investigate these claims. Pursuant to an agreement entered into with the Trustees in 1991,

Alcoa and Reynolds had been working cooperatively with General Motors Corporation, which is facing similar claims by the

Trustees, to assess potential injuries to natural resources in the region. With the bankruptcy of General Motors in 2009, Motors

Liquidation Company (MLC) took over General Motors’ liability in this matter. In September 2009, MLC notified Alcoa and the

Trustees that it would no longer participate in the cooperative process. Alcoa and the Trustees agreed to continue to work

together cooperatively without MLC to resolve Alcoa’s and Reynolds’ natural resources damages liability in this matter. In

January 2011, the Trustees, representing the United States, the State of New York and the Mohawk tribe, and Alcoa reached an

agreement in principle to resolve the natural resource damage claims. The agreement is subject to final approval of the

respective parties and will be subject to a federal court approved consent decree, including public notice and comment. Any

upward adjustment in the remediation reserve would be taken in connection with the finalization of the settlement agreement.

As previously reported, in August 2005, Dany Lavoie, a resident of Baie Comeau in the Canadian Province of Québec, filed a

Motion for Authorization to Institute a Class Action and for Designation of a Class Representative against Alcoa Canada Inc.,

Alcoa Limitée, Societe Canadienne de MetauxReynolds Limitée and Canadian British Aluminumin the Superior Court of

Québec in the District of Baie Comeau. Plaintiff seeks to institute the class action on behalf of a putative class consisting of all

past, present and future owners, tenants and residents of Baie Comeau’s St. Georges neighborhood. He alleges that

defendants, as the present and past owners and operators of an aluminumsmelter in Baie Comeau, have negligently allowed

the emission of certain contaminants fromthe smelter, specifically Polycyclic Aromatic Hydrocarbons or “PAHs”, that have

been deposited on the lands and houses of the St. Georges neighborhood and its environs causing damage to the property of

the putative class and causing health concerns for those who inhabit that neighborhood. Plaintiff originally moved to certify a

class action, sought to compel additional remediation to be conducted by the defendants beyond that already undertaken by

themvoluntarily, sought an injunction against further emissions in excess of a limit to be determined by the court in

consultation with an independent expert, and sought money damages on behalf of all class members. In May 2007, the court

authorized a class action suit to include only people who suffered property damage or personal injury damages caused by the

emission of PAHs fromthe smelter. In September 2007, the plaintiff filed his claimagainst the original defendants, which the

court had authorized in May. Alcoa has filed its Statement of Defense and plaintiff has filed an Answer to that Statement.

Alcoa also filed a Motion for Particulars with respect to certain paragraphs of plaintiff’s Answer and a Motion to Strike with

respect to certain paragraphs of plaintiff’s Answer. In late 2010, the Court denied these motions. At this stage of the

proceeding, the company is unable to reasonably predict an outcome or to estimate a range of reasonably possible loss.

As previously reported, in January 2006, in Musgrave v. Alcoa, et al, Warrick Circuit Court, County of Warrick, Indiana; 87-

C01-0601-CT-0006, Alcoa Inc. and a subsidiary were sued by an individual, on behalf of himself and all

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persons similarly situated, claiming harmfromalleged exposure to waste that had been disposed in designated pits at the

Squaw Creek Mine in the 1970s. During February 2007, class allegations were dropped and the matter now proceeds as an

individual claim. Alcoa filed a renewed motion to dismiss (arguing that the claims are barred by the Indiana Workers’

Compensation Act), amended its answer to include Indiana’s Recreational Use Statute as an affirmative defense and filed a

motion for summary judgment based on the Recreational Use Statute. The court granted Alcoa’s motion to dismiss regarding

plaintiffs’ occupationally-related claims and denied the motion regarding plaintiffs’ recreationally-related claims. On January 17,

2012, the court denied all outstanding motions with no opinion issued. The trial date for this matter has been scheduled for

2012. There is some limited discovery ongoing in this matter. The company is unable to reasonably predict an outcome or to

estimate a range of reasonably possible loss.

Also as previously reported, in October 2006, in Barnett, et al. v. Alcoa and Alcoa Fuels, Inc., Warrick Circuit Court, County of

Warrick, Indiana; 87-C01-0601-PL-499, forty-one plaintiffs sued Alcoa Inc. and a subsidiary, asserting claims similar to the

Musgrave matter, discussed above. In November 2007, Alcoa Inc. and its subsidiary filed motions to dismiss both the

Musgrave and Barnett cases. In October 2008, the Warrick County Circuit Court granted Alcoa’s motions to dismiss,

dismissing all claims arising out of alleged occupational exposure to wastes at the Squaw Creek Mine, but in November 2008,

the trial court clarified its ruling, indicating that the order does not dispose of plaintiffs’ personal injury claims based upon

alleged “recreational” or non-occupational exposure. Plaintiffs also filed a “second amended complaint” in response to the

court’s orders granting Alcoa’s motions to dismiss. On July 7, 2010, the court granted the parties’ joint motions for a general

continuance of trialsettings. Discovery in this matter is stayed pending the outcome of the Musgrave matter. The company is

unable to reasonably predict an outcome or to estimate a range of reasonably possible loss.

As previously reported, in 1996, Alcoa acquired the Fusina, Italy smelter and rolling operations and the Portovesme, Italy

smelter (both of which are owned by Alcoa’s subsidiary, Alcoa Trasformazioni S.r.l.) fromAlumix, an entity owned by the

Italian Government. Alcoa also acquired the extrusion plants located in Feltre and Bolzano, Italy. At the time of the acquisition,

Alumixindemnified Alcoa for pre-existing environmental contamination at the sites. In 2004, the Italian Ministry of Environment

(MOE) issued orders to Alcoa Trasformazioni S.r.l. and Alumixfor the development of a clean-up plan related to soil

contamination in excess of allowable limits under legislative decree and to institute emergency actions and pay natural resource

damages. On April 5, 2006, Alcoa Trasformazioni S.r.l.’s Fusina site was also sued by the MOE and Minister of Public Works

(MOPW) in the Civil Court of Venice for an alleged liability for environmental damages, in parallel with the orders already

issued by the MOE. Alcoa Trasformazioni S.r.l. appealed the orders, defended the civil case for environmental damages (which

is still pending) and filed suit against Alumix, as discussed below. Similar issues also existed with respect to the Bolzano and

Feltre plants, based on orders issued by local authorities in 2006. All the orders have been challenged in front of the

Administrative Regional Courts, and all trials are still pending. However, in Bolzano the Municipality of Bolzano withdrew the

order, and the Regional Administrative Tribunal of Veneto suspended the order in Feltre. Most, if not all, of the underlying

activities occurred during the ownership of Alumix, the governmental entity that sold the Italian plants to Alcoa.

As noted above, in response to the 2006 civilsuit by the MOE and MOPW, Alcoa Trasformazioni S.r.l. filed suit against Alumix

claiming indemnification under the original acquisition agreement, but brought that suit in the Court of Rome due to

jurisdictional rules. The Court of Rome has appointed an expert to assess the causes of the pollution. In June 2008, the parties

(Alcoa and now Ligestra S.r.l. (Ligestra), the successor to Alumix) signed a preliminary agreement by which they have

committed to pursue a settlement and asked for a suspension of the technical assessment during the negotiations. The Court of

Rome accepted the request, and postponed the technical assessment, reserving its ability to fixthe deadline depending on the

development of negotiations. Alcoa and Ligestra agreed to a settlement in December 2008 with respect to the Feltre

site. Ligestra paid the sumof 1.08 million Euros and Alcoa committed to clean up the site. Further postponements were granted

by the Court of Rome, and the next hearing was fixed for November 2011. The trial was then suspended under the joint request

of the parties, and will have to be restarted in 2012. In the meantime, in December 2009, Alcoa Trasformazioni S.r.l. and Ligestra

reached an initial agreement for settlement of the liabilities related to Fusina. The settlement would also allow Alcoa to settle

the 2006 civilsuit by the MOE and MOPW for the environmental damages pending before the Civil Court of Venice. The

agreement outlines an

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allocation of payments to the MOE for emergency action and natural resource damages and the scope and costs for a proposed

soil remediation. In February 2011, a further and more detailed settlement relating to Fusina was reached, allocating 80% and

20% of the remediation costs to Ligestra and Alcoa, respectively. Later in 2011, Alcoa and Ligestra signed a similar agreement

relating to the Portovesme site. The agreements are contingent upon final acceptance of the remediation project by the MOE.

To provide time for settlement with Ligestra, the Minister of Environment and Alcoa jointly requested and the Civil Court of

Venice has granted a series of postponements of hearings in the Venice trial, assuming that the case will be closed. The

company is unable to reasonably predict an outcome or to estimate a range of reasonably possible loss.

As previously reported, on November 30, 2010, Alcoa Alumínio S.A. (Alumínio) received service of a lawsuit that had been

filed by the public prosecutors of the State of Pará in Brazil in November 2009. The suit names the company and the State of

Pará, which, through its Environmental Agency, had issued the operating license for the company’s new bauxite mine in

Juruti. The suit concerns the impact of the project on the region’s water systemand alleges that certain conditions of the

original installation license were not met by the company. In the lawsuit, plaintiffs requested a preliminary injunction

suspending the operating license and ordering payment of compensation. On April 14, 2010, the court denied plaintiffs’

request. Alumínio presented its defense in March 2011, on grounds that it was in compliance with the terms and conditions of

its operating license, which included plans to mitigate the impact of the project on the region’s water system. In April, 2011, the

State of Pará defended itself in the case asserting that the operating license contains the necessary plans to mitigate such

impact, that the State monitors the performance of Aluminio’s obligations arising out of such license, that the licensing process

is valid and legal, and that the suit is meritless. This proceeding is in its preliminary stage and the company is unable to

reasonably predict an outcome or to estimate a range of reasonably possible loss.

As previously reported, by an amended complaint filed April 21, 2005, Alcoa Global Fasteners, Inc. was added as a defendant in

Orange County Water District (the “Plaintiff”) v. Northrop Corporation, et al., civil action 04cc00715 (Superior Court of

California, County of Orange). Plaintiff alleges contamination or threatened contamination of a drinking water aquifer by Alcoa,

certain of the entities that preceded Alcoa at the same locations as property owners and/or operators, and other current and

former industrial and manufacturing businesses that operated in Orange County in past decades. Currently thirteen original

defendants remain in the case. Plaintiff seeks to recover the cost of aquifer remediation and attorney’s fees. This matter was

stayed as to all parties during the initial period of a bankruptcy case by a co-defendant; the stay has now been lifted as to

Alcoa and all other defendants except the bankrupt co-defendant. Trial for the remaining original defendants began and was

adjourned on February 10, 2012, to allow plaintiff to complete expert discovery without breaching a five-year mandatory

dismissalstatute. The trial is scheduled to reconvene on or about March 26, 2012. Third party complaints against crossdefendants are stayed until a future phase of trial at a yet-to-be-determined date. Plaintiff has asserted a total remedy cost of

$150 million plus attorneys’ fees. Defendants do not believe such costs are consistent with appropriate remediation standards.

Alcoa contends that its liability, if any could be established, is minimal. A similar matter, Orange County Water District v. Sabic,

et al, civil action 30-2008-00078246 (Superior Court of California, County of Orange) was filed against Alcoa Global Fasteners,

Inc. on June 23, 2008. This matter also alleges contamination or threatened contamination of a drinking water aquifer by Alcoa

and others. While a trial has been set for 2013, plaintiff has not yet disclosed its estimate of remediation costs. Alcoa believes

that it is not responsible for any contamination as alleged in the complaint or that if any liability were to be established, its

liability would be insignificant. At this time, Alcoa is unable to reasonably predict an outcome or to estimate a range of

reasonably possible loss for either matter.

St. Croix Proceedings

Josephat Henry. As previously reported, in September 1998, Hurricane Georges struck the U.S. Virgin Islands, including the

St. CroixAlumina, L.L.C. (SCA) facility on the island of St. Croix. The wind and rain associated with the hurricane caused

material at the location to be blown into neighboring residential areas. SCA undertook or arranged various cleanup and

remediation efforts. The Division of Environmental Protection (DEP) of the Department of Planning and Natural Resources

(DPNR) of the Virgin Islands Government issued a Notice of Violation that Alcoa has contested. In February 1999, certain

residents of St. Croixcommenced a civilsuit in the Territorial Court of the Virgin

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Islands seeking compensatory and punitive damages and injunctive relief for alleged personal injuries and property damages

associated with “bauxite or red dust” fromthe SCA facility. The suit, which has been removed to the District Court of the Virgin

Islands (the “Court”), names SCA, Alcoa and Glencore Ltd. as defendants, and, in August 2000, was accorded class action

treatment. The class was defined to include persons in various defined neighborhoods who “suffered damages and/or injuries

as a result of exposure during and after Hurricane Georges to red dust and red mud blown during Hurricane Georges.” All of the

defendants have denied liability, and discovery and other pretrial proceedings have been underway since 1999. Plaintiffs’

expert reports claimthat the material blown during Hurricane Georges consisted of bauxite and red mud, and contained

crystalline silica, chromium, and other substances. The reports further claim, among other things, that the population of the six

subject neighborhoods as of the 2000 census (a total of 3,730 people) has been exposed to toxic substances through the fault

of the defendants, and hence will be able to show entitlement to lifetime medical monitoring as well as other compensatory and

punitive relief. These opinions have been contested by the defendants’ expert reports, that state, among other things, that

plaintiffs were not exposed to the substances alleged and that in any event the level of alleged exposure does not justify

lifetime medical monitoring. Alcoa and SCA turned over this matter to their insurance carriers who have been providing a

defense. Glencore Ltd. is jointly defending the case with Alcoa and SCA and has a pending motion to dismiss. In June 2008, the

Court granted defendants’ joint motion to decertify the original class of plaintiffs, and certified a new class as to the claimof

ongoing nuisance, insofar as plaintiffs seek cleanup, abatement, or removal of the red mud currently present at the facility. (The

named plaintiffs had previously dropped their claims for medical monitoring as a consequence of the court’s rejection of

plaintiffs’ proffered expert opinion testimony). The Court expressly denied certification of a class as to any claims for

remediation or cleanup of any area outside the facility (including plaintiffs’ property). The new class could seek only injunctive

relief rather than monetary damages. Named plaintiffs, however, could continue to prosecute their claims for personal injury,

property damage, and punitive damages. In August 2009, in response to defendants’ motions, the Court dismissed the named

plaintiffs’ claims for personal injury and punitive damages, and denied the motion with respect to their property damage claims.

In September 2009, the Court granted defendants’ motion for summary judgment on the class plaintiffs’ claimfor injunctive

relief. In October 2009, plaintiffs appealed the Court’s summary judgment order dismissing the claimfor injunctive relief and in

March 2011, the U.S. Court of Appeals for the Third Circuit dismissed plaintiffs’ appeal of that order. In September 2011, the

parties reached an oral agreement to settle the remaining claims in the case which would resolve the personal property damage

claims of the 12 remaining individual plaintiffs. Plaintiffs have indicated that they nevertheless intend to appeal all of the claim

dismissals that have occurred in the trial court over the life of the case. The company anticipates that this appeal will be filed

within 60 days following entry of such settlement. Alcoa’s share of the settlement is fully insured.

Contract Action. As previously reported, on April 23, 2004, St. CroixRenaissance Group, L.L.L.P. (SCRG), Brownfield Recovery

Corp., and Energy Answers Corporation of Puerto Rico (collectively referred to as “Plaintiffs”) filed a suit against St. Croix

Alumina L.L.C. and Alcoa World Alumina, LLC (collectively referred to as “Alcoa”) in the Territorial Court of the Virgin Islands,

Division of St. Croixfor claims related to the sale of Alcoa’s former St. Croixalumina refinery to Plaintiffs. Alcoa thereafter

removed the case to federal court and after a several year period of discovery and motion practice, a jury trial on the matter took

place in St. CroixfromJanuary 11, 2011 to January 20, 2011. The jury returned a verdict in favor of Plaintiffs and the Court

awarded damages as described: on a claimof breaches of warranty, the jury awarded $13 million; on the same claim, the jury

awarded punitive damages in the amount of $6 million; and on a negligence claimfor property damage, the jury awarded $10

million. Plaintiffs filed a motion seeking pre-judgment interest on the jury award. In February 2011, Alcoa filed post-trial motions

seeking judgment notwithstanding the verdict or, in the alternative, a new trial. In May 2011, the court granted Alcoa’s motion

for judgment regarding Plaintiffs’ $10 million negligence award and denied the remainder of Alcoa’s motions. Additionally, the

court awarded Plaintiffs pre-judgment interest of $2 million on the breach of warranty award. As a result of the court’s post-trial

decisions, Alcoa recorded a charge of $20 million in 2011. In June 2011, Alcoa filed a notice of appeal with the U.S. Court of

Appeals for the Third Circuit regarding Alcoa’s denied post-trial motions. Also on June 22, 2011, SCRGfiled a notice of cross

appeal with the Third Circuit Court related to certain pre-trial decisions of the court and of the court’s post-trial ruling on the

negligence claim. The Third Circuit has referred this matter to mediation as is its standard practice in appeals.

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NRD Action. As previously reported, in May 2005, AWA and SCA were among the defendants listed in a lawsuit brought by

the Commissioner of the DPNR, Dean Plaskett, in his capacity as Trustee for Natural Resources of the Territory of the United

States Virgin Islands in the District Court of the Virgin Islands, Division of St. Croix. The complaint seeks damages for alleged

injuries to natural resources caused by alleged releases froman alumina refinery facility in St. Croixthat was owned by SCA

from1995 to 2002. Also listed in the lawsuit are previous and subsequent owners of the alumina refinery and the owners of an

adjacent oil refinery. Claims are brought under CERCLA, U.S. Virgin Islands law, and common law. The plaintiff has not

specified in the complaint the amount it seeks in damages. The defendants filed motions to dismiss in 2005. In October 2007, in

an effort to resolve the liability of SCRGin the lawsuit, as well as any other CERCLA liability SCRGmay have with respect to

the facility, DPNR filed a new lawsuit against SCRGseeking the recovery of response costs under CERCLA, and the plaintiff

and SCRGfiled a joint Agreement and Consent Decree. The remaining defendants each filed objections to the Agreement and

Consent Decree, and in October 2008, the court denied entry of the Agreement and Consent Decree. The court also ruled on

the motions to dismiss that were filed by all defendants in 2005. The court dismissed two counts fromthe complaint (common

law trespass and V.I. Water Pollution Control Act), but denied the motions with regard to the other sixcounts (CERCLA, V.I.

Oil Spill Prevention and Pollution Control Act, and common law strict liability, negligence, negligence per se and nuisance). The

court also ruled that the Virgin Islands Government was the proper plaintiff for the territorial law claims and required re-filing of

the complaint by the proper parties, which was done in November 2008. The plaintiffs subsequently moved to amend their

complaint further, were granted leave by the court to do so, and filed an amended complaint on July 30, 2009. AWA and SCA

filed an answer, counterclaimand cross-claimagainst SCRGin response to the amended complaint in August 2009. In response

to the plaintiffs’ amended complaint, the other former owners of the alumina refinery filed answers, counterclaims, and crossclaims against SCRGand certain agencies of the Virgin Islands Government. During July 2009, each defendant except SCRG

filed a partial motion for summary judgment seeking dismissal of the CERCLA cause of action on statute of limitations grounds.

In July 2010, the court granted in part and denied in part each defendant’s motion for summary judgment. The court granted

each defendant’s motion as to alleged injury to off-site groundwater and downstreamsurface water resources but denied each

motion as to alleged injury to on-site groundwater resources.

SCA-Only Territorial Action. As previously reported, in December 2006, SCA was sued by the Commissioner of DPNR, U.S.

Virgin Islands, in the Superior Court of the Virgin Islands, Division of St. Croix. The plaintiff alleges violations of the Coastal

Zone Management Act and a construction permit issued thereunder. The complaint seeks a civil fine of $10,000 under the

Coastal Zone Management Act, civil penalties of $10,000 per day for alleged intentional and knowing violations of the Coastal

Zone Management Act, exemplary damages, costs, interest and attorney’s fees, and “other such amounts as may be just and

proper.” SCA responded to the complaint on February 2, 2007 by filing an answer and motion to disqualify DPNR’s private

attorney. The court has not yet ruled on the motion.

Multi-Party Enforcement Action. As previously reported, in December 2006, SCA, along with unaffiliated prior and subsequent

owners, were sued by the Commissioner of the DPNR, U.S. Virgin Islands, in the Superior Court of the Virgin Islands, Division

of St. Croix. This second suit alleges violations by the defendants of certain permits and environmentalstatutes said to apply

to the facility. The complaint seeks the completion of certain actions regarding the facility, a civil fine fromeach defendant of

$10,000 under the Coastal Zone Management Act, civil penalties of $50,000 per day for each alleged violation of the Water

Pollution Control Act, $10,000 per day for alleged intentional and knowing violations of the Coastal Zone Management Act,

exemplary damages, costs, interest and attorney’s fees, and “other such amounts as may be just and proper.” SCA responded

to the complaint on February 2, 2007 by filing an answer and motion to disqualify DPNR’s private attorney. The parties fully

briefed the motion and are awaiting a decision fromthe court. In October 2007, plaintiff and defendant SCRGentered into a

settlement agreement resolving claims against SCRG. Plaintiff filed a notice of dismissal with the court, and the court entered an

order dismissing SCRGon November 2, 2007. SCA objected to the dismissal and requested that the court withdraw its order,

and the parties have briefed SCA’s objection and request. A decision fromthe court is pending. On November 10, 2007, SCA

filed a motion for summary judgment seeking dismissal of all claims in the case. The parties completed briefing of the motion in

January 2008. The court has not yet ruled on the motion.

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Cost Recovery Action. As previously reported, and noted above, in October 2007, DPNR filed a CERCLA cost recovery suit

against SCRG. After the court denied entry of the Agreement and Consent Decree in October 2008, the cost recovery case lay

dormant until May 2009, when SCRGfiled a third-party complaint for contribution and other relief against several third-party

defendants, including AWA and SCA. SCRGfiled an amended third-party complaint on August 31, 2009, and served it on

third-party defendants in mid-September 2009. AWA and SCA filed their answer to the amended third-party complaint on

October 30, 2009. On January 8, 2010, DPNR filed a motion to assert claims directly against certain third-party defendants,

including AWA and SCA. On January 29, 2010, the court granted plaintiff’s motion. On November 15, 2010, plaintiff and all

defendants filed motions for summary judgment addressing various issues relating to liability, recoverability of costs, and

divisibility of harm. On March 4, 2011, the court issued a memorandumand order granting defendants’ motions for summary

judgment and entered judgment in favor of the defendants. On March 18, 2011, DPNR filed a motion for reconsideration of the

order and judgment, and that motion was denied on April 15, 2011. On May 16, 2011, DPNR filed an appeal with the U.S. Court

of Appeals for the Third Circuit. That appeal remains pending.

Abednego. As previously reported, on January 14, 2010, Alcoa was served with a complaint involving approximately 2,900

individual persons claimed to be residents of St. Croixwho are alleged to have suffered personal injury or property damage

fromHurricane Georges or winds blowing material fromthe property since the time of the hurricane. This complaint, Abednego,

et al. v. Alcoa, et al. was filed in the Superior Court of the Virgin Islands, St. CroixDivision. The complaint names as defendants

the same entities as were sued in the February 1999 action earlier described and have added as a defendant the current owner

of the alumina facility property. In February 2010, Alcoa and SCA removed the case to the federal court for the District of the

Virgin Islands. Subsequently, plaintiffs filed motions to remand the case to territorial court as well as a third amended

complaint, and defendants have moved to dismiss the case for failure to state a claimupon which relief can be granted. On

March 17, 2011, the court granted plaintiffs’ motion to remand to territorial court. Thereafter, Alcoa filed a motion for allowance

of appeal. The motion was denied on May 18, 2011. The parties await assignment of the case to a trial judge.

Proposed Consent Decree for Certain St. Croix Proceedings. On November 21, 2011, Alcoa, SCRGand the DPNR lodged a

proposed Consent Decree with the U.S. District Court for the Virgin Islands, which Consent Decree contains terms of a

settlement between the parties resolving the following matters:

• the Contract Action;

• the NRD Action;

• the SCA-Only Territorial Action;

• the Multi-Party Enforcement Action; and

• the Cost Recovery Action.

On January 12, 2012, the court held a hearing on the issue of whether to approve and enter the Consent Decree. On February

13, 2012 the court granted the motion to enter the Consent Decree.

Other Contingencies

In addition to the matters discussed above, various other lawsuits, claims, and proceedings have been or may be instituted or

asserted against Alcoa, including those pertaining to environmental, product liability, and safety and health matters. While the

amounts claimed in these other matters may be substantial, the ultimate liability cannot now be determined because of the

considerable uncertainties that exist. Therefore, it is possible that the company’s liquidity or results of operations in a particular

period could be materially affected by one or more of these other matters. However, based on facts currently available,

management believes that the disposition of these other matters that are pending or asserted will not have a material adverse

effect, individually or in the aggregate, on the financial position of the company.

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Item 4. Mine Safety Disclosures.

The information concerning mine safety violations or other regulatory matters required by Section 1503(a) of the Dodd-Frank

Wall Street Reformand Consumer Protection Act and Item104 of Regulation S-K (17 CFR 229.104 is included in Exhibit 95 of

this report, which is incorporated herein by reference.

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PART II

Item 5. Market for Registrant’s Common Equity, RelatedStockholder Matters andIssuer Purchases

of Equity Securities.

The company’s common stock is listed on the New York Stock Exchange where it trades under the symbol AA. The company’s

quarterly high and low trading stock prices and dividends per common share for 2011 and 2010 are shown below.

2011 2010

Quarter High Low Dividend High Low Dividend

First $17.75 $15.42 $ 0.03 $17.60 $12.26 $ 0.03

Second 18.47 14.56 0.03 15.15 10.01 0.03

Third 16.60 9.56 0.03 12.25 9.81 0.03

Fourth 11.66 8.45 0.03 15.63 11.81 0.03

Year 18.47 8.45 $ 0.12 17.60 9.81 $ 0.12

The number of holders of common stock was approximately 319,000 as of February 6, 2012.

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Stock Performance Graph

The following graph compares the most recent five-year performance of Alcoa’s common stock with (1) the Standard & Poor’s

500 Indexand (2) the Standard & Poor’s 500 Materials Index, a group of 27 companies categorized by Standard & Poor’s as

active in the “materials” market sector. Such information shall not be deemed to be “filed.”

As of December 31, 2006 2007 2008 2009 2010 2011

Alcoa Inc. $ 100 $ 124 $ 39 $ 58 $ 56 $ 32

S&P 500 Index 100 105 66 84 97 99

S&P 500 Materials Index 100 123 67 99 121 109

Copyright 2012 Standard& Poor’s, a division of The McGraw-Hill Companies Inc. All rights reserved.

Source: Research Data Group, Inc. (www.researchdatagroup.com/S&P.htm)

43

® ®

®

®

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Issuer Purchases of Equity Securities

Period

Total

Number

of Shares

Purchased

(a)

Average

Price

Paid

Per

Share

Total Number

of Shares

Purchasedas

Part of Publicly

Announced

Repurchase

Plans or

Programs

Maximum

Number

of Shares that

May Yet Be

PurchasedUnder

the Plans or

Programs

January 1 – January 31, 2011 2,582 16.52 - -

February 1 – February 28, 2011 2,462 17.32 - -

March 1 – March 31, 2011 - - - -

Total for quarter ended March 31,

2011 5,044 16.91 - -

April 1 – April 30, 2011 - - - -

May 1 – May 31, 2011 - - - -

June 1 – June 30, 2011 - - - -

Total for quarter ended June 30, 2011 - - - -

July 1 – July 31, 2011 - - - -

August 1 – August 31, 2011 - - - -

September 1 – September 30, 2011 - - - -

Total for quarter ended

September 30, 2011 - - - -

October 1 – October 31, 2011 - - - -

November 1 – November 30, 2011 - - - -

December 1 – December 31, 2011 - - - -

Total for quarter ended December 31,

2011 - - - -

(a) This column includes the deemed surrender of existing shares of Alcoa common stock to the company by stock-based

compensation plan participants to satisfy the exercise price of employee stock options at the time of exercise. These

surrendered shares are not part of any publicly announced share repurchase program.

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Item 6. SelectedFinancial Data

(dollars in millions, except per-share amounts andingot prices; shipments in thousands of metric tons [kmt])

For the year endedDecember 31, 2011 2010 2009 2008 2007

Sales $24,951 $21,013 $18,439 $26,901 $29,280

Amounts attributable to Alcoa common shareholders:

Income (loss) fromcontinuing operations $ 614 $ 262 $ (985) $ 229 $ 2,814

Loss fromdiscontinued operations (3) (8) (166) (303) (250)

Net income (loss) $ 611 $ 254 $(1,151) $ (74) $ 2,564

Earnings per share attributable to Alcoa common shareholders:

Basic:

Income (loss) fromcontinuing operations $ 0.58 $ 0.25 $ (1.06) $ 0.27 $ 3.24

Loss fromdiscontinued operations (0.01) - (0.17) (0.37) (0.29)

Net income (loss) $ 0.57 $ 0.25 $ (1.23) $ (0.10) $ 2.95

Diluted:

Income (loss) fromcontinuing operations $ 0.55 $ 0.25 $ (1.06) $ 0.27 $ 3.22

Loss fromdiscontinued operations - (0.01) (0.17) (0.37) (0.28)

Net income (loss) $ 0.55 $ 0.24 $ (1.23) $ (0.10) $ 2.94

Shipments of alumina (kmt) 9,218 9,246 8,655 8,041 7,834

Shipments of aluminumproducts (kmt) 5,037 4,757 5,097 5,481 5,393

Alcoa’s average realized price per metric ton of aluminum $ 2,636 $ 2,356 $ 1,856 $ 2,714 $ 2,784

Cash dividends declared per common share $ 0.12 $ 0.12 $ 0.26 $ 0.68 $ 0.68

Total assets 40,120 39,293 38,472 37,822 38,803

Short-termborrowings 62 92 176 478 563

Commercial paper 224 - - 1,535 856

Long-termdebt, including amounts due within one year 9,085 9,073 9,643 8,565 6,573

The data presented in the Selected Financial Data table should be read in conjunction with the information provided in

Management’s Discussion and Analysis of Financial Condition and Results of Operations in Part II Item7 and the

Consolidated Financial Statements in Part II Item8 of this Form10-K.

Item 7. Management’s Discussion andAnalysis of Financial Condition andResults of Operations.

(dollars in millions, except per-share amounts andingot prices; production andshipments in thousands of metric tons [kmt])

Overview

Our Business

Alcoa is the world leader in the production and management of primary aluminum, fabricated aluminum, and alumina combined,

through its active and growing participation in all major aspects of the industry: technology, mining, refining, smelting,

fabricating, and recycling. Aluminumis a commodity that is traded on the London Metal Exchange (LME) and priced daily

based on market supply and demand. Aluminumand alumina represent more than 80% of Alcoa’s revenues, and the price of

aluminuminfluences the operating results of Alcoa. Nonaluminumproducts include precision castings and aerospace and

industrial fasteners. Alcoa’s products are used worldwide in aircraft, automobiles, commercial transportation, packaging,

building and construction, oil and gas, defense, consumer electronics, and industrial applications.

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Alcoa is a global company operating in 31 countries. Based upon the country where the point of sale occurred, the U.S. and

Europe generated 49% and 27%, respectively, of Alcoa’s sales in 2011. In addition, Alcoa has investments and operating

activities in, among others, Australia, Brazil, China, Guinea, Iceland, Russia, and Saudi Arabia, all of which present

opportunities for substantial growth. Governmental policies, laws and regulations, and other economic factors, including

inflation and fluctuations in foreign currency exchange rates and interest rates, affect the results of operations in these

countries.

Management Reviewof 2011 andOutlook for the Future

At the end of 2010, management had projected growth in global aluminumdemand of 12% for 2011. While demand started

strong in the year, it weakened in the second half, resulting in an estimated actual growth rate of 10%. Additionally, LME

pricing levels declined steadily fromthe peak reached in mid-2011, resulting in a more than 27% decrease by the end of the year.

The Company also faced demand destruction for aluminumend products in Europe and significant headwinds for certain input

costs during 2011. Despite these challenges, the 2011 financial results of Alcoa improved over 2010, due in large part to the

decisions made by management. At the beginning of 2011, management continued its previous actions fromits two-year cash

sustainability program, which began in 2009 to achieve targets related to procurement efficiencies, overhead rationalization, and

working capital improvements. Additionally, management planned to further improve Alcoa’s liquidity position by maintaining

a consistent level of capital expenditures with that of 2010, refinancing long-termdebt set to mature during 2013, and

contributing equity to satisfy a large portion of the Company’s 2011 obligation to its U.S. pension plans.

The following financial information reflects some key metrics of Alcoa’s 2011 results:

• Sales of $24,951, a 19% improvement over 2010;

• Income fromcontinuing operations of $614, or $0.55 per diluted share, an increase of $352 compared to 2010;

• Totalsegment after-taxoperating income of $1,893, a 33% improvement over 2010;

• Cash fromoperations of $2,193, in excess of $2,000 for the second consecutive year;

• Capital expenditures of $1,287, under $1,500 for the second consecutive year;

• Cash on hand at the end of the year of $1,939, in excess of $1,000 for the third consecutive year;

• Increase in total debt of $206, but a decrease of $1,207 over the past three years; and

• Debt-to-capital ratio of 35%, consistent with the targeted range of 30% to 35%.

Management is projecting continued growth (increase of 7%) in the global consumption of primary aluminumin 2012, but at a

slower pace than 2011. China and India are expected to have double-digit increases in aluminumdemand while Russia and Brazil

are expected to have 4% to 5% increases in aluminumconsumption rates. Such growth, along with industry-wide capacity

curtailments, will result in demand exceeding supply for primary aluminum. For alumina, growth in global consumption is

estimated to be 9%, and overallsupply and demand are expected to be balanced. Management also anticipates improved market

conditions for aluminumproducts in most major global end markets, particularly aerospace and automotive. On the cost side,

energy prices and certain raw materials are expected to continue to be a challenge. Management has established and is

committed to achieving the following specific goals in 2012:

• producing additionalsavings over those realized in 2009 through 2011 fromprocurement, overhead, and working

capital programs;

• generating positive cash flow fromoperations that will exceed capitalspending; and

• maintaining a debt-to-capital ratio between 30% and 35%.

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Looking ahead over the next two to four years, management will continue to focus on its aggressive strategic targets

established at the end of 2010. These targets include lowering Alcoa’s refining and smelting operations on the cost curve to

the 23rd (from30th) and 41st (from51st) percentiles, respectively, by 2015 and driving revenue growth in the midstream

(increase of $2,500) and downstream(increase of $1,600) operations by 2013. In conjunction with the revenue targets,

management is committed to improving margins that will exceed historical levels in the midstreamand downstreamoperations.

In 2011, production significantly improved at the Juruti bauxite mine development, nameplate capacity was achieved for the São

Luís refinery expansion, and a part of the Estreito hydroelectric power project became operational. These developments, along

with the planned full or partial curtailment of 240 kmt of smelting capacity in Europe and the fullstartup of Estreito, both

expected to occur in 2012, and the completion of the aluminumcomplexin Saudi Arabia by 2014, will help improve the

Company’s position on the cost curve. The midstreamand downstreamoperations both achieved margins that exceeded

historical levels and approximately 50% of the respective revenue growth targets in 2011. The midstreamoperations will

continue to build on this success in 2012, through continued volume growth in Russia and China, including emerging markets

like consumer electronics, and expansion of the rolling mill in Davenport, IA to meet rising U.S. automotive demand, due to

changing emissions regulations. The downstreamoperations will further their accomplishments in 2012 through continued

innovative solutions to meet a wide-range of customer needs.

Results of Operations

Earnings Summary

Income fromcontinuing operations attributable to Alcoa for 2011 was $614, or $0.55 per diluted share, compared with $262, or

$0.25 per share, in 2010. The improvement of $352 in continuing operations was primarily due to the following: higher realized

prices for alumina and aluminum; stronger volumes in the midstreamand downstreamsegments; net productivity

improvements; and a net favorable change in mark-to-market derivative contracts; partially offset by higher input costs; net

unfavorable foreign currency movements; higher income taxes due to better operating results; and additional restructuring

charges.

Income fromcontinuing operations attributable to Alcoa for 2010 was $262, or $0.25 per share, compared with a loss from

continuing operations of $985, or $1.06 per share, in 2009. The improvement of $1,247 in continuing operations was primarily

due to the following: increases in realized prices for alumina and aluminum; ongoing net costs savings and productivity

improvements across allsegments; and the absence of both a charge associated with a European Commission electricity

pricing matter in Italy and a loss on the sale of an equity investment; partially offset by net unfavorable foreign currency

movements; higher energy costs; unfavorable changes in LIFO (last in, first out) inventories; additional depreciation charges

and operating costs for growth projects; and the absence of gains on the exchange of equity interests and on the acquisition of

bauxite and refinery interests.

Net income attributable to Alcoa for 2011 was $611, or $0.55 per share, compared with net income of $254, or $0.24 per share, in

2010, and a net loss of $1,151, or $1.23 per share, in 2009. In 2011, net income of $611 included a loss fromdiscontinued

operations of $3, and in 2010 and 2009, net income of $254 and net loss of $1,151 included a loss fromdiscontinued operations

of $8 and $166, respectively.

In March 2009, management initiated a series of operational and financial actions to significantly improve Alcoa’s cost

structure and liquidity. Operational actions included procurement efficiencies and overhead rationalization to reduce costs and

working capital initiatives to yield significant cash improvements. Financial actions included a reduction in the quarterly

common stock dividend from$0.17 per share to $0.03 per share, which began with the dividend paid on May 25, 2009, and the

issuance of 172.5 million shares of common stock and $575 in convertible notes that collectively yielded $1,438 in net proceeds.

In January 2010, management initiated further operational actions to not only maintain the procurement and overhead savings

and working capital improvements achieved in 2009, but to improve on themthroughout 2010. Also, a further reduction in

capital expenditures was planned in order to achieve the level necessary to sustain operations without sacrificing the quality of

Alcoa’s alumina and aluminumproducts. In 2011, management continued its previous actions to maintain the achieved

procurement and overhead savings fromthe past two years and to further improve cash with working capital initiatives.

Additionally, maintaining a level of capital expenditures consistent with that of 2010 was planned. During 2012, management

plans to continue the actions from

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the past three years to achieve additional procurement and overhead savings, to further improve on working capital, and to

maintain a consistent level of capital expenditures.

In late 2008, management made the decision to reduce Alcoa’s aluminumand alumina production in response to the then global

economic downturn. As a result of this decision, reductions of 750 kmt, or 18%, of annualized output fromAlcoa’s global

smelting systemwere implemented (includes previous curtailment at Rockdale, TX in June 2008). Accordingly, reductions in

alumina output were also initiated with a plan to reduce production by 1,500 kmt-per-year across the global refining system.

The aluminumand alumina production curtailments were completed in early 2009 as planned. Smelters in Rockdale (267 kmt-peryear) and Tennessee (215 kmt-per-year) were fully curtailed while another 268 kmt-per-year was partially curtailed at various

other locations. The refinery in Point Comfort, TX was partially curtailed by approximately 1,500 kmt-per-year between the end

of 2008 and the beginning of 2009 (384 kmt-per-year remains curtailed as of December 31, 2011). In mid-2009, further action

became necessary resulting in the decision to fully curtail the Massena East, NYsmelter (125 kmt-per-year) and partially curtail

the Suralco (Suriname) refinery (870 kmt-per-year: 793 kmt-per-year remains curtailed as of December 31, 2011).

In 2011, Alcoa restarted the following previously curtailed production capacity in the U.S.: Massena East (125 kmt-per-year);

Wenatchee, WA (43 kmt-per-year); and Ferndale, WA (Intalco: 47 kmt-per-year (11 kmt more than previously planned)). These

restarts increased aluminumproduction by approximately 150 kmt during 2011 and are expected to increase aluminum

production by 215 kmt on an annual basis in 2012 and beyond and occurred to help meet anticipated growth in aluminum

demand and to meet obligations outlined in power agreements with energy providers.

In late 2011, management approved the permanent shutdown and demolition of the smelter located in Tennessee and two

potlines (capacity of 76 kmt-per-year) at the smelter located in Rockdale (four potlines remain). This decision was made after a

comprehensive strategic analysis was performed to determine the best course of action for each facility. Factors leading to this

decision were in general focused on achieving sustained competitiveness and included, among others: lack of an economically

viable, long-termpower solution; changed market fundamentals; cost competitiveness; required future capital investment; and

restart costs.

Also, at the end of 2011, management approved a partial or full curtailment of three European smelters as follows: Portovesme,

Italy (150 kmt-per-year); Avilés, Spain (46 kmt out of 93 kmt-per-year); and La Coruña, Spain (44 kmt out of 87 kmt-per-year).

These curtailments are expected to be completed in the first half of 2012. The curtailment of the Portovesme smelter may lead to

the permanent closure of the facility, while the curtailments at the two smelters in Spain are planned to be temporary. These

actions are the result of uncompetitive energy positions, combined with rising material costs and falling aluminumprices (mid2011 to late 2011).

Sales—Sales for 2011 were $24,951 compared with sales of $21,013 in 2010, an improvement of $3,938, or 19%. The increase was

primarily due to a rise in realized prices for alumina and aluminum, better pricing in the midstreamsegment, and higher volumes

in the Primary Metals segment and virtually all businesses in the midstreamand downstreamsegments.

Sales for 2010 were $21,013 compared with sales of $18,439 in 2009, an improvement of $2,574, or 14%. The increase was mainly

driven by a rise in realized prices for alumina and aluminum, as a result of significantly higher LME prices, favorable pricing in

the midstreamsegment, and sales fromthe smelters in Norway (acquired on March 31, 2009: increase of $332), slightly offset by

the absence of sales fromdivested businesses (Transportation Products Europe and most of Global Foil: decrease of $175) and

unfavorable mixin the downstreamsegment.

Cost of Goods Sold—COGS as a percentage of Sales was 82.1% in 2011 compared with 81.7% in 2010. The percentage was

negatively impacted by higher energy and raw materials costs and net unfavorable foreign currency movements due to a

weaker U.S. dollar, mostly offset by the previously mentioned higher realized prices and net productivity improvements.

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COGS as a percentage of Sales was 81.7% in 2010 compared with 91.7% in 2009. The percentage was positively impacted by the

significant rise in realized prices for alumina and aluminum; net cost savings and productivity improvements across all

segments; and the absence of a charge related to a European Commission’s decision on electricity pricing for smelters in Italy

($250); somewhat offset by net unfavorable foreign currency movements due to a weaker U.S. dollar; unfavorable LIFO

adjustments, as a result of the considerable rise in LME prices, and a significantly smaller reduction in LIFO inventory

quantities; increases in energy costs; and higher operating costs for Brazil growth projects placed in service.

Selling, General Administrative, andOther Expenses—SG&A expenses were $1,027, or 4.1% of Sales, in 2011 compared with

$961, or 4.6% of Sales, in 2010. The increase of $66 was principally the result of higher labor costs and an increase in bad debt

expense. The increase in labor costs was the result of a higher average employee base and a higher cost of employee benefits.

The higher bad debt expense was caused by charges for anticipated customer credit losses, primarily related to those in

Europe.

SG&A expenses were $961, or 4.6% of Sales, in 2010 compared with $1,009, or 5.5% of Sales, in 2009. The decline of $48 was

mostly due to reductions in expenses for contractors and consultants; lower deferred compensation, as a result of a decline in

plan performance; and decreases in bad debt expense and information technology expenditures. An increase in labor costs,

principally due to higher annual incentive and performance compensation and employee benefits costs (employer matching

savings plan contributions for U.S. salaried participants were suspended during 2009) somewhat offset the aforementioned

expense reductions.

Research andDevelopment Expenses—R&D expenses were $184 in 2011 compared with $174 in 2010 and $169 in 2009. The

increase in 2011 as compared to 2010 and in 2010 as compared to 2009 was mainly driven by incremental increases across

varying expenses necessary to support R&D activities.

Provision for Depreciation, Depletion, andAmortization—The provision for DD&A was $1,479 in 2011 compared with $1,450

in 2010. The increase of $29, or 2%, was mostly due to a portion of the assets placed into service in mid-2011 related to a new

hydroelectric power facility in Brazil, along with a number of small increases at various locations.

The provision for DD&A was $1,450 in 2010 compared with $1,311 in 2009. The increase of $139, or 11%, was principally the

result of the assets placed into service during the second half of 2009 related to the Juruti bauxite mine development and São

Luís refinery expansion in Brazil, the smelters in Norway (acquired on March 31, 2009), the new Bohai (China) flat-rolled product

facility, and a high-quality coated sheet line at the Samara (Russia) facility, slightly offset by the cessation in DD&A due to the

decision in early 2010 to permanently shut down and demolish two U.S. smelters (see Restructuring and Other Charges below).

Restructuring andOther Charges—Restructuring and other charges for each year in the three-year period ended

December 31, 2011 were comprised of the following:

2011 2010 2009

Asset impairments $ 150 $ 139 $ 54

Layoff costs 93 43 186

Other exit costs 61 58 37

Reversals of previously recorded layoff and other exit costs (23) (33) (40)

Restructuring and other charges $ 281 $ 207 $ 237

Layoff costs were recorded based on approved detailed action plans submitted by the operating locations that specified

positions to be eliminated, benefits to be paid under existing severance plans, union contracts or statutory requirements, and

the expected timetable for completion of the plans.

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2011 Actions—In 2011, Alcoa recorded Restructuring and other charges of $281 ($181 after-taxand noncontrolling interests),

which were comprised of the following components: $127 ($82 after-tax) in asset impairments and $36 ($23 after-tax) in other exit

costs related to the permanent shutdown and planned demolition of certain idled structures at two U.S. locations (see below);

$93 ($68 after-taxand noncontrolling interests) for the layoff of approximately 1,600 employees (820 in the Primary Metals

segment, 470 in the Flat-Rolled Products segment, 160 in the Alumina segment, 20 in the Engineered Products and Solutions

segment, and 130 in Corporate), including the effects of planned smelter curtailments (see below); $23 ($12 after-taxand

noncontrolling interests) for other asset impairments, including the write-off of the carrying value of an idled structure in

Australia that processed spent pot lining and adjustments to the fair value of the one remaining foil location while it was

classified as held for sale due to foreign currency movements; $20 ($8 after-taxand noncontrolling interests) for a litigation

matter related to the former St. Croixlocation; a net charge of $5 ($4 after-tax) for other small items; and $23 ($16 after-tax) for the

reversal of previously recorded layoff reserves due to normal attrition and changes in facts and circumstances, including a

change in plans for Alcoa’s aluminumpowder facility in Rockdale, TX.

In late 2011, management approved the permanent shutdown and demolition of certain facilities at two U.S. locations, each of

which was previously temporarily idled for various reasons. The identified facilities are the smelter located in Alcoa, TN

(capacity of 215 kmt-per-year) and two potlines (capacity of 76 kmt-per-year) at the smelter located in Rockdale, TX (remaining

capacity of 191 kmt-per-year composed of four potlines). Demolition and remediation activities related to these actions will

begin in the first half of 2012 and are expected to be completed in 2015 for the Tennessee smelter and in 2013 for the two

potlines at the Rockdale smelter. This decision was made after a comprehensive strategic analysis was performed to determine

the best course of action for each facility. Factors leading to this decision were in general focused on achieving sustained

competitiveness and included, among others: lack of an economically viable, long-termpower solution; changed market

fundamentals; cost competitiveness; required future capital investment; and restart costs. The asset impairments of $127

represent the write off of the remaining book value of properties, plants, and equipment related to these facilities. Additionally,

remaining inventories, mostly operating supplies, were written down to their net realizable value resulting in a charge of $6 ($4

after-tax), which was recorded in COGS. The other exit costs of $36 represent $18 ($11 after-tax) in environmental remediation

and $17 ($11 after-tax) in asset retirement obligations, both triggered by the decision to permanently shut down and demolish

these structures, and $1 ($1 after-tax) in other related costs.

Also, at the end of 2011, management approved a partial or full curtailment of three European smelters as follows: Portovesme,

Italy (150 kmt-per-year); Avilés, Spain (46 kmt out of 93 kmt-per-year); and La Coruña, Spain (44 kmt out of 87 kmt-per-year).

These curtailments are expected to be completed in the first half of 2012. The curtailment of the Portovesme smelter may lead to

the permanent closure of the facility, while the curtailments at the two smelters in Spain are planned to be temporary. These

actions are the result of uncompetitive energy positions, combined with rising material costs and falling aluminumprices (mid2011 to late 2011). As a result of these decisions, Alcoa recorded costs of $33 ($31 after-tax) for the layoff of approximately 650

employees. As Alcoa engages in discussions with the respective employee representatives and governments, additional

charges may be recognized in 2012.

As of December 31, 2011, approximately 380 of the 1,600 employees were terminated. The remaining terminations for the 2011

restructuring programs are expected to be completed by the end of 2012. In 2011, cash payments of $24 were made against

layoff reserves related to the 2011 restructuring programs.

2010 Actions—In 2010, Alcoa recorded Restructuring and other charges of $207 ($130 after-taxand noncontrolling interests),

which were comprised of the following components: $127 ($80 after-taxand noncontrolling interests) in asset impairments and

$46 ($29 after-taxand noncontrolling interests) in other exit costs related to the permanent shutdown and planned demolition of

certain idled structures at five U.S. locations (see below); $43 ($29 after-taxand noncontrolling interests) for the layoff of

approximately 875 employees (625 in the Engineered Products and Solutions segment; 75 in the Primary Metals segment; 60 in

the Alumina segment; 25 in the Flat-Rolled Products segment; and 90 in Corporate); $22 ($14 after-tax) in net charges (including

$12 ($8 after-tax) for asset impairments) related to divested and to be divested businesses (Automotive Castings, Global Foil,

Transportation Products Europe, and Packaging and Consumer) for, among other items, the settlement of a contract with a

former customer, foreign

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currency movements, working capital adjustments, and a taxindemnification; $2 ($2 after-taxand noncontrolling interests) for

various other exit costs; and $33 ($24 after-taxand noncontrolling interests) for the reversal of prior periods’ layoff reserves,

including a portion of those related to the Portovesme smelter in Italy due to the execution of a new power agreement.

In early 2010, management approved the permanent shutdown and demolition of the following structures, each of which was

previously temporarily idled for different reasons: the Eastalco smelter located in Frederick, MD (capacity of 195 kmt-per-year);

the smelter located in Badin, NC (capacity of 60 kmt-per-year); an aluminumfluoride plant in Point Comfort, TX; a paste plant

and cast house in Massena, NY; and one potline at the smelter in Warrick, IN (capacity of 40 kmt-per-year). This decision was

made after a comprehensive strategic analysis was performed to determine the best course of action for each facility. Factors

leading to this decision included current market fundamentals, cost competitiveness, other existing idle capacity, required

future capital investment, and restart costs, as well as the elimination of ongoing holding costs. The asset impairments of $127

represent the write off of the remaining book value of properties, plants, and equipment related to these facilities. Additionally,

remaining inventories, mostly operating supplies, were written down to their net realizable value resulting in a charge of $8 ($5

after-taxand noncontrolling interests), which was recorded in COGS. The other exit costs of $46 represent $30 ($19 after-taxand

noncontrolling interests) in asset retirement obligations and $14 ($9 after-tax) in environmental remediation, both triggered by

the decision to permanently shut down and demolish these structures, and $2 ($1 after-taxand noncontrolling interests) in

other related costs.

As of December 31, 2011, approximately 790 of the 875 employees were terminated. The remaining terminations are expected to

be completed by the end of 2012. In 2011 and 2010, cash payments of $7 and $21, respectively, were made against layoff

reserves related to 2010 restructuring programs.

2009 Actions—In 2009, Alcoa recorded Restructuring and other charges of $237 ($151 after-taxand noncontrolling interests),

which were comprised of the following components: $177 ($121 after-taxand noncontrolling interests) for the layoff of

approximately 6,600 employees (2,980 in the Engineered Products and Solutions segment; 2,190 in the Flat-Rolled Products

segment; 1,080 in the Primary Metals segment; 180 in the Alumina segment; and 170 in Corporate) to address the impact of the

global economic downturn on Alcoa’s businesses and a $9 ($6 after-tax) curtailment charge due to the remeasurement of

pension plans as a result of the workforce reductions; $41 ($20 after-tax) in adjustments to the Global Foil and Transportation

Products Europe businesses held for sale due to unfavorable foreign currency movements for both businesses and a change in

the estimated fair value for the Global Foil business and $13 ($11 after-tax) in other asset impairments; $18 ($12 after-tax) for the

write-off of previously capitalized third-party costs related to potential business acquisitions due to the adoption of changes to

accounting for business combinations; net charges of $19 ($10 after-taxand noncontrolling interests) for various other items,

such as accelerated depreciation and lease termination costs for shutdown facilities; and $40 ($29 after-taxand noncontrolling

interests) for reversals of previously recorded layoff and other exit costs due to normal attrition and changes in facts and

circumstances.

As of December 31, 2011, approximately 5,700 of the 6,000 employees were terminated. The total number of employees

associated with 2009 restructuring programs was updated in 2010 to reflect changes in plans (e.g., the previously mentioned

new power agreement at the Portovesme smelter in Italy – see 2010 Actions above), natural attrition, and other factors. The

remaining terminations are expected to be completed by the end of 2012. In 2011 and 2010, cash payments of $13 and $60,

respectively, were made against layoff reserves related to 2009 restructuring programs.

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Alcoa does not include Restructuring and other charges in the results of its reportable segments. The pretaximpact of

allocating such charges to segment results would have been as follows:

2011 2010 2009

Alumina $ 39 $ 12 $ 5

Primary Metals 212 145 30

Flat-Rolled Products 19 (11) 65

Engineered Products and Solutions (3) 18 64

Segment total 267 164 164

Corporate 14 43 73

Total restructuring and other charges $ 281 $ 207 $ 237

Interest Expense—Interest expense was $524 in 2011 compared with $494 in 2010. The increase of $30, or 6%, was primarily due

to a $41 net charge related to the early retirement of various outstanding notes ($74 in purchase premiums paid partially offset

by a $33 gain for “in-the-money” interest rate swaps), somewhat offset by the absence of a $14 net charge related to the early

retirement of various outstanding notes ($42 in purchase premiums paid partially offset by a $28 gain for “in-the-money”

interest rate swaps).

Interest expense was $494 in 2010 compared with $470 in 2009. The increase of $24, or 5%, was principally caused by a $69

decline in interest capitalized, mainly the result of placing the Juruti and São Luís growth projects in service during the second

half of 2009; and a $14 net charge related to the early retirement of various outstanding notes ($42 in purchase premiums paid

partially offset by a $28 gain for “in-the-money” interest rate swaps); mostly offset by a 7% lower average debt level, primarily

due to the absence of commercial paper resulting fromAlcoa’s improved liquidity position; and lower amortization expense of

financing costs, principally related to the fees paid (fully amortized in October 2009) for the former $1,900 364-day senior

unsecured revolving credit facility.

Other (Income) Expenses, net—Other income, net was $87 in 2011 compared with Other expenses, net of $5 in 2010. The

change of $92 was mainly the result of a net favorable change of $89 in mark-to-market derivative contracts, a gain of $43 from

the sale of land in Australia, and higher equity income froman investment in a natural gas pipeline in Australia due to the

recognition of a discrete income taxbenefit by the consortium(Alcoa World Alumina and Chemicals’ share of the benefit was

$24), slightly offset by a decrease in the cash surrender value of company-owned life insurance.

Other expenses, net was $5 in 2010 compared with Other income, net of $161 in 2009. The change of $166 was mostly due to the

absence of a $188 gain on the Elkem/Sapa AB exchange transaction, a $92 gain related to the acquisition of a BHP Billiton

subsidiary in the Republic of Suriname, and a $22 gain on the sale of property in Vancouver, WA; net foreign currency losses;

and a smaller improvement in the cash surrender value of company-owned life insurance; partially offset by the absence of

both a $182 realized loss on the sale of an equity investment and an equity loss related to Alcoa’s former 50% equity stake in

Elkem; and a net favorable change of $25 in mark-to-market derivative contracts.

Income Taxes—Alcoa’s effective taxrate was 24.0% (provision on income) in 2011 compared with the U.S. federalstatutory

rate of 35%. The effective taxrate differs fromthe U.S. federalstatutory rate mainly due to foreign income taxed in lower rate

jurisdictions.

Alcoa’s effective taxrate was 26.9% (provision on income) in 2010 compared with the U.S. federalstatutory rate of 35%. The

effective taxrate differs fromthe U.S. federalstatutory rate primarily due to foreign income taxed in lower rate jurisdictions, a

$57 discrete income taxbenefit for the reversal of a valuation allowance as a result of previously restricted net operating losses

of a foreign subsidiary now available, a $24 discrete income taxbenefit related to a Canadian provincial taxlaw change

permitting a taxreturn to be filed in U.S. dollars, and a $13 net discrete income taxbenefit for various other items, partially offset

by a $79 discrete income taxcharge as a result of a change in the tax

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treatment of federalsubsidies received related to prescription drug benefits provided under certain retiree health care benefit

plans that were determined to be actuarially equivalent to Medicare Part D and a $19 discrete income taxcharge based on

settlement discussions of several matters with international taxing authorities (this amount represents a decrease to Alcoa’s

unrecognized taxbenefits).

Alcoa’s effective taxrate was 38.3% (benefit on a loss) in 2009 compared with the U.S. federalstatutory rate of 35%. The

effective taxrate differs fromthe U.S. federalstatutory rate principally due to a $12 income taxbenefit related to the

noncontrolling interests’ share of the gain associated with the acquisition of a BHP Billiton subsidiary in the Republic of

Suriname and the following discrete taxitems: a $71 benefit for the reorganization of an equity investment; a $34 benefit for the

reversal of a valuation allowance on foreign deferred taxassets; a $31 benefit for a taxrate change (from15% to 18%) in

Iceland; a $31 benefit related to a Canadian taxlaw change allowing a taxreturn to be filed in U.S. dollars; a $10 benefit related

to a change in the sale structure of two locations included in the Global Foil business than originally anticipated; and a $7

benefit related to the Elkem/Sapa AB exchange transaction. Partially offsetting these benefits were items related to smelter

operations in Italy, which included a $41 valuation allowance placed on existing deferred taxassets and charges not tax

benefitted as follows: $250 related to a recent decision by the European Commission on electricity pricing, $15 for

environmental remediation, and $15 for layoffs.

Management anticipates that the effective taxrate in 2012 will be approximately 27%. However, changes in the current

economic environment, taxlegislation or rate changes, currency fluctuations, ability to realize deferred taxassets, and the

results of operations in certain taxing jurisdictions may cause this estimated rate to fluctuate.

In December 2011, one of the Company’s subsidiaries in Brazil applied for a taxholiday related to its expanded mining and

refining operations. If approved, the taxrate for this subsidiary will decrease significantly, resulting in future cash taxsavings

over the 10-year holiday period (would be effective as of January 1, 2012). Additionally, the net deferred taxasset of the

subsidiary would be remeasured at the lower rate in the period the holiday is approved. This remeasurement would result in a

decrease to the net deferred taxasset and a noncash charge to earnings of approximately $60 to $90.

Noncontrolling Interests—Net income attributable to noncontrolling interests was $194 in 2011 compared with $138 in 2010.

The increase of $56 was largely the result of higher earnings at Alcoa World Alumina and Chemicals (AWAC), which is owned

60% by Alcoa and 40% by Alumina Limited. The improved earnings at AWAC were mainly driven by higher realized prices,

partially offset by higher input costs and net unfavorable foreign currency movements due to a weaker U.S. dollar.

Net income attributable to noncontrolling interests was $138 in 2010 compared with $61 in 2009. The increase of $77 was mostly

due to higher earnings at AWAC, which is owned 60% by Alcoa and 40% by Alumina Limited. The improved earnings at

AWAC were attributed primarily to a rise in realized prices, partially offset by net unfavorable foreign currency movements due

to a weaker U.S. dollar, higher depreciation expense and operating costs related to the Juruti and São Luís growth projects

placed into service in the second half of 2009, and the absence of a gain recognized on the acquisition of a BHP Billiton

subsidiary in the Republic of Suriname.

Loss From DiscontinuedOperations—Loss fromdiscontinued operations in 2011 was $3 comprised of an additional loss of $3

($5 pretax) related to the wire harness and electrical portion of the Electrical and Electronic Solutions (EES) business as a result

of a negotiated preliminary settlement related to claims filed in 2010 against Alcoa by PlatinumEquity in an insolvency

proceeding in Germany, a net gain of $2 ($3 pretax) related to both the wire harness and electrical portion and the electronics

portion of the EES business for a number of small post-closing and other adjustments, and a $2 ($2 pretax) reversal of the gain

recognized in 2006 related to the sale of the home exteriors business for an adjustment to an outstanding obligation, which was

part of the terms of sale.

Loss fromdiscontinued operations in 2010 was $8 comprised of an additional loss of $6 ($9 pretax) related to the wire harness

and electrical portion of the EES business as a result of a contract settlement with a former customer of this business and an

additional loss of $2 ($4 pretax) related to the electronics portion of the EES business for the settling of working capital, which

was not included in the divestiture transaction.

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Loss fromdiscontinued operations in 2009 was $166 comprised of a $129 ($168 pretax) loss on the divestiture of the wire

harness and electrical portion of the EES business, a $9 ($13 pretax) loss on the divestiture of the electronics portion of the EES

business, and the remainder was for the operational results of the EES business prior to the divestitures.

In late 2008, Alcoa reclassified the EES business to discontinued operations based on the decision to divest the business. The

divestiture of the wire harness and electrical portion of the EES business was completed in June 2009 and the divestiture of the

electronics portion of the EES business was completed in December 2009. The results of the Engineered Products and

Solutions segment were reclassified to reflect the movement of the EES business into discontinued operations.

Segment Information

Alcoa’s operations consist of four worldwide reportable segments: Alumina, Primary Metals, Flat-Rolled Products, and

Engineered Products and Solutions. Segment performance under Alcoa’s management reporting systemis evaluated based on

a number of factors; however, the primary measure of performance is the after-taxoperating income (ATOI) of each segment.

Certain items such as the impact of LIFO inventory accounting; interest expense; noncontrolling interests; corporate expense

(general administrative and selling expenses of operating the corporate headquarters and other global administrative facilities,

along with depreciation and amortization on corporate-owned assets); restructuring and other charges; discontinued

operations; and other items, including intersegment profit eliminations and other metal adjustments, differences between tax

rates applicable to the segments and the consolidated effective taxrate, the results of the soft alloy extrusions business in

Brazil, and other nonoperating items such as foreign currency transaction gains/losses and interest income are excluded from

segment ATOI.

ATOI for all reportable segments totaled $1,893 in 2011, $1,424 in 2010, and $(234) in 2009. See Note Q to the Consolidated

Financial Statements in Part II Item8 of this Form10-K for additional information. The following discussion provides

shipments, sales, and ATOI data for each reportable segment and production data for the Alumina and Primary Metals

segments for each of the three years in the period ended December 31, 2011.

Alumina

2011 2010 2009

Alumina production (kmt) 16,486 15,922 14,265

Third-party alumina shipments (kmt) 9,218 9,246 8,655

Third-party sales $ 3,462 $ 2,815 $ 2,161

Intersegment sales 2,727 2,212 1,534

Totalsales $ 6,189 $ 5,027 $ 3,695

ATOI $ 607 $ 301 $ 112

This segment represents a portion of Alcoa’s upstreamoperations and consists of the Company’s worldwide refinery system,

including the mining of bauxite, which is then refined into alumina. Alumina is mainly sold directly to internal and external

smelter customers worldwide or is sold to customers who process it into industrial chemical products. A portion of this

segment’s third-party sales are completed through the use of agents, alumina traders, and distributors. Slightly more than half

of Alcoa’s alumina production is sold under supply contracts to third parties worldwide, while the remainder is used internally

by the Primary Metals segment.

In 2011, alumina production increased by 564 kmt compared to 2010. The improvement was mostly the result of higher

production at the São Luís (Brazil) refinery, as the ramp-up of the 2,100 kmt expanded capacity (the Alumina segment’s share is

approximately 1,100 kmt-per-year) that began in late 2009 continued through 2011.

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In 2010, alumina production increased by 1,657 kmt compared to 2009. The increase was mainly driven by the Point Comfort, TX

refinery as most of the 1,500 kmt-per-year curtailment initiated between the fourth quarter of 2008 and the first quarter of 2009

was restored. In addition, production included the continued ramp-up of the São Luís refinery expansion and the 45% interest

in the Suralco (Suriname) refinery acquired in mid-2009.

Third-party sales for the Alumina segment improved 23% in 2011 compared with 2010, largely attributable to a 21% increase in

realized prices, driven by the movement of customer contracts to alumina indexpricing, benefits fromimproved spot prices, and

improved pricing fromLME-based contracts. Third-party sales for this segment rose 30% in 2010 compared with 2009, primarily

related to a 29% increase in realized prices, driven by significantly higher LME prices, coupled with a 7% increase in volumes.

Intersegment sales for the Alumina segment climbed 23% in 2011 compared with 2010 and 44% in 2010 compared with 2009. The

increase in both period comparisons was principally due to higher realized prices and an increase in demand fromthe Primary

Metals segment.

ATOI for the Alumina segment increased $306 in 2011 compared with 2010, mainly caused by the significant improvement in

realized prices and a gain on the sale of land in Australia ($30), partially offset by considerably higher input costs, particularly

related to caustic and fuel oil, and net unfavorable foreign currency movements due to a weaker U.S. dollar, especially against

the Australian dollar.

ATOI for this segment improved $189 in 2010 compared with 2009, mostly due to the significant increase in realized prices and

benefits of cost savings initiatives, particularly lower caustic costs. These positive impacts were partially offset by net

unfavorable foreign currency movements due to a weaker U.S. dollar, particularly against the Australian dollar; higher

depreciation expense and operating costs (includes the impact of a failure of a ship unloader) associated with the start-up of

the Juruti bauxite mine and the São Luís refinery expansion, both of which began in the second half of 2009; the absence of a

$60 gain recognized on the acquisition of BHP Billiton’s interest in Suralco; and higher fuel oil costs.

In 2012, third-party sales will continue to shift towards alumina indexor spot pricing, and productivity improvements will be an

intense area of focus. Also, significant, planned maintenance for operations in Australia during the first part of the year and

higher costs for raw materials are expected to negatively impact results. Additionally, alumina production across the global

systemwill be reduced to reflect smelter curtailments as well as prevailing market conditions. Furthermore, in the second half of

2012, Alcoa’s refineries in Australia will be subject to a carbon taxrecently approved by the Australian government related to

greenhouse gas emissions; this is not expected to have a significant impact on the Alumina segment’s results in 2012.

Primary Metals

2011 2010 2009

Aluminumproduction (kmt) 3,775 3,586 3,564

Third-party aluminumshipments (kmt) 2,981 2,845 3,038

Alcoa’s average realized price per metric ton of aluminum $ 2,636 $2,356 $1,856

Third-party sales $ 8,240 $7,070 $5,252

Intersegment sales 3,192 2,597 1,836

Totalsales $11,432 $9,667 $7,088

ATOI $ 481 $ 488 $ (612)

This segment represents a portion of Alcoa’s upstreamoperations and consists of the Company’s worldwide smelter system.

Primary Metals receives alumina, mostly fromthe Alumina segment, and produces primary aluminumused by Alcoa’s

fabricating businesses, as well as sold to external customers, aluminumtraders, and commodity markets. Results fromthe sale

of aluminumpowder, scrap, and excess power are also included in this segment, as well as the results of aluminumderivative

contracts and buy/resell activity. Primary aluminumproduced by Alcoa and used internally is transferred to other segments at

prevailing market prices. The sale of primary aluminumrepresents more

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than 90% of this segment’s third-party sales. Buy/resell activity refers to when this segment purchases metal fromexternal or

internalsources and resells such metal to external customers or the midstreamand downstreamsegments in order to maximize

smelting systemefficiency and to meet customer requirements.

At December 31, 2011, Alcoa had 644 kmt of idle capacity on a base capacity of 4,518 kmt. In 2011, idle capacity decreased 234

kmt compared to 2010 due to the full restart of previously curtailed production capacity in the U.S.: Massena East, NY(125 kmtper-year); Wenatchee, WA (43 kmt-per-year); and Ferndale, WA (Intalco: 47 kmt-per-year (11 kmt more than previously

planned)). These restarts increased aluminumproduction by approximately 150 kmt during 2011 and are expected to increase

aluminumproduction by 215 kmt on an annual basis in 2012 and beyond and occurred to help meet anticipated growth in

aluminumdemand and to meet obligations outlined in power agreements with energy providers.

In late 2011, management approved the permanent shutdown and demolition of certain facilities at two U.S. locations, each of

which was previously temporarily idled for various reasons. The identified facilities are the smelter located in Alcoa, TN

(capacity of 215 kmt-per-year) and two potlines (capacity of 76 kmt-per-year) at the smelter located in Rockdale, TX (remaining

capacity of 191 kmt-per-year composed of four potlines). This decision was made after a comprehensive strategic analysis was

performed to determine the best course of action for each facility. Factors leading to this decision were in general focused on

achieving sustained competitiveness and included, among others: lack of an economically viable, long-termpower solution;

changed market fundamentals; cost competitiveness; required future capital investment; and restart costs.

Also, at the end of 2011, management approved a partial or full curtailment of three European smelters as follows: Portovesme,

Italy (150 kmt-per-year); Avilés, Spain (46 kmt out of 93 kmt-per-year); and La Coruña, Spain (44 kmt out of 87 kmt-per-year).

These curtailments are expected to be completed in the first half of 2012. The curtailment of the Portovesme smelter may lead to

the permanent closure of the facility, while the curtailments at the two smelters in Spain are planned to be temporary. These

actions are the result of uncompetitive energy positions, combined with rising material costs and falling aluminumprices (mid2011 to late 2011).

As a result of these decisions, idle capacity is expected to decrease by a net 51 kmt and base capacity will decline by 291 kmt

during 2012.

At December 31, 2010, Alcoa had 878 kmt of idle capacity on a base capacity of 4,518 kmt. In 2010, idle capacity decreased 356

kmt compared to 2009 due to the restart of 32 kmt of previously curtailed production capacity at a smelter in Brazil, the decision

to permanently curtail the smelters located in Frederick, MD (195 kmt-per-year) and Badin, NC (60 kmt-per-year) and one potline

(40 kmt-per-year) at the smelter in Warrick, IN, and the restart of 61 kmt of previously curtailed production capacity at various

smelters, slightly offset by the full curtailment of the Fusina smelter (44 kmt-per-year) in Italy as a result of uneconomical power

prices. In June 2010, Alcoa halted production at the Avilés smelter (93 kmt-per-year) in Spain due to torrential flooding.

Production was restarted a few months after the flood and the smelter was at full operating rate by the end of 2010. Base

capacity dropped 295 kmt between December 31, 2010 and 2009 due to the previously mentioned permanent curtailments. The

decision to permanently curtail these facilities was made after a comprehensive strategic analysis was performed to determine

the best course of action for each facility. Factors leading to this decision included current market fundamentals, cost

competitiveness, other existing idle capacity, required future capital investment, and restart costs, as well as the elimination of

ongoing holding costs.

In 2011, aluminumproduction improved by 189 kmt, mainly the result of the previously mentioned restarted capacity at

Massena East, Ferndale, and Wenatchee, as well as higher production at the Avilés smelter (see above). In 2010, aluminum

production increased by 22 kmt, mostly due to the two smelters located in Norway (acquired full ownership on March 31, 2009,

previously held a 50% equity interest), as well as a number of small increases at other smelters, but was virtually offset by the

smelter curtailments during 2009 for Tennessee and Massena East and during 2010 for Fusina and the halted production at the

Avilés smelter.

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Third-party sales for the Primary Metals segment improved 17% in 2011 compared with 2010, primarily due to a 12% rise in

average realized prices, driven by 10% higher average LME prices; higher volumes, largely attributable to the previously

mentioned restarted U.S. capacity; and increased revenue fromthe sale of excess power. Third-party sales for this segment

climbed 35% in 2010 compared with 2009, mainly due to a 27% rise in average realized prices, driven by 31% higher average

LME prices, and the acquisition of the smelters located in Norway (increase of $332), slightly offset by a decline in both

buy/resell activity and volumes.

Intersegment sales for the Primary Metals segment rose 23% in 2011 compared with 2010 and 41% in 2010 compared with 2009.

The increase in both period comparisons was mainly the result of an improvement in realized prices, driven by the higher LME,

and an increase in buy/resell activity.

ATOI for the Primary Metals segment declined $7 in 2011 compared with 2010, primarily caused by significantly higher input

costs, including carbon, alumina, and energy, and net unfavorable foreign currency movements due to a weaker U.S. dollar,

virtually offset by improved realized prices, net productivity improvements, and higher excess power sales.

ATOI for this segment improved $1,100 in 2010 compared with 2009, principally related to the significant increase in realized

prices; the absence of a charge related to a European Commission’s decision on electricity pricing for smelters in Italy ($250);

and benefits fromcost savings initiatives, particularly coke and pitch; somewhat offset by much higher alumina and energy

prices; the absence of a gain related to Alcoa’s acquisition of the other 50% of the smelters in Norway ($112); and net

unfavorable foreign currency movements due to a weaker U.S. dollar.

In 2012, pricing is anticipated to follow a 15-day lag on the LME and net productivity improvements are expected to continue.

Also, planned maintenance for power plants during the first part of the year and higher energy costs are expected to negatively

impact results, while a benefit is anticipated in the second half of the year related to coke prices as a result of a shift in the

supply-demand balance fromshort to long. Additionally, three smelters in Europe, representing 240 kmt-per-year, are expected

to be fully or partially curtailed during the first half of the year. Furthermore, in the second half of 2012, Alcoa’s smelters in

Australia will be subject to a carbon taxrecently approved by the Australian government related to greenhouse gas emissions;

this is not expected to have a significant impact on the Primary Metals segment’s results in 2012.

Flat-RolledProducts

2011 2010 2009

Third-party aluminumshipments (kmt) 1,780 1,658 1,831

Third-party sales $7,642 $6,277 $6,069

Intersegment sales 218 180 113

Totalsales $7,860 $6,457 $6,182

ATOI $ 266 $ 220 $ (49)

This segment represents Alcoa’s midstreamoperations, whose principal business is the production and sale of aluminumplate

and sheet. A small portion of this segment’s operations relate to foil produced at one plant in Brazil. This segment includes

rigid container sheet (RCS), which is sold directly to customers in the packaging and consumer market and is used to produce

aluminumbeverage cans. Seasonal increases in RCS sales are generally experienced in the second and third quarters of the

year. This segment also includes sheet and plate used in the aerospace, automotive, commercial transportation, and building

and construction markets (mainly used in the production of machinery and equipment and consumer durables), which is sold

directly to customers and through distributors. Approximately one-half of the third-party sales in this segment consist of RCS,

while the other one-half of third-party sales are derived fromsheet and plate and foil used in industrial markets. While the

customer base for flat-rolled products is large, a significant amount of sales of RCS, sheet, and plate is to a relatively small

number of customers.

Third-party sales for the Flat-Rolled Products segment climbed 22% in 2011 compared with 2010, primarily driven by better

pricing; higher volumes across most businesses, particularly related to the packaging, aerospace, and commercial

transportation markets; favorable foreign currency movements, mainly due to a stronger euro; and favorable product

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mix. Third-party sales for this segment increased 3% in 2010 compared with 2009, principally due to better pricing and higher

volumes in most key end markets, partially offset by lower volumes in the segment’s can sheet business, largely due to a

decision in early 2010 to curtailsales to a North American customer and the absence of sales ($125 in 2009) fromtwo foil plants

(Spain and China), which were divested in late 2009.

ATOI for the Flat-Rolled Products segment rose $46 in 2011 compared with 2010, primarily attributable to the previously

mentioned positive pricing, volume, and product miximpacts, partially offset by higher input costs and charges for anticipated

customer credit losses. ATOI for this segment improved $269 in 2010 compared with 2009, mainly the result of both favorable

pricing and increased productivity across all businesses due to cost savings initiatives, including the operations in Russia as

results turned profitable.

In 2012, continued demand strength in the aerospace and automotive markets is expected, although the outlook for Europe

remains weak. Additionally, net productivity improvements are anticipated, somewhat offset by higher energy and

transportation costs.

EngineeredProducts andSolutions

2011 2010 2009

Third-party aluminumshipments (kmt) 221 197 180

Third-party sales $5,345 $4,584 $4,689

ATOI $ 539 $ 415 $ 315

This segment represents Alcoa’s downstreamoperations and includes titanium, aluminum, and super alloy investment

castings; forgings and fasteners; aluminumwheels; integrated aluminumstructuralsystems; and architectural extrusions used

in the aerospace, automotive, building and construction, commercial transportation, and power generation markets. These

products are sold directly to customers and through distributors. Additionally, hard alloy extrusions products, which are also

sold directly to customers and through distributors, serve the aerospace, automotive, commercial transportation, and industrial

products markets.

On March 9, 2011, Alcoa completed an acquisition of the aerospace fastener business of TransDigmGroup Inc. for $240. This

business is a leading global designer, producer, and supplier of highly engineered aircraft components, with three locations

(one in the state of California and two in the United Kingdom) that employ a combined 400 people. Specifically, this business

provides a wide variety of high-strength, high temperature nickel alloy specialty engine fasteners, airframe bolts, and slotted

entry bearings. In 2010, this business generated sales of $61. The assets and liabilities of this business were included in the

Engineered Products and Solutions segment as of March 31, 2011; this business’ results of operations were included in this

segment beginning March 9, 2011.

In July 2010, Alcoa completed an acquisition of the commercial building and construction business of a privately-held

company, Traco, for $77. This business, located in Cranberry, Pennsylvania, employing 650 people, is a premier manufacturer of

windows and doors for the commercial building and construction market and generated sales of approximately $100 in 2009.

The assets and liabilities of this business were included in the Engineered Products and Solutions segment as of the end of

July 2010 and this business’ results of operations were included in this segment since the beginning of August 2010.

Third-party sales for the Engineered Products and Solutions segment climbed 17% in 2011 compared with 2010, largely

attributable to higher volumes across all businesses, especially related to the aerospace and commercial transportation markets.

Additionally, sales fromthe acquired fastener business ($58) and fromthe acquired building and construction business

(increase of $40) and favorable foreign currency movements due to a stronger euro were positive impacts. Slightly offsetting

the positive contributions was the absence of sales related to the April 2010 divestiture of the Transportation Products Europe

business ($28). Third-party sales for this segment decreased 2% in 2010 compared with 2009, primarily due to unfavorable

pricing and mixacross all businesses; lower volumes for the fasteners, power and propulsion, and building and construction

businesses; the absence of sales related to the

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divestiture of the Transportation Products Europe business in April 2010 (decrease of $50); and unfavorable foreign currency

movements due to a weaker euro. These negative impacts were mostly offset by higher volumes in the wheels and forgings

businesses and sales fromthe newly acquired business mentioned above ($37).

ATOI for the Engineered Products and Solutions segment rose 30% in 2011 compared with 2010, principally the result of the

previously mentioned volume impacts and net productivity improvements across most businesses, somewhat offset by

unfavorable price/product mix. ATOI for this segment climbed 32% in 2010 compared with 2009, mainly due to productivity

improvements and cost reduction initiatives across all businesses, partially offset by unfavorable pricing and mix.

In 2012, the aerospace market is expected to remain strong and incremental gains are anticipated for the commercial

transportation market (excluding Europe), while the building and construction market is expected to decline. Also, continued

net productivity improvements are anticipated.

Reconciliation of ATOIto ConsolidatedNet Income (Loss) Attributable to Alcoa

Items required to reconcile totalsegment ATOI to consolidated net income (loss) attributable to Alcoa include: the impact of

LIFO inventory accounting; interest expense; noncontrolling interests; corporate expense (general administrative and selling

expenses of operating the corporate headquarters and other global administrative facilities, along with depreciation and

amortization on corporate-owned assets); restructuring and other charges; discontinued operations; and other items, including

intersegment profit eliminations and other metal adjustments, differences between taxrates applicable to the segments and the

consolidated effective taxrate, the results of the soft alloy extrusions business in Brazil, and other nonoperating items such as

foreign currency transaction gains/losses and interest income.

The following table reconciles totalsegment ATOI to consolidated net income (loss) attributable to Alcoa:

2011 2010 2009

Totalsegment ATOI $1,893 $1,424 $ (234)

Unallocated amounts (net of tax):

Impact of LIFO (38) (16) 235

Interest expense (340) (321) (306)

Noncontrolling interests (194) (138) (61)

Corporate expense (290) (291) (304)

Restructuring and other charges (196) (134) (155)

Discontinued operations (3) (8) (166)

Other (221) (262) (160)

Consolidated net income (loss) attributable to Alcoa $ 611 $ 254 $(1,151)

The significant changes in the reconciling items between totalsegment ATOI and consolidated net income attributable to

Alcoa for 2011 compared with 2010 consisted of:

• a change in the Impact of LIFO, due to higher prices for alumina and metal, both of which were driven by an increase

in LME prices and higher input costs, particularly coke, energy, and caustic soda;

• an increase in Interest expense, principally caused by a $27 net charge related to the early retirement of various

outstanding notes ($48 in purchase premiums paid partially offset by a $21 gain for “in-the-money” interest rate

swaps), somewhat offset by the absence of a $9 net charge related to the early retirement of various outstanding

notes ($27 in purchase premiums paid partially offset by an $18 gain for “in-the-money” interest rate swaps);

• an increase in Noncontrolling interests, mainly due to higher earnings at AWAC, principally driven by higher realized

prices, partially offset by higher input costs and net unfavorable foreign currency movements due to a weaker U.S.

dollar;

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• an increase in Restructuring and other charges, mostly due to higher layoff costs, largely attributable to Alcoa’s

plans to curtail three smelters in Europe; and

• a change in Other, primarily due to a net favorable change of $57 in mark-to-market derivative contracts and the

difference between the consolidated effective taxrate and the estimated taxrates applicable to the segments, partially

offset by a decrease in the cash surrender value of company-owned life insurance.

The significant changes in the reconciling items between totalsegment ATOI and consolidated net income (loss) attributable

to Alcoa for 2010 compared with 2009 consisted of:

• a change in the Impact of LIFO due to higher prices for alumina and metal, both of which were driven by a significant

rise in LME prices, and a significantly smaller reduction in LIFO inventory quantities;

• an increase in Interest expense, primarily due to a decline in interest capitalized (mainly the result of placing the Juruti

and São Luís growth projects in service during the second half of 2009) and a $9 net charge related to the early

retirement of various outstanding notes ($27 in purchase premiums paid partially offset by an $18 gain for “in-themoney” interest rate swaps), mostly offset by a 7% lower average debt level (primarily due to the absence of

commercial paper resulting fromAlcoa’s improved liquidity position) and lower amortization expense of financing

costs (principally related to the fees paid (fully amortized in October 2009) for the former $1,900 364-day senior

unsecured revolving credit facility);

• an increase in Noncontrolling interests, mainly due to higher earnings at AWAC, primarily driven by a rise in realized

prices, partially offset by net unfavorable foreign currency movements due to a weaker U.S. dollar, higher

depreciation and operating costs related to the Juruti and São Luís growth projects placed into service in the second

half of 2009, and the absence of a gain recognized on the acquisition of a BHP Billiton subsidiary in the Republic of

Suriname;

• a decline in Corporate expense, primarily due to reductions in expenses for contractors and consultants, lower

deferred compensation (as a result of a decline in plan performance), a decrease in bad debt expense, and a decrease

in information technology expenditures, somewhat offset by an increase in labor costs (principally due to higher

annual incentive and performance compensation and employee benefits costs (employer matching savings plan

contributions for U.S. salaried participants were suspended during 2009));

• a decrease in Restructuring and other charges, mainly due to lower layoff charges, somewhat offset by higher asset

impairments and other exit costs, primarily related to the permanent shutdown and planned demolition of certain idled

structures at five U.S. locations;

• a change in Discontinued operations, mostly the result of the absence of both a $129 loss (an additional $6 loss was

recognized in 2010) on the divestiture of the wire harness and electrical portion of the EES business (June 2009) and a

$9 loss on the divestiture of the electronics portion of the EES business (December 2009); and

• a change in Other, mainly due to a net income taxcharge (includes discrete taxitems) related to the difference in the

consolidated effective taxrate and the estimated taxrates applicable to the segments, net foreign currency losses, the

absence of a $21 favorable adjustment for the finalization of the estimated fair value of the former Sapa AB joint

venture, and a smaller improvement in the cash surrender value of company-owned life insurance; partially offset by

the absence of a $118 realized loss on the sale of an equity investment and favorable changes in mark-to-market

derivative contracts.

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Environmental Matters

See the Environmental Matters section of Note N to the Consolidated Financial Statements in Part II Item8 of this Form10-K.

Liquidity andCapital Resources

Alcoa maintains a disciplined approach to cash management and strengthening of its balance sheet. In 2011, as in the prior two

years, management continued this approach while providing the Company with the necessary liquidity to operate effectively as

the global economy continues to recover fromthe economic downturn that began in 2008.

In response to changes in the economic markets across the globe in the second half of 2008, management initiated the

following actions to conserve cash and preserve liquidity: greater scrutiny over the daily management of Alcoa’s cash

position; higher risk tolerance on raw materials with lower minimumorder quantities and lower carrying levels; targeted

headcount reductions across the globe; a globalsalary and hiring freeze (lifted at the beginning of 2010); suspension of the

existing share repurchase program(expired in December 2010); and the addition of a new 364-day $1,900 revolving credit facility

(expired in October 2009). A number of changes were also made to Alcoa’s capital expenditures strategy as follows: capital

expenditure approval levels were lowered dramatically; growth projects were halted where it was deemed economically feasible;

and all non-critical capital expenditures were stopped. Capital expenditures are deemed critical if they maintain Alcoa’s

compliance with the law, keep a facility operating, or satisfy customer requirements if the benefits outweigh the costs. The

planned sale or shutdown of various businesses contributed positively to Alcoa’s liquidity position in 2009.

In March 2009, management initiated an additionalseries of operational and financial actions to significantly improve Alcoa’s

cost structure and liquidity. Operational actions included procurement efficiencies and overhead rationalization to reduce costs

and working capital initiatives to yield significant cash improvements. Financial actions included a reduction in the quarterly

common stock dividend from$0.17 per share to $0.03 per share, which began with the dividend paid on May 25, 2009, and the

issuance of 172.5 million shares of common stock and $575 in convertible notes that collectively yielded $1,438 in net proceeds.

In January 2010, management initiated further operational actions to not only maintain the procurement and overhead savings

and working capital improvements achieved in 2009, but to improve on themthroughout 2010. Also, a further reduction in

capital expenditures was planned in order to achieve the level necessary to sustain operations without sacrificing the quality of

Alcoa’s alumina and aluminumproducts.

In 2011, management continued its previous actions to maintain the achieved procurement and overhead savings fromthe past

two years and to further improve cash with working capital initiatives. Additionally, maintaining a level of capital expenditures

consistent with that of 2010 was planned. During 2012, management plans to continue the actions fromthe past three years to

achieve additional procurement and overhead savings, to further improve on working capital, and to maintain a consistent level

of capital expenditures.

Along with the foregoing actions, cash provided fromoperations and financing activities is expected to be adequate to cover

Alcoa’s current operational and business needs. For an analysis of long-termliquidity, see Contractual Obligations and OffBalance Sheet Arrangements.

Cash from Operations

Cash fromoperations in 2011 was $2,193 compared with $2,261 in 2010. The decline of $68, or 3%, was largely attributable to

higher pension contributions of $223, a lower net cash inflow associated with working capital of $206, an additional cash

outflow of $71 in noncurrent assets, and a lower cash inflow of $36 in noncurrent liabilities, mostly offset by better operating

results.

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The higher pension contributions were principally driven by cash contributions made to U.S. pension plans towards

maintaining an approximately 80% funded status.

The major components of the lower net cash inflow in working capital were as follows: an additional outflow of $122 in

inventories, mostly due to higher production as a result of increased demand and rising input costs; a higher inflow of $47 in

prepaid expenses and other current assets, primarily driven by the absence of collateral posted related to a mark-to-market

energy contract that ended in September 2011; an additional inflow of $66 in accounts payable, trade, principally the result of

higher purchasing needs and timing of vendor payments; a lower outflow of $201 in accrued expenses, mostly related to fewer

cash payments for restructuring programs and the absence of a reduction in collateral held related to mark-to-market energy

contracts; and a smaller inflow of $385 in taxes, including income taxes, mainly due to the absence of a $347 federal income tax

refund for the carryback of Alcoa’s 2009 net loss to prior taxyears.

The additional outflow in noncurrent assets was largely attributable to higher deferred mining costs related to bauxite

operations in Australia, while the lower inflow in noncurrent liabilities was mainly caused by a smaller increase in the

environmental remediation reserve.

Cash fromoperations in 2010 was $2,261 compared with $1,365 in 2009. The improvement of $896, or 66%, was primarily due to

significantly better operating results, partially offset by a lower net cash inflow associated with working capital of $904.

The major components of the lower net cash inflow in working capital were as follows: an additional outflow of $787 in

receivables, primarily as a result of higher sales in three of the four reportable segments and a significant rise in LME prices; a

higher outflow of $1,485 in inventories, mostly due to a build-up of levels to meet anticipated demand and higher input costs;

an additional inflow of $962 in accounts payable, trade, principally the result of higher purchasing needs and timing of vendor

payments; and a higher inflow of $646 in taxes, including income taxes, mainly due to a $310 receivable recorded in 2009 and the

receipt of $347 in 2010, both related to a federal income taxrefund for the carryback of Alcoa’s 2009 net loss to prior taxyears.

Financing Activities

Cash provided fromfinancing activities was $62 in 2011 compared with cash used for financing activities of $952 in 2010 and

cash provided fromfinancing activities of $37 in 2009.

The source of cash in 2011 was mostly driven by $1,256 in additions to long-termdebt, of which $1,248 was for the issuance of

5.40% Notes due 2021; and a change of $224 in commercial paper; mostly offset by $1,194 in payments on long-termdebt,

principally related to $881 for the early retirement of all of the 5.375% Notes due 2013 and a portion of the 6.00% Notes due

2013, $218 for previous borrowings on the loans supporting the São Luís refinery expansion, Juruti bauxite mine development,

and Estreito hydroelectric power project in Brazil, and $45 for a loan associated with the Samara, Russia facility; net cash

distributed to noncontrolling interests of $88, all of which relates to Alumina Limited’s share of AWAC; and $131 in dividends

paid to shareholders.

The use of cash in 2010 was primarily due to $1,757 in payments on long-termdebt, mostly related to $511 for the repayment of

7.375% Notes due 2010 as scheduled, $825 for the early retirement of all of the 6.50% Notes due 2011 and a portion of the 6.00%

Notes due 2012 and 5.375% Notes due 2013, and $287 related to previous borrowings on the loans supporting the São Luís

refinery expansion and Juruti bauxite mine development in Brazil; $125 in dividends paid to shareholders; net cash paid to

noncontrolling interests of $94, all of which relates to Alumina Limited’s share of AWAC; $66 in acquisitions of noncontrolling

interests, mainly the result of the $60 paid to redeemthe convertible securities of a subsidiary that were held by Alcoa’s former

partner related to the joint venture in Saudi Arabia; and a change of $44 in short-termborrowings; partially offset by $1,126 in

additions to long-termdebt, of which $998 was for the issuance of 6.150% Notes due 2020 and $76 was related to borrowings

under the loans that support the Estreito hydroelectric power project in Brazil.

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The source of cash in 2009 was principally the result of $1,049 in additions to long-termdebt, mainly driven by net proceeds of

$562 fromthe issuance of $575 in convertible notes and $394 in borrowings under loans that support the São Luís refinery

expansion, Juruti bauxite mine development, and Estreito hydroelectric power project in Brazil; net proceeds of $876 fromthe

issuance of 172.5 million shares of common stock; and net cash received fromnoncontrolling interests of $340, principally

related to Alumina Limited’s share of AWAC; all of which was mostly offset by a $1,535 decrease in outstanding commercial

paper, partly due to tightening in the credit markets and a reduction in market availability as a result of the change in Alcoa’s

credit ratings in early 2009; $228 in dividends paid to shareholders; a $292 net change in short-termborrowings ($1,300 was

borrowed and repaid under Alcoa’s $1,900 364-day senior unsecured revolving credit facility in early 2009 and $255 in new

loans to support Alcoa Alumínio’s export operations was borrowed and repaid during 2009), mostly the result of repayments of

working capital loans in Spain and Asia and a $155 decrease in accounts payable settlement arrangements; and payments on

long-termdebt of $156, including $97 related to the loans in Brazil for growth projects.

On July 25, 2011, Alcoa entered into a Five-Year Revolving Credit Agreement (the “Credit Agreement”) with a syndicate of

lenders and issuers named therein. The Credit Agreement provides a $3,750 senior unsecured revolving credit facility (the

“Credit Facility”), the proceeds of which are to be used to provide working capital or for other general corporate purposes of

Alcoa, including support of Alcoa’s commercial paper program. Subject to the terms and conditions of the Credit Agreement,

Alcoa may fromtime to time request increases in lender commitments under the Credit Facility, not to exceed $500 in aggregate

principal amount, and may also request the issuance of letters of credit, subject to a letter of credit sublimit of $1,000 under the

Credit Facility.

The Credit Facility matures on July 25, 2016, unless extended or earlier terminated in accordance with the provisions of the

Credit Agreement. Alcoa may make two one-year extension requests during the termof the Credit Facility, with any extension

being subject to the lender consent requirements set forth in the Credit Agreement. Under the provisions of the Credit

Agreement, Alcoa will pay a fee of 0.25% (based on Alcoa’s long-termdebt ratings as of December 31, 2011) of the total

commitment per annumto maintain the Credit Facility.

The Credit Facility is unsecured and amounts payable under it will rank pari passu with all other unsecured, unsubordinated

indebtedness of Alcoa. Borrowings under the Credit Facility may be denominated in U.S. dollars or euros. Loans will bear

interest at a base rate or a rate equal to LIBOR, plus, in each case, an applicable margin based on the credit ratings of Alcoa’s

outstanding senior unsecured long-termdebt. The applicable margin on base rate loans and LIBOR loans will be 0.50% and

1.50% per annum, respectively, based on Alcoa’s long-termdebt ratings as of December 31, 2011. Loans may be prepaid

without premiumor penalty, subject to customary breakage costs.

The Credit Facility replaces Alcoa’s Five-Year Revolving Credit Agreement, dated as of October 2, 2007 (the “Former Credit

Agreement”), which was scheduled to mature on October 2, 2012. The Former Credit Agreement, which had a total capacity

(excluding the commitment of Lehman Commercial Paper Inc.) of $3,275 and was undrawn, was terminated effective July 25,

2011.

The Credit Agreement includes covenants substantially similar to those in the Former Credit Agreement, including, among

others, (a) a leverage ratio, (b) limitations on Alcoa’s ability to incur liens securing indebtedness for borrowed money,

(c) limitations on Alcoa’s ability to consummate a merger, consolidation or sale of all or substantially all of its assets, and

(d) limitations on Alcoa’s ability to change the nature of its business. As of December 31, 2011, Alcoa was in compliance with

allsuch covenants.

The obligation of Alcoa to pay amounts outstanding under the Credit Facility may be accelerated upon the occurrence of an

“Event of Default” as defined in the Credit Agreement. Such Events of Default include, among others, (a) Alcoa’s failure to pay

the principal of, or interest on, borrowings under the Credit Facility, (b) any representation or warranty of Alcoa in the Credit

Agreement proving to be materially false or misleading, (c) Alcoa’s breach of any of its covenants contained in the Credit

Agreement, and (d) the bankruptcy or insolvency of Alcoa.

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There were no amounts outstanding at December 31, 2011 and no amounts were borrowed during 2011 under the Credit Facility.

There were no amounts outstanding at December 31, 2010 and no amounts were borrowed during 2011 and 2010 under the

Former Credit Agreement.

In February 2011, Alcoa filed an automatic shelf registration statement with the Securities and Exchange Commission for an

indeterminate amount of securities for future issuance. This shelf registration statement replaced Alcoa’s existing shelf

registration statement (filed in March 2008). As of December 31, 2011 and 2010, $1,250 and $3,075 in senior debt securities were

issued under the respective shelf registration statements.

Alcoa’s cost of borrowing and ability to access the capital markets are affected not only by market conditions but also by the

short- and long-termdebt ratings assigned to Alcoa’s debt by the major credit rating agencies.

On April 12, 2011, Standard and Poor’s Ratings Services (S&P) affirmed the following ratings for Alcoa: long-termdebt at BBBand short-termdebt at A-3. Additionally, S&P changed the current outlook fromnegative to stable.

On March 2, 2011, Moody’s Investors Service (Moody’s) confirmed the following ratings for Alcoa: long-termdebt at Baa3 and

short-termdebt at Prime-3. Additionally, Moody’s changed the current outlook fromnegative to stable. On September 7, 2011,

Moody’s affirmed the ratings and outlook published in its March 2, 2011 report.

On February 22, 2011, Fitch Ratings (Fitch) affirmed the following ratings for Alcoa: long-termdebt at BBB- and short-termdebt

at F3. Additionally, Fitch changed the current outlook fromnegative to stable.

Investing Activities

Cash used for investing activities was $1,852 in 2011 compared with $1,272 in 2010 and $721 in 2009.

The use of cash in 2011 was principally due to $1,287 in capital expenditures (includes costs related to environmental control in

new and expanded facilities of $148), 28% of which related to growth projects, including the Estreito hydroelectric power

project and Juruti bauxite mine development; $374 in additions to investments, mostly for the equity contributions of $249

related to the aluminumcomplexjoint venture in Saudi Arabia and purchase of $41 in available-for-sale securities held by

Alcoa’s captive insurance company; and $239 (net of cash acquired for the acquisition of an aerospace fastener business);

slightly offset by $54 in sales of investments, primarily related to available-for-sale securities held by Alcoa’s captive insurance

company; and $38 in proceeds fromthe sale of assets, mainly attributable to the sale of land in Australia.

The use of cash in 2010 was primarily due to $1,015 in capital expenditures (includes costs related to environmental control in

new and expanded facilities of $87), 44% of which related to growth projects, including the Estreito hydroelectric power project,

Juruti bauxite mine development, and São Luís refinery expansion; $352 in additions to investments, mostly for the equity

contributions of $160 related to the joint venture in Saudi Arabia and purchase of $126 in available-for-sale securities held by

Alcoa’s captive insurance company; and $72 for acquisitions, principally related to the purchase of a new building and

construction systems business; slightly offset by $141 in sales of investments, virtually all of which related to the sale of

available-for-sale securities held by Alcoa’s captive insurance company.

The use of cash in 2009 was mainly due to $1,622 in capital expenditures (includes costs related to environmental control in new

and expanded facilities of $59), 68% of which related to growth projects, including the São Luís refinery expansion, Juruti

bauxite mine development, and Estreito hydroelectric power project; $181 in additions to investments, mostly for $83 in

available-for-sale securities held by Alcoa’s captive insurance company and an $80 interest in a new joint venture in Saudi

Arabia; and a net cash outflow of $65 for the divestiture of assets and businesses, including a cash outflow of $204 for the EES

business, cash inflows of $111 for the collection of a note related to the 2007 sale of the Three Oaks mine and the sale of

property in Vancouver, WA, and a cash inflow of $20 for the sale of the Shanghai (China) foil plant; all of which was partially

offset by $1,031 fromsales of investments, mostly related to the receipt of $1,021 for the sale of an equity investment; and a net

cash inflow of $112 from

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acquisitions, mainly due to $97 fromthe acquisition of a BHP Billiton subsidiary in the Republic of Suriname and $18 fromthe

Elkem/Sapa AB exchange transaction.

Contractual Obligations andOff-Balance Sheet Arrangements

Contractual Obligations. Alcoa is required to make future payments under various contracts, including long-termpurchase

obligations, debt agreements, and lease agreements. Alcoa also has commitments to fund its pension plans, provide payments

for other postretirement benefit plans, and finance capital projects. As of December 31, 2011, a summary of Alcoa’s outstanding

contractual obligations is as follows (these contractual obligations are grouped in the same manner as they are classified in the

Statement of Consolidated Cash Flows in order to provide a better understanding of the nature of the obligations and to

provide a basis for comparison to historical information):

Total 2012 2013-2014 2015-2016 Thereafter

Operating activities:

Energy-related purchase obligations $22,094 $1,802 $ 3,008 $ 2,949 $ 14,335

Raw material purchase obligations 4,978 1,963 1,403 963 649

Other purchase obligations 3,249 244 491 358 2,156

Operating leases 1,290 246 285 195 564

Interest related to total debt 4,848 508 956 855 2,529

Estimated minimumrequired pension funding 2,500 650 1,250 600 -

Other postretirement benefit payments 2,660 285 565 545 1,265

Layoff and other restructuring payments 134 85 30 19 -

Deferred revenue arrangements 238 109 29 16 84

Uncertain taxpositions 63 - - - 63

Financing activities:

Total debt 9,366 731 1,292 71 7,272

Dividends to shareholders - - - - -

Investing activities:

Capital projects 1,351 711 583 57 -

Equity contributions 691 350 341 - -

Payments related to acquisitions - - - - -

Totals $53,462 $7,684 $ 10,233 $ 6,628 $ 28,917

Obligations for Operating Activities

Energy-related purchase obligations consist primarily of electricity and natural gas contracts with expiration dates ranging from

less than 1 year to 40 years. The majority of raw material and other purchase obligations have expiration dates of 24 months or

less. Certain purchase obligations contain variable pricing components, and, as a result, actual cash payments may differ from

the estimates provided in the preceding table. Operating leases represent multi-year obligations for certain computer

equipment, plant equipment, vehicles, and buildings and alumina refinery process control technology.

Interest related to total debt is based on interest rates in effect as of December 31, 2011 and is calculated on debt with maturities

that extend to 2037. The effect of outstanding interest rate swaps, which are accounted for as fair value hedges, are included in

interest related to total debt. As of December 31, 2011, these hedges effectively convert the interest rate fromfixed to floating

on $515 of debt through 2018. As the contractual interest rates for certain debt and interest rate swaps are variable, actual cash

payments may differ fromthe estimates provided in the preceding table.

Estimated minimumrequired pension funding and postretirement benefit payments are based on actuarial estimates using

current assumptions for discount rates, long-termrate of return on plan assets, rate of compensation increases, and health care

cost trend rates. The minimumrequired contributions for pension funding are estimated to be $650 for 2012, $650 for 2013, $600

for 2014, $400 for 2015, and $200 for 2016. These expected pension contributions reflect

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the impacts of the Pension Protection Act of 2006 and the Worker, Retiree, and Employer Recovery Act of 2008. Pension

contributions are expected to continue to decline if all actuarial assumptions are realized and remain the same in the future.

Other postretirement benefit payments are expected to approximate $270 to $285 annually for years 2012 through 2016 and $250

annually for years 2017 through 2021. Such payments will be slightly offset by subsidy receipts related to Medicare Part D,

which are estimated to be approximately $25 to $35 annually for years 2012 through 2021. Alcoa has determined that it is not

practicable to present pension funding and other postretirement benefit payments beyond 2016 and 2021, respectively.

Layoff and other restructuring payments primarily relate to severance costs and are expected to be paid within one year.

Amounts scheduled to be paid beyond one year are related to lease termination costs, ongoing site remediation work, and

special termination benefit payments.

Deferred revenue arrangements require Alcoa to deliver alumina and sheet and plate to certain customers over the specified

contract period (through 2027 for one alumina contract and through 2012 and 2020 for two sheet and plate contracts). While

these obligations are not expected to result in cash payments, they represent contractual obligations for which the Company

would be obligated if the specified product deliveries could not be made.

Uncertain taxpositions taken or expected to be taken on an income taxreturn may result in additional payments to tax

authorities. The amount in the preceding table includes interest and penalties accrued related to such positions as of

December 31, 2011. The total amount of uncertain taxpositions is included in the “Thereafter” column as the Company is not

able to reasonably estimate the timing of potential future payments. If a taxauthority agrees with the taxposition taken or

expected to be taken or the applicable statute of limitations expires, then additional payments will not be necessary.

Obligations for Financing Activities

Total debt amounts in the preceding table represent the principal amounts of all outstanding debt, including short-term

borrowings, commercial paper, and long-termdebt. Maturities for long-termdebt extend to 2037.

Alcoa has historically paid quarterly dividends on its preferred and common stock. Including dividends on preferred stock,

Alcoa paid $131 in dividends to shareholders during 2011. Because all dividends are subject to approval by Alcoa’s Board of

Directors, amounts are not included in the preceding table unless such authorization has occurred. As of December 31, 2011,

there were 1,064,412,066 and 546,024 shares of outstanding common stock and preferred stock, respectively. The annual

preferred stock dividend is at the rate of $3.75 per share and the annual common stock dividend is $0.12 per share.

Obligations for Investing Activities

Capital projects in the preceding table only include amounts approved by management as of December 31, 2011. Funding levels

may vary in future years based on anticipated construction schedules of the projects. It is expected that significant expansion

projects will be funded through various sources, including cash provided fromoperations. Total capital expenditures are

anticipated to be approximately $1,350 in 2012.

Equity contributions represent Alcoa’s committed investment related to a joint venture in Saudi Arabia. In December 2009,

Alcoa signed an agreement to enter into a joint venture to develop a new aluminumcomplexin Saudi Arabia, comprised of a

bauxite mine, alumina refinery, aluminumsmelter, and rolling mill, which will require the Company to contribute approximately

$1,100 over a four-year period (2010 through 2013). As of December 31, 2011, Alcoa has made equity contributions of $409. The

timing of the amounts included in the preceding table may vary based on changes in anticipated construction schedules of the

project.

Payments related to acquisitions are based on provisions in certain acquisition agreements that state additional funds are due

to the seller fromAlcoa if the businesses acquired achieve stated financial and operational thresholds. Amounts

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are only presented in the preceding table if it is has been determined that payment is more likely than not to occur. In

connection with the 2005 acquisition of two fabricating facilities in Russia, Alcoa could be required to make contingent

payments of approximately $50 through 2015, but are not included in the preceding table as they have not met such standard.

Off-Balance Sheet Arrangements. At December 31, 2011, Alcoa has maximumpotential future payments for guarantees issued

on behalf of certain third parties of $779. These guarantees expire in 2015 through 2027 and relate to project financing for

hydroelectric power projects in Brazil and the aluminumcomplexin Saudi Arabia. Alcoa also has outstanding bank guarantees

related to legal, customs duties, and leasing obligations, among others. The total amount committed under these guarantees,

which expire at various dates, was $436 at December 31, 2011.

Alcoa has outstanding letters of credit primarily related to workers’ compensation, derivative contracts, and leasing

obligations. The total amount committed under these letters of credit, which expire at various dates, mostly in 2012, was $334 at

December 31, 2011. Alcoa also has outstanding surety bonds primarily related to customs duties, self-insurance, and legal

obligations. The total amount committed under these bonds, which automatically renew or expire at various dates, mostly in

2012, was $183 at December 31, 2011.

Alcoa had a programto sell a senior undivided interest in certain customer receivables, without recourse, on a continuous

basis to a third-party for cash (up to $250). This programwas renewed on October 29, 2009 and was due to expire on

October 28, 2010. On March 26, 2010, Alcoa terminated this programand repaid the $250 originally received in 2009. In light of

the adoption of accounting changes related to the transfer of financial assets, had the securitization programnot been

terminated, it would have resulted in a $250 increase in both Receivables fromcustomers and Short-termborrowings on Alcoa’s

Consolidated Balance Sheet.

Also on March 26, 2010, Alcoa entered into two one-year arrangements (both were renewed in March 2011) with third parties to

sell certain customer receivables outright without recourse on a continuous basis. Additionally, in November 2011, Alcoa

entered into a five-year arrangement with another third party to sell additional customer receivables outright without recourse

on a continuous basis. As of December 31, 2011, $212 of the sold receivables under the three arrangements combined were

uncollected. Alcoa is servicing the customer receivables for the third parties at market rates; therefore, no servicing asset or

liability was recorded.

Critical Accounting Policies andEstimates

The preparation of the Consolidated Financial Statements in accordance with accounting principles generally accepted in the

United States of America requires management to make certain judgments, estimates, and assumptions regarding uncertainties

that affect the amounts reported in the Consolidated Financial Statements and disclosed in the accompanying Notes. Areas

that require significant judgments, estimates, and assumptions include accounting for derivatives and hedging activities;

environmental and litigation matters; asset retirement obligations; the testing of goodwill, equity investments, and properties,

plants, and equipment for impairment; estimating fair value of businesses to be divested; pension plans and other

postretirement benefits obligations; stock-based compensation; and income taxes.

Management uses historical experience and all available information to make these judgments, estimates, and assumptions, and

actual results may differ fromthose used to prepare the Company’s Consolidated Financial Statements at any given time.

Despite these inherent limitations, management believes that Management’s Discussion and Analysis of Financial Condition

and Results of Operations and the Consolidated Financial Statements and accompanying Notes provide a meaningful and fair

perspective of the Company.

A summary of the Company’s significant accounting policies is included in Note A to the Consolidated Financial Statements in

Part II Item8 of this Form10-K. Management believes that the application of these policies on a consistent basis enables the

Company to provide the users of the Consolidated Financial Statements with useful and reliable information about the

Company’s operating results and financial condition.

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Derivatives andHedging. Derivatives are held for purposes other than trading and are part of a formally documented risk

management program. For derivatives designated as fair value hedges, Alcoa measures hedge effectiveness by formally

assessing, at least quarterly, the historical high correlation of changes in the fair value of the hedged itemand the derivative

hedging instrument. For derivatives designated as cash flow hedges, Alcoa measures hedge effectiveness by formally

assessing, at least quarterly, the probable high correlation of the expected future cash flows of the hedged itemand the

derivative hedging instrument. The ineffective portions of both types of hedges are recorded in sales or other income or

expense in the current period. If the hedging relationship ceases to be highly effective or it becomes probable that an expected

transaction will no longer occur, future gains or losses on the derivative instrument are recorded in other income or expense.

Alcoa accounts for interest rate swaps related to its existing long-termdebt and hedges of firmcustomer commitments for

aluminumas fair value hedges. As a result, the fair values of the derivatives and changes in the fair values of the underlying

hedged items are reported in other current and noncurrent assets and liabilities in the Consolidated Balance Sheet. Changes in

the fair values of these derivatives and underlying hedged items generally offset and are recorded each period in sales or

interest expense, consistent with the underlying hedged item.

Alcoa accounts for hedges of foreign currency exposures and certain forecasted transactions as cash flow hedges. The fair

values of the derivatives are recorded in other current and noncurrent assets and liabilities in the Consolidated Balance Sheet.

The effective portions of the changes in the fair values of these derivatives are recorded in other comprehensive income and

are reclassified to sales, cost of goods sold, or other income or expense in the period in which earnings are impacted by the

hedged items or in the period that the transaction no longer qualifies as a cash flow hedge. These contracts cover the same

periods as known or expected exposures, generally not exceeding five years.

If no hedging relationship is designated, the derivative is marked to market through earnings.

Cash flows fromderivatives are recognized in the Statement of Consolidated Cash Flows in a manner consistent with the

underlying transactions.

Environmental Matters. Expenditures for current operations are expensed or capitalized, as appropriate. Expenditures relating

to existing conditions caused by past operations, which will not contribute to future revenues, are expensed. Liabilities are

recorded when remediation costs are probable and can be reasonably estimated. The liability may include costs such as site

investigations, consultant fees, feasibility studies, outside contractors, and monitoring expenses. Estimates are generally not

discounted or reduced by potential claims for recovery. Claims for recovery are recognized as agreements are reached with third

parties. The estimates also include costs related to other potentially responsible parties to the extent that Alcoa has reason to

believe such parties will not fully pay their proportionate share. The liability is continuously reviewed and adjusted to reflect

current remediation progress, prospective estimates of required activity, and other factors that may be relevant, including

changes in technology or regulations.

Litigation Matters. For asserted claims and assessments, liabilities are recorded when an unfavorable outcome of a matter is

deemed to be probable and the loss is reasonably estimable. Management determines the likelihood of an unfavorable outcome

based on many factors such as the nature of the matter, available defenses and case strategy, progress of the matter, views and

opinions of legal counsel and other advisors, applicability and success of appeals processes, and the outcome of similar

historical matters, among others. Once an unfavorable outcome is deemed probable, management weighs the probability of

estimated losses, and the most reasonable loss estimate is recorded. If an unfavorable outcome of a matter is deemed to be

reasonably possible, then the matter is disclosed and no liability is recorded. With respect to unasserted claims or

assessments, management must first determine that the probability that an assertion will be made is likely, then, a determination

as to the likelihood of an unfavorable outcome and the ability to reasonably estimate the potential loss is made. Legal matters

are reviewed on a continuous basis to determine if there has been a change in management’s judgment regarding the likelihood

of an unfavorable outcome or the estimate of a potential loss.

Asset Retirement Obligations. Alcoa recognizes asset retirement obligations (AROs) related to legal obligations associated

with the normal operation of Alcoa’s bauxite mining, alumina refining, and aluminumsmelting facilities. These AROs consist

primarily of costs associated with spent pot lining disposal, closure of bauxite residue areas, mine

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reclamation, and landfill closure. Alcoa also recognizes AROs for any significant lease restoration obligation, if required by a

lease agreement, and for the disposal of regulated waste materials related to the demolition of certain power facilities. The fair

values of these AROs are recorded on a discounted basis, at the time the obligation is incurred, and accreted over time for the

change in present value. Additionally, Alcoa capitalizes asset retirement costs by increasing the carrying amount of the related

long-lived assets and depreciating these assets over their remaining useful life.

Certain conditional asset retirement obligations (CAROs) related to alumina refineries, aluminumsmelters, and fabrication

facilities have not been recorded in the Consolidated Financial Statements due to uncertainties surrounding the ultimate

settlement date. A CARO is a legal obligation to performan asset retirement activity in which the timing and (or) method of

settlement are conditional on a future event that may or may not be within Alcoa’s control. Such uncertainties exist as a result

of the perpetual nature of the structures, maintenance and upgrade programs, and other factors. At the date a reasonable

estimate of the ultimate settlement date can be made, Alcoa would record an ARO for the removal, treatment, transportation,

storage and (or) disposal of various regulated assets and hazardous materials such as asbestos, underground and

aboveground storage tanks, polychlorinated biphenyls, various process residuals, solid wastes, electronic equipment waste,

and various other materials. Such amounts may be material to the Consolidated Financial Statements in the period in which they

are recorded. If Alcoa was required to demolish allsuch structures immediately, the estimated CARO as of December 31, 2011

ranges fromless than $1 to $52 per structure (131 structures) in today’s dollars.

Goodwill. Goodwill is not amortized; instead, it is reviewed for impairment annually (in the fourth quarter) or more frequently if

indicators of impairment exist or if a decision is made to sell a business. A significant amount of judgment is involved in

determining if an indicator of impairment has occurred. Such indicators may include deterioration in general economic

conditions, negative developments in equity and credit markets, adverse changes in the markets in which an entity operates,

increases in input costs that have a negative effect on earnings and cash flows, or a trend of negative or declining cash flows

over multiple periods, among others. The fair value that could be realized in an actual transaction may differ fromthat used to

evaluate the impairment of goodwill.

Goodwill is allocated among and evaluated for impairment at the reporting unit level, which is defined as an operating segment

or one level below an operating segment. Alcoa has nine reporting units, of which five are included in the Engineered Products

and Solutions segment. The remaining four reporting units are the Alumina segment, the Primary Metals segment, the FlatRolled Products segment, and the soft alloy extrusions business in Brazil, which is included in Corporate. Almost 90% of

Alcoa’s total goodwill is allocated to three reporting units as follows: Alcoa Fastening Systems (AFS) ($1,153) and Alcoa

Power and Propulsion (APP) ($1,627) businesses, both of which are included in the Engineered Products and Solutions

segment, and Primary Metals ($1,841). These amounts include an allocation of Corporate’s goodwill.

In September 2011, the Financial Accounting Standards Board issued new accounting guidance for testing goodwill for

impairment (see the Recently Adopted Accounting Guidance section of Note A to the Consolidated Financial Statements in

Part II Item8 of this Form10-K). The guidance provides an entity the option to first assess qualitative factors to determine

whether the existence of events or circumstances leads to a determination that it is more likely than not (more than 50%) that

the estimated fair value of a reporting unit is less than its carrying amount. If an entity elects to performa qualitative

assessment and determines that an impairment is more likely than not, the entity is then required to performthe existing twostep quantitative impairment test (described below), otherwise no further analysis is required. An entity also may elect not to

performthe qualitative assessment and, instead, proceed directly to the two-step quantitative impairment test. The ultimate

outcome of the goodwill impairment review for a reporting unit should be the same whether an entity chooses to performthe

qualitative assessment or proceeds directly to the two-step quantitative impairment test.

In the 2011 fourth quarter, in conjunction with management’s annual review of goodwill, Alcoa early adopted the new

guidance. As a result, Alcoa instituted a policy for its annual review of goodwill to performthe qualitative assessment for all

reporting units not subjected directly to the two-step quantitative impairment test. Management will proceed

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directly to the two-step quantitative impairment test for a minimumof three reporting units (based on facts and circumstances)

during each annual review of goodwill. This policy will result in each of the nine reporting units being subjected to the twostep quantitative impairment test at least once during every three-year period.

Under the qualitative assessment, various events and circumstances (or factors) that would affect the estimated fair value of a

reporting unit are identified (similar to impairment indicators above). These factors are then classified by the type of impact

they would have on the estimated fair value using positive, neutral, and adverse categories based on current business

conditions. Additionally, an assessment of the level of impact that a particular factor would have on the estimated fair value is

determined using high, medium, and low weighting. Furthermore, management considers the results of the most recent two-step

quantitative impairment test completed for a reporting unit (this would be 2010 in which the estimated fair values of all nine

reporting units were substantially in excess of their carrying values) and compares the weighted average cost of capital

(WACC) between the current and prior years for each reporting unit.

During the 2011 annual review of goodwill, management performed the qualitative assessment for sixreporting units.

Management concluded that it was not more likely than not that the estimated fair values of the sixreporting units were less

than their carrying values. As such, no further analysis was required.

Under the two-step quantitative impairment test, the evaluation of impairment involves comparing the current fair value of each

reporting unit to its carrying value, including goodwill. Alcoa uses a DCF model to estimate the current fair value of its

reporting units when testing for impairment, as management believes forecasted cash flows are the best indicator of such fair

value. A number of significant assumptions and estimates are involved in the application of the DCF model to forecast

operating cash flows, including markets and market share, sales volumes and prices, costs to produce, taxrates, capital

spending, discount rate, and working capital changes. Most of these assumptions vary significantly among the reporting units.

Cash flow forecasts are generally based on approved business unit operating plans for the early years and historical

relationships in later years. The betas used in calculating the individual reporting units’ WACC rate are estimated for each

business with the assistance of valuation experts.

In the event the estimated fair value of a reporting unit per the DCF model is less than the carrying value, additional analysis

would be required. The additional analysis would compare the carrying amount of the reporting unit’s goodwill with the implied

fair value of that goodwill, which may involve the use of valuation experts. The implied fair value of goodwill is the excess of

the fair value of the reporting unit over the fair value amounts assigned to all of the assets and liabilities of that unit as if the

reporting unit was acquired in a business combination and the fair value of the reporting unit represented the purchase price. If

the carrying value of goodwill exceeds its implied fair value, an impairment loss equal to such excess would be recognized,

which could significantly and adversely impact reported results of operations and shareholders’ equity.

During the 2011 annual review of goodwill, management proceeded directly to the two-step quantitative impairment test for

three reporting units as follows: the Primary Metals segment, building and construction systems, which is included in the

Engineered Products and Solutions segment, and the soft alloy extrusions business in Brazil. The estimated fair values of these

three reporting units were substantially in excess of their carrying values, resulting in no impairment.

As part of the 2011 annual review of goodwill, management considered the market capitalization of Alcoa’s common stock in

relation to the Company’s totalshareholders’ equity. At December 31, 2011, the market capitalization of Alcoa’s common stock

was $9,207. While this amount is less than the Company’s totalshareholders’ equity at December 31, 2011, the estimated

aggregate fair value of Alcoa’s reporting units was substantially in excess of the aforementioned market capitalization amount.

In management’s judgment, the main reasons for the difference between Alcoa’s market capitalization and totalshareholders’

equity at December 31, 2011 are the overall decline in the capital markets and significantly lower commodity prices. As it relates

to the capital markets, there was, and continues to be, significant uncertainty of the sovereign debt of many European

countries. This uncertainty has affected the liquidity of many companies that either operate or are located in Europe, although,

Alcoa has not been impacted significantly. The combination of this uncertainty and the continuing decline in commodity prices

caused significant and volatile fluctuations in the price of Alcoa’s common stock. At December 31, 2011 and 2010, the market

price of Alcoa’s common stock was $8.65 and $15.39, respectively, which equates to a decline of 44%. During 2011, the size and

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structure of the Company did not change and there were no specific events or transactions that would cause management to

reasonably expect such a decline in the market price of Alcoa’s common stock. As a result, management believes the quoted

market price of Alcoa’s common stock does not fully reflect the underlying value of the future aggregate cash flows of the

Company’s reporting units. Accordingly, management does not believe that the comparison of Alcoa’s market capitalization

and totalshareholders’ equity as of December 31, 2011 is an indication that goodwill is impaired.

Equity Investments. Alcoa invests in a number of privately-held companies, primarily through joint ventures and consortia,

which are accounted for on the equity method. The equity method is applied in situations where Alcoa has the ability to

exercise significant influence, but not control, over the investee. Management reviews equity investments for impairment

whenever certain indicators are present suggesting that the carrying value of an investment is not recoverable. This analysis

requires a significant amount of judgment frommanagement to identify events or circumstances indicating that an equity

investment is impaired. The following items are examples of impairment indicators:significant, sustained declines in an

investee’s revenue, earnings, and cash flow trends; adverse market conditions of the investee’s industry or geographic area;

the investee’s ability to continue operations measured by several items, including liquidity; and other factors. Once an

impairment indicator is identified, management uses considerable judgment to determine if the impairment is other than

temporary, in which case the equity investment is written down to its estimated fair value. An impairment that is other than

temporary could significantly and adversely impact reported results of operations.

Properties, Plants, andEquipment. Properties, plants, and equipment are reviewed for impairment whenever events or changes

in circumstances indicate that the carrying amount of such assets (asset group) may not be recoverable. Recoverability of

assets is determined by comparing the estimated undiscounted net cash flows of the operations related to the assets (asset

group) to their carrying amount. An impairment loss would be recognized when the carrying amount of the assets (asset group)

exceeds the estimated undiscounted net cash flows. The amount of the impairment loss to be recorded is calculated as the

excess of the carrying value of the assets (asset group) over their fair value, with fair value determined using the best

information available, which generally is a DCF model. The determination of what constitutes an asset group, the associated

estimated undiscounted net cash flows, and the estimated useful lives of assets also require significant judgments.

DiscontinuedOperations andAssets HeldFor Sale. The fair values of all businesses to be divested are estimated using

accepted valuation techniques such as a DCF model, valuations performed by third parties, earnings multiples, or indicative

bids, when available. A number of significant estimates and assumptions are involved in the application of these techniques,

including the forecasting of markets and market share, sales volumes and prices, costs and expenses, and multiple other

factors. Management considers historical experience and all available information at the time the estimates are made; however,

the fair value that is ultimately realized upon the divestiture of a business may differ fromthe estimated fair value reflected in

the Consolidated Financial Statements.

Pension andOther Postretirement Benefits. Liabilities and expenses for pension and other postretirement benefits are

determined using actuarial methodologies and incorporate significant assumptions, including the interest rate used to discount

the future estimated liability, the expected long-termrate of return on plan assets, and several assumptions relating to the

employee workforce (salary increases, health care cost trend rates, retirement age, and mortality).

The interest rate used to discount future estimated liabilities is determined using a Company-specific yield curve model (abovemedian) developed with the assistance of an external actuary. The cash flows of the plans’ projected benefit obligations are

discounted using a single equivalent rate derived fromyields on high quality corporate bonds, which represent a broad

diversification of issuers in various sectors, including finance and banking, manufacturing, transportation, insurance, and

pharmaceutical, among others. The yield curve model parallels the plans’ projected cash flows, which have an average duration

of 10 years, and the underlying cash flows of the bonds included in the model exceed the cash flows needed to satisfy the

Company’s plans’ obligations multiple times. In 2011, 2010, and 2009, the discount rate used to determine benefit obligations

for U.S. pension and other postretirement benefit plans was 4.90%, 5.75%, and 6.15%, respectively. The impact on the liabilities

of a change in the discount rate of 1/4 of 1% would be approximately $425 and either a charge or credit of $18 to after-tax

earnings in the following year.

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The expected long-termrate of return on plan assets is generally applied to a five-year market-related value of plan assets (a

four-year average or the fair value at the plan measurement date is used for certain non-U.S. plans). The process used by

management to develop this assumption has expanded fromone that relied primarily on historical asset return information to

one that also incorporates forward-looking returns by asset class, as described below.

Prior to developing the expected long-termrate of return for calendar year 2009, management focused on historical actual

returns (annual, 10-year moving, and 20-year moving averages) when developing this assumption. Based on that process,

management utilized 9% for the expected long-termrate of return for several years through 2008. For calendar year 2009, the

expected long-termrate of return was reduced to 8.75% due to lower future expected market returns as a result of the then

global economic downturn. This was supported by the fact that, in 2008, the 10-year moving average of actual performance fell

below 9% for the first time in 20 years, although the 20-year moving average continued to exceed 9%.

For calendar year 2010, management expanded its process by incorporating expected future returns on current and planned

asset allocations using information fromvarious external investment managers and management’s own judgment. Management

considered this forward-looking analysis as well as the historical return information, and concluded the expected rate of return

for calendar 2010 would remain at 8.75%, which was between the 20-year moving average actual return performance and the

estimated future return developed by asset class.

For calendar year 2011, management again incorporated both actual historical return information and expected future returns

into its analysis. Based on strategic asset allocation changes and estimates of future returns by asset class, management used

8.50% as its expected long-termrate of return for 2011. This rate again falls within the range of the 20-year moving average of

actual performance and the expected future return developed by asset class.

For calendar year 2012, management used the same methodology as it did for 2011 and determined that 8.50% will be the

expected long-termrate of return.

A change in the assumption for the expected long-termrate of return on plan assets of 1/4 of 1% would impact after-tax

earnings by approximately $16 for 2012.

In 2011, a net charge of $991 ($593 after-tax) was recorded in other comprehensive loss, primarily due to an 85 basis point

decrease in the discount rate, which was slightly offset by the favorable performance of the plan assets and the recognition of

actuarial losses and prior service costs. In 2010, a net charge of $216 ($138 after-tax) was recorded in other comprehensive

income, primarily due to a 40 basis point decrease in the discount rate, which was somewhat offset by the favorable

performance of the plan assets and the recognition of actuarial losses and prior service costs. In 2009, a net charge of $182

($102 after-tax) was recorded in other comprehensive income, primarily due to a 25 basis point decrease in the discount rate,

which was somewhat offset by the favorable performance of the plan assets and the recognition of actuarial losses and prior

service costs. Additionally, in 2010 and 2009, a charge of $2 and $8, respectively, was recorded in accumulated other

comprehensive loss due to the reclassification of deferred taxes related to the Medicare Part D prescription drug subsidy.

Stock-basedCompensation. Alcoa recognizes compensation expense for employee equity grants using the non-substantive

vesting period approach, in which the expense (net of estimated forfeitures) is recognized ratably over the requisite service

period based on the grant date fair value. The fair value of new stock options is estimated on the date of grant using a latticepricing model. Determining the fair value of stock options at the grant date requires judgment, including estimates for the

average risk-free interest rate, dividend yield, volatility, annual forfeiture rate, and exercise behavior. These assumptions may

differ significantly between grant dates because of changes in the actual results of these inputs that occur over time.

As part of Alcoa’s stock-based compensation plan design, individuals who are retirement-eligible have a six-month requisite

service period in the year of grant. Equity grants are issued in January each year. As a result, a larger portion of expense will be

recognized in the first half of each year for these retirement-eligible employees. Compensation

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expense recorded in 2011, 2010, and 2009 was $83 ($56 after-tax), $84 ($57 after-tax), and $87 ($58 after-tax), respectively. Of this

amount, $18, $19, and $21 in 2011, 2010, and 2009, respectively, pertains to the acceleration of expense related to retirementeligible employees.

Most plan participants can choose whether to receive their award in the formof stock options, stock awards, or a combination

of both. This choice is made before the grant is issued and is irrevocable.

Income Taxes. The provision for income taxes is determined using the asset and liability approach of accounting for income

taxes. Under this approach, the provision for income taxes represents income taxes paid or payable (or received or receivable)

for the current year plus the change in deferred taxes during the year. Deferred taxes represent the future taxconsequences

expected to occur when the reported amounts of assets and liabilities are recovered or paid, and result fromdifferences

between the financial and taxbases of Alcoa’s assets and liabilities and are adjusted for changes in taxrates and taxlaws when

enacted.

Valuation allowances are recorded to reduce deferred taxassets when it is more likely than not that a taxbenefit will not be

realized. In evaluating the need for a valuation allowance, management considers all potentialsources of taxable income,

including income available in carryback periods, future reversals of taxable temporary differences, projections of taxable

income, and income fromtaxplanning strategies, as well as all available positive and negative evidence. Positive evidence

includes factors such as a history of profitable operations, projections of future profitability within the carryforward period,

including fromtaxplanning strategies, and the Company’s experience with similar operations. Existing favorable contracts and

the ability to sell products into established markets are additional positive evidence. Negative evidence includes items such as

cumulative losses, projections of future losses, or carryforward periods that are not long enough to allow for the utilization of a

deferred taxasset based on existing projections of income. Deferred taxassets for which no valuation allowance is recorded

may not be realized upon changes in facts and circumstances, resulting in a future charge to establish a valuation allowance.

Taxbenefits related to uncertain taxpositions taken or expected to be taken on a taxreturn are recorded when such benefits

meet a more likely than not threshold. Otherwise, these taxbenefits are recorded when a taxposition has been effectively

settled, which means that the statute of limitation has expired or the appropriate taxing authority has completed their

examination even though the statute of limitations remains open. Interest and penalties related to uncertain taxpositions are

recognized as part of the provision for income taxes and are accrued beginning in the period that such interest and penalties

would be applicable under relevant taxlaw untilsuch time that the related taxbenefits are recognized.

RelatedParty Transactions

Alcoa buys products fromand sells products to various related companies, consisting of entities in which Alcoa retains a 50%

or less equity interest, at negotiated arms-length prices between the two parties. These transactions were not material to the

financial position or results of operations of Alcoa for all periods presented.

Recently AdoptedAccounting Guidance

See the Recently Adopted Accounting Guidance section of Note A to the Consolidated Financial Statements in Part II Item8 of

this Form10-K.

Recently IssuedAccounting Guidance

See the Recently Issued Accounting Guidance section of Note A to the Consolidated Financial Statements in Part II Item8 of

this Form10-K.

Item 7A. Quantitative andQualitative Disclosures About Market Risk.

See the Derivatives section of Note X to the Consolidated Financial Statements in Part II Item8 of this Form10-K.

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Item 8. Financial Statements andSupplementary Data

Management’s Reports to Alcoa Shareholders

Management’s Report on Financial Statements andPractices

The accompanying Consolidated Financial Statements of Alcoa Inc. and its subsidiaries (the “Company”) were prepared by

management, which is responsible for their integrity and objectivity. The statements were prepared in accordance with

generally accepted accounting principles and include amounts that are based on management’s best judgments and estimates.

The other financial information included in the annual report is consistent with that in the financialstatements.

Management also recognizes its responsibility for conducting the Company’s affairs according to the highest standards of

personal and corporate conduct. This responsibility is characterized and reflected in key policy statements issued fromtime to

time regarding, among other things, conduct of its business activities within the laws of the host countries in which the

Company operates and potentially conflicting outside business interests of its employees. The Company maintains a

systematic programto assess compliance with these policies.

Management’s Report on Internal Control over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over financial reporting for the

Company. In order to evaluate the effectiveness of internal control over financial reporting, as required by Section 404 of the

Sarbanes-Oxley Act, management has conducted an assessment, including testing, using the criteria in Internal Control—

Integrated Framework, issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The

Company’s systemof internal control over financial reporting is designed to provide reasonable assurance regarding the

reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally

accepted accounting principles. The Company’s internal control over financial reporting includes those policies and

procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions

and dispositions of the assets of the Company; (ii) provide reasonable assurance that transactions are recorded as necessary

to permit preparation of financialstatements in accordance with generally accepted accounting principles, and that receipts and

expenditures of the Company are being made only in accordance with authorizations of management and directors of the

Company; and (iii) 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 financialstatements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,

projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate

because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Based on the assessment, management has concluded that the Company maintained effective internal control over financial

reporting as of December 31, 2011, based on criteria in Internal Control—Integrated Framework issued by the COSO.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2011 has been audited by

PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included

herein.

/s/ Klaus Kleinfeld

Klaus Kleinfeld

Chairman and

Chief Executive Officer

/s/ Charles D. McLane, Jr.

Charles D. McLane, Jr.

Executive Vice President and

Chief Financial Officer
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Report of Independent RegisteredPublic Accounting Firm

To the Shareholders and Board of Directors of Alcoa Inc.

In our opinion, the accompanying consolidated balance sheets and the related statements of consolidated operations, changes

in consolidated equity, consolidated comprehensive (loss) income, and consolidated cash flows present fairly, in all material

respects, the financial position of Alcoa Inc. and its subsidiaries (the “Company”) at December 31, 2011 and 2010, and the

results of their operations and their cash flows for each of the three years in the period ended December 31, 2011 in conformity

with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in

all material respects, effective internal control over financial reporting as of December 31, 2011, based on criteria established in

Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission

(COSO). The Company’s management is responsible for these financialstatements, for maintaining effective internal control

over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the

accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express opinions on

these financialstatements and on the Company’s internal control over financial reporting based on our integrated audits. We

conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).

Those standards require that we plan and performthe audits to obtain reasonable assurance about whether the financial

statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all

material respects. Our audits of the financialstatements included examining, on a test basis, evidence supporting the amounts

and disclosures in the financialstatements, assessing the accounting principles used and significant estimates made by

management, and evaluating the overall financialstatement presentation. Our audit of internal control over financial reporting

included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness

exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our

audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our

audits provide a reasonable basis for our opinions.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the

reliability of financial reporting and the preparation of financialstatements for external purposes in accordance with generally

accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures

that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and

dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to

permit preparation of financialstatements in accordance with generally accepted accounting principles, and that receipts and

expenditures of the company are being made only in accordance with authorizations of management and directors of the

company; and (iii) 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 financialstatements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also,

projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate

because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

PricewaterhouseCoopers LLP

Pittsburgh, Pennsylvania

February 16, 2012

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Alcoa andsubsidiaries

Statement of ConsolidatedOperations

(in millions, except per-share amounts)

For the year endedDecember 31, 2011 2010 2009

Sales (Q) $24,951 $21,013 $18,439

Cost of goods sold (exclusive of expenses below) 20,480 17,174 16,902

Selling, general administrative, and other expenses 1,027 961 1,009

Research and development expenses 184 174 169

Provision for depreciation, depletion, and amortization 1,479 1,450 1,311

Restructuring and other charges (D) 281 207 237

Interest expense (V) 524 494 470

Other (income) expenses, net (O) (87) 5 (161)

Total costs and expenses 23,888 20,465 19,937

Income (loss) fromcontinuing operations before income taxes 1,063 548 (1,498)

Provision (benefit) for income taxes (T) 255 148 (574)

Income (loss) fromcontinuing operations 808 400 (924)

Loss fromdiscontinued operations (B) (3) (8) (166)

Net income (loss) 805 392 (1,090)

Less: Net income attributable to noncontrolling interests 194 138 61

Net Income (Loss) Attributable to Alcoa $ 611 $ 254 $(1,151)

Amounts Attributable to Alcoa Common Shareholders:

Income (loss) fromcontinuing operations $ 614 $ 262 $ (985)

Loss fromdiscontinued operations (3) (8) (166)

Net income (loss) $ 611 $ 254 $(1,151)

Earnings per Share Attributable to Alcoa Common Shareholders (S):

Basic:

Income (loss) fromcontinuing operations $ 0.58 $ 0.25 $ (1.06)

Loss fromdiscontinued operations (0.01) – (0.17)

Net income (loss) $ 0.57 $ 0.25 $ (1.23)

Diluted:

Income (loss) fromcontinuing operations $ 0.55 $ 0.25 $ (1.06)

Loss fromdiscontinued operations – (0.01) (0.17)

Net income (loss) $ 0.55 $ 0.24 $ (1.23)

The accompanying notes are an integral part of the consolidated financialstatements.

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Alcoa andsubsidiaries

ConsolidatedBalance Sheet

(in millions)

December 31, 2011 2010

Assets

Current assets:

Cash and cash equivalents (X) $ 1,939 $ 1,543

Receivables fromcustomers, less allowances of $46 in both 2011 and 2010 (U) 1,571 1,591

Other receivables 371 326

Inventories (G) 2,899 2,584

Prepaid expenses and other current assets 933 875

Total current assets 7,713 6,919

Properties, plants, and equipment, net (H) 19,416 20,183

Goodwill (E) 5,251 5,122

Investments (I) 1,626 1,340

Deferred income taxes (T) 3,546 3,184

Other noncurrent assets (J) 2,568 2,545

Total Assets $40,120 $39,293

Liabilities

Current liabilities:

Short-termborrowings (K & X) $ 62 $ 92

Commercial paper (K & X) 224 -

Accounts payable, trade 2,692 2,331

Accrued compensation and retirement costs 985 932

Taxes, including income taxes 438 461

Other current liabilities 1,167 1,204

Long-termdebt due within one year (K & X) 445 231

Total current liabilities 6,013 5,251

Long-termdebt, less amount due within one year (K & X) 8,640 8,842

Accrued pension benefits (W) 3,261 2,923

Accrued other postretirement benefits (W) 2,583 2,615

Other noncurrent liabilities and deferred credits (L) 2,428 2,576

Total liabilities 22,925 22,207

Contingencies and commitments (N)

Equity

Alcoa shareholders’ equity:

Preferred stock (R) 55 55

Common stock (R) 1,178 1,141

Additional capital 7,561 7,087

Retained earnings 11,629 11,149

Treasury stock, at cost (3,952) (4,146)

Accumulated other comprehensive loss (2,627) (1,675)

Total Alcoa shareholders’ equity 13,844 13,611

Noncontrolling interests (M) 3,351 3,475

Total equity 17,195 17,086

Total Liabilities andEquity $40,120 $39,293

The accompanying notes are an integral part of the consolidated financialstatements.

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Alcoa andsubsidiaries

Statement of ConsolidatedCash Flows

(in millions)

For the year endedDecember 31, 2011 2010 2009

Cash from Operations

Net income (loss) $ 805 $ 392 $(1,090)

Adjustments to reconcile net income (loss) to cash fromoperations:

Depreciation, depletion, and amortization 1,481 1,451 1,311

Deferred income taxes (T) (181) (287) (596)

Equity (income) loss, net of dividends (26) (22) 39

Restructuring and other charges (D) 281 207 237

Net gain frominvesting activities—asset sales (O) (41) (9) (106)

Loss fromdiscontinued operations (B) 3 8 166

Stock-based compensation (R) 83 84 87

Excess taxbenefits fromstock-based payment arrangements (6) (1) -

Other 53 151 219

Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and

foreign currency translation adjustments:

(Increase) decrease in receivables (115) (102) 685

(Increase) decrease in inventories (339) (217) 1,268

Decrease in prepaid expenses and other current assets 74 27 126

Increase (decrease) in accounts payable, trade 394 328 (634)

(Decrease) in accrued expenses (38) (239) (98)

Increase (decrease) in taxes, including income taxes 118 503 (143)

Pension contributions (W) (336) (113) (128)

(Increase) in noncurrent assets (154) (83) (201)

Increase in noncurrent liabilities 147 183 234

(Increase) in net assets held for sale (B) - (7) 3

Cash providedfrom continuing operations 2,203 2,254 1,379

Cash (usedfor) providedfrom discontinuedoperations (10) 7 (14)

Cash providedfrom operations 2,193 2,261 1,365

Financing Activities

Net change in short-termborrowings (K) (31) (44) (292)

Net change in commercial paper (K) 224 - (1,535)

Additions to long-termdebt (K) 1,256 1,126 1,049

Debt issuance costs (K) (17) (6) (17)

Payments on long-termdebt (K) (1,194) (1,757) (156)

Proceeds fromexercise of employee stock options (R) 37 13 -

Excess taxbenefits fromstock-based payment arrangements 6 1 -

Issuance of common stock (R) - - 876

Dividends paid to shareholders (131) (125) (228)

Distributions to noncontrolling interests (257) (256) (140)

Contributions fromnoncontrolling interests (I & M) 169 162 480

Acquisitions of noncontrolling interests (I) - (66) -

Cash providedfrom (usedfor) financing activities 62 (952) 37

Investing Activities

Capital expenditures (1,287) (1,015) (1,617)

Capital expenditures of discontinued operations - - (5)

Acquisitions, net of cash acquired (F & P) (240) (72) 112

Proceeds fromthe sale of assets and businesses (F) 38 4 (65)
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Additions to investments (I) (374) (352) (181)

Sales of investments (I) 54 141 1,031

Other (43) 22 4

Cash usedfor investing activities (1,852) (1,272) (721)

Effect of exchange rate changes on cash andcash equivalents (7) 25 38

Net change in cash and cash equivalents 396 62 719

Cash and cash equivalents at beginning of year 1,543 1,481 762

Cash andcash equivalents at endof year $ 1,939 $ 1,543 $ 1,481

The accompanying notes are an integral part of the consolidated financialstatements.

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Alcoa andsubsidiaries

Statement of Changes in ConsolidatedEquity

(in millions, except per-share amounts)

Alcoa Inc. Shareholders

Preferred

stock

Common

stock

Additional

capital

Retained

earnings

Treasury

stock

Accumulated

other comprehensive lossNoncontrolling

interests

Total

equity

Balance at December 31, 2008 $ 55 $ 925 $ 5,850 $ 12,400 $ (4,326) $ (3,169) $ 2,597 $14,332

Net (loss) income - - - (1,151) - - 61 (1,090)

Other comprehensive income - - - - - 1,077 323 1,400

Cash dividends declared:

Preferred @ $3.75 per share - - - (2) - - - (2)

Common @ $0.26 per share - - - (227) - - - (227)

Beneficial conversion option on convertible notes,

net of tax - - 43 - - - - 43

Stock-based compensation (R) - - 87 - - - - 87

Common stock issued: compensation plans (R) - - (76) - 58 - - (18)

Issuance of common stock (R) - 172 704 - - - - 876

Distributions - - - - - - (140) (140)

Contributions (M) - - - - - - 440 440

Purchase of equity from noncontrolling interest

(F) - - - - - - (179) (179)

Other - - - - - - (2) (2)

Balance at December 31, 2009 55 1,097 6,608 11,020 (4,268) (2,092) 3,100 15,520

Net income - - - 254 - - 138 392

Other comprehensive income - - - - - 417 334 751

Cash dividends declared:

Preferred @ $3.75 per share - - - (2) - - - (2)

Common @ $0.12 per share - - - (123) - - - (123)

Stock-based compensation (R) - - 84 - - - - 84

Common stock issued: compensation plans (R) - - (139) - 122 - - (17)

Issuance of common stock (R) - 44 556 - - - - 600

Distributions - - - - - - (256) (256)

Contributions (M) - - - - - - 162 162

Purchase of equity from noncontrolling interest

(P) - - (2) - - - (4) (6)

Other (I) - - (20) - - - 1 (19)

Balance at December 31, 2010 55 1,141 7,087 11,149 (4,146) (1,675) 3,475 17,086

Net income - - - 611 - - 194 805

Other comprehensive loss - - - - - (952) (229) (1,181)

Cash dividends declared:

Preferred @ $3.75 per share - - - (2) - - - (2)

Common @ $0.12 per share - - - (129) - - - (129)

Stock-based compensation (R) - - 83 - - - - 83

Common stock issued: compensation plans (R) - - (172) - 194 - - 22

Issuance of common stock (R) - 37 563 - - - - 600

Distributions - - - - - - (257) (257)

Contributions (M) - - - - - - 169 169

Other - - - - - - (1) (1)

Balance at December 31, 2011 $ 55 $ 1,178 $ 7,561 $ 11,629 $ (3,952) $ (2,627) $ 3,351 $17,195

The accompanying notes are an integral part of the consolidated financialstatements.

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Alcoa andsubsidiaries

Statement of ConsolidatedComprehensive (Loss) Income

(in millions)

Alcoa Inc.

Noncontrolling

Interests Total

For the year ended

December 31, 2011 2010 2009 2011 2010 2009 2011 2010 2009

Net income (loss) $ 611 $ 254 $(1,151) $ 194 $ 138 $ 61 $ 805 $ 392 $(1,090)

Other comprehensive (loss) income, net of tax:

Change in unrecognized net actuarial loss

and prior service cost/benefit related to

pension and other postretirement

benefits (W) (593) (140) (110) (59) (4) 8 (652) (144) (102)

Foreign currency translation adjustments

(A) (543) 441 1,377 (165) 334 320 (708) 775 1,697

Unrealized gains on available-for-sale

securities (I):

Unrealized holding (losses) gains - (5) 49 - - - - (5) 49

Net amount reclassified to earnings - 4 381 - - - - 4 381

Net change in unrealized gains on

available-for-sale securities - (1) 430 - - - - (1) 430

Unrecognized losses on derivatives (X):

Net change fromperiodic

revaluations 63 (21) (609) (6) 4 (5) 57 (17) (614)

Net amount reclassified to

earnings 121 138 (11) 1 - - 122 138 (11)

Net change in unrecognized

losses on derivatives 184 117 (620) (5) 4 (5) 179 121 (625)

Total Other comprehensive (loss) income, net

of tax (952) 417 1,077 (229) 334 323 (1,181) 751 1,400

Comprehensive (loss) income $(341) $ 671 $ (74) $ (35) $ 472 $ 384 $ (376) $1,143 $ 310

The accompanying notes are an integral part of the consolidated financialstatements.

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Alcoa andsubsidiaries

Notes to the ConsolidatedFinancial Statements

(dollars in millions, except per-share amounts)

A. Summary of Significant Accounting Policies

Basis of Presentation. The Consolidated Financial Statements of Alcoa Inc. and subsidiaries (“Alcoa” or the “Company”) are

prepared in conformity with accounting principles generally accepted in the United States of America (GAAP) and require

management to make certain judgments, estimates, and assumptions. These may affect the reported amounts of assets and

liabilities and the disclosure of contingent assets and liabilities at the date of the financialstatements. They also may affect the

reported amounts of revenues and expenses during the reporting period. Actual results could differ fromthose estimates upon

subsequent resolution of identified matters. Certain amounts in previously issued financialstatements were reclassified to

conformto the 2011 presentation (see Note B).

Principles of Consolidation. The Consolidated Financial Statements include the accounts of Alcoa and companies in which

Alcoa has a controlling interest. Intercompany transactions have been eliminated. The equity method of accounting is used for

investments in affiliates and other joint ventures over which Alcoa has significant influence but does not have effective

control. Investments in affiliates in which Alcoa cannot exercise significant influence are accounted for on the cost method.

Management also evaluates whether an Alcoa entity or interest is a variable interest entity and whether Alcoa is the primary

beneficiary. Consolidation is required if both of these criteria are met. Alcoa does not have any variable interest entities

requiring consolidation.

RelatedParty Transactions. Alcoa buys products fromand sells products to various related companies, consisting of entities

in which Alcoa retains a 50% or less equity interest, at negotiated arms-length prices between the two parties. These

transactions were not material to the financial position or results of operations of Alcoa for all periods presented.

Cash Equivalents. Cash equivalents are highly liquid investments purchased with an original maturity of three months or less.

Inventory Valuation. Inventories are carried at the lower of cost or market, with cost for a substantial portion of U.S. and

Canadian inventories determined under the last-in, first-out (LIFO) method. The cost of other inventories is principally

determined under the average-cost method.

Properties, Plants, andEquipment. Properties, plants, and equipment are recorded at cost. Depreciation is recorded principally

on the straight-line method at rates based on the estimated useful lives of the assets. For greenfield assets, the units of

production method is used to record depreciation. Depreciation is recorded on temporarily idled facilities untilsuch time

management approves a permanent shutdown. The following table details the weighted-average useful lives of structures and

machinery and equipment by reporting segment (numbers in years):

Segment Structures Machinery andequipment

Alumina 29 25

Primary Metals 34 21

Flat-Rolled Products 31 21

Engineered Products and Solutions 27 18

Gains or losses fromthe sale of assets are generally recorded in other income or expenses (see policy that follows for assets

classified as held for sale and discontinued operations). Repairs and maintenance are charged to expense as incurred. Interest

related to the construction of qualifying assets is capitalized as part of the construction costs. Depletion related to mineral

reserves is recorded using the units of production method.

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Properties, plants, and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the

carrying amount of such assets (asset group) may not be recoverable. Recoverability of assets is determined by comparing the

estimated undiscounted net cash flows of the operations related to the assets (asset group) to their carrying amount. An

impairment loss would be recognized when the carrying amount of the assets (asset group) exceeds the estimated

undiscounted net cash flows. The amount of the impairment loss to be recorded is calculated as the excess of the carrying

value of the assets (asset group) over their fair value, with fair value determined using the best information available, which

generally is a discounted cash flow model (DCF model). The determination of what constitutes an asset group, the associated

estimated undiscounted net cash flows, and the estimated useful lives of assets also require significant judgments.

Goodwill andOther Intangible Assets. Goodwill is not amortized; instead, it is reviewed for impairment annually (in the fourth

quarter) or more frequently if indicators of impairment exist or if a decision is made to sell a business. A significant amount of

judgment is involved in determining if an indicator of impairment has occurred. Such indicators may include deterioration in

general economic conditions, negative developments in equity and credit markets, adverse changes in the markets in which an

entity operates, increases in input costs that have a negative effect on earnings and cash flows, or a trend of negative or

declining cash flows over multiple periods, among others. The fair value that could be realized in an actual transaction may

differ fromthat used to evaluate the impairment of goodwill.

Goodwill is allocated among and evaluated for impairment at the reporting unit level, which is defined as an operating segment

or one level below an operating segment. Alcoa has nine reporting units, of which five are included in the Engineered Products

and Solutions segment. The remaining four reporting units are the Alumina segment, the Primary Metals segment, the FlatRolled Products segment, and the soft alloy extrusions business in Brazil, which is included in Corporate. Almost 90% of

Alcoa’s total goodwill is allocated to three reporting units as follows: Alcoa Fastening Systems (AFS) ($1,153) and Alcoa

Power and Propulsion (APP) ($1,627) businesses, both of which are included in the Engineered Products and Solutions

segment, and Primary Metals ($1,841). These amounts include an allocation of Corporate’s goodwill.

In September 2011, the Financial Accounting Standards Board issued new accounting guidance for testing goodwill for

impairment (see Recently Adopted Accounting Guidance section of Note A below). The guidance provides an entity the

option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination

that it is more likely than not (more than 50%) that the estimated fair value of a reporting unit is less than its carrying amount. If

an entity elects to performa qualitative assessment and determines that an impairment is more likely than not, the entity is then

required to performthe existing two-step quantitative impairment test (described below), otherwise no further analysis is

required. An entity also may elect not to performthe qualitative assessment and, instead, proceed directly to the two-step

quantitative impairment test. The ultimate outcome of the goodwill impairment review for a reporting unit should be the same

whether an entity chooses to performthe qualitative assessment or proceeds directly to the two-step quantitative impairment

test.

In the 2011 fourth quarter, in conjunction with management’s annual review of goodwill, Alcoa early adopted the new

guidance. As a result, Alcoa instituted a policy for its annual review of goodwill to performthe qualitative assessment for all

reporting units not subjected directly to the two-step quantitative impairment test. Management will proceed directly to the

two-step quantitative impairment test for a minimumof three reporting units (based on facts and circumstances) during each

annual review of goodwill. This policy will result in each of the nine reporting units being subjected to the two-step

quantitative impairment test at least once during every three-year period.

Under the qualitative assessment, various events and circumstances (or factors) that would affect the estimated fair value of a

reporting unit are identified (similar to impairment indicators above). These factors are then classified by the type of impact

they would have on the estimated fair value using positive, neutral, and adverse categories based on current business

conditions. Additionally, an assessment of the level of impact that a particular factor would have on the estimated fair value is

determined using high, medium, and low weighting. Furthermore, management considers the results of the most recent two-step

quantitative impairment test completed for a reporting unit (this would be 2010 in which the estimated fair values of all nine

reporting units were substantially in excess of their carrying values) and compares the weighted average cost of capital

(WACC) between the current and prior years for each reporting unit.

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During the 2011 annual review of goodwill, management performed the qualitative assessment for sixreporting units.

Management concluded that it was not more likely than not that the estimated fair values of the sixreporting units were less

than their carrying values. As such, no further analysis was required.

Under the two-step quantitative impairment test, the evaluation of impairment involves comparing the current fair value of each

reporting unit to its carrying value, including goodwill. Alcoa uses a DCF model to estimate the current fair value of its

reporting units when testing for impairment, as management believes forecasted cash flows are the best indicator of such fair

value. A number of significant assumptions and estimates are involved in the application of the DCF model to forecast

operating cash flows, including markets and market share, sales volumes and prices, costs to produce, taxrates, capital

spending, discount rate, and working capital changes. Most of these assumptions vary significantly among the reporting units.

Cash flow forecasts are generally based on approved business unit operating plans for the early years and historical

relationships in later years. The betas used in calculating the individual reporting units’ WACC rate are estimated for each

business with the assistance of valuation experts.

In the event the estimated fair value of a reporting unit per the DCF model is less than the carrying value, additional analysis

would be required. The additional analysis would compare the carrying amount of the reporting unit’s goodwill with the implied

fair value of that goodwill, which may involve the use of valuation experts. The implied fair value of goodwill is the excess of

the fair value of the reporting unit over the fair value amounts assigned to all of the assets and liabilities of that unit as if the

reporting unit was acquired in a business combination and the fair value of the reporting unit represented the purchase price. If

the carrying value of goodwill exceeds its implied fair value, an impairment loss equal to such excess would be recognized,

which could significantly and adversely impact reported results of operations and shareholders’ equity.

During the 2011 annual review of goodwill, management proceeded directly to the two-step quantitative impairment test for

three reporting units as follows: the Primary Metals segment, building and construction systems, which is included in the

Engineered Products and Solutions segment, and the soft alloy extrusions business in Brazil. The estimated fair values of these

three reporting units were substantially in excess of their carrying values, resulting in no impairment.

As part of the 2011 annual review of goodwill, management considered the market capitalization of Alcoa’s common stock in

relation to the Company’s totalshareholders’ equity. At December 31, 2011, the market capitalization of Alcoa’s common stock

was $9,207. While this amount is less than the Company’s totalshareholders’ equity at December 31, 2011, the estimated

aggregate fair value of Alcoa’s reporting units was substantially in excess of the aforementioned market capitalization amount.

In management’s judgment, the main reasons for the difference between Alcoa’s market capitalization and totalshareholders’

equity at December 31, 2011 are the overall decline in the capital markets and significantly lower commodity prices. As it relates

to the capital markets, there was, and continues to be, significant uncertainty of the sovereign debt of many European

countries. This uncertainty has affected the liquidity of many companies that either operate or are located in Europe, although,

Alcoa has not been impacted significantly. The combination of this uncertainty and the continuing decline in commodity prices

caused significant and volatile fluctuations in the price of Alcoa’s common stock. At December 31, 2011 and 2010, the market

price of Alcoa’s common stock was $8.65 and $15.39, respectively, which equates to a decline of 44%. During 2011, the size and

structure of the Company did not change and there were no specific events or transactions that would cause management to

reasonably expect such a decline in the market price of Alcoa’s common stock. As a result, management believes the quoted

market price of Alcoa’s common stock does not fully reflect the underlying value of the future aggregate cash flows of the

Company’s reporting units. Accordingly, management does not believe that the comparison of Alcoa’s market capitalization

and totalshareholders’ equity as of December 31, 2011 is an indication that goodwill is impaired.

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Intangible assets with indefinite useful lives are not amortized while intangible assets with finite useful lives are amortized

generally on a straight-line basis over the periods benefited. The following table details the weighted-average useful lives of

software and other intangible assets by reporting segment (numbers in years):

Segment Software Other intangible assets

Alumina 10 -

Primary Metals 10 40

Flat-Rolled Products 9 10

Engineered Products and Solutions 9 17

Equity Investments. Alcoa invests in a number of privately-held companies, primarily through joint ventures and consortia,

which are accounted for on the equity method. The equity method is applied in situations where Alcoa has the ability to

exercise significant influence, but not control, over the investee. Management reviews equity investments for impairment

whenever certain indicators are present suggesting that the carrying value of an investment is not recoverable. This analysis

requires a significant amount of judgment frommanagement to identify events or circumstances indicating that an equity

investment is impaired. The following items are examples of impairment indicators:significant, sustained declines in an

investee’s revenue, earnings, and cash flow trends; adverse market conditions of the investee’s industry or geographic area;

the investee’s ability to continue operations measured by several items, including liquidity; and other factors. Once an

impairment indicator is identified, management uses considerable judgment to determine if the impairment is other than

temporary, in which case the equity investment is written down to its estimated fair value. An impairment that is other than

temporary could significantly and adversely impact reported results of operations.

Revenue Recognition. Alcoa recognizes revenue when title, ownership, and risk of loss pass to the customer, all of which

occurs upon shipment or delivery of the product and is based on the applicable shipping terms. The shipping terms vary

across all businesses and depend on the product, the country of origin, and the type of transportation (truck, train, or vessel).

Alcoa periodically enters into long-termsupply contracts with alumina and aluminumcustomers and receives advance

payments for product to be delivered in future periods. These advance payments are recorded as deferred revenue, and

revenue is recognized as shipments are made and title, ownership, and risk of loss pass to the customer during the termof the

contracts.

Environmental Matters. Expenditures for current operations are expensed or capitalized, as appropriate. Expenditures relating

to existing conditions caused by past operations, which will not contribute to future revenues, are expensed. Liabilities are

recorded when remediation costs are probable and can be reasonably estimated. The liability may include costs such as site

investigations, consultant fees, feasibility studies, outside contractors, and monitoring expenses. Estimates are generally not

discounted or reduced by potential claims for recovery. Claims for recovery are recognized as agreements are reached with third

parties. The estimates also include costs related to other potentially responsible parties to the extent that Alcoa has reason to

believe such parties will not fully pay their proportionate share. The liability is continuously reviewed and adjusted to reflect

current remediation progress, prospective estimates of required activity, and other factors that may be relevant, including

changes in technology or regulations.

Litigation Matters. For asserted claims and assessments, liabilities are recorded when an unfavorable outcome of a matter is

deemed to be probable and the loss is reasonably estimable. Management determines the likelihood of an unfavorable outcome

based on many factors such as the nature of the matter, available defenses and case strategy, progress of the matter, views and

opinions of legal counsel and other advisors, applicability and success of appeals processes, and the outcome of similar

historical matters, among others. Once an unfavorable outcome is deemed probable, management weighs the probability of

estimated losses, and the most reasonable loss estimate is recorded. If an unfavorable outcome of a matter is deemed to be

reasonably possible, then the matter is disclosed and no liability is recorded. With respect to unasserted claims or

assessments, management must first determine that the probability that

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an assertion will be made is likely, then, a determination as to the likelihood of an unfavorable outcome and the ability to

reasonably estimate the potential loss is made. Legal matters are reviewed on a continuous basis to determine if there has been

a change in management’s judgment regarding the likelihood of an unfavorable outcome or the estimate of a potential loss.

Asset Retirement Obligations. Alcoa recognizes asset retirement obligations (AROs) related to legal obligations associated

with the normal operation of Alcoa’s bauxite mining, alumina refining, and aluminumsmelting facilities. These AROs consist

primarily of costs associated with spent pot lining disposal, closure of bauxite residue areas, mine reclamation, and landfill

closure. Alcoa also recognizes AROs for any significant lease restoration obligation, if required by a lease agreement, and for

the disposal of regulated waste materials related to the demolition of certain power facilities. The fair values of these AROs are

recorded on a discounted basis, at the time the obligation is incurred, and accreted over time for the change in present value.

Additionally, Alcoa capitalizes asset retirement costs by increasing the carrying amount of the related long-lived assets and

depreciating these assets over their remaining useful life.

Certain conditional asset retirement obligations (CAROs) related to alumina refineries, aluminumsmelters, and fabrication

facilities have not been recorded in the Consolidated Financial Statements due to uncertainties surrounding the ultimate

settlement date. A CARO is a legal obligation to performan asset retirement activity in which the timing and (or) method of

settlement are conditional on a future event that may or may not be within Alcoa’s control. Such uncertainties exist as a result

of the perpetual nature of the structures, maintenance and upgrade programs, and other factors. At the date a reasonable

estimate of the ultimate settlement date can be made, Alcoa would record an ARO for the removal, treatment, transportation,

storage, and (or) disposal of various regulated assets and hazardous materials such as asbestos, underground and

aboveground storage tanks, polychlorinated biphenyls (PCBs), various process residuals, solid wastes, electronic equipment

waste, and various other materials. Such amounts may be material to the Consolidated Financial Statements in the period in

which they are recorded.

Income Taxes. The provision for income taxes is determined using the asset and liability approach of accounting for income

taxes. Under this approach, the provision for income taxes represents income taxes paid or payable (or received or receivable)

for the current year plus the change in deferred taxes during the year. Deferred taxes represent the future taxconsequences

expected to occur when the reported amounts of assets and liabilities are recovered or paid, and result fromdifferences

between the financial and taxbases of Alcoa’s assets and liabilities and are adjusted for changes in taxrates and taxlaws when

enacted.

Valuation allowances are recorded to reduce deferred taxassets when it is more likely than not that a taxbenefit will not be

realized. In evaluating the need for a valuation allowance, management considers all potentialsources of taxable income,

including income available in carryback periods, future reversals of taxable temporary differences, projections of taxable

income, and income fromtaxplanning strategies, as well as all available positive and negative evidence. Positive evidence

includes factors such as a history of profitable operations, projections of future profitability within the carryforward period,

including fromtaxplanning strategies, and the Company’s experience with similar operations. Existing favorable contracts and

the ability to sell products into established markets are additional positive evidence. Negative evidence includes items such as

cumulative losses, projections of future losses, or carryforward periods that are not long enough to allow for the utilization of a

deferred taxasset based on existing projections of income. Deferred taxassets for which no valuation allowance is recorded

may not be realized upon changes in facts and circumstances, resulting in a future charge to establish a valuation allowance.

Taxbenefits related to uncertain taxpositions taken or expected to be taken on a taxreturn are recorded when such benefits

meet a more likely than not threshold. Otherwise, these taxbenefits are recorded when a taxposition has been effectively

settled, which means that the statute of limitation has expired or the appropriate taxing authority has completed their

examination even though the statute of limitations remains open. Interest and penalties related to uncertain taxpositions are

recognized as part of the provision for income taxes and are accrued beginning in the period that such interest and penalties

would be applicable under relevant taxlaw untilsuch time that the related taxbenefits are recognized.

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Stock-BasedCompensation. Alcoa recognizes compensation expense for employee equity grants using the non-substantive

vesting period approach, in which the expense (net of estimated forfeitures) is recognized ratably over the requisite service

period based on the grant date fair value. The fair value of new stock options is estimated on the date of grant using a latticepricing model. Determining the fair value of stock options at the grant date requires judgment, including estimates for the

average risk-free interest rate, dividend yield, volatility, annual forfeiture rate, and exercise behavior. These assumptions may

differ significantly between grant dates because of changes in the actual results of these inputs that occur over time.

Most plan participants can choose whether to receive their award in the formof stock options, stock awards, or a combination

of both. This choice is made before the grant is issued and is irrevocable.

Derivatives andHedging. Derivatives are held for purposes other than trading and are part of a formally documented risk

management program. For derivatives designated as fair value hedges, Alcoa measures hedge effectiveness by formally

assessing, at least quarterly, the historical high correlation of changes in the fair value of the hedged itemand the derivative

hedging instrument. For derivatives designated as cash flow hedges, Alcoa measures hedge effectiveness by formally

assessing, at least quarterly, the probable high correlation of the expected future cash flows of the hedged itemand the

derivative hedging instrument. The ineffective portions of both types of hedges are recorded in sales or other income or

expense in the current period. If the hedging relationship ceases to be highly effective or it becomes probable that an expected

transaction will no longer occur, future gains or losses on the derivative instrument are recorded in other income or expense.

Alcoa accounts for interest rate swaps related to its existing long-termdebt and hedges of firmcustomer commitments for

aluminumas fair value hedges. As a result, the fair values of the derivatives and changes in the fair values of the underlying

hedged items are reported in other current and noncurrent assets and liabilities in the Consolidated Balance Sheet. Changes in

the fair values of these derivatives and underlying hedged items generally offset and are recorded each period in sales or

interest expense, consistent with the underlying hedged item.

Alcoa accounts for hedges of foreign currency exposures and certain forecasted transactions as cash flow hedges. The fair

values of the derivatives are recorded in other current and noncurrent assets and liabilities in the Consolidated Balance Sheet.

The effective portions of the changes in the fair values of these derivatives are recorded in other comprehensive income and

are reclassified to sales, cost of goods sold, or other income or expense in the period in which earnings are impacted by the

hedged items or in the period that the transaction no longer qualifies as a cash flow hedge. These contracts cover the same

periods as known or expected exposures, generally not exceeding five years.

If no hedging relationship is designated, the derivative is marked to market through earnings.

Cash flows fromderivatives are recognized in the Statement of Consolidated Cash Flows in a manner consistent with the

underlying transactions.

Foreign Currency. The local currency is the functional currency for Alcoa’s significant operations outside the U.S., except for

certain operations in Canada, Russia and Iceland, where the U.S. dollar is used as the functional currency. The determination of

the functional currency for Alcoa’s operations is made based on the appropriate economic and management indicators.

Effective January 1, 2010, the functional currency of a subsidiary located in Brazil (that is part of Alcoa World Alumina and

Chemicals, which is 60% owned by Alcoa and 40% owned by Alumina Limited) was changed fromthe U.S. dollar to the

Brazilian real (BRL). This change was made as a result of changes in the operations of the business following the completion of

the São Luís refinery expansion and Juruti bauxite mine development. In connection with this change, on January 1, 2010, an

adjustment of $309 was recorded as an increase to the net nonmonetary assets of this subsidiary (primarily properties, plants,

and equipment) with a corresponding adjustment to the foreign currency translation component of Accumulated other

comprehensive loss. The functional currency of all of Alcoa’s Brazilian operations is now BRL.

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Acquisitions. Alcoa’s acquisitions are accounted for using the purchase method. The purchase price is allocated to the assets

acquired and liabilities assumed based on their estimated fair values. Any excess purchase price over the fair value of the net

assets acquired is recorded as goodwill. For all acquisitions, operating results are included in the Statement of Consolidated

Operations since the dates of the acquisitions.

DiscontinuedOperations andAssets HeldFor Sale. For those businesses where management has committed to a plan to

divest, each business is valued at the lower of its carrying amount or estimated fair value less cost to sell. If the carrying

amount of the business exceeds its estimated fair value, an impairment loss is recognized. Fair value is estimated using

accepted valuation techniques such as a DCF model, valuations performed by third parties, earnings multiples, or indicative

bids, when available. A number of significant estimates and assumptions are involved in the application of these techniques,

including the forecasting of markets and market share, sales volumes and prices, costs and expenses, and multiple other

factors. Management considers historical experience and all available information at the time the estimates are made; however,

the fair value that is ultimately realized upon the divestiture of a business may differ fromthe estimated fair value reflected in

the Consolidated Financial Statements. Depreciation, depletion, and amortization expense is not recorded on assets of a

business to be divested once they are classified as held for sale.

Businesses to be divested are classified in the Consolidated Financial Statements as either discontinued operations or held for

sale. For businesses classified as discontinued operations, the balance sheet amounts and results of operations are reclassified

fromtheir historical presentation to assets and liabilities of operations held for sale on the Consolidated Balance Sheet and to

discontinued operations on the Statement of Consolidated Operations, respectively, for all periods presented. The gains or

losses associated with these divested businesses are recorded in discontinued operations on the Statement of Consolidated

Operations. The Statement of Consolidated Cash Flows is also reclassified for assets and liabilities of operations held for sale

and discontinued operations for all periods presented. Additionally, segment information does not include the assets or

operating results of businesses classified as discontinued operations for all periods presented. Management does not expect

any continuing involvement with these businesses following their divestiture, and these businesses are expected to be

disposed of within one year.

For businesses classified as held for sale that do not qualify for discontinued operations treatment, the balance sheet and cash

flow amounts are reclassified fromtheir historical presentation to assets and liabilities of operations held for sale for all periods

presented. The results of operations continue to be reported in continuing operations. The gains or losses associated with

these divested businesses are recorded in restructuring and other charges on the Statement of Consolidated Operations. The

segment information includes the assets and operating results of businesses classified as held for sale for all periods

presented. Management expects that Alcoa will have continuing involvement with these businesses following their divestiture,

primarily in the formof equity participation, or ongoing aluminumor other significant supply contracts.

Recently AdoptedAccounting Guidance. On September 30, 2009, Alcoa adopted changes issued by the Financial Accounting

Standards Board (FASB) to the authoritative hierarchy of GAAP. These changes establish the FASB Accounting Standards

Codification (Codification) as the source of authoritative accounting principles recognized by the FASB to be applied by

nongovernmental entities in the preparation of financialstatements in conformity with GAAP. Rules and interpretive releases of

the Securities and Exchange Commission (SEC) under authority of federalsecurities laws are also sources of authoritative

GAAP for SEC registrants. The FASB will no longer issue new standards in the formof Statements, FASB Staff Positions, or

Emerging Issues Task Force Abstracts; instead the FASB will issue Accounting Standards Updates. Accounting Standards

Updates will not be authoritative in their own right as they will only serve to update the Codification. These changes and the

Codification itself do not change GAAP. Other than the manner in which new accounting guidance is referenced, the adoption

of these changes had no impact on the Consolidated Financial Statements.

Fair Value Accounting—On January 1, 2011, Alcoa adopted changes issued by the FASB to disclosure requirements for fair

value measurements. Specifically, the changes require a reporting entity to disclose, in the reconciliation of fair value

measurements using significant unobservable inputs (Level 3), separate information about purchases, sales,

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issuances, and settlements (that is, on a gross basis rather than as one net number). These changes were applied to the

disclosures in Note W and the Derivatives section of Note X to the Consolidated Financial Statements.

Effective January 1, 2010, Alcoa adopted changes issued by the FASB on January 21, 2010 to disclosure requirements for fair

value measurements. Specifically, the changes require a reporting entity to disclose separately the amounts of significant

transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers. The changes

also clarify existing disclosure requirements related to how assets and liabilities should be grouped by class and valuation

techniques used for recurring and nonrecurring fair value measurements. The adoption of these changes had no impact on the

Consolidated Financial Statements.

On June 30, 2009, Alcoa adopted changes issued by the FASB to fair value accounting. These changes provide additional

guidance for estimating fair value when the volume and level of activity for an asset or liability have significantly decreased

and includes guidance for identifying circumstances that indicate a transaction is not orderly. This guidance is necessary to

maintain the overall objective of fair value measurements, which is that fair value is the price that would be received to sell an

asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date under current

market conditions. The adoption of these changes had no impact on the Consolidated Financial Statements.

On June 30, 2009, Alcoa adopted changes issued by the FASB to fair value disclosures of financial instruments. These changes

require a publicly traded company to include disclosures about the fair value of its financial instruments whenever it issues

summarized financial information for interimreporting periods. Such disclosures include the fair value of all financial

instruments, for which it is practicable to estimate that value, whether recognized or not recognized in the statement of financial

position; the related carrying amount of these financial instruments; and the method(s) and significant assumptions used to

estimate the fair value. Other than including the required disclosures in Alcoa’s Forms 10-Q, the adoption of these changes had

no impact on the Consolidated Financial Statements (these disclosures were already required for annual reporting periods – see

the Other Financial Instruments section of Note X).

On June 30, 2009, Alcoa adopted changes issued by the FASB to the recognition and presentation of other-than-temporary

impairments. These changes amend existing other-than-temporary impairment guidance for debt securities to make the

guidance more operational and to improve the presentation and disclosure of other-than-temporary impairments on debt and

equity securities. The adoption of these changes had no impact on the Consolidated Financial Statements.

On October 1, 2009, Alcoa adopted changes issued by the FASB to fair value accounting for liabilities. These changes clarify

existing guidance that in circumstances in which a quoted price in an active market for the identical liability is not available, an

entity is required to measure fair value using either a valuation technique that uses a quoted price of either a similar liability or a

quoted price of an identical or similar liability when traded as an asset, or another valuation technique that is consistent with

the principles of fair value measurements, such as an income approach (e.g., present value technique). This guidance also

states that both a quoted price in an active market for the identical liability and a quoted price for the identical liability when

traded as an asset in an active market when no adjustments to the quoted price of the asset are required are Level 1 fair value

measurements. The adoption of these changes had no impact on the Consolidated Financial Statements.

Business Combinations andConsolidation Accounting—On January 1, 2011, Alcoa adopted changes issued by the FASB to

the disclosure of pro forma information for business combinations. These changes clarify that if a public entity presents

comparative financialstatements, the entity should disclose revenue and earnings of the combined entity as though the

business combination that occurred during the current year had occurred as of the beginning of the comparable prior annual

reporting period only. Also, the existing supplemental pro forma disclosures were expanded to include a description of the

nature and amount of material, nonrecurring pro forma adjustments directly attributable to the business combination included

in the reported pro forma revenue and earnings. The adoption of these changes had no impact on the Consolidated Financial

Statements.

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On January 1, 2010, Alcoa adopted changes issued by the FASB to accounting for variable interest entities. These changes

require an enterprise to performan analysis to determine whether the enterprise’s variable interest or interests give it a

controlling financial interest in a variable interest entity; to require ongoing reassessments of whether an enterprise is the

primary beneficiary of a variable interest entity; to eliminate the solely quantitative approach previously required for

determining the primary beneficiary of a variable interest entity; to add an additional reconsideration event for determining

whether an entity is a variable interest entity when any changes in facts and circumstances occur such that holders of the

equity investment at risk, as a group, lose the power fromvoting rights or similar rights of those investments to direct the

activities of the entity that most significantly impact the entity’s economic performance; and to require enhanced disclosures

that will provide users of financialstatements with more transparent information about an enterprise’s involvement in a variable

interest entity. The adoption of these changes had no impact on the Consolidated Financial Statements.

Effective January 1, 2010, Alcoa adopted changes issued by the FASB on January 6, 2010 for a scope clarification to the

FASB’s previously-issued guidance (see directly below) on accounting for noncontrolling interests in consolidated financial

statements. These changes clarify the accounting and reporting guidance for noncontrolling interests and changes in

ownership interests of a consolidated subsidiary. An entity is required to deconsolidate a subsidiary when the entity ceases to

have a controlling financial interest in the subsidiary. Upon deconsolidation of a subsidiary, an entity recognizes a gain or loss

on the transaction and measures any retained investment in the subsidiary at fair value. The gain or loss includes any gain or

loss associated with the difference between the fair value of the retained investment in the subsidiary and its carrying amount

at the date the subsidiary is deconsolidated. In contrast, an entity is required to account for a decrease in its ownership interest

of a subsidiary that does not result in a change of control of the subsidiary as an equity transaction. The adoption of these

changes had no impact on the Consolidated Financial Statements.

On January 1, 2009, Alcoa adopted changes issued by the FASB to consolidation accounting and reporting. These changes

establish accounting and reporting for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary.

This guidance defines a noncontrolling interest, previously called a minority interest, as the portion of equity in a subsidiary

not attributable, directly or indirectly, to a parent. These changes require, among other items, that a noncontrolling interest be

included in the consolidated statement of financial position within equity separate fromthe parent’s equity; consolidated net

income to be reported at amounts inclusive of both the parent’s and noncontrolling interest’s shares and, separately, the

amounts of consolidated net income attributable to the parent and noncontrolling interest all on the consolidated statement of

operations; and if a subsidiary is deconsolidated, any retained noncontrolling equity investment in the former subsidiary be

measured at fair value and a gain or loss be recognized in net income based on such fair value. Other than the change in

presentation of noncontrolling interests, the adoption of these changes had no impact on the Consolidated Financial

Statements.

On January 1, 2009, Alcoa adopted changes issued by the FASB to accounting for business combinations. While retaining the

fundamental requirements of accounting for business combinations, including that the purchase method be used for all

business combinations and for an acquirer to be identified for each business combination, these changes define the acquirer as

the entity that obtains control of one or more businesses in the business combination and establishes the acquisition date as

the date that the acquirer achieves control instead of the date that the consideration is transferred. These changes require an

acquirer in a business combination, including business combinations achieved in stages (step acquisition), to recognize the

assets acquired, liabilities assumed, and any noncontrolling interest in the acquiree at the acquisition date, measured at their

fair values as of that date, with limited exceptions. This guidance also requires the recognition of assets acquired and liabilities

assumed arising fromcertain contractual contingencies as of the acquisition date, measured at their acquisition-date fair values.

Additionally, these changes require acquisition-related costs to be expensed in the period in which the costs are incurred and

the services are received instead of including such costs as part of the acquisition price. The adoption of these changes

resulted in a charge of $18 ($12 after-tax) in Restructuring and other charges on the accompanying Statement of Consolidated

Operations for the write off of previously capitalized third-party costs related to potential business acquisitions (see Note D).

Also, this guidance was applied to an acquisition completed on March 31, 2009 (see Note F).

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Effective January 1, 2009, Alcoa adopted changes issued by the FASB on April 1, 2009 to accounting for business

combinations. These changes apply to all assets acquired and liabilities assumed in a business combination that arise from

certain contingencies and requires (i) an acquirer to recognize at fair value, at the acquisition date, an asset acquired or liability

assumed in a business combination that arises froma contingency if the acquisition-date fair value of that asset or liability can

be determined during the measurement period otherwise the asset or liability should be recognized at the acquisition date if

certain defined criteria are met; (ii) contingent consideration arrangements of an acquiree assumed by the acquirer in a business

combination be recognized initially at fair value; (iii) subsequent measurements of assets and liabilities arising from

contingencies be based on a systematic and rational method depending on their nature and contingent consideration

arrangements be measured subsequently; and (iv) disclosures of the amounts and measurement basis of such assets and

liabilities and the nature of the contingencies. These changes were applied to an acquisition completed on March 31, 2009 (see

Note F).

Goodwill andOther Intangible Assets—On January 1, 2011, Alcoa adopted changes issued by the FASB to the testing of

goodwill for impairment. These changes require an entity to performallsteps in the test for a reporting unit whose carrying

value is zero or negative if it is more likely than not (more than 50%) that a goodwill impairment exists based on qualitative

factors. This will result in the elimination of an entity’s ability to assert that such a reporting unit’s goodwill is not impaired and

additional testing is not necessary despite the existence of qualitative factors that indicate otherwise. Based on the most recent

impairment review of Alcoa’s goodwill (2011 fourth quarter), the adoption of these changes had no impact on the Consolidated

Financial Statements.

In September 2011, the FASB issued changes to the testing of goodwill for impairment. These changes provide an entity the

option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination

that it is more likely than not (more than 50%) that the fair value of a reporting unit is less than its carrying amount. Such

qualitative factors may include the following: macroeconomic conditions; industry and market considerations; cost factors;

overall financial performance; and other relevant entity-specific events. If an entity elects to performa qualitative assessment

and determines that an impairment is more likely than not, the entity is then required to performthe existing two-step

quantitative impairment test, otherwise no further analysis is required. An entity also may elect not to performthe qualitative

assessment and, instead, proceed directly to the two-step quantitative impairment test. Under either option, the ultimate

outcome of the goodwill impairment test should be the same. These changes are required to become effective for Alcoa for any

goodwill impairment test performed on January 1, 2012 or later; however, early adoption is permitted. Alcoa elected to early

adopt these changes in conjunction with management’s annual review of goodwill in the fourth quarter of 2011 (see the

Goodwill and Other Intangible Assets section of Note A above). The adoption of these changes had no impact on the

Consolidated Financial Statements.

On January 1, 2009, Alcoa adopted changes issued by the FASB to accounting for intangible assets. These changes amend the

factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a

recognized intangible asset in order to improve the consistency between the useful life of a recognized intangible asset outside

of a business combination and the period of expected cash flows used to measure the fair value of an intangible asset in a

business combination. The adoption of these changes had no impact on the Consolidated Financial Statements.

Derivative Instruments andHedging Activities—On July 1, 2010, Alcoa adopted changes to existing accounting requirements

for embedded credit derivatives. Specifically, the changes clarify the scope exception regarding when embedded credit

derivative features are not considered embedded derivatives subject to potential bifurcation and separate accounting. The

adoption of these changes had no impact on the Consolidated Financial Statements.

On January 1, 2009, Alcoa adopted changes issued by the FASB to disclosures about derivative instruments and hedging

activities. These changes require enhanced disclosures about an entity’s derivative and hedging activities, including (i) how

and why an entity uses derivative instruments, (ii) how derivative instruments and related hedged items are accounted for, and

(iii) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash

flows. Other than the required disclosures (see the Derivatives section of Note X), the adoption of these changes had no

impact on the Consolidated Financial Statements.

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Other—On January 1, 2011, Alcoa adopted changes issued by the FASB to revenue recognition for multiple-deliverable

arrangements. These changes require separation of consideration received in such arrangements by establishing a selling price

hierarchy (not the same as fair value) for determining the selling price of a deliverable, which will be based on available

information in the following order: vendor-specific objective evidence, third-party evidence, or estimated selling price; eliminate

the residual method of allocation and require that the consideration be allocated at the inception of the arrangement to all

deliverables using the relative selling price method, which allocates any discount in the arrangement to each deliverable on the

basis of each deliverable’s selling price; require that a vendor determine its best estimate of selling price in a manner that is

consistent with that used to determine the price to sell the deliverable on a standalone basis; and expand the disclosures

related to multiple-deliverable revenue arrangements. The adoption of these changes had no impact on the Consolidated

Financial Statements, as Alcoa does not currently have any such arrangements with its customers.

On January 1, 2011, Alcoa adopted changes issued by the FASB to the classification of certain employee share-based payment

awards. These changes clarify that there is not an indication of a condition that is other than market, performance, or service if

an employee share-based payment award’s exercise price is denominated in the currency of a market in which a substantial

portion of the entity’s equity securities trade and differs fromthe functional currency of the employer entity or payroll currency

of the employee. An employee share-based payment award is required to be classified as a liability if the award does not

contain a market, performance, or service condition. Prior to this guidance, the difference between the currency denomination

of an employee share-based payment award’s exercise price and the functional currency of the employer entity or payroll

currency of the employee was not a factor considered by management when determining the proper classification of a sharebased payment award. The adoption of these changes had no impact on the Consolidated Financial Statements.

On January 1, 2010, Alcoa adopted changes issued by the FASB to accounting for transfers of financial assets. These changes

remove the concept of a qualifying special-purpose entity and remove the exception fromthe application of variable interest

accounting to variable interest entities that are qualifying special-purpose entities; limit the circumstances in which a transferor

derecognizes a portion or component of a financial asset; define a participating interest; require a transferor to recognize and

initially measure at fair value all assets obtained and liabilities incurred as a result of a transfer accounted for as a sale; and

require enhanced disclosure. The adoption of these changes had no impact on the Consolidated Financial Statements. In

March 2010, management terminated the Company’s accounts receivable securitization program(see Note U); had this program

not been terminated, the adoption of these changes would have resulted in a $250 increase to both Receivables fromcustomers

and Short-termborrowings on the accompanying Consolidated Balance Sheet.

Effective January 1, 2010, Alcoa adopted changes issued by the FASB on February 24, 2010 to accounting for and disclosure of

events that occur after the balance sheet date but before financialstatements are issued or available to be issued, otherwise

known as “subsequent events.” Specifically, these changes clarify that an entity that is required to file or furnish its financial

statements with the SEC is not required to disclose the date through which subsequent events have been evaluated (see

directly below). Other than the elimination of disclosing the date through which management has performed its evaluation for

subsequent events (see Note Y), the adoption of these changes had no impact on the Consolidated Financial Statements.

On June 30, 2009, Alcoa adopted changes issued by the FASB to accounting for and disclosure of events that occur after the

balance sheet date but before financialstatements are issued or are available to be issued, otherwise known as “subsequent

events.” Specifically, these changes set forth the period after the balance sheet date during which management of a reporting

entity should evaluate events or transactions that may occur for potential recognition or disclosure in the financialstatements,

the circumstances under which an entity should recognize events or transactions occurring after the balance sheet date in its

financialstatements, and the disclosures that an entity should make about events or transactions that occurred after the

balance sheet date (see directly above). The adoption of these changes had no impact on the Consolidated Financial

Statements as management already followed a similar approach prior to the adoption of this new guidance (see Note Y).

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On January 1, 2009, Alcoa adopted changes issued by the FASB to the calculation of earnings per share. These changes state

that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether

paid or unpaid) are participating securities and shall be included in the computation of earnings per share pursuant to the twoclass method (see Note S). The computation of earnings per share for all periods presented in the Consolidated Financial

Statements was prepared in accordance with these changes. As a result, the adoption of these changes had no impact on the

Consolidated Financial Statements.

On December 31, 2009, Alcoa adopted changes issued by the FASB to employers’ disclosures about postretirement benefit

plan assets. These changes provide guidance on an employer’s disclosures about plan assets of a defined benefit pension or

other postretirement plan. This guidance is intended to ensure that an employer meets the objectives of the disclosures about

plan assets in an employer’s defined benefit pension or other postretirement plan to provide users of financialstatements with

an understanding of the following: how investment allocation decisions are made; the major categories of plan assets; the

inputs and valuation techniques used to measure the fair value of plan assets; the effect of fair value measurements using

significant unobservable inputs on changes in plan assets; and significant concentrations of risk within plan assets. Other than

the required disclosures (see Note W), the adoption of these changes had no impact on the Consolidated Financial Statements.

Recently IssuedAccounting Guidance. In May 2011, the FASB issued changes to conformexisting guidance regarding fair

value measurement and disclosure between GAAP and International Financial Reporting Standards. These changes both

clarify the FASB’s intent about the application of existing fair value measurement and disclosure requirements and amend

certain principles or requirements for measuring fair value or for disclosing information about fair value measurements. The

clarifying changes relate to the application of the highest and best use and valuation premise concepts, measuring the fair

value of an instrument classified in a reporting entity’s shareholders’ equity, and disclosure of quantitative information about

unobservable inputs used for Level 3 fair value measurements. The amendments relate to measuring the fair value of financial

instruments that are managed within a portfolio; application of premiums and discounts in a fair value measurement; and

additional disclosures concerning the valuation processes used and sensitivity of the fair value measurement to changes in

unobservable inputs for those items categorized as Level 3, a reporting entity’s use of a nonfinancial asset in a way that differs

fromthe asset’s highest and best use, and the categorization by level in the fair value hierarchy for items required to be

measured at fair value for disclosure purposes only. These changes become effective for Alcoa on January 1, 2012. Other than

the additional disclosure requirements, management has determined that the adoption of these changes will not have an impact

on the Consolidated Financial Statements.

In June 2011, the FASB issued changes to the presentation of comprehensive income. These changes give an entity the option

to present the total of comprehensive income, the components of net income, and the components of other comprehensive

income either in a single continuous statement of comprehensive income or in two separate but consecutive statements; the

option to present components of other comprehensive income as part of the statement of changes in stockholders’ equity was

eliminated. The items that must be reported in other comprehensive income or when an itemof other comprehensive income

must be reclassified to net income were not changed. Additionally, no changes were made to the calculation and presentation

of earnings per share. These changes become effective for Alcoa on January 1, 2012. Other than the change in presentation,

management has determined that the adoption of these changes will not have an impact on the Consolidated Financial

Statements.

In December 2011, the FASB issued changes to the disclosure of offsetting assets and liabilities. These changes require an

entity to disclose both gross information and net information about both instruments and transactions eligible for offset in the

statement of financial position and instruments and transactions subject to an agreement similar to a master netting

arrangement. The enhanced disclosures will enable users of an entity’s financialstatements to understand and evaluate the

effect or potential effect of master netting arrangements on an entity’s financial position, including the effect or potential effect

of rights of setoff associated with certain financial instruments and derivative instruments. These changes become effective for

Alcoa on January 1, 2013. Other than the additional disclosure requirements, management has determined that the adoption of

these changes will not have an impact on the Consolidated Financial Statements.

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B. DiscontinuedOperations andAssets Heldfor Sale

For the years ended December 31, 2011 and 2010, there were no active businesses classified as discontinued operations. The

Electrical and Electronic Solutions (EES) business was the only active business classified as discontinued operations in the

accompanying Statement of Consolidated Operations for the year ended December 31, 2009.

In late 2008, Alcoa reclassified the EES business to discontinued operations based on the decision to divest the business. The

divestiture of the wire harness and electrical portion of the EES business was completed in June 2009 and the divestiture of the

electronics portion of the EES business was completed in December 2009 (see Note F). The results of the Engineered Products

and Solutions segment were reclassified to reflect the movement of the EES business into discontinued operations.

The following table details selected financial information of discontinued operations:

2011 2010 2009

Sales $ - $ - $ 306

Loss fromoperations before income taxes $ (4) $ (11) $(221)

Benefit for income taxes 1 3 55

Loss fromdiscontinued operations $ (3) $ (8) $(166)

In 2011, discontinued operations included an additional loss of $3 ($5 pretax) related to the wire harness and electrical portion

of the EES business as a result of a negotiated preliminary settlement related to claims filed in 2010 against Alcoa by Platinum

Equity in an insolvency proceeding in Germany, a net gain of $2 ($3 pretax) related to both the wire harness and electrical

portion and the electronics portion of the EES business for a number of small post-closing and other adjustments, and a $2 ($2

pretax) reversal of the gain recognized in 2006 related to the sale of the home exteriors business for an adjustment to an

outstanding obligation, which was part of the terms of sale. In 2010, discontinued operations included an additional loss of $6

($9 pretax) related to the wire harness and electrical portion of the EES business as a result of a contract settlement with a

former customer of this business and an additional loss of $2 ($4 pretax) related to the electronics portion of the EES business

for the settling of working capital, which was not included in the divestiture transaction. In 2009, discontinued operations was

comprised of a $129 ($168 pretax) loss on the divestiture of the wire harness and electrical portion of the EES business, a $9 ($13

pretax) loss on the divestiture of the electronics portion of the EES business, and the remainder was for the operational results

of the EES business prior to the divestitures.

For both periods presented in the accompanying Consolidated Balance Sheet, the assets and liabilities of operations classified

as held for sale included the electronics portion of the EES business (working capital components) and the Hawesville, KY

automotive casting facility. In late 2011, management made the decision to no longer commit to a plan to sell the one remaining

plant of the Global Foil business located in Brazil. Instead, management intends to refocus efforts to drive higher profitability

and to consider expanding the functionality of the plant to manufacture certain products aimed at capturing new growth in

Brazil. As a result, the assets and liabilities related to this plant were removed fromheld for sale classification. The

Consolidated Financial Statements for all prior periods presented were reclassified to reflect this change.

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The major classes of assets and liabilities of operations held for sale were as follows:

December 31, 2011 2010

Assets:

Receivables $ - $ 2

Properties, plants, and equipment 2 2

Other assets - 2

Assets held for sale* $ 2 $ 6

Liabilities:

Accounts payable, trade $ 1 $ 1

Accrued expenses 5 15

Liabilities of operations held for sale* $ 6 $ 16

* Assets held for sale were included in Other noncurrent assets and Liabilities of operations held for sale were included in

Other noncurrent liabilities and deferred credits on the accompanying Consolidated Balance Sheet.

C. Asset Retirement Obligations

Alcoa has recorded AROs related to legal obligations associated with the normal operations of bauxite mining, alumina refining,

and aluminumsmelting facilities. These AROs consist primarily of costs associated with spent pot lining disposal, closure of

bauxite residue areas, mine reclamation, and landfill closure. Alcoa also recognizes AROs for any significant lease restoration

obligation, if required by a lease agreement, and for the disposal of regulated waste materials related to the demolition of certain

power facilities.

In addition to AROs, certain CAROs related to alumina refineries, aluminumsmelters, and fabrication facilities have not been

recorded in the Consolidated Financial Statements due to uncertainties surrounding the ultimate settlement date. Such

uncertainties exist as a result of the perpetual nature of the structures, maintenance and upgrade programs, and other factors.

At the date a reasonable estimate of the ultimate settlement date can be made (e.g., planned demolition), Alcoa would record an

ARO for the removal, treatment, transportation, storage, and (or) disposal of various regulated assets and hazardous materials

such as asbestos, underground and aboveground storage tanks, PCBs, various process residuals, solid wastes, electronic

equipment waste, and various other materials. If Alcoa was required to demolish allsuch structures immediately, the estimated

CARO as of December 31, 2011 ranges fromless than $1 to $52 per structure (131 structures) in today’s dollars.

The following table details the carrying value of recorded AROs by major category (of which $76 and $92 was classified as a

current liability as of December 31, 2011 and 2010, respectively):

December 31, 2011 2010

Spent pot lining disposal $ 187 $ 177

Closure of bauxite residue areas 173 156

Mine reclamation 164 156

Demolition* 34 24

Landfill closure 17 19

Other 4 2

$ 579 $ 534

* In 2011 and 2010, AROs were recorded as a result of management’s decision to permanently shut down and demolish certain

structures, each of which was previously temporarily idled for different reasons (see Note D).

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The following table details the changes in the total carrying value of recorded AROs:

December 31, 2011 2010

Balance at beginning of year $ 534 $ 453

Accretion expense 22 21

Payments (86) (38)

Liabilities incurred 115 43

Translation and other (6) 55

Balance at end of year $ 579 $ 534

D. Restructuring andOther Charges

Restructuring and other charges for each year in the three-year period ended December 31, 2011 were comprised of the

following:

2011 2010 2009

Asset impairments $ 150 $ 139 $ 54

Layoff costs 93 43 186

Other exit costs 61 58 37

Reversals of previously recorded layoff and other exit costs (23) (33) (40)

Restructuring and other charges $ 281 $ 207 $ 237

Layoff costs were recorded based on approved detailed action plans submitted by the operating locations that specified

positions to be eliminated, benefits to be paid under existing severance plans, union contracts or statutory requirements, and

the expected timetable for completion of the plans.

2011 Actions. In 2011, Alcoa recorded Restructuring and other charges of $281 ($181 after-taxand noncontrolling interests),

which were comprised of the following components: $127 ($82 after-tax) in asset impairments and $36 ($23 after-tax) in other exit

costs related to the permanent shutdown and planned demolition of certain idled structures at two U.S. locations (see below);

$93 ($68 after-taxand noncontrolling interests) for the layoff of approximately 1,600 employees (820 in the Primary Metals

segment, 470 in the Flat-Rolled Products segment, 160 in the Alumina segment, 20 in the Engineered Products and Solutions

segment, and 130 in Corporate), including the effects of planned smelter curtailments (see below); $23 ($12 after-taxand

noncontrolling interests) for other asset impairments, including the write-off of the carrying value of an idled structure in

Australia that processed spent pot lining and adjustments to the fair value of the one remaining foil location while it was

classified as held for sale (see Note B) due to foreign currency movements; $20 ($8 after-taxand noncontrolling interests) for a

litigation matter related to the former St. Croixlocation (see the Litigation section of Note N); a net charge of $5 ($4 after-tax) for

other small items; and $23 ($16 after-tax) for the reversal of previously recorded layoff reserves due to normal attrition and

changes in facts and circumstances, including a change in plans for Alcoa’s aluminumpowder facility in Rockdale, TX.

In late 2011, management approved the permanent shutdown and demolition of certain facilities at two U.S. locations, each of

which was previously temporarily idled for various reasons. The identified facilities are the smelter located in Alcoa, TN

(capacity of 215 kmt-per-year) and two potlines (capacity of 76 kmt-per-year) at the smelter located in Rockdale, TX (remaining

capacity of 191 kmt-per-year composed of four potlines). Demolition and remediation activities related to these actions will

begin in the first half of 2012 and are expected to be completed in 2015 for the Tennessee smelter and in 2013 for the two

potlines at the Rockdale smelter. This decision was made after a comprehensive strategic analysis was performed to determine

the best course of action for each facility. Factors leading to this decision were in general focused on achieving sustained

competitiveness and included, among others: lack of an economically viable, long-termpower solution; changed market

fundamentals; cost competitiveness; required future capital investment; and restart costs. The asset impairments of $127

represent the write off of the remaining book value of properties, plants, and equipment related to these facilities. Additionally,

remaining inventories, mostly operating

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supplies, were written down to their net realizable value resulting in a charge of $6 ($4 after-tax), which was recorded in Cost of

goods sold on the accompanying Statement of Consolidated Operations. The other exit costs of $36 represent $18 ($11 aftertax) in environmental remediation (see Note N) and $17 ($11 after-tax) in asset retirement obligations (see Note C), both

triggered by the decision to permanently shut down and demolish these structures, and $1 ($1 after-tax) in other related costs.

Also, at the end of 2011, management approved a partial or full curtailment of three European smelters as follows: Portovesme,

Italy (150 kmt-per-year); Avilés, Spain (46 kmt out of 93 kmt-per-year); and La Coruña, Spain (44 kmt out of 87 kmt-per-year).

These curtailments are expected to be completed in the first half of 2012. The curtailment of the Portovesme smelter may lead to

the permanent closure of the facility, while the curtailments at the two smelters in Spain are planned to be temporary. These

actions are the result of uncompetitive energy positions, combined with rising material costs and falling aluminumprices (mid2011 to late 2011). As a result of these decisions, Alcoa recorded costs of $33 ($31 after-tax) for the layoff of approximately 650

employees. As Alcoa engages in discussions with the respective employee representatives and governments, additional

charges may be recognized in 2012.

As of December 31, 2011, approximately 380 of the 1,600 employees were terminated. The remaining terminations for the 2011

restructuring programs are expected to be completed by the end of 2012. In 2011, cash payments of $24 were made against

layoff reserves related to the 2011 restructuring programs.

2010 Actions. In 2010, Alcoa recorded Restructuring and other charges of $207 ($130 after-taxand noncontrolling interests),

which were comprised of the following components: $127 ($80 after-taxand noncontrolling interests) in asset impairments and

$46 ($29 after-taxand noncontrolling interests) in other exit costs related to the permanent shutdown and planned demolition of

certain idled structures at five U.S. locations (see below); $43 ($29 after-taxand noncontrolling interests) for the layoff of

approximately 875 employees (625 in the Engineered Products and Solutions segment; 75 in the Primary Metals segment; 60 in

the Alumina segment; 25 in the Flat-Rolled Products segment; and 90 in Corporate); $22 ($14 after-tax) in net charges (including

$12 ($8 after-tax) for asset impairments) related to divested and to be divested businesses (Automotive Castings, Global Foil,

Transportation Products Europe, and Packaging and Consumer) for, among other items, the settlement of a contract with a

former customer, foreign currency movements, working capital adjustments, and a taxindemnification; $2 ($2 after-taxand

noncontrolling interests) for various other exit costs; and $33 ($24 after-taxand noncontrolling interests) for the reversal of

prior periods’ layoff reserves, including a portion of those related to the Portovesme smelter in Italy due to the execution of a

new power agreement (see the European Commission Matters section of Note N).

In early 2010, management approved the permanent shutdown and demolition of the following structures, each of which was

previously temporarily idled for different reasons: the Eastalco smelter located in Frederick, MD (capacity of 195 kmt-per-year);

the smelter located in Badin, NC (capacity of 60 kmt-per-year); an aluminumfluoride plant in Point Comfort, TX; a paste plant

and cast house in Massena, NY; and one potline at the smelter in Warrick, IN (capacity of 40 kmt-per-year). This decision was

made after a comprehensive strategic analysis was performed to determine the best course of action for each facility. Factors

leading to this decision included current market fundamentals, cost competitiveness, other existing idle capacity, required

future capital investment, and restart costs, as well as the elimination of ongoing holding costs. The asset impairments of $127

represent the write off of the remaining book value of properties, plants, and equipment related to these facilities. Additionally,

remaining inventories, mostly operating supplies, were written down to their net realizable value resulting in a charge of $8

($5 after-taxand noncontrolling interests), which was recorded in Cost of goods sold on the accompanying Statement of

Consolidated Operations. The other exit costs of $46 represent $30 ($19 after-taxand noncontrolling interests) in asset

retirement obligations (see Note C) and $14 ($9 after-tax) in environmental remediation (see Note N), both triggered by the

decision to permanently shut down and demolish these structures, and $2 ($1 after-taxand noncontrolling interests) in other

related costs.

As of December 31, 2011, approximately 790 of the 875 employees were terminated. The remaining terminations are expected to

be completed by the end of 2012. In 2011 and 2010, cash payments of $7 and $21, respectively, were made against layoff

reserves related to 2010 restructuring programs.

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2009 Actions. In 2009, Alcoa recorded Restructuring and other charges of $237 ($151 after-taxand noncontrolling interests),

which were comprised of the following components: $177 ($121 after-taxand noncontrolling interests) for the layoff of

approximately 6,600 employees (2,980 in the Engineered Products and Solutions segment; 2,190 in the Flat-Rolled Products

segment; 1,080 in the Primary Metals segment; 180 in the Alumina segment; and 170 in Corporate) to address the impact of the

global economic downturn on Alcoa’s businesses and a $9 ($6 after-tax) curtailment charge due to the remeasurement of

pension plans as a result of the workforce reductions (see Note W); $41 ($20 after-tax) in adjustments to the Global Foil and

Transportation Products Europe businesses held for sale due to unfavorable foreign currency movements for both businesses

and a change in the estimated fair value for the Global Foil business and $13 ($11 after-tax) in other asset impairments; $18 ($12

after-tax) for the write-off of previously capitalized third-party costs related to potential business acquisitions due to the

adoption of changes to accounting for business combinations (see Note A); net charges of $19 ($10 after-taxand

noncontrolling interests) for various other items, such as accelerated depreciation and lease termination costs for shutdown

facilities; and $40 ($29 after-taxand noncontrolling interests) for reversals of previously recorded layoff and other exit costs

due to normal attrition and changes in facts and circumstances.

As of December 31, 2011, approximately 5,700 of the 6,000 employees were terminated. The total number of employees

associated with 2009 restructuring programs was updated in 2010 to reflect changes in plans (e.g., the previously mentioned

new power agreement at the Portovesme smelter in Italy – see 2010 Actions above), natural attrition, and other factors. The

remaining terminations are expected to be completed by the end of 2012. In 2011 and 2010, cash payments of $13 and $60,

respectively, were made against layoff reserves related to 2009 restructuring programs.

Alcoa does not include Restructuring and other charges in the results of its reportable segments. The pretaximpact of

allocating such charges to segment results would have been as follows:

2011 2010 2009

Alumina $ 39 $ 12 $ 5

Primary Metals 212 145 30

Flat-Rolled Products 19 (11) 65

Engineered Products and Solutions (3) 18 64

Segment total 267 164 164

Corporate 14 43 73

Total restructuring and other charges $ 281 $ 207 $ 237

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Activity and reserve balances for restructuring charges were as follows:

Layoff

costs

Other

exit costs Total

Reserve balances at December 31, 2008 $ 251 $ 77 $ 328

2009:

Cash payments (203) (18) (221)

Restructuring charges 186 13 199

Other* (74) (6) (80)

Reserve balances at December 31, 2009 160 66 226

2010:

Cash payments (93) (15) (108)

Restructuring charges 43 53 96

Other* (57) (41) (98)

Reserve balances at December 31, 2010 53 63 116

2011:

Cash payments (45) (9) (54)

Restructuring charges 93 37 130

Other* (24) (34) (58)

Reserve balances at December 31, 2011 $ 77 $ 57 $ 134

* Other includes reversals of previously recorded restructuring charges and the effects of foreign currency translation. In 2011,

Other for other exit costs also included a reclassification of the following restructuring charges: $18 in environmental and $17

in asset retirement obligations, as these liabilities are included in Alcoa’s separate reserves for environmental remediation

(see Note N) and asset retirement obligations (see Note C), respectively. In 2010, Other for other exit costs also included a

reclassification of the following restructuring charges: $30 in asset retirement and $14 in environmental obligations, as these

liabilities are included in Alcoa’s separate reserves for asset retirement obligations (see Note C) and environmental

remediation (see Note N), respectively. In 2009, Other for layoff costs also included a reduction of $26 for reserves related to

the wire harness and electrical portion of the EES business as PlatinumEquity assumed these obligations (see Note F).

The remaining reserves are expected to be paid in cash during 2012, with the exception of approximately $45 to $50, which is

expected to be paid over the next several years for lease termination costs, ongoing site remediation work, and special

termination benefit payments.

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E. Goodwill andOther Intangible Assets

The following table details the changes in the carrying amount of goodwill:

Alumina

Primary

Metals

FlatRolled

Products

Engineered

Products

and

Solutions Corporate* Total

Balance at December 31, 2009:

Goodwill $ 17 $ 939 $ 210 $ 2,532 $ 1,384 $5,082

Accumulated impairment losses - - - (28) - (28)

17 939 210 2,504 1,384 5,054

Acquisition of businesses - 48 - 28 - 76

Translation (5) 6 (3) (9) 3 (8)

Balance at December 31, 2010:

Goodwill 12 993 207 2,551 1,387 5,150

Accumulated impairment losses - - - (28) - (28)

12 993 207 2,523 1,387 5,122

Acquisition of businesses - - - 150 - 150

Translation (1) (2) 1 (7) (12) (21)

Balance at December 31, 2011:

Goodwill 11 991 208 2,694 1,375 5,279

Accumulated impairment losses - - - (28) - (28)

$ 11 $ 991 $ 208 $ 2,666 $ 1,375 $5,251

* As of December 31, 2011, $1,349 of the amount reflected in Corporate is allocated to each of Alcoa’s four reportable

segments ($163 to Alumina, $850 to Primary Metals, $63 to Flat-Rolled Products, and $273 to Engineered Products and

Solutions) included in the table above for purposes of impairment testing (see Note A). This goodwill is reflected in

Corporate for segment reporting purposes because it is not included in management’s assessment of performance by the

four reportable segments.

Other intangible assets, which are included in Other noncurrent assets on the accompanying Consolidated Balance Sheet, were

as follows:

December 31, 2011

Gross

carrying

amount

Accumulated

amortization

Computer software $ 902 $ (595)

Patents and licenses 148 (85)

Other intangibles 72 (25)

Total amortizable intangible assets 1,122 (705)

Indefinite-lived trade names, trademarks, and customer relationships 77 -

Total other intangible assets $ 1,199 $ (705)

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December 31, 2010

Gross

carrying

amount

Accumulated

amortization

Computer software $ 936 $ (555)

Patents and licenses 148 (80)

Other intangibles 68 (28)

Total amortizable intangible assets 1,152 (663)

Indefinite-lived trade names and trademarks 35 -

Total other intangible assets $ 1,187 $ (663)

Computer software consists primarily of software costs associated with an enterprise business solution (EBS) within Alcoa to

drive common systems among all businesses.

Amortization expense related to the intangible assets in the tables above for the years ended December 31, 2011, 2010, and 2009

was $86, $86, and $85, respectively, and is expected to be in the range of approximately $80 to $90 annually from2012 to 2016.

F. Acquisitions andDivestitures

Pro forma results of the Company, assuming all acquisitions described below were made at the beginning of the earliest prior

period presented, would not have been materially different fromthe results reported.

2011 Acquisitions. On March 9, 2011, Alcoa completed an acquisition of the aerospace fastener business of TransDigmGroup

Inc. for $240 (cash acquired and post-closing adjustments resulted in a net purchase price of $239). This business is a leading

global designer, producer, and supplier of highly engineered aircraft components, with three locations (one in the state of

California and two in the United Kingdom) that employ a combined 400 people. Specifically, this business provides a wide

variety of high-strength, high temperature nickel alloy specialty engine fasteners, airframe bolts, and slotted entry bearings. In

2010, this business generated sales of $61. The assets and liabilities of this business were included in the Engineered Products

and Solutions segment as of March 31, 2011; this business’ results of operations were included in this segment beginning

March 9, 2011. Based on the preliminary purchase price allocation, goodwill of $154 was recorded for this transaction.

Approximately $60 of goodwill is estimated to be deductible for income taxpurposes. The final allocation of the purchase price

will be based on valuation and other studies, including environmental and other contingent liabilities. Other intangible assets

may be identified as a result of the final valuation. The purchase price is subject to certain post-closing adjustments as defined

in the acquisition agreement. This acquisition is part of a strategic plan to accelerate the growth of Alcoa’s fastener business,

while adding efficiencies, broadening the existing technology base, and expanding product offerings to better serve customers

and increase shareholder value.

2010 Acquisitions. In July 2010, Alcoa completed an acquisition of the commercial building and construction business of a

privately-held company, Traco, for $77. This business, located in Cranberry, Pennsylvania, employing 650 people, is a premier

manufacturer of windows and doors for the commercial building and construction market and generated sales of approximately

$100 in 2009. The assets and liabilities of this business were included in the Engineered Products and Solutions segment as of

the end of July 2010 and this business’ results of operations were included in this segment since the beginning of August 2010.

Based on the preliminary purchase price allocation, goodwill of $28 was recorded for this transaction. In 2011, the purchase

price allocation was finalized based on the completion of a valuation study resulting in a reduction in the initial goodwill

amount of $4. All of the $24 in goodwill is deductible for income taxpurposes. Also in 2011, Alcoa paid an additional $1 to

settle working capital, as provided for in the acquisition agreement, reflecting an adjustment to the purchase price. This

transaction is no longer subject to post-closing adjustments.

2010 Divestitures. In April 2010, Alcoa completed the divestiture of the Transportation Products Europe business, the assets

and liabilities of which were classified as held for sale in 2008, to two separate buyers. Combined, this business

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sold for $14, which was included in Proceeds fromthe sale of assets and businesses on the accompanying Statement of

Consolidated Cash Flows; a gain of $5 ($5 after-tax) was recognized in Restructuring and other charges on the accompanying

Statement of Consolidated Operations. These two transactions are no longer subject to post-closing adjustments. This

business generated sales of $78 in 2009 and, at the time of divestiture, had approximately 360 employees at three locations.

2009 Acquisitions. In March 2009, Alcoa completed a non-cash exchange of its 45.45% stake in the Sapa AB joint venture for

Orkla ASA’s (Orkla) 50% stake in the ElkemAluminiumANS joint venture (Elkem). As a result of this transaction, Elkemis now

owned 100% by Alcoa and Sapa AB is now owned 100% by Orkla. Prior to the completion of the exchange transaction, Alcoa

accounted for its investments in Sapa AB and Elkemon the equity method and the carrying values were $475 and $435,

respectively, at December 31, 2008. Elkemincludes aluminumsmelters in Lista and Mosjøen, Norway with a combined output of

282 kmt and the anode plant in Mosjøen in which Alcoa already held an 82% stake. These three facilities employed

approximately 700 workers combined. The addition of the two smelters and anode plant (supports Norway and Iceland

operations) strengthens Alcoa’s leadership position within the aluminumindustry. The assets and liabilities of Elkemwere

included in the Primary Metals segment beginning March 31, 2009 (the final amounts recorded were based on the completion of

a valuation study– see below) and Elkem’s results of operations were reflected in this segment starting on April 1, 2009 (prior to

this transaction, Alcoa’s existing 50% stake in Elkemwas reflected as equity income in this segment). The exchange transaction

resulted in the recognition of a $188 gain ($133 after-tax), comprised of a $156 adjustment to the carrying value of Alcoa’s

existing 50% interest in Elkemin accordance with fair value accounting and a $32 adjustment for the finalization of the estimated

fair value of the Sapa AB joint venture. The $188 gain was reflected in Other (income) expenses, net on the accompanying

Statement of Consolidated Operations, of which $156 ($112 after-tax) was reflected in the Primary Metals segment and $32 ($21

after-tax) was reflected in Corporate. The portion of the gain reflected in Corporate was because the original write-down of the

45.45% Sapa AB investment to its estimated fair value in December 2008 was reflected in Corporate. At the time the exchange

transaction was completed, Elkemhad $18 in cash, which was reflected in the accompanying Statement of Consolidated Cash

Flows as a cash inflow on the acquisitions line.

In early 2010, the purchase price allocation was finalized based on the completion of a valuation study resulting in goodwill of

$48 (half of which is deductible for U.S. income taxpurposes) and a corresponding reduction in properties, plants, and

equipment. There was no change to the gain recognized on the transaction in 2009. Under business combination accounting,

prior periods, beginning with the period of acquisition, are required to be revised to reflect changes to the original purchase

price allocation; however, this $48 (and the related depreciation expense that would have been recognized in 2009) was deemed

immaterial for this purpose.

In June 2009, Alcoa completed an acquisition of a fasteners business located in Morocco for $3. This transaction did not have

a material impact on Alcoa’s Consolidated Financial Statements.

In July 2009, Alcoa World Alumina LLC (AWA LLC), a majority-owned subsidiary of Alcoa and part of Alcoa World Alumina

and Chemicals, acquired a BHP Billiton (BHP) subsidiary that holds interests in four bauxite mines and one refining facility in

the Republic of Suriname. These interests were part of joint ventures between AWA LLC’s wholly-owned subsidiary in

Suriname (Suriname AluminumCompany LLC (Suralco)) and BHP’s subsidiary in which Suralco held a 55% stake and BHP’s

subsidiary held a 45% stake. This acquisition strengthens Alcoa’s presence in Suriname and supports its overall growth

strategy. In this transaction, in exchange for relinquishing BHP of any further obligations, liabilities, and responsibilities related

to the joint ventures (certain of which could result in the recognition of charges in future periods), AWA LLC received direct

ownership of the BHP subsidiary. This transaction was accounted for as an asset acquisition as it did not meet the

requirements to be accounted for as a business combination. Prior to the completion of this transaction, Suralco accounted for

its 55% interest in the Suriname operations on the proportional consolidation method. The assets and liabilities of the former

BHP subsidiary were included in the Alumina segment beginning July 31, 2009 and 100% of the results of the Suriname

operations were reflected in this segment starting on August 1, 2009. This acquisition resulted in the addition of 993 kmt of

alumina refining capacity (2,207 kmt is total refinery capacity – approximately 870 kmt is curtailed) to Alcoa’s global refining

system. Alcoa recorded a gain of $92 ($36 after-taxand noncontrolling interest), which was reflected in Other (income)

expenses, net

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on the accompanying Statement of Consolidated Operations and was reflected in the Alumina segment’s results ($60 after-tax).

At the time this transaction was completed, the BHP subsidiary had $97 in cash, which was reflected in the accompanying

Statement of Consolidated Cash Flows as a cash inflow on the acquisitions line.

2009 Divestitures. In June 2009, Alcoa completed the divestiture of the wire harness and electrical portion of the EES business

to PlatinumEquity, effective June 1, 2009. Alcoa paid $200 to divest this portion of the EES business and recognized a loss of

$129 ($168 pretax) in discontinued operations (see Note B) on the accompanying Statement of Consolidated Operations. The

total cash payment was comprised of the agreed upon transaction price of $175 and working capital and other adjustments of

$25 based on the provisions of the purchase agreement. This transaction is no longer subject to post-closing adjustments.

Proceeds fromthe sale of assets and businesses on the accompanying Statement of Consolidated Cash Flows include the $200

as a cash outflow. The wire harness and electrical portion of the EES business generated sales of $1,114 in 2008 and, at the time

of divestiture, had operations in 13 countries employing approximately 16,200 employees.

In early 2010, Alcoa recognized an additional loss of $6 ($9 pretax) in discontinued operations as a result of a contract

settlement with a former customer of this business (see Note B). Separately, the legal entity that operated the previously sold

wire harness and electrical business in Germany filed for insolvency. No lawsuits were filed against Alcoa related to this

bankruptcy; however, PlatinumEquity did file claims against Alcoa in the proceeding. In 2011, Alcoa recognized an additional

loss of $3 ($5 pretax) in discontinued operations as a result of a negotiated settlement related to these claims (see Note B).

In December 2009, Alcoa completed the divestiture of the electronics portion of the EES business to Flextronics Inc. Alcoa paid

$4 upon consummation of the transaction and recognized a loss of $9 ($13 pretax) in discontinued operations (see Note B) on

the accompanying Statement of Consolidated Operations. This transaction remains subject to certain post-closing adjustments

as defined in the purchase agreement. Proceeds fromthe sale of assets and businesses on the accompanying Statement of

Consolidated Cash Flows include this payment as a cash outflow. The electronics portion of the EES business generated sales

of $104 in 2008 and, at the time of divestiture, had operations in four countries employing approximately 450 employees.

In late 2009, Alcoa completed the sale of two of its foil plants (Sabiñánigo, Spain and Shanghai, China), which were part of the

Global Foil business, the assets and liabilities of which were classified as held for sale in 2008, to two separate buyers.

Combined, these two facilities were sold for $20, which was included in Proceeds fromthe sale of assets and businesses on the

accompanying Statement of Consolidated Cash Flows, and resulted in a net loss of less than $1. These two transactions are no

longer subject to post-closing adjustments. These two locations generated sales of $169 in 2008 and, at the time of divestiture,

had approximately 460 employees.

In connection with the 2005 acquisition of two fabricating facilities in Russia, Alcoa could be required to make contingent

payments of approximately $50 through 2015 based upon the achievement of various financial and operating targets. Any such

payment would be reflected as additional goodwill.

G. Inventories

December 31, 2011 2010

Finished goods $ 537 $ 474

Work-in-process 911 826

Bauxite and alumina 656 621

Purchased raw materials 532 405

Operating supplies 263 258

$2,899 $2,584

At December 31, 2011 and 2010, the total amount of inventories valued on a LIFO basis was 35%. If valued on an average-cost

basis, total inventories would have been $801 and $742 higher at December 31, 2011 and 2010,

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respectively. During the three-year period ended December 31, 2011, reductions in LIFO inventory quantities caused partial

liquidations of the lower cost LIFO inventory base. These liquidations resulted in the recognition of income of $2 ($1 after-tax)

in 2011, $27 ($17 after-tax) in 2010, and $175 ($114 after-tax) in 2009.

H. Properties, Plants, andEquipment, Net

December 31, 2011 2010

Land and land rights, including mines $ 667 $ 631

Structures 12,111 11,657

Machinery and equipment 23,333 23,189

36,111 35,477

Less: accumulated depreciation, depletion, and amortization 18,404 17,487

17,707 17,990

Construction work-in-progress 1,709 2,193

$19,416 $20,183

As of December 31, 2011 and 2010, the net carrying value of temporarily idled smelting assets was $166 and $306, representing

353 kmt and 587 kmt of idle capacity, respectively. Additionally, the net carrying value of permanently idled smelting assets,

representing 291 kmt, was written off at the end of 2011 (see Note D). At December 31, 2010, the net carrying value of these now

permanently idled smelting assets was $152. Also, the net carrying value of temporarily idled refining assets was $65 and $100

as of December 31, 2011 and 2010, representing 1,177 and 1,321 kmt of idle capacity, respectively.

I. Investments

December 31, 2011 2010

Equity investments $1,524 $1,244

Other investments 102 96

$1,626 $1,340

Equity Investments. As of December 31, 2011 and 2010, Equity investments included an interest in a project to develop a fullyintegrated aluminumcomplexin Saudi Arabia (see below), hydroelectric power projects in Brazil (see Note N), a smelter

operation in Canada (25.05% of Pechiney Reynolds Quebec, Inc.), bauxite mining interests in Guinea (45% of Halco Mining,

Inc.) and Brazil (18.2% of Mineração Rio do Norte S.A.), and a natural gas pipeline in Australia (see Note N). In 2011, 2010, and

2009, Alcoa received $100, $33, and $56, respectively, in dividends fromits equity investments.

In December 2009, Alcoa and Saudi Arabian Mining Company (known as “Ma’aden”) entered into a 30-year joint venture

shareholders’ agreement (automatic extension for an additional 20 years, unless the parties agree otherwise or unless earlier

terminated) setting forth the terms for the development, construction, ownership, and operation of an integrated bauxite mine,

alumina refinery, aluminumsmelter, and rolling mill, in Saudi Arabia. Specifically, the project to be developed by the joint

venture will consist of: (i) a bauxite mine for the extraction of approximately 4,000 kmt of bauxite fromthe Al Ba’itha bauxite

deposit near Quiba in the northern part of Saudi Arabia; (ii) an alumina refinery with an initial capacity of 1,800 kmt; (iii) a

primary aluminumsmelter with an initial capacity of 740 kmt; and (iv) a rolling mill with an initial capacity of 380 kmt. The

refinery, smelter, and rolling mill will be constructed in an industrial area at Ras Al Khair (formerly Ras Az Zawr) on the east

coast of Saudi Arabia. The facilities will use critical infrastructure, including power generation derived fromreserves of natural

gas, as well as port and rail facilities, developed by the government of Saudi Arabia. First production fromthe smelter and

rolling mill is anticipated in 2013, and first production fromthe mine and refinery is expected in 2014.

As initially conceived, the joint venture was to be owned 60% by Ma’aden with the other 40% being controlled by Alcoa

through a special-purpose vehicle (SPV). Through this SPVarrangement, Alcoa and AluminumFinancing

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Limited would each have had a 20% economic interest in the joint venture. AluminumFinancing Limited’s investment was in

the formof subordinated, participating convertible notes issued by the SPV(the “Notes”), which had common equity rights in

the SPV, and were to be converted into permanent equity at a future date based on certain conditions as defined in the

underlying SPVagreement.

Following the signing of the joint venture shareholders’ agreement, Alcoa paid Ma’aden $80 representing the initial investment

of the 40% interest in the project. This investment was included in Additions to investments on the accompanying Statement

of Consolidated Cash Flows. AluminumFinancing Limited’s 50% share of the $80 was reflected as Convertible securities of

subsidiary on the Consolidated Balance Sheet and in Contributions fromnoncontrolling interests on the accompanying

Statement of Consolidated Cash Flows.

In March 2010, Alcoa and Ma’aden executed a supplement to the joint venture shareholders’ agreement and modified the

ownership structure such that the joint venture is now owned 74.9% by Ma’aden and 25.1% by Alcoa (AluminumFinancing

Limited is no longer a participant). Concurrent with modifying the joint venture shareholders’ agreement with Ma’aden, Alcoa

entered into an agreement with AluminumFinancing Limited under which Alcoa redeemed the $40 in Notes, and Aluminum

Financing Limited terminated all of its current and future interests in the SPV, for a payment of $60. This $60 was included in

Acquisitions of noncontrolling interests on the accompanying Statement of Consolidated Cash Flows. The difference between

the redemption amount and the carrying value of the Notes was reflected as a reduction in Additional capital on the

accompanying Consolidated Balance Sheet.

Going forward, Ma’aden and Alcoa will have put and call options, respectively, whereby Ma’aden can require Alcoa to

purchase fromMa’aden, or Alcoa can require Ma’aden to sell to Alcoa, a 14.9% interest in the joint venture at the then fair

market value. These options may only be exercised in a six-month window that opens five years after the Commercial

Production Date (as defined in the joint venture shareholders’ agreement) and, if exercised, must be exercised for the full 14.9%

interest. In addition, Alcoa paid $22 and $34 to Ma’aden in 2011 and 2010, respectively, representing Alcoa’s pro rata share of

certain agreed upon pre-incorporation costs incurred by Ma’aden before formation of the joint venture.

The Alcoa affiliate that holds Alcoa’s interests in the smelting company and the rolling mill company is wholly owned by

Alcoa, and the Alcoa affiliate that holds Alcoa’s interests in the mining and refining company is wholly owned by Alcoa World

Alumina and Chemicals (AWAC), which is owned 60% by Alcoa and 40% by Alumina Limited. Except in limited circumstances,

Alcoa may not sell, transfer or otherwise dispose of or encumber or enter into any agreement in respect of the votes or other

rights attached to its interests in the joint venture without Ma’aden’s prior written consent.

A number of Alcoa employees performvarious types of services for the smelting, rolling mill, and refining and mining

companies as part of the construction of the fully-integrated aluminumcomplex. At December 31, 2011, Alcoa has an

outstanding receivable of $25 fromthe smelting, rolling mill, and refining and mining companies for labor and other employeerelated expenses.

Capital investment in the project is expected to total approximately $10,800 (SAR 40.5 billion). As a result of the changes in the

ownership structure described above, Alcoa’s equity investment in the joint venture will be approximately $1,100 over a fouryear period, and Alcoa will be responsible for its pro rata share of the joint venture’s project financing. During 2011 and 2010,

Alcoa contributed $249 and $160, respectively, towards the $1,100 commitment. As of December 31, 2011 and 2010, the carrying

value of Alcoa’s investment in this project, including the initial investment and respective pre-incorporation costs, was $565

and $285, respectively.

In late 2010, the smelting and rolling mill companies entered into project financing totaling $4,035, of which $1,013 represents

Alcoa’s share (the equivalent of Alcoa’s 25.1% interest in the smelting and rolling mill companies). In conjunction with the

financing, Alcoa issued guarantees on behalf of the smelting and rolling mill companies to the lenders in the event that such

companies default on their debt service requirements through June 2017 and December 2018, respectively, (Ma’aden issued

similar guarantees for its 74.9% interest). Alcoa’s guarantees for the smelting and

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rolling mill companies cover total debt service requirements of $108 in principal and up to a maximumof approximately $50 in

interest per year (based on projected interest rates). At December 31, 2011 and 2010, the combined fair value of the guarantees

was $8 and was included in Other noncurrent liabilities and deferred credits on the accompanying Consolidated Balance Sheet.

Under the project financing, a downgrade of Alcoa’s credit ratings below investment grade by at least two agencies would

require Alcoa to provide a letter of credit or fund an escrow account for a portion or all of Alcoa’s remaining equity commitment

to the joint venture project in Saudi Arabia.

In late 2011, the refining and mining company entered into project financing totaling $1,992, of which $500 represents AWAC’s

25.1% interest in the refining and mining company. In conjunction with the financing, Alcoa, on behalf of AWAC, issued

guarantees to the lenders in the event that the refining and mining company defaults on its debt service requirements through

June 2019 (Ma’aden issued similar guarantees for its 74.9% interest). Alcoa’s guarantees for the refining and mining company

cover total debt service requirements of $60 in principal and up to a maximumof approximately $25 in interest per year (based

on projected interest rates). At December 31, 2011, the combined fair value of the guarantees was $4. In the event Alcoa would

be required to make payments under the guarantees, 40% of such amount would be contributed to Alcoa by Alumina Limited,

consistent with its ownership interest in AWAC. Under the project financing, a downgrade of Alcoa’s credit ratings below

investment grade by at least two agencies would require Alcoa to provide a letter of credit or fund an escrow account for a

portion or all of Alcoa’s remaining equity commitment to the joint venture project in Saudi Arabia.

Power for the refinery, smelter, and rolling mill will be supplied under a gas allocation fromSaudi Aramco, based on

authorization of the Ministry of Petroleumand Mineral Resources of Saudi Arabia (the “Ministry of Petroleum”). The letter

authorizing the gas allocation provides for gas to be tolled and power to be supplied to the refinery, smelter, and rolling mill

froman adjacent power and water desalination plant being constructed by a company ultimately owned by the government of

Saudi Arabia, with the major tolling elements fixed at cost. The gas allocation is contingent on the finalization of implementing

contractual arrangements and on the achievement of certain milestones, as defined in the joint venture shareholders’

agreement, and includes possible penalties if the milestones are not met, including the following: (i) potential forfeiture of a

$350 letter of credit required to be provided to the Ministry of Petroleumby Ma’aden (with Alcoa responsible for its pro rata

share) to ensure completion of the refinery, (ii) potential forfeiture of the gas allocation if the smelter is not completed, (iii) a

potential requirement for the smelter to allocate 275 kmt of aluminumto other entities determined by the Ministry of Petroleumif

the rolling mill is not constructed, and (iv) under a new version of the gas allocation (issued in early 2011), forfeiture of a $60

letter of credit if certain auxiliary rolling facilities are not completed.

The parties subject to the joint venture shareholders’ agreement and the SPVagreement may not sell, transfer, or otherwise

dispose of, pledge, or encumber any interests in the joint venture or SPVuntil certain milestones have been met as defined in

both agreements. Under the joint venture shareholders’ agreement, upon the occurrence of an unremedied event of default by

Alcoa, Ma’aden may purchase, or, upon the occurrence of an unremedied event of default by Ma’aden, Alcoa may sell, its

interest for consideration that varies depending on the time of the default. Under the SPVagreement, upon the occurrence of an

unremedied event of default by Alcoa, Alcoa’s right to receive distributions will be suspended.

Other Investments. As of December 31, 2011 and 2010, Other investments included $92 and $93, respectively, in exchangetraded fixed income and equity securities, which are classified as available-for-sale and are carried at fair value with unrealized

gains and losses recognized in other comprehensive income. Unrealized and realized gains and losses related to these

securities were immaterial in 2011, 2010, and 2009.

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J. Other Noncurrent Assets

December 31, 2011 2010

Intangibles, net (E) $ 494 $ 524

Value-added taxreceivable 510 495

Cash surrender value of life insurance 455 464

Prepaid gas transmission contract 346 332

Deferred mining costs, net 221 173

Unamortized debt expense 98 95

Fair value of derivative contracts (X) 44 92

Prepaid pension benefit (W) 109 84

Other 291 286

$2,568 $2,545

K. Debt

Long-Term Debt.

December 31, 2011 2010

6% Notes, due 2012 $ 322 $ 322

5.375% Notes, due 2013 - 553

6% Notes, due 2013 422 750

5.25% Convertible Notes, due 2014 575 575

5.55% Notes, due 2017 750 750

6.5% Bonds, due 2018 250 250

6.75% Notes, due 2018 750 750

5.72% Notes, due 2019 750 750

6.15% Notes, due 2020 1,000 1,000

5.40% Notes, due 2021 1,250 -

5.87% Notes, due 2022 627 627

5.9% Notes, due 2027 625 625

6.75% Bonds, due 2028 300 300

5.95% Notes due 2037 625 625

BNDES Loans, due 2012-2029 (see below for weighted average rates) 627 899

Other* 212 297

9,085 9,073

Less: amount due within one year 445 231

$8,640 $8,842

* Other includes various financing arrangements related to subsidiaries, unamortized debt discounts related to the outstanding

notes and bonds listed in the table above, a beneficial conversion feature related to the convertible notes (see below), and

adjustments to the carrying value of long-termdebt related to interest swap contracts accounted for as fair value hedges (see

the Derivatives section of Note X).

The principal amount of long-termdebt maturing in each of the next five years is $445 in 2012, $549 in 2013, $743 in 2014, $45 in

2015, and $26 in 2016.

Public Debt—In February 2011, Alcoa filed an automatic shelf registration statement with the Securities and Exchange

Commission for an indeterminate amount of securities for future issuance. This shelf registration statement replaced Alcoa’s

existing shelf registration statement (filed in March 2008). As of December 31, 2011 and 2010, $1,250 and $3,075 in senior debt

securities were issued under the respective shelf registration statements.

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In April 2011, Alcoa completed a public debt offering under its existing shelf registration statement (dated February 18, 2011)

for $1,250 of 5.40% Notes due 2021 (the “2021 Notes”). Alcoa received $1,241 in net proceeds fromthe public debt offering

reflecting an original issue discount and payment of financing costs. The net proceeds were used for the early retirement of

$881 in outstanding notes (see below), early repayment of $101 in outstanding loans related to the bauxite mine development in

Brazil (see BNDES Loans below), and the remainder was used for general corporate purposes. The original issue discount and

financing costs were deferred and are being amortized to interest expense over the termof the 2021 Notes. Interest on the 2021

Notes is paid semi-annually in April and October, which commenced in October 2011. Alcoa has the option to redeemthe 2021

Notes, as a whole or in part, at any time or fromtime to time, on at least 30 days, but not more than 60 days, prior notice to the

holders of the 2021 Notes at a redemption price specified in the 2021 Notes. The 2021 Notes are subject to repurchase upon the

occurrence of a change in control repurchase event (as defined in the 2021 Notes) at a repurchase price in cash equal to 101%

of the aggregate principal amount of the 2021 Notes repurchased, plus any accrued and unpaid interest on the 2021 Notes

repurchased. The 2021 Notes rank pari passu with Alcoa’s other unsecured senior unsubordinated indebtedness.

In May 2011, Alcoa completed the following tender offers: (i) any and all of its 5.375% Notes due 2013 (the “5.375% Notes”)

and (ii) up to $400 of its 6.00% Notes due 2013 (the “6.00% Notes” and collectively with the 5.375% Notes, the “Notes”). Upon

expiration of the tender offers, $269 and $328 of the aggregate outstanding principal amount of the 5.375% Notes and 6.00%

Notes, respectively, were validly tendered and accepted. Additionally in May 2011, subsequent to the expiration of the tender

offer for the 5.375% Notes, Alcoa elected to call for redemption the remaining outstanding principal of $284 under the

provisions of the 5.375% Notes. The total cash paid to the holders of the tendered 5.375% Notes and 6.00% Notes and the

called 5.375% Notes was $972, which consisted of $881 in debt principal, $74 in purchase premiums, and $17 in accrued and

unpaid interest fromthe respective last interest payment dates up to, but not including, the respective settlement dates. The

$74 was recorded in Interest expense on the accompanying Statement of Consolidated Operations. At December 31, 2011, the

6.00% Notes had a remaining outstanding principal of $422.

In conjunction with the early retirement of the 5.375% Notes, Alcoa terminated interest rate swaps with a notional amount

totaling $550. These swaps were accounted for as fair value hedges and were used to convert the stated interest rate of the

5.375% Notes fromfixed to floating. At the time of termination, the swaps were “in-the-money” resulting in a gain of $33, which

was recorded in Interest expense on the accompanying Statement of Consolidated Operations.

On August 1, 2010, Alcoa repaid the $511 in outstanding principal of its 7.375% Notes as scheduled using available cash on

hand.

In August 2010, Alcoa completed a public debt offering under its then-existing shelf registration statement for $1,000 of 6.150%

Notes due 2020 (the “2020 Notes”). Alcoa received $993 in net proceeds fromthe public debt offering reflecting an original

issue discount and payment of financing costs. The net proceeds were used for the early retirement of $825 in outstanding

notes (see below), early repayment of $88 in outstanding loans related to the refinery expansion and bauxite mine development

in Brazil (see BNDES Loans below), and the remainder was for the repayment of other outstanding debt. The original issue

discount and financing costs were deferred and are being amortized to interest expense over the termof the 2020 Notes.

Interest on the 2020 Notes is paid semi-annually in February and August, which commenced February 2011. Alcoa has the

option to redeemthe 2020 Notes, as a whole or in part, at any time or fromtime to time, on at least 30 days, but not more than 60

days, prior notice to the holders of the 2020 Notes at a redemption price specified in the 2020 Notes. The 2020 Notes are subject

to repurchase upon the occurrence of a change in control repurchase event (as defined in the 2020 Notes) at a repurchase price

in cash equal to 101% of the aggregate principal amount of the 2020 Notes repurchased, plus any accrued and unpaid interest

on the 2020 Notes repurchased. The 2020 Notes rank pari passu with Alcoa’s other unsecured senior unsubordinated

indebtedness.

Also in August 2010, Alcoa completed the following tender offers: (i) any and all of its 6.50% Notes due 2011 (the “2011

Notes”) and (ii) an amount of its 6.00% Notes due 2012 (the “2012 Notes”) and its 5.375% Notes not to exceed the difference

between $750 and the purchase price of the 2011 Notes accepted for purchase, provided that the

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purchase of the 5.375% Notes was subject to an aggregate purchase sublimit of $50. Upon expiration of the tender offers, $253,

$195, and $47 of the aggregate outstanding principal amount of the 2011 Notes, 2012 Notes, and 5.375% Notes, respectively,

were validly tendered and accepted. Additionally in August 2010, subsequent to the expiration of the tender offer for the 2011

Notes, Alcoa elected to call for redemption the remaining outstanding principal of $330 under the provisions of the 2011 Notes.

The total cash paid to the holders of the tendered 2011 Notes, 2012 Notes, and 5.375% Notes and the called 2011 Notes was

$878, which consisted of $825 in debt principal, $42 in purchase premiums, and $11 in accrued and unpaid interest fromthe

respective last interest payment dates up to, but not including, the respective settlement dates. The $42 was recorded in

Interest expense on the accompanying Statement of Consolidated Operations. At December 31, 2010, the 2012 Notes and

5.375% Notes had a remaining outstanding principal of $322 and $553, respectively.

In conjunction with the early retirement of the 2011 Notes and a portion of both the 2012 Notes and 5.375% Notes, Alcoa

terminated all or a portion of various interest rate swaps with a notional amount totaling $825 (equivalent to the debt principal

retired). These swaps were accounted for as fair value hedges and were used to convert the stated interest rates of the 2011

Notes, 2012 Notes, and 5.375% Notes fromfixed to floating. At the time of termination, the swaps were “in-the-money”

resulting in a gain of $28, which was recorded in Interest expense on the accompanying Statement of Consolidated Operations.

At December 31, 2010, the 2012 Notes and 5.375% Notes had outstanding interest rate swaps with a remaining notional amount

of $315 and $550, respectively.

BNDES Loans—In March 2008, Alcoa Alumínio (Alumínio) entered into two separate loan agreements (the “First Loans”) with

Brazil’s National Bank for Economic and Social Development (BNDES) related to the Juruti bauxite mine development and the

São Luís refinery expansion.

The first loan agreement provides for a commitment of $248 (R$500), which is divided into five subloans, and was used to pay

for certain expenditures of the Juruti bauxite mine development. Interest on four of the subloans totaling $233 (R$470) is a Brazil

real rate of interest equal to BNDES’ long-terminterest rate, 6.00% as of December 31, 2011 and 2010, plus a weighted-average

margin of 2.13%. Interest on the fifth subloan of $15 (R$30) is a U.S. dollar rate of interest equal to the average cost incurred by

BNDES in raising capital outside of Brazil, 3.59% and 4.16% as of December 31, 2011 and 2010, respectively, plus a margin of

2.40%.

Principal and interest were payable monthly beginning in September 2009 and ending in November 2014 for the four subloans

totaling $233 (R$470) and beginning in November 2009 and ending in January 2015 for the subloan of $15 (R$30). Prior to these

dates, interest was payable quarterly on borrowed amounts.

As of December 31, 2011, Alumínio’s outstanding borrowings were $55 (R$102) and $3 (R$7) and the weighted-average interest

rate was 8.13% and 5.99% for the subloans totaling $233 (R$470) and the subloan of $15 (R$30), respectively. During 2011,

Alumínio repaid $131 (R$209) and $7 (R$11) of outstanding borrowings related to the subloans totaling $233 (R$470) and the

subloan of $15 (R$30), respectively. As of December 31, 2010, Alumínio’s outstanding borrowings were $186 (R$312) and $10

(R$17) and the weighted-average interest rate was 8.13% and 6.56% for the subloans totaling $233 (R$470) and the subloan of

$15 (R$30), respectively. During 2010, Alumínio repaid $75 (R$130) and $4 (R$8) of outstanding borrowings related to the

subloans totaling $233 (R$470) and the subloan of $15 (R$30), respectively.

The second loan agreement provides for a commitment of $374 (R$650), which is divided into three subloans, and was used to

pay for certain expenditures of the São Luís refinery expansion. Interest on two of the subloans totaling $339 (R$589) is a Brazil

real rate of interest equal to BNDES’ long-terminterest rate plus a weighted-average margin of 1.99%. Interest on the third

subloan of $35 (R$61) is a U.S. dollar rate of interest equal to the average cost incurred by BNDES in raising capital outside of

Brazil plus a margin of 2.02%.

Principal and interest were payable monthly beginning in December 2009 and ending in February 2015 for the two subloans

totaling $339 (R$589) and beginning in February 2010 and ending in April 2015 for the subloan of $35 (R$61). Prior to these

dates, interest was payable quarterly on borrowed amounts.

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As of December 31, 2011, Alumínio’s outstanding borrowings were $191 (R$356) and $23 (R$42) and the weighted-average

interest rate was 7.99% and 5.61% for the subloans totaling $339 (R$589) and the subloan of $35 (R$61), respectively. During

2011, Alumínio repaid $67 (R$113) and $7 (R$11) of outstanding borrowings related to the subloans totaling $339 (R$589) and

the subloan of $35 (R$61), respectively. As of December 31, 2010, Alumínio’s outstanding borrowings were $280 (R$469) and

$29 (R$48) and the weighted-average interest rate was 7.99% and 6.18% for the subloans totaling $339 (R$589) and the subloan

of $35 (R$61), respectively. During 2010, Alumínio repaid $64 (R$112) and $6 (R$11) of outstanding borrowings related to the

subloans totaling $339 (R$589) and the subloan of $35 (R$61), respectively.

The First Loans may be repaid early without penalty with the approval of BNDES. Also, the First Loans include a financial

covenant that states that Alcoa must maintain a debt-to-equity ratio of 1.5 or lower.

In June 2008, Alumínio finalized certain documents related to another loan agreement with BNDES. This loan agreement

provides for a commitment of $397 (R$687), which is divided into three subloans, and is being used to pay for certain

expenditures of the Estreito hydroelectric power project. Interest on the three subloans is a Brazil real rate of interest equal to

BNDES’ long-terminterest rate plus a weighted-average margin of 1.48%. Principal and interest are payable monthly beginning

in October 2011 and ending in September 2029 for two of the subloans totaling R$667 and beginning in July 2012 and ending in

June 2018 for the subloan of R$20. This loan may be repaid early without penalty with the approval of BNDES. As of

December 31, 2011 and 2010, Alumínio’s outstanding borrowings were $355 (R$661) and $394 (R$662), respectively, and the

weighted-average interest rate was 7.50% and 7.52%, respectively. During 2011, Alumínio repaid $5 (R$9) of outstanding

borrowings

In May 2009, Alumínio entered into two new loan agreements (the “Second Loans”) with BNDES related to the Juruti bauxite

mine development and the São Luís refinery expansion.

The first loan agreement provided for a commitment of $321 (R$750), which was divided into sixsubloans, and was used to pay

for certain expenditures of the Juruti bauxite mine development. Interest on two of the subloans totaling $257 (R$600) was a

U.S. dollar rate of interest equal to the average cost incurred by BNDES in raising capital outside of Brazil plus a weightedaverage margin of 1.69%. Interest on four of the subloans totaling $64 (R$150) was a Brazil real rate of interest equal to BNDES’

long-terminterest rate plus a weighted-average margin of 1.59%. As of December 31, 2010, Alumínio had no outstanding

borrowings under any of the subloans. During 2010, Alumínio repaid early $70 (R$123) and $23 (R$41) of outstanding

borrowings related to the subloans totaling $257 (R$600) and the subloans totaling $64 (R$150), respectively.

The second loan agreement provided for a commitment of $86 (R$200), which was divided into four subloans, and was used to

pay for certain expenditures of the São Luís refinery expansion. Interest on two of the subloans totaling $69 (R$160) was a U.S.

dollar rate of interest equal to the average cost incurred by BNDES in raising capital outside of Brazil plus a weighted-average

margin of 1.70%. Interest on two of the subloans totaling $17 (R$40) was a Brazil real rate of interest equal to BNDES’ long-term

interest rate plus a weighted-average margin of 1.70%. As of December 31, 2010, Alumínio had no outstanding borrowings

under any of the subloans. During 2010, Alumínio repaid early $33 (R$57) and $12 (R$19) of outstanding borrowings related to

the subloans totaling $69 (R$160) and the subloans totaling $17 (R$40), respectively.

Principal and interest on the Second Loans were payable monthly beginning in November 2010 and ending in April 2016. Prior

to November 2010, interest was payable quarterly on borrowed amounts. The Second Loans were repaid early without penalty

under the approval of BNDES. With the full repayment of the Second Loans, the commitments were effectively terminated.

Commercial Paper. Outstanding commercial paper was $224 at December 31, 2011. Alcoa had no outstanding commercial paper

at December 31, 2010. In 2011 and 2010, the average outstanding commercial paper was $197 and $166. Commercial paper

matures at various times within one year and had an annual weighted average interest rate of 0.6%, 0.7%, and 3.1% during 2011,

2010, and 2009, respectively.

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On July 25, 2011, Alcoa entered into a Five-Year Revolving Credit Agreement (the “Credit Agreement”) with a syndicate of

lenders and issuers named therein. The Credit Agreement provides a $3,750 senior unsecured revolving credit facility (the

“Credit Facility”), the proceeds of which are to be used to provide working capital or for other general corporate purposes of

Alcoa, including support of Alcoa’s commercial paper program. Subject to the terms and conditions of the Credit Agreement,

Alcoa may fromtime to time request increases in lender commitments under the Credit Facility, not to exceed $500 in aggregate

principal amount, and may also request the issuance of letters of credit, subject to a letter of credit sublimit of $1,000 under the

Credit Facility.

The Credit Facility matures on July 25, 2016, unless extended or earlier terminated in accordance with the provisions of the

Credit Agreement. Alcoa may make two one-year extension requests during the termof the Credit Facility, with any extension

being subject to the lender consent requirements set forth in the Credit Agreement. Under the provisions of the Credit

Agreement, Alcoa will pay a fee of 0.25% (based on Alcoa’s long-termdebt ratings as of December 31, 2011) of the total

commitment per annumto maintain the Credit Facility.

The Credit Facility is unsecured and amounts payable under it will rank pari passu with all other unsecured, unsubordinated

indebtedness of Alcoa. Borrowings under the Credit Facility may be denominated in U.S. dollars or euros. Loans will bear

interest at a base rate or a rate equal to LIBOR, plus, in each case, an applicable margin based on the credit ratings of Alcoa’s

outstanding senior unsecured long-termdebt. The applicable margin on base rate loans and LIBOR loans will be 0.50% and

1.50% per annum, respectively, based on Alcoa’s long-termdebt ratings as of December 31, 2011. Loans may be prepaid

without premiumor penalty, subject to customary breakage costs.

The Credit Facility replaces Alcoa’s Five-Year Revolving Credit Agreement, dated as of October 2, 2007 (the “Former Credit

Agreement”), which was scheduled to mature on October 2, 2012. The Former Credit Agreement, which had a total capacity

(excluding the commitment of Lehman Commercial Paper Inc.) of $3,275 and was undrawn, was terminated effective July 25,

2011.

The Credit Agreement includes covenants substantially similar to those in the Former Credit Agreement, including, among

others, (a) a leverage ratio, (b) limitations on Alcoa’s ability to incur liens securing indebtedness for borrowed money,

(c) limitations on Alcoa’s ability to consummate a merger, consolidation or sale of all or substantially all of its assets, and

(d) limitations on Alcoa’s ability to change the nature of its business. As of December 31, 2011, Alcoa was in compliance with

allsuch covenants.

The obligation of Alcoa to pay amounts outstanding under the Credit Facility may be accelerated upon the occurrence of an

“Event of Default” as defined in the Credit Agreement. Such Events of Default include, among others, (a) Alcoa’s failure to pay

the principal of, or interest on, borrowings under the Credit Facility, (b) any representation or warranty of Alcoa in the Credit

Agreement proving to be materially false or misleading, (c) Alcoa’s breach of any of its covenants contained in the Credit

Agreement, and (d) the bankruptcy or insolvency of Alcoa.

There were no amounts outstanding at December 31, 2011 and no amounts were borrowed during 2011 under the Credit Facility.

There were no amounts outstanding at December 31, 2010 and no amounts were borrowed during 2011 and 2010 under the

Former Credit Agreement.

Short-Term Borrowings. At December 31, 2011 and 2010, Short-termborrowings were $62 and $92, respectively (see Note Y).

These amounts included $53 and $56 at December 31, 2011 and 2010, respectively, related to accounts payable settlement

arrangements with certain vendors and third-party intermediaries. These arrangements provide that, at the vendor’s request,

the third-party intermediary advances the amount of the scheduled payment to the vendor, less an appropriate discount, before

the scheduled payment date and Alcoa makes payment to the third-party intermediary on the date stipulated in accordance

with the commercial terms negotiated with its vendors. Alcoa records imputed interest related to these arrangements as interest

expense in the Statement of Consolidated Operations. The remaining amount of short-termborrowings represents working

capital loans for various subsidiaries.

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L. Other Noncurrent Liabilities andDeferredCredits

December 31, 2011 2010

Fair value of derivative contracts (X) $ 624 $ 703

Asset retirement obligations (C) 503 442

Deferred income taxes (T) 395 388

Accrued compensation and retirement costs 304 314

Environmental remediation (N) 289 302

Deferred alumina sales revenue 116 125

Other 197 302

$2,428 $2,576

M. Noncontrolling Interests

The following table summarizes the noncontrolling shareholders’ interests in the equity of Alcoa’s majority-owned

consolidated subsidiaries:

December 31, 2011 2010

Alcoa World Alumina and Chemicals $3,324 $3,452

Other 27 23

$3,351 $3,475

In 2011, 2010, and 2009, Alcoa received $169, $162, and $440, respectively, in contributions fromthe noncontrolling shareholder

(Alumina Limited) of Alcoa World Alumina and Chemicals.

N. Contingencies andCommitments

Contingencies

Litigation. On February 27, 2008, Alcoa Inc. received notice that AluminiumBahrain B.S.C. (Alba) had filed suit against Alcoa

Inc. and Alcoa World Alumina LLC (collectively, “Alcoa”), and others, in the U.S. District Court for the Western District of

Pennsylvania (the “Court”), Civil Action number 08-299, styled AluminiumBahrain B.S.C. v. Alcoa Inc., Alcoa World Alumina

LLC, WilliamRice, and Victor Phillip Dahdaleh. The complaint alleges that certain Alcoa entities and their agents, including

Victor Phillip Dahdaleh, have engaged in a conspiracy over a period of 15 years to defraud Alba. The complaint further alleges

that Alcoa and its employees or agents (1) illegally bribed officials of the government of Bahrain and (or) officers of Alba in

order to force Alba to purchase alumina at excessively high prices, (2) illegally bribed officials of the government of Bahrain

and (or) officers of Alba and issued threats in order to pressure Alba to enter into an agreement by which Alcoa would

purchase an equity interest in Alba, and (3) assigned portions of existing supply contracts between Alcoa and Alba for the

sole purpose of facilitating alleged bribes and unlawful commissions. The complaint alleges that Alcoa and the other

defendants violated the Racketeer Influenced and Corrupt Organizations Act (RICO) and committed fraud. Alba’s complaint

seeks compensatory, consequential, exemplary, and punitive damages, rescission of the 2005 alumina supply contract, and

attorneys’ fees and costs. Alba seeks treble damages with respect to its RICO claims.

On February 26, 2008, Alcoa Inc. had advised the U.S. Department of Justice (DOJ) and the Securities and Exchange

Commission (SEC) that it had recently become aware of these claims, had already begun an internal investigation, and intended

to cooperate fully in any investigation that the DOJ or the SEC may commence. On March 17, 2008, the DOJ notified Alcoa that

it had opened a formal investigation and Alcoa has been cooperating with the government.

In response to a motion filed by the DOJ on March 27, 2008, the Court ordered the suit filed by Alba to be administratively

closed and that all discovery be stayed to allow the DOJ to fully conduct an investigation without the

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interference and distraction of ongoing civil litigation. The Court further ordered that the case will be reopened at the close of

the DOJ’s investigation. On November 8, 2011, at Alcoa’s request, the Court removed the case fromadministrative stay and

ordered Alba to file an Amended Complaint by November 28, 2011 and a RICO case statement 30 days thereafter for the limited

purpose of allowing Alcoa to move to dismiss Alba’s lawsuit. Pursuant to the November 8, 2011 order, briefing on the motion

to dismiss is to be completed by March 2012. Separately, the DOJ’s and SEC’s investigations are ongoing. While Alcoa has

been engaged in dialogue with both the DOJ and SEC, it is unable to reasonably predict an outcome or to estimate a range of

reasonably possible loss with regard to any of the governmental or private party matters discussed above, but such losses may

be material in a particular period to Alcoa’s results of operations.

In November 2006, in Curtis v. Alcoa Inc., Civil Action No. 3:06cv448 (E.D. Tenn.), a class action was filed by plaintiffs

representing approximately 13,000 retired former employees of Alcoa or Reynolds Metals Company and spouses and

dependents of such retirees alleging violation of the Employee Retirement Income Security Act (ERISA) and the LaborManagement Relations Act by requiring plaintiffs, beginning January 1, 2007, to pay health insurance premiums and increased

co-payments and co-insurance for certain medical procedures and prescription drugs. Plaintiffs alleged these changes to their

retiree health care plans violated their rights to vested health care benefits. Plaintiffs additionally alleged that Alcoa had

breached its fiduciary duty to plaintiffs under ERISA by misrepresenting to themthat their health benefits would never change.

Plaintiffs sought injunctive and declaratory relief, back payment of benefits, and attorneys’ fees. Alcoa had consented to

treatment of plaintiffs’ claims as a class action. During the fourth quarter of 2007, following briefing and argument, the court

ordered consolidation of the plaintiffs’ motion for preliminary injunction with trial, certified a plaintiff class, bifurcated and

stayed the plaintiffs’ breach of fiduciary duty claims, struck the plaintiffs’ jury demand, but indicated it would use an advisory

jury, and set a trial date of September 17, 2008. In August 2008, the court set a new trial date of March 24, 2009 and,

subsequently, the trial date was moved to September 22, 2009. In June 2009, the court indicated that it would not use an

advisory jury at trial. Trial in the matter was held over eight days commencing September 22, 2009 and ending on October 1,

2009 in federal court in Knoxville, TN before the Honorable Thomas Phillips, U.S. District Court Judge. At the conclusion of

evidence, the court set a post-hearing briefing schedule for submission of proposed findings of fact and conclusions of law by

the parties and for replies to the same. Post trial briefing was submitted on December 4, 2009.

On March 9, 2011, the court issued a judgment order dismissing plaintiffs’ lawsuit in its entirety with prejudice for the reasons

stated in its Findings of Fact and Conclusions of Law. On March 23, 2011, plaintiffs filed a motion for clarification and/or

amendment of the judgment order, which seeks, among other things, a declaration that plaintiffs’ retiree benefits are vested

subject to an annual cap and an injunction preventing Alcoa, prior to 2017, frommodifying the plan design to which plaintiffs

are subject or changing the premiums and deductibles that plaintiffs must pay. Also on March 23, 2011, plaintiffs filed a motion

for award of attorney’s fees and expenses. Alcoa filed its opposition to both motions on April 11, 2011. The time for plaintiffs to

appeal fromthe court’s March 9, 2011 judgment will not begin until the court disposes of these motions.

On April 23, 2004, St. CroixRenaissance Group, L.L.L.P. (SCRG), Brownfield Recovery Corp., and Energy Answers Corporation

of Puerto Rico (collectively referred to as “Plaintiffs”) filed a suit against St. CroixAlumina L.L.C. and Alcoa World Alumina,

LLC (collectively referred to as “Alcoa”) in the Territorial Court of the Virgin Islands, Division of St. Croixfor claims related to

the sale of Alcoa’s former St. Croixalumina refinery to Plaintiffs. Alcoa thereafter removed the case to federal court and after a

several year period of discovery and motion practice, a jury trial on the matter took place in St. CroixfromJanuary 11, 2011 to

January 20, 2011. The jury returned a verdict in favor of Plaintiffs and awarded damages as described: on a claimof breaches of

warranty, the jury awarded $13; on the same claim, the jury awarded punitive damages in the amount of $6; and on a negligence

claimfor property damage, the jury awarded $10. Plaintiffs filed a motion seeking pre-judgment interest on the jury award. On

February 17, 2011, Alcoa filed post-trial motions seeking judgment notwithstanding the verdict or, in the alternative, a new trial.

On May 31, 2011, the court granted Alcoa’s motion for judgment regarding Plaintiffs’ $10 negligence award and denied the

remainder of Alcoa’s motions. Additionally, the court awarded Plaintiffs pre-judgment interest of $2 on the breach of warranty

award. As a result of the court’s post-trial decisions, Alcoa recorded a charge of $20 in 2011 (See Note D). On June 14, 2011,

Alcoa filed a notice of appeal with the U.S. Court of Appeals for the Third Circuit regarding Alcoa’s

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denied post-trial motions. On June 22, 2011, SCRGfiled a notice of cross appeal with the Third Circuit Court related to certain

pre-trial decisions of the court and of the court’s post-trial ruling on the negligence claim. The Third Circuit Court referred this

matter to mediation as is its standard practice in appeals.

Before 2002, Alcoa purchased power in Italy in the regulated energy market and received a drawback of a portion of the price of

power under a special tariff in an amount calculated in accordance with a published resolution of the Italian Energy Authority,

Energy Authority Resolution n. 204/1999. In 2001, the Energy Authority published another resolution, which clarified that the

drawback would be calculated in the same manner, and in the same amount, in either the regulated or unregulated market. At

the beginning of 2002, Alcoa left the regulated energy market to purchase energy in the unregulated market. Subsequently, in

2004, the Energy Authority introduced regulation no. 148/2004 which set forth a different method for calculating the special

tariff that would result in a different drawback for the regulated and unregulated markets. Alcoa challenged the new regulation

in the Administrative Court of Milan and received a favorable judgment in 2006. Following this ruling, Alcoa continued to

receive the power price drawback in accordance with the original calculation method, through 2009, when the European

Commission declared allsuch special tariffs to be impermissible “state aid.” In 2010, the Energy Authority appealed the 2006

ruling to the Consiglio di Stato (final court of appeal). On December 2, 2011, the Consiglio di Stato ruled in favor of the Energy

Authority and against Alcoa, thus presenting the opportunity for the energy regulators to seek reimbursement fromAlcoa of

an amount equal to the difference between the actual drawback amounts received over the relevant time period, and the

drawback as it would have been calculated in accordance with regulation 148/2004. Any such reimbursement would have to be

made by way of a separate claimto Alcoa fromthe energy authorities and, thus far, no such claimhas been presented. At this

time, the company is unable to reasonably predict an outcome for this matter.

European Commission Matters. In July 2006, the European Commission (EC) announced that it had opened an investigation to

establish whether an extension of the regulated electricity tariff granted by Italy to some energy-intensive industries complies

with European Union (EU) state aid rules. The Italian power tariff extended the tariff that was in force until December 31, 2005

through November 19, 2009 (Alcoa has been incurring higher power costs at its smelters in Italy subsequent to the tariff end

date). The extension was originally through 2010, but the date was changed by legislation adopted by the Italian Parliament

effective on August 15, 2009. Prior to expiration of the tariff in 2005, Alcoa had been operating in Italy for more than 10 years

under a power supply structure approved by the EC in 1996. That measure provided a competitive power supply to the primary

aluminumindustry and was not considered state aid fromthe Italian Government. The EC’s announcement expressed concerns

about whether Italy’s extension of the tariff beyond 2005 was compatible with EU legislation and potentially distorted

competition in the European market of primary aluminum, where energy is an important part of the production costs.

On November 19, 2009, the EC announced a decision in this matter stating that the extension of the tariff by Italy constituted

unlawfulstate aid, in part, and, therefore, the Italian Government is to recover a portion of the benefit Alcoa received since

January 2006 (including interest). The amount of this recovery will be based on a calculation that is being prepared by the

Italian Government. Pending formal notification fromthe Italian Government, Alcoa estimates that a payment in the range of

$300 to $500 will be required (the timing of such payment is uncertain). In late 2009, after discussions with legal counsel and

reviewing the bases on which the EC decided, including the different considerations cited in the EC decision regarding Alcoa’s

two smelters in Italy, Alcoa recorded a charge of $250, including $20 to write off a receivable fromthe Italian Government for

amounts due under the now expired tariff structure. On April 19, 2010, Alcoa filed an appeal of this decision with the General

Court of the EU. Alcoa will pursue allsubstantive and procedural legalsteps available to annul the EC’s decision. On

May 22, 2010, Alcoa also filed with the General Court a request for injunctive relief to suspend the effectiveness of the

decision, but, on July 12, 2010, the General Court denied such request. On September 10, 2010, Alcoa appealed the July 12, 2010

decision to the European Court of Justice (ECJ); this appeal was dismissed on December 16, 2011.

On March 23, 2011, the EC announced that it has decided to refer the Italian Government to the ECJ for failure to comply with

the EC’s November 19, 2009 decision.

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Separately, on November 29, 2006, Alcoa filed an appeal before the General Court (formerly the European Court of First

Instance) seeking the annulment of the EC’s decision to open an investigation alleging that such decision did not follow the

applicable procedural rules. On March 25, 2009, the General Court denied Alcoa’s appeal. On May 29, 2009, Alcoa appealed the

March 25, 2009 ruling before the ECJ. The hearing of the May 29, 2009 appeal was held on June 24, 2010. On July 21, 2011, the

ECJ denied Alcoa’s appeal.

As a result of the EC’s November 19, 2009 decision, management had contemplated ceasing operations at its Italian smelters

due to uneconomical power costs. In February 2010, management agreed to continue to operate its smelters in Italy for up to six

months while a long-termsolution to address increased power costs could be negotiated.

Also in February 2010, the Italian Government issued a decree, which was converted into law by the Italian Parliament in March

2010, to provide interruptibility rights to certain industrial customers who were willing to be subject to temporary interruptions

in the supply of power (i.e. compensation for power interruptions when grids are overloaded) over a three-year period. Alcoa

applied for and was granted such rights (expiring on December 31, 2012) related to its Portovesme smelter. In May 2010, the EC

stated that, based on their review of the validity of the decree, the interruptibility rights should not be considered state aid. On

July 29, 2010, Alcoa executed a new power agreement effective September 1, 2010 through December 31, 2012 for the

Portovesme smelter, replacing the short-term, market-based power contract that was in effect since early 2010.

Additionally in May 2010, Alcoa and the Italian Government agreed to a temporary idling of the Fusina smelter. As of June 30,

2010, the Fusina smelter was fully curtailed (44 kmt-per-year).

At the end of 2011, as part of a restructuring of Alcoa’s globalsmelting system(see Note D), management decided to curtail

operations at the Portovesme smelter during the first half of 2012. This action may lead to the permanent closure of the

Portovesme smelter, due to the uncertain prospects for viable, long-termpower once the current agreement expires at the end of

2012, along with rising raw materials costs and falling global aluminumprices (mid-2011 to late 2011).

In January 2007, the EC announced that it had opened an investigation to establish whether the regulated electricity tariffs

granted by Spain comply with EU state aid rules. At the time the EC opened its investigation, Alcoa had been operating in

Spain for more than nine years under a power supply structure approved by the Spanish Government in 1986, an equivalent

tariff having been granted in 1983. The investigation is limited to the year 2005 and is focused both on the energy-intensive

consumers and the distribution companies. The investigation provided 30 days to any interested party to submit observations

and comments to the EC. With respect to the energy-intensive consumers, the EC opened the investigation on the assumption

that prices paid under the tariff in 2005 were lower than a pool price mechanism, therefore being, in principle, artificially below

market conditions. Alcoa submitted comments in which the company provided evidence that prices paid by energy-intensive

consumers were in line with the market, in addition to various legal arguments defending the legality of the Spanish tariff

system. It is Alcoa’s understanding that the Spanish tariff systemfor electricity is in conformity with all applicable laws and

regulations, and therefore no state aid is present in the tariff system. While Alcoa does not believe that an unfavorable

decision is probable, management has estimated that the total potential impact froman unfavorable decision could be

approximately $90 (€70) pretax. Also, while Alcoa believes that any additional cost would only be assessed for the year 2005, it

is possible that the EC could extend its investigation to later years. If the EC’s investigation concludes that the regulated

electricity tariffs for industries are unlawful, Alcoa will have an opportunity to challenge the decision in the EU courts.

Environmental Matters. Alcoa continues to participate in environmental assessments and cleanups at a number of locations

(more than 100). These include owned or operating facilities and adjoining properties, previously owned or operating facilities

and adjoining properties, and waste sites, including Superfund (Comprehensive Environmental Response, Compensation and

Liability Act (CERCLA)) sites. A liability is recorded for environmental remediation when a cleanup programbecomes probable

and the costs or damages can be reasonably estimated.

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As assessments and cleanups proceed, the liability is adjusted based on progress made in determining the extent of remedial

actions and related costs and damages. The liability can change substantially due to factors such as the nature and extent of

contamination, changes in remedial requirements, and technological changes, among others.

Alcoa’s remediation reserve balance was $347 and $333 at December 31, 2011 and 2010 (of which $58 and $31 was classified as a

current liability), respectively, and reflects the most probable costs to remediate identified environmental conditions for which

costs can be reasonably estimated. In 2011, the remediation reserve was increased by $31 due to charges of $18 related to the

decision to permanently shut down and demolish a U.S. smelter (see Note D) and a net increase of $13 associated with a

number of other sites. In 2010, the remediation reserve was increased by $46 due to charges of $19 related to the Massena

West, NYsite discussed below, $14 related to the decision to permanently shut down and demolish two U.S. smelters (see Note

D), and $11 related to a settlement offer made in late 2010 for outstanding claims resulting fromhistorical discharges into nearby

rivers fromboth smelters in Massena, NY(separate frommatter below); a reversal of $9 for previous charges related to a facility

located in Russia due to new information; and a net increase of $11 associated with a number of other sites. In both periods, the

changes to the remediation reserve, except for the aforementioned $18 in 2011 and $14 in 2010, were recorded in Cost of goods

sold on the accompanying Statement of Consolidated Operations. Payments related to remediation expenses applied against

the reserve were $19 and $17 in 2011 and 2010, respectively. These amounts include expenditures currently mandated, as well as

those not required by any regulatory authority or third party. In 2011 and 2010, the change in the reserve also reflects a

decrease of $1 and $3, respectively, due to the effects of foreign currency translation. Also, the change in the 2011 reserve

reflects an increase of $3 related to the acquisition of an aerospace fasteners business (see Note F).

Included in annual operating expenses are the recurring costs of managing hazardous substances and environmental programs.

These costs are estimated to be approximately 2% of cost of goods sold.

The following discussion provides details regarding the current status of certain significant reserves related to current or

former Alcoa sites.

Massena West, NY—Alcoa has been conducting investigations and studies of the Grasse River, adjacent to Alcoa’s Massena

plant site, under a 1989 order fromthe U.S. Environmental Protection Agency (EPA) issued under CERCLA. Sediments and fish

in the river contain varying levels of polychlorinated biphenyls (PCBs).

Alcoa submitted various Analysis of Alternatives Reports to the EPA starting in 1998 through 2002 that reported the results of

river and sediment studies, potential alternatives for remedial actions related to the PCB contamination, and additional

information requested by the EPA.

In June 2003, the EPA requested that Alcoa gather additional field data to assess the potential for sediment erosion fromwinter

river ice formation and breakup. The results of these additionalstudies, submitted in a report to the EPA in April 2004, suggest

that this phenomenon has the potential to occur approximately every 10 years and may impact sediments in certain portions of

the river under all remedialscenarios. The EPA informed Alcoa that a final remedial decision for the river could not be made

without substantially more information, including river pilot studies on the effects of ice formation and breakup on each of the

remedial techniques. Alcoa submitted to the EPA, and the EPA approved, a Remedial Options Pilot Study (ROPS) to gather this

information. The scope of this study included sediment removal and capping, the installation of an ice controlstructure, and

significant monitoring.

From2004 through 2008, Alcoa completed the work outlined in the ROPS. In November 2008, Alcoa submitted an update to the

EPA incorporating the new information obtained fromthe ROPS related to the feasibility and costs associated with various

capping and dredging alternatives, including options for ice control. As a result, Alcoa increased the reserve associated with

the Grasse River by $40 for the estimated costs of a proposed ice control remedy and for partialsettlement of potential damages

of natural resources.

In late 2009, the EPA requested that Alcoa submit a complete revised Analysis of Alternatives Report in March 2010 to address

questions and comments fromthe EPA and various stakeholders. On March 24, 2010, Alcoa submitted the

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revised report, which included an expanded list of proposed remedial alternatives, as directed by the EPA. Alcoa increased the

reserve associated with the Grasse River by $17 to reflect an increase in the estimated costs of the Company’s recommended

capping alternative as a result of changes in scope that occurred due to the questions and comments fromthe EPA and various

stakeholders. While the EPA reviews the revised report, Alcoa will continue with its on-going monitoring and field studies

activities. In late 2010, Alcoa increased the reserve by $2 based on the most recent estimate of costs expected to be incurred for

on-going monitoring and field studies activities. In late 2011, the EPA and various stakeholders completed their review of the

March 2010 revised report and submitted questions and comments to Alcoa. As a result, Alcoa increased the reserve by $1 to

reflect a revision in the estimate of costs expected to be incurred for on-going monitoring and field studies activities.

The ultimate selection of a remedy may result in additional liability. Alternatives analyzed in the most recent Analysis of

Alternatives report that are equally effective as the recommended capping remedy range in additional estimated costs between

$20 and $100. Alcoa may be required to record a subsequent reserve adjustment at the time the EPA’s Record of Decision is

issued that may exceed the estimated range.

Sherwin, TX—In connection with the sale of the Sherwin alumina refinery, which was required to be divested as part of the

Reynolds merger in 2000, Alcoa agreed to retain responsibility for the remediation of the then existing environmental

conditions, as well as a pro rata share of the final closure of the active waste disposal areas, which remain in use. Alcoa’s share

of the closure costs is proportional to the total period of operation of the active waste disposal areas. Alcoa estimated its

liability for the active disposal areas by making certain assumptions about the period of operation, the amount of material

placed in the area prior to closure, and the appropriate technology, engineering, and regulatory status applicable to final

closure. The most probable cost for remediation was reserved.

East St. Louis, IL—In response to questions regarding environmental conditions at the former East St. Louis operations, Alcoa

and the City of East St. Louis, the owner of the site, entered into an administrative order with the EPA in December 2002 to

performa remedial investigation and feasibility study of an area used for the disposal of bauxite residue fromhistoric alumina

refining operations. A draft feasibility study was submitted to the EPA in April 2005. The feasibility study included remedial

alternatives that ranged fromno further action to significant grading, stabilization, and water management of the bauxite residue

disposal areas. As a result, Alcoa increased the environmental reserve for this location by $15 in 2005. The EPA’s ultimate

selection of a remedy could result in additional liability. Alcoa may be required to record a subsequent reserve adjustment at

the time the EPA’s Record of Decision is issued.

Vancouver, WA—In 1987, Alcoa sold its Vancouver smelter to a company that is now known as Evergreen Aluminum

(Evergreen). The purchase and sale agreement contained a provision that Alcoa retain liability for any environmental issues

that arise subsequent to the sale that pre-date 1987. As a result of this obligation, Alcoa recorded a reserve for the Vancouver

location at that time. Evergreen decommissioned the smelter and cleaned up its portion of the site under a consent order with

the Washington Department of Ecology (WDE). In February 2008, Evergreen notified Alcoa that it had identified numerous

areas containing contamination that predated 1987.

Separately, in September 2008, Alcoa completed a Remedial Investigation/Feasibility Study (RI/FS) under the Washington State

Model Toxics Control Act and negotiated a consent decree with the WDE, which requires Alcoa to complete cleanup of PCB

contaminated sediments in the Columbia River as well as remediate soil contamination in upland portions of the Vancouver

property.

In late 2008, Alcoa started cleanup work on the Columbia River and discovered additional contamination and waste materials

along the shoreline area and in upland areas. In addition, Evergreen presented additional cost estimates for contaminated areas

that were discovered since March 2008.

As a result of all of the above items related to the former Vancouver site, Alcoa increased the environmental reserve by $16 in

2008.

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While continuing the cleanup work on the Columbia River in early 2009, Alcoa discovered more contamination and waste

materials, resulting in a $2 increase to the environmental reserve. Later in 2009, cleanup work was completed related to the

Evergreen property, the Columbia River, and the upland portions of the Vancouver property. Alcoa submitted a final report on

this cleanup work to the WDE near the end of 2009 satisfying the remediation requirements of the consent decree.

On March 17, 2010, Alcoa received a letter fromthe WDE stating that the work performed by Alcoa related to the Columbia

River and the upland portions of the Vancouver property met all of the requirements of the consent decree, as well as the

industrial cleanup standards under the Washington State Model Toxics Control Act. No additional reserve adjustment was

necessary.

Fusina andPortovesme, Italy—In 1996, Alcoa acquired the Fusina smelter and rolling operations and the Portovesme smelter,

both of which are owned by Alcoa’s subsidiary Alcoa Trasformazioni S.r.l., fromAlumix, an entity owned by the Italian

Government. At the time of the acquisition, Alumixindemnified Alcoa for pre-existing environmental contamination at the sites.

In 2004, the Italian Ministry of Environment (MOE) issued orders to Alcoa Trasformazioni S.r.l. and Alumixfor the development

of a clean-up plan related to soil contamination in excess of allowable limits under legislative decree and to institute emergency

actions and pay natural resource damages. Alcoa Trasformazioni S.r.l. appealed the orders and filed suit against Alumix, among

others, seeking indemnification for these liabilities under the provisions of the acquisition agreement. In 2009, Ligestra S.r.l.,

Alumix’s successor, and Alcoa Trasformazioni S.r.l. agreed to a stay on the court proceedings while investigations were

conducted and negotiations advanced towards a possible settlement. In December 2009, Alcoa Trasformazioni S.r.l. and

Ligestra S.r.l. reached an agreement for settlement of the liabilities related to Fusina while negotiations continue related to

Portovesme. The agreement outlines an allocation of payments to the MOE for emergency action and natural resource damages

and the scope and costs for a proposed soil remediation project, which was formally presented to the MOE in mid-2010. The

agreement is contingent upon final acceptance of the remediation project by the MOE. As a result of entering into this

agreement, Alcoa increased the reserve by $12 for Fusina. Additionally, due to new information derived fromthe site

investigations conducted at Portovesme in 2009, Alcoa increased the reserve by $3 in 2009.

Other. In addition to the matters discussed above, various other lawsuits, claims, and proceedings have been or may be

instituted or asserted against Alcoa, including those pertaining to environmental, product liability, and safety and health

matters. While the amounts claimed in these other matters may be substantial, the ultimate liability cannot now be determined

because of the considerable uncertainties that exist. Therefore, it is possible that the Company’s liquidity or results of

operations in a particular period could be materially affected by one or more of these other matters. However, based on facts

currently available, management believes that the disposition of these other matters that are pending or asserted will not have a

material adverse effect, individually or in the aggregate, on the financial position of the Company.

Commitments

Investments. Alumínio, a wholly-owned subsidiary of Alcoa, is a participant in several hydroelectric power projects in Brazil for

purposes of increasing its energy self-sufficiency and providing a long-term, low-cost source of power for its facilities. Two of

these projects, Machadinho and Barra Grande, were completed in 2002 and 2006, respectively.

Alumínio committed to taking a share of the output of the Machadinho and Barra Grande projects each for 30 years at cost

(including cost of financing the project). In the event that other participants in either one of these projects fail to fulfill their

financial responsibilities, Alumínio may be required to fund a portion of the deficiency. In accordance with the respective

agreements, if Alumínio funds any such deficiency, its participation and share of the output fromthe respective project will

increase proportionately.

Alumínio accounts for the Machadinho and Barra Grande hydroelectric projects as equity method investments. Alumínio’s

investment participation in these projects is 30.99% for Machadinho and 42.18% for Barra Grande. Its total investment in these

projects was $266 (R$496) and $274 (R$461) at December 31, 2011 and 2010, respectively. Alcoa’s maximumexposure to loss on

these completed projects is approximately $300 (R$570), which represents

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Alumínio’s investments in both projects and guarantee of debt for Machadinho only (the guarantee by the participants in the

Barra Grande project was released by the lender effective December 29, 2010) as of December 31, 2011.

In early 2006, Alumínio acquired an additional 6.41% share in the Estreito hydroelectric power project, reaching 25.49% of total

participation in the consortium. This additionalshare entitles Alumínio to 38 megawatts of assured energy. Alumínio’s share of

the project is estimated to have installed capacity of approximately 280 megawatts and assured power of approximately 150

megawatts. In December 2006, the consortiumobtained the environmental installation license, after completion of certain

socioeconomic and cultural impact studies as required by a governmental agency. Construction began in early 2007 and is

expected to be completed in 2012 (start-up of the facility began in April 2011 with full capacity expected to be reached in 2012).

In early 2010, the consortiumapproved an increase of approximately $720 (R$1,300) in estimated costs to complete the Estreito

project as a result of currency, inflation, and the price and scope of construction, among other factors. Total estimated project

costs are approximately $2,600 (R$4,900) and Alumínio’s share is approximately $670 (R$1,250). As of December 31, 2011,

approximately $630 (R$1,170) of Alumínio’s commitment was expended on the project.

Construction began on the Serra do Facão hydroelectric power project in early 2007 and was completed in the first half of 2011

(this facility is operating at full capacity). Alumínio’s share of the Serra do Facão project is 34.97% and entitles Alumínio to

approximately 65 megawatts of assured power. Total estimated project costs are approximately $540 (R$1,000) and Alumínio’s

share is approximately $190 (R$350). Through March 31, 2009, the participants in the consortiumwere required to provide

capital for their respective share of the project costs. In April 2009, the consortiumobtained long-termfinancing for the

estimated remaining costs of construction. At that time, the participants in this project were no longer required to provide

capital for their share of the project costs. Instead, the participants were each required to guarantee (expires 2027) a portion of

the consortium’s debt. In mid-2010, the capacity under the long-termfinancing arrangement was exhausted; therefore, the

participants were once again required to begin providing capital for their share of the remaining costs. As of December 31, 2011,

approximately $180 (R$340) of Alumínio’s commitment was expended on the project (includes both funds provided by Alumínio

and Alumínio’s share of the long-termfinancing). Alumínio accounts for the Serra do Facão hydroelectric power project as an

equity method investment and its total investment in this project was $105 (R$196) and $116 (R$195) at December 31, 2011 and

2010, respectively. Alcoa’s maximumexposure to loss on this project is approximately $220 (R$400), which represents

Alumínio’s investment and guarantee of debt as of December 31, 2011.

With Machadinho, Barra Grande, Serra do Facão, and part of Estreito, Alumínio’s current power self-sufficiency is 67% (will be

approximately 70% once the Estreito hydroelectric power project described above is completed and operating at full capacity),

to meet a total energy demand of approximately 690 megawatts fromtwo smelters (São Luís (Alumar) and Poços de Caldas) and

one refinery (Poços de Caldas) in Brazil.

In 2004, Alcoa acquired a 20% interest in a consortium, which subsequently purchased the Dampier to Bunbury Natural Gas

Pipeline (DBNGP) in Western Australia, in exchange for an initial cash investment of $17 (A$24). The investment in the DBNGP,

which is classified as an equity investment, was made in order to secure a competitively priced long-termsupply of natural gas

to Alcoa’s refineries in Western Australia. Alcoa has made additional contributions of $141 (A$176), including $16 (A$16) and

$9 (A$9) in 2011 and 2010, respectively, for its share of the pipeline capacity expansion and other operational purposes of the

consortium. No further expansion of the pipeline’s capacity is planned at this time. In late 2011, the consortiuminitiated a threeyear equity call plan to improve its capitalization structure. This plan requires Alcoa to contribute $40 (A$40), of which $5 (A$6)

was made in 2011. In addition to its equity ownership, Alcoa has an agreement to purchase gas transmission services fromthe

DBNGP. At December 31, 2011, Alcoa has an asset of $346 (A$342) representing prepayments made under the agreement for

future gas transmission services. Alcoa’s maximumexposure to loss on the investment and the related contract is

approximately $510 (A$510) as of December 31, 2011.

Purchase Obligations. Alcoa is party to unconditional purchase obligations for energy that expire between 2012 and 2041.

Commitments related to these contracts total $286 in 2012, $300 in 2013, $309 in 2014, $309 in 2015, $308 in 2016, and $6,234

thereafter. Expenditures under these contracts totaled $227 in 2011, $129 in 2010, and $87 in 2009.

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Additionally, Alcoa has entered into other purchase commitments for energy, raw materials, and other goods and services,

which total $3,723 in 2012, $2,198 in 2013, $2,095 in 2014, $1,830 in 2015, $1,823 in 2016, and $10,906 thereafter.

Operating Leases. Certain computer equipment, plant equipment, vehicles, and buildings and alumina refinery process control

technology are under operating lease agreements. Total expense fromcontinuing operations for all leases was $287 in 2011,

$260 in 2010, and $249 in 2009. Under long-termoperating leases, minimumannual rentals are $246 in 2012, $159 in 2013, $126 in

2014, $109 in 2015, $86 in 2016, and $564 thereafter.

Guarantees. At December 31, 2011, Alcoa has maximumpotential future payments for guarantees issued on behalf of certain

third parties of $779. These guarantees expire in 2015 through 2027 and relate to project financing for hydroelectric power

projects in Brazil and the aluminumcomplexin Saudi Arabia (see Note 1). Alcoa also has outstanding bank guarantees related

to legal, customs duties, and leasing obligations, among others. The total amount committed under these guarantees, which

expire at various dates, was $436 at December 31, 2011.

Letters of Credit. Alcoa has outstanding letters of credit primarily related to workers’ compensation, derivative contracts, and

leasing obligations. The total amount committed under these letters of credit, which expire at various dates, mostly in 2012, was

$334 at December 31, 2011.

Surety Bonds. Alcoa has outstanding surety bonds primarily related to customs duties, self-insurance, and legal obligations.

The total amount committed under these bonds, which automatically renew or expire at various dates, mostly in 2012, was $183

at December 31, 2011.

O. Other (Income) Expenses, Net

2011 2010 2009

Equity (income) loss $ (15) $ (14) $ 14

Interest income (20) (19) (18)

Foreign currency losses (gains), net 16 13 (82)

Net gain fromasset sales (41) (9) (106)

Net (gain) loss on mark-to-market derivative contracts (X) (52) 37 62

Other, net 25 (3) (31)

$ (87) $ 5 $(161)

In 2011, Equity income included higher earnings froman investment in a natural gas pipeline in Australia due to the recognition

of a discrete income taxbenefit by the consortium(Alcoa World Alumina and Chemicals’ share of the benefit was $24). Also in

2011, Net gain fromasset sales included a $43 gain related to the sale of land in Australia. In 2009, Net gain fromasset sales

included a $188 gain related to the Elkem/Sapa AB exchange transaction (see Note F), a $182 loss on the sale of an equity

method investment, and a $92 gain related to the acquisition of a BHP subsidiary (see Note F).

P. Cash FlowInformation

Cash paid for interest and income taxes was as follows:

2011 2010 2009

Interest, net of amount capitalized $ 491 $ 452 $ 396

Income taxes, net of amount refunded 382 (67) 168

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The details related to cash paid for acquisitions were as follows:

2011 2010 2009

Assets acquired $ 253 $ 87 $ 389

Liabilities assumed (12) (15) (294)

Noncontrolling interests acquired - 4 -

Redemption of convertible securities of subsidiary - 40 -

Reduction in Alcoa shareholders’ equity - 22 -

Gain recognized - - (92)

Cash paid 241 138 3

Less: cash acquired 1 - 115

Net cash paid (received) $ 240 $ 138 $(112)

In 2011 and 2010, Alcoa issued $600 in common stock to satisfy a portion of its accrued pension benefits liability (see Notes R

and W).

Q. Segment andGeographic Area Information

Alcoa is primarily a producer of aluminumproducts. Aluminumand alumina represent more than 80% of Alcoa’s revenues.

Nonaluminumproducts include precision castings and aerospace and industrial fasteners. Alcoa’s segments are organized by

product on a worldwide basis. Segment performance under Alcoa’s management reporting systemis evaluated based on a

number of factors; however, the primary measure of performance is the after-taxoperating income (ATOI) of each segment.

Certain items such as the impact of LIFO inventory accounting; interest expense; noncontrolling interests; corporate expense

(general administrative and selling expenses of operating the corporate headquarters and other global administrative facilities,

along with depreciation and amortization on corporate-owned assets); restructuring and other charges; discontinued

operations; and other items, including intersegment profit eliminations and other metal adjustments, differences between tax

rates applicable to the segments and the consolidated effective taxrate, the results of the soft alloy extrusions business in

Brazil, and other nonoperating items such as foreign currency transaction gains/losses and interest income are excluded from

segment ATOI. Segment assets exclude, among others, cash and cash equivalents; deferred income taxes; goodwill not

allocated to businesses for segment reporting purposes; corporate fixed assets; LIFO reserves; and other items, including the

assets of the soft alloy extrusions business in Brazil and assets classified as held for sale related to discontinued operations.

The accounting policies of the segments are the same as those described in the Summary of Significant Accounting Policies

(see Note A). Transactions among segments are established based on negotiation among the parties. Differences between

segment totals and Alcoa’s consolidated totals for line items not reconciled are in Corporate.

Alcoa’s products are used worldwide in transportation (including aerospace, automotive, truck, trailer, rail, and shipping),

packaging, building and construction, oil and gas, defense, and industrial applications. Total export sales fromthe U.S.

included in continuing operations were $1,988 in 2011, $1,543 in 2010, and $1,530 in 2009.

Alcoa’s operations consist of four worldwide reportable segments as follows:

Alumina. This segment represents a portion of Alcoa’s upstreamoperations and consists of the Company’s worldwide refinery

system, including the mining of bauxite, which is then refined into alumina. Alumina is mainly sold directly to internal and

externalsmelter customers worldwide or is sold to customers who process it into industrial chemical products. A portion of this

segment’s third-party sales are completed through the use of agents, alumina traders, and distributors. Slightly more than half

of Alcoa’s alumina production is sold under supply contracts to third parties worldwide, while the remainder is used internally

by the Primary Metals segment.

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Primary Metals. This segment represents a portion of Alcoa’s upstreamoperations and consists of the Company’s worldwide

smelter system. Primary Metals receives alumina, mostly fromthe Alumina segment, and produces primary aluminumused by

Alcoa’s fabricating businesses, as well as sold to external customers, aluminumtraders, and commodity markets. Results from

the sale of aluminumpowder, scrap, and excess power are also included in this segment, as well as the results of aluminum

derivative contracts and buy/resell activity. Primary aluminumproduced by Alcoa and used internally is transferred to other

segments at prevailing market prices. The sale of primary aluminumrepresents more than 90% of this segment’s third-party

sales. Buy/resell activity refers to when this segment purchases metal fromexternal or internalsources and resells such metal to

external customers or the midstreamand downstreamsegments in order to maximize smelting systemefficiency and to meet

customer requirements.

Flat-RolledProducts. This segment represents Alcoa’s midstreamoperations, whose principal business is the production and

sale of aluminumplate and sheet. A small portion of this segment’s operations relate to foil produced fromone plant in Brazil.

This segment includes rigid container sheet (RCS), which is sold directly to customers in the packaging and consumer market

and is used to produce aluminumbeverage cans. Seasonal increases in RCS sales are generally experienced in the second and

third quarters of the year. This segment also includes sheet and plate used in the aerospace, automotive, commercial

transportation, and building and construction markets (mainly used in the production of machinery and equipment and

consumer durables), which is sold directly to customers and through distributors. Approximately one-half of the third-party

sales in this segment consist of RCS, while the other one-half of third-party sales are derived fromsheet and plate and foil used

in industrial markets. While the customer base for flat-rolled products is large, a significant amount of sales of RCS, sheet, and

plate is to a relatively small number of customers.

EngineeredProducts andSolutions. This segment represents Alcoa’s downstreamoperations and includes titanium,

aluminum, and super alloy investment castings; forgings and fasteners; aluminumwheels; integrated aluminumstructural

systems; and architectural extrusions used in the aerospace, automotive, building and construction, commercial transportation,

and power generation markets. These products are sold directly to customers and through distributors. Additionally, hard alloy

extrusions products, which are also sold directly to customers and through distributors, serve the aerospace, automotive,

commercial transportation, and industrial products markets.

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The operating results and assets of Alcoa’s reportable segments were as follows:

Alumina

Primary

Metals

FlatRolled

Products

Engineered

Products

and

Solutions Total

2011

Sales:

Third-party sales $ 3,462 $ 8,240 $ 7,642 $ 5,345 $24,689

Intersegment sales 2,727 3,192 218 - 6,137

Totalsales $ 6,189 $ 11,432 $ 7,860 $ 5,345 $30,826

Profit and loss:

Equity income (loss) $ 25 $ (7) $ (3) $ 1 $ 16

Depreciation, depletion, and amortization 444 556 237 158 1,395

Income taxes 179 92 104 260 635

ATOI 607 481 266 539 1,893

2010

Sales:

Third-party sales $ 2,815 $ 7,070 $ 6,277 $ 4,584 $20,746

Intersegment sales 2,212 2,597 180 - 4,989

Totalsales $ 5,027 $ 9,667 $ 6,457 $ 4,584 $25,735

Profit and loss:

Equity income $ 10 $ 1 $ - $ 2 $ 13

Depreciation, depletion, and amortization 406 571 238 154 1,369

Income taxes 60 96 92 195 443

ATOI 301 488 220 415 1,424

2009

Sales:

Third-party sales $ 2,161 $ 5,252 $ 6,069 $ 4,689 $18,171

Intersegment sales 1,534 1,836 113 - 3,483

Totalsales $ 3,695 $ 7,088 $ 6,182 $ 4,689 $21,654

Profit and loss:

Equity income (loss) $ 8 $ (26) $ - $ 2 $ (16)

Depreciation, depletion, and amortization 292 560 227 177 1,256

Income taxes (22) (365) 48 139 (200)

ATOI 112 (612) (49) 315 (234)

2011

Assets:

Capital expenditures $ 371 $ 463 $ 157 $ 173 $ 1,164

Equity investments 450 925 123 - 1,498

Goodwill 11 991 208 2,666 3,876

Total assets 9,782 11,867 4,559 5,831 32,039

2010

Assets:

Capital expenditures $ 295 $ 380 $ 104 $ 125 $ 904

Equity investments 413 741 60 - 1,214

Goodwill 12 993 207 2,523 3,735

Total assets 9,967 11,947 4,522 5,434 31,870

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The following tables reconcile certain segment information to consolidated totals:

2011 2010 2009

Sales:

Totalsegment sales $30,826 $25,735 $21,654

Elimination of intersegment sales (6,137) (4,989) (3,483)

Corporate* 262 267 268

Consolidated sales $24,951 $21,013 $18,439

* For all periods presented, the Corporate amount includes third-party sales of three soft alloy extrusion facilities located in

Brazil.

2011 2010 2009

Net income (loss) attributable to Alcoa:

Totalsegment ATOI $1,893 $1,424 $ (234)

Unallocated amounts (net of tax):

Impact of LIFO (38) (16) 235

Interest expense (340) (321) (306)

Noncontrolling interests (194) (138) (61)

Corporate expense (290) (291) (304)

Restructuring and other charges (196) (134) (155)

Discontinued operations (3) (8) (166)

Other (221) (262) (160)

Consolidated net income (loss) attributable to Alcoa $ 611 $ 254 $(1,151)

December 31, 2011 2010

Assets:

Totalsegment assets $32,039 $31,870

Elimination of intersegment receivables (483) (471)

Unallocated amounts:

Cash and cash equivalents 1,939 1,543

Deferred income taxes 3,738 3,400

Corporate goodwill 1,375 1,387

Corporate fixed assets, net 943 930

LIFO reserve (801) (742)

Other 1,370 1,376

Consolidated assets $40,120 $39,293

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Geographic information for sales was as follows (based upon the country where the point of sale occurred):

2011 2010 2009

Sales:

U.S.* $12,295 $10,560 $ 9,546

Australia 3,587 2,842 2,287

Spain 1,487 1,234 1,099

Brazil 1,371 1,182 897

Netherlands** 1,025 940 1,002

Norway 927 809 477

France 825 662 669

Russia 761 584 383

Hungary 665 505 419

Italy 537 418 394

United Kingdom 412 331 379

China 283 188 156

Germany 229 231 260

Other 547 527 471

$24,951 $21,013 $18,439

* Sales that occurred in the U.S. include a portion of alumina fromAlcoa’s refineries in Suriname, Brazil, Australia, and Jamaica

and aluminumfromthe Company’s smelters in Canada.

**Sales that occurred in the Netherlands include aluminumfromAlcoa’s smelter in Iceland.

Geographic information for long-lived assets was as follows (based upon the physical location of the assets):

December 31, 2011 2010

Long-lived assets:

Brazil $ 4,844 $ 5,470

U.S. 4,573 4,528

Australia 3,390 3,380

Iceland 1,615 1,633

Canada 1,447 1,440

Norway 894 981

Russia 531 554

Spain 451 483

China 424 410

Jamaica 417 435

Other 830 869

$19,416 $20,183

R. PreferredandCommon Stock

PreferredStock. Alcoa has two classes of preferred stock: Class A Preferred Stock and Class B Serial Preferred Stock. Class A

Preferred Stock has 660,000 shares authorized at a par value of $100 per share with an annual $3.75 cumulative dividend

preference per share. There were 546,024 of such shares outstanding at December 31, 2011 and 2010. Class B Serial Preferred

Stock has 10 million shares authorized (none issued) and a par value of $1 per share.

Common Stock. There are 1.8 billion shares authorized at a par value of $1 per share, and 1,177,906,557 and 1,141,387,994 shares

were issued at December 31, 2011 and 2010, respectively. The current dividend yield as authorized by Alcoa’s Board of

Directors is $0.12 per annumor $0.03 per quarter.

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In January 2011, Alcoa contributed 36,518,563 newly issued shares of its common stock to a master trust that holds the assets

of certain U.S. defined benefit pension plans in a private placement transaction. These shares were valued at $16.43 per share

(the closing price of Alcoa’s common stock on January 24, 2011), or $600 in the aggregate, and were issued to satisfy the

estimated minimumrequired funding and to provide additional funding towards maintaining an approximately 80% funded

status of Alcoa’s U.S. pension plans. On January 25, 2011, the 36,518,563 shares were registered under Alcoa’s then-current

shelf registration statement dated March 10, 2008 (replaced by shelf registration statement dated February 18, 2011) for resale

by the master trust, as selling stockholder.

In January 2010, Alcoa contributed 44,313,146 newly issued shares of its common stock to a master trust that holds the assets

of certain U.S. defined benefit pension plans in a private placement transaction. These shares were valued at $13.54 per share

(the closing price of Alcoa’s common stock on January 26, 2010), or $600 in the aggregate, and were issued to satisfy a portion

of Alcoa’s future funding obligations to these plans, including a portion of the estimated minimumrequired funding for 2011.

On January 27, 2010, the 44,313,146 shares were registered under Alcoa’s then-current shelf registration statement dated

March 10, 2008 for resale by the master trust, as selling stockholder.

As of December 31, 2011, 110 million and 93 million shares of common stock were reserved for issuance upon conversion of

convertible notes and under Alcoa’s stock-based compensation plans, respectively. Alcoa issues shares fromtreasury stock to

satisfy the exercise of stock options and the conversion of stock awards.

Alcoa had a share repurchase program(expired on December 31, 2010) that authorized the purchase of up to 25% (or

approximately 217 million shares) of its outstanding common stock at December 31, 2006, in the open market or through

privately negotiated transactions, directly or through brokers or agents. During the termof this program(began in October

2007), Alcoa repurchased 101 million shares (share repurchases were suspended in October 2008 to preserve liquidity in light of

the then global economic downturn).

Share Activity (number of shares)

Common stock

Treasury Outstanding

Balance at endof 2008 124,257,170 800,317,368

Public offering - 172,500,000

Issued for stock-based compensation plans (1,561,452) 1,561,452

Balance at endof 2009 122,695,718 974,378,820

Private placement - 44,313,146

Conversion of convertible notes - 310

Issued for stock-based compensation plans (3,333,689) 3,333,689

Balance at endof 2010 119,362,029 1,022,025,965

Private placement - 36,518,563

Issued for stock-based compensation plans (5,867,538) 5,867,538

Balance at endof 2011 113,494,491 1,064,412,066

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Stock-basedCompensation

Stock options under Alcoa’s stock-based compensation plans are granted in January each year at not less than market prices

on the dates of grant. Prior to 2011, performance stock options were also granted to certain individuals. For performance stock

options granted in 2010, the final number of options earned was based on Alcoa’s adjusted free cash flow and profitability

against pre-established targets. For performance stock options granted in 2009, the final number of options earned was based

on Alcoa’s adjusted free cash flow against a pre-established target. Stock option features based on date of original grant were

as follows:

Date of

original grant Vesting Term Reloadfeature

2002 and prior One year 10 years One reload

over option term

2003 3 years

(1/3 each year)

10 years One reload in 2004 for 1/3

vesting in

2004

2004 - 2009 3 years

(1/3 each year)

6 years None

2010 and forward 3 years

(1/3 each year)

10 years

None

In addition to the stock options described above, Alcoa grants stock awards that vest three years fromthe date of grant. In

2010 and 2009, certain of these stock awards were granted with the same performance conditions described above for

performance stock options. In 2011, the final number of performance stock awards earned will be based on the achievement of

sales and profitability targets over a three-year period (2011-2013). One-third of the award will be earned each year based on the

performance against pre-established targets for that year. The performance stock awards earned over the three-year period vest

in 2014.

Most plan participants can choose whether to receive their award in the formof stock options, stock awards, or a combination

of both. This choice is made before the grant is issued and is irrevocable.

The following table summarizes the total compensation expense recognized for allstock options and stock awards (there was

no stock-based compensation expense capitalized in 2011, 2010, or 2009):

2011 2010 2009

Compensation expense recognized:

Stock option grants $ 34 $ 44 $ 53

Stock award grants 49 40 34

Total compensation expense before income taxes 83 84 87

Benefit for income taxes 27 27 29

Total compensation expense, net of income taxes $ 56 $ 57 $ 58

As part of Alcoa’s stock-based compensation plan design, individuals who are retirement-eligible have a six-month requisite

service period in the year of grant. As a result, a larger portion of expense will be recognized in the first half of each year for

these retirement-eligible employees. Of the total compensation expense before income taxes included in the table above, $18,

$19, and $21 in 2011, 2010, and 2009, respectively, pertains to the acceleration of expense related to retirement-eligible

employees.

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The fair value of new options is estimated on the date of grant using a lattice-pricing model with the following assumptions:

2011 2010 2009

Weighted average fair value per option $ 4.96 $ 4.67 $ 3.34

Average risk-free interest rate 0.19-3.44% 0.14-3.62% 0.3-2.65%

Dividend yield 0.9% 1.1% 1.2%

Volatility 36-43% 47-51% 38-76%

Annual forfeiture rate 5% 4% 3%

Exercise behavior 45% 35% 43%

Life (years) 5.8 5.6 4.2

The range of average risk-free interest rates is based on a yield curve of interest rates at the time of the grant based on the

contractual life of the option. Prior to 2009, the dividend yield was based on a five-year average. For 2009, the dividend yield

was based on a three-month average as a result of the significant decline in Alcoa’s stock price in 2008, due to the then-global

economic downturn, and the reduction in Alcoa’s quarterly common stock dividend from$0.17 per share to $0.03 per share. In

2010, the dividend yield was extended to a one-year average due to the stabilization of the global economy. In 2011, Alcoa

continued to use a one-year average for the dividend yield. Volatility is based on historical and implied volatilities over the term

of the option. Alcoa utilizes historical option forfeiture data to estimate annual pre- and post-vesting forfeitures. The exercise

behavior assumption represents a weighted average exercise ratio (exercise patterns for grants issued over the number of years

in the contractual option term) of an option’s intrinsic value resulting fromhistorical employee exercise behavior. The life of an

option is an output of the lattice-pricing model based upon the other assumptions used in the determination of the fair value.

The activity for stock options was as follows (options in millions):

2011 2010 2009

Outstanding, beginning of year:

Number of options 56.1 65.5 46.2

Weighted average exercise price $19.29 $24.44 $35.61

Granted:

Number of options 4.5 9.0 27.1

Weighted average exercise price $16.24 $13.52 $ 8.34

Exercised:

Number of options (4.3) (1.6) -

Weighted average exercise price $ 8.59 $ 8.34 $ -

Expired or forfeited:

Number of options (9.5) (16.8) (7.8)

Weighted average exercise price $31.90 $37.21 $34.60

Outstanding, end of year:

Number of options 46.8 56.1 65.5

Weighted average exercise price $17.41 $19.29 $24.44

Exercisable, end of year:

Number of options 28.8 30.2 37.7

Weighted average exercise price $20.90 $26.91 $35.51

The total intrinsic value of options exercised during 2011 and 2010 was $34 and $8, respectively. In 2011 and 2010, the cash

received fromoption exercises was $37 and $13 and the total taxbenefit realized fromthese exercises was $11 and $2,

respectively. There were no options exercised in 2009.

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The following tables summarize certain stock option information at December 31, 2011 (number of options and intrinsic value in

millions):

Options Fully Vestedand/or Expectedto Vest*

Range of

exercise price Number

Weighted

average

remaining

contractual

life

Weighted

average

exercise

price

Intrinsic

Value

$6.12 - $19.93 32.2 5.10 $ 10.72 $ 7

$19.94 - $27.71 2.8 1.03 22.56 -

$27.72 - $35.49 4.1 0.94 29.47 -

$35.50 - $47.35 7.7 0.12 37.28 -

Total 46.8 3.67 17.41 $ 7

* Expected forfeitures are immaterial to the Company and are not reflected in the table above.

Options Fully VestedandExercisable

Range of

exercise price Number

Weighted

average

remaining

contractual

life

Weighted

average

exercise

price

Intrinsic

Value

$6.12 - $19.93 14.2 3.94 $ 9.32 $ 4

$19.94 - $27.71 2.8 1.03 22.56 -

$27.72 - $35.49 4.1 0.94 29.47 -

$35.50 - $47.35 7.7 0.12 37.28 -

Total 28.8 2.21 20.90 $ 4

In addition to stock option awards, the Company grants stock awards and performance share awards, both of which vest three

years fromthe date of grant. Performance share awards are issued at target and the final award amount is determined at the end

of the performance period.

The following table summarizes the outstanding stock and performance share awards (awards in millions):

Stock

Awards

Performance

Share Awards Total

Weighted

average

FMV

per award

Outstanding, January 1, 2011 6.2 1.5 7.7 $ 16.80

Granted 2.7 1.3 4.0 16.15

Converted (2.3) - (2.3) 28.78

Forfeited (0.2) (0.1) (0.3) 13.54

Performance share adjustment - 0.2 0.2 14.59

Outstanding, December 31, 2011 6.4 2.9 9.3 13.63

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At December 31, 2011, there was $21 and $44 of unrecognized compensation expense (pretax) related to non-vested stock

option grants and non-vested stock award grants, respectively. This expense is expected to be recognized over a weighted

average period of 1.6 years. As of December 31, 2011, the following table summarizes the unrecognized compensation expense

expected to be recognized in future periods:

Stockbasedcompensation

expense (pretax)

2012 $ 41

2013 22

2014 2

Totals $ 65

S. Earnings Per Share

Basic earnings per share (EPS) amounts are computed by dividing earnings, after the deduction of preferred stock dividends

declared and dividends and undistributed earnings allocated to participating securities, by the average number of common

shares outstanding. Diluted EPS amounts assume the issuance of common stock for all potentially dilutive share equivalents

outstanding not classified as participating securities.

As disclosed in Note A, on January 1, 2009, Alcoa adopted changes issued by the FASB to the calculation of earnings per

share. These changes state that unvested share-based payment awards that contain nonforfeitable rights to dividends or

dividend equivalents (whether paid or unpaid) are participating securities and shall be included in the computation of earnings

per share pursuant to the two-class method for all periods presented. Prior to January 1, 2010, under Alcoa’s stock-based

compensation programs, certain employees were granted stock and performance awards, which entitle those employees to

receive nonforfeitable dividends during the vesting period on a basis equivalent to the dividends paid to holders of Alcoa’s

common stock. As such, these unvested stock and performance awards met the definition of a participating security. Under the

two-class method, all earnings, whether distributed or undistributed, are allocated to each class of common stock and

participating securities based on their respective rights to receive dividends. Prior to the adoption of these changes, stock and

performance awards that contain nonforfeitable rights to dividends or dividend equivalents were considered potentialshares of

common stock and were included only in the diluted EPS calculation under the treasury stock method as long as their effect

was not anti-dilutive. At December 31, 2011, 2010, and 2009 there were 2 million, 4 million, and 7 million such participating

securities outstanding, respectively. None of the loss fromcontinuing operations in 2009 was allocated to these participating

securities because these awards do not share in any loss generated by Alcoa.

Effective January 1, 2010, new grants of stock and performance awards do not contain a nonforfeitable right to dividends

during the vesting period. As a result, an employee will forfeit the right to dividends accrued on unvested awards if that person

does not fulfill their service requirement during the vesting period. As such, these awards are not treated as participating

securities in the EPS calculation as the employees do not have equivalent dividend rights as common shareholders. These

awards are included in the EPS calculation utilizing the treasury stock method similar to stock options. At December 31, 2011

and 2010, there were 8 million and 4 million such awards outstanding, respectively.

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The information used to compute basic and diluted EPS attributable to Alcoa common shareholders was as follows (shares in

millions):

2011 2010 2009

Income (loss) fromcontinuing operations attributable to Alcoa common shareholders $ 614 $ 262 $(985)

Less: preferred stock dividends declared 2 2 2

Income (loss) fromcontinuing operations available to common equity 612 260 (987)

Less: dividends and undistributed earnings allocated to participating securities 1 1 -

Income (loss) fromcontinuing operations available to Alcoa common shareholders—basic 611 259 (987)

Add: interest expense related to convertible notes 30 - -

Income (loss) fromcontinuing operations available to Alcoa common shareholders—diluted $ 641 $ 259 $(987)

Average shares outstanding—basic 1,061 1,018 935

Effect of dilutive securities:

Stock options 7 6 -

Stock and performance awards 4 1 -

Convertible notes 89 - -

Average shares outstanding—diluted 1,161 1,025 935

In 2010, 89 million share equivalents related to convertible notes were not included in the computation of diluted EPS because

their effect was anti-dilutive. In 2009, basic average shares outstanding and diluted average shares outstanding were the same

because the effect of potentialshares of common stock was anti-dilutive since Alcoa generated a loss fromcontinuing

operations. As a result, 89 million share equivalents related to convertible notes and 26 million stock options were not included

in the computation of diluted EPS. Had Alcoa generated sufficient income fromcontinuing operations in 2009, 69 million and

2 million potentialshares of common stock related to the convertible notes and stock options, respectively, would have been

included in diluted average shares outstanding.

Options to purchase 27 million, 23 million, and 39 million shares of common stock at a weighted average exercise price of $24.00,

$32.73, and $35.33 per share were outstanding as of December 31, 2011, 2010, and 2009, respectively, but were not included in

the computation of diluted EPS because they were anti-dilutive, as the exercise prices of the options were greater than the

average market price of Alcoa’s common stock.

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T. Income Taxes

The components of income (loss) fromcontinuing operations before income taxes were as follows:

2011 2010 2009

U.S. $ (98) $(403) $ (512)

Foreign 1,161 951 (986)

$1,063 $ 548 $(1,498)

The provision (benefit) for income taxes on income (loss) fromcontinuing operations consisted of the following:

2011 2010 2009

Current:

Federal* $ 10 $ 33 $(119)

Foreign 427 409 142

State and local (1) (7) (1)

436 435 22

Deferred:

Federal* 28 37 (89)

Foreign (211) (320) (510)

State and local 2 (4) 3

(181) (287) (596)

Total $ 255 $ 148 $(574)

* Includes U.S. taxes related to foreign income

Included in discontinued operations is a taxbenefit of $1 in 2011, $3 in 2010, and $55 in 2009.

The exercise of employee stock options generated a taxbenefit of $6 in 2011 and $2 in 2010, representing only the amount

realized for the difference between compensation expense recognized for financial reporting and taxpurposes. These amounts

increased equity and reduced current taxes payable in their respective periods. There were no exercises of employee stock

options in 2009.

Alcoa also has unamortized tax-deductible goodwill of $179 resulting fromintercompany stock sales and reorganizations

(generally at a 30% to 34% rate). Alcoa recognizes the taxbenefits associated with this tax-deductible goodwill as it is being

amortized for local income taxpurposes rather than in the period in which the transaction is consummated.

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A reconciliation of the U.S. federalstatutory rate to Alcoa’s effective taxrate for continuing operations was as follows (the

effective taxrate for both 2011 and 2010 was a provision on income and for 2009 was a benefit on a loss):

2011 2010 2009

U.S. federalstatutory rate 35.0% 35.0% 35.0%

Taxes on foreign operations (8.4) (3.5) (4.8)

Permanent differences on restructuring charges and asset disposals - 0.7 1.1

Audit and other adjustments to prior years’ accruals (1.1) 1.2 (0.7)

Noncontrolling interests 0.8 2.6 -

Statutory taxrate and law changes 0.8 (5.1) 4.2

Reorganization of equity investment - - 4.7

Items related to smelter operations in Italy* - - (9.3)

Taxlaw change related to Medicare Part D - 14.4 -

Release of valuation allowances (0.3) (10.6) 2.3

Amortization of goodwill (2.8) (5.2) 3.5

Other - (2.6) 2.3

Effective taxrate 24.0% 26.9% 38.3%

* Includes items not taxbenefitted as follows: a $250 charge related to a 2009 decision by the European Commission on

electricity pricing (see Note N), a $15 charge for environmental remediation, and a $15 restructuring charge for layoffs. Also

includes a $41 valuation allowance placed on existing deferred taxassets.

On March 23, 2010, the Patient Protection and Affordable Care Act (the “PPACA”) was signed into law, and, on March 30,

2010, the Health Care and Education Reconciliation Act of 2010 (the “HCERA” and, together with PPACA, the “Acts”), which

makes various amendments to certain aspects of the PPACA, was signed into law. The Acts effectively change the tax

treatment of federalsubsidies paid to sponsors of retiree health benefit plans that provide prescription drug benefits that are at

least actuarially equivalent to the corresponding benefits provided under Medicare Part D.

Alcoa pays a portion of the prescription drug cost for eligible retirees under certain postretirement benefit plans. These

benefits were determined to be actuarially equivalent to the Medicare Part D prescription drug benefit of the Medicare

Prescription Drug, Improvement and Modernization Act of 2003 (the “MPDIMA”). Alcoa has been receiving the federal

subsidy since the 2006 taxyear related to the aforementioned postretirement benefit plans. Under the MPDIMA, the federal

subsidy did not reduce an employer’s income taxdeduction for the costs of providing such prescription drug plans nor was it

subject to income taxindividually.

Under the Acts, beginning in 2013, an employer’s income taxdeduction for the costs of providing Medicare Part D-equivalent

prescription drug benefits to retirees will be reduced by the amount of the federalsubsidy. Under GAAP, any impact froma

change in taxlaw must be recognized in earnings in the period enacted regardless of the effective date. As a result, Alcoa

recognized a noncash charge of $79 in 2010 for the elimination of a related deferred taxasset to reflect the change in the tax

treatment of the federalsubsidy.

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The components of net deferred taxassets and liabilities were as follows:

2011 2010

December 31,

Deferred

tax

assets

Deferred

tax

liabilities

Deferred

tax

assets

Deferred

tax

liabilities

Depreciation $ 74 $ 933 $ 204 $ 1,330

Employee benefits 2,668 51 2,383 45

Loss provisions 325 9 391 40

Deferred income/expense 45 181 104 159

Taxloss carryforwards 2,035 - 1,953 -

Taxcredit carryforwards 477 - 503 -

Derivatives and hedging activities 109 43 162 12

Other 315 288 633 547

6,048 1,505 6,333 2,133

Valuation allowance (1,398) - (1,268) -

$ 4,650 $ 1,505 $ 5,065 $ 2,133

The following table details the expiration periods of the deferred taxassets presented above:

December 31, 2011

Expires

within

10 years

Expires

within

11-20 years

No

expiration* Other* Total

Taxloss carryforwards $ 340 $ 815 $ 880 $ - $ 2,035

Taxcredit carryforwards 360 58 59 - 477

Other - - 507 3,029 3,536

Valuation allowance (231) (643) (213) (311) (1,398)

$ 469 $ 230 $ 1,233 $ 2,718 $ 4,650

* Deferred taxassets with no expiration may still have annual limitations on utilization. Other represents deferred taxassets

whose expiration is dependent upon the reversal of the underlying temporary difference. A substantial amount of Other

relates to employee benefits that will become deductible for taxpurposes over an extended period of time as contributions

are made to employee benefit plans and payments are made to retirees.

The total deferred taxasset (net of valuation allowance) is supported by taxable temporary differences that reverse within the

carryforward period (approximately 25%), taxplanning strategies (approximately 5%), and projections of future taxable income

exclusive of reversing temporary differences (approximately 70%).

Valuation allowances are recorded to reduce deferred taxassets when it is more likely than not that a taxbenefit will not be

realized. In evaluating the need for a valuation allowance, management considers all potentialsources of taxable income,

including income available in carryback periods, future reversals of taxable temporary differences, projections of taxable

income, and income fromtaxplanning strategies, as well as all available positive and negative evidence. Positive evidence

includes factors such as a history of profitable operations, projections of future profitability within the carryforward period,

including fromtaxplanning strategies, and the Company’s experience with similar operations. Existing favorable contracts and

the ability to sell product into established markets are additional positive evidence. Negative evidence includes items such as

cumulative losses, projections of future losses, or carryforward periods that are not long enough to allow the utilization of the

deferred taxasset based on existing projections of income. In certain jurisdictions, deferred taxassets related to cumulative

losses exist without a valuation allowance where in management’s judgment the weight of the positive evidence more than

offsets the negative evidence of the cumulative losses. Upon changes in facts and circumstances, management may conclude

that deferred taxassets for which no valuation allowance is currently recorded may not be realizable in future periods, resulting

in a future charge to record a valuation allowance. Existing valuation allowances are re-examined under the same standards of

positive and

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negative evidence. If it is determined that it is more likely than not that a deferred taxasset will be realized, the appropriate

amount of the valuation allowance, if any, is released. Deferred taxassets and liabilities are also re-measured to reflect changes

in underlying taxrates due to law changes and the granting and lapse of taxholidays.

In December 2011, one of the Company’s subsidiaries in Brazil applied for a taxholiday related to its expanded mining and

refining operations. If approved, the taxrate for this subsidiary will decrease significantly, resulting in future cash taxsavings

over the 10-year holiday period (would be effective as of January 1, 2012). Additionally, the net deferred taxasset of the

subsidiary would be remeasured at the lower rate in the period the holiday is approved. This remeasurement would result in a

decrease to the net deferred taxasset and a noncash charge to earnings of approximately $60 to $90.

The following table details the changes in the valuation allowance:

December 31, 2011 2010

Balance at beginning of year $1,268 $1,345

Increase to allowance 157 25

Release of allowance* (25) (90)

Acquisitions/Divestitures - (3)

Foreign currency translation (2) (9)

Balance at end of year $1,398 $1,268

* In 2010, this amount includes $57 for the reversal of a valuation allowance related to previously restricted net operating

losses of a foreign subsidiary now available.

The cumulative amount of Alcoa’s foreign undistributed net earnings for which no deferred taxes have been provided was

approximately $8,300 at December 31, 2011. Management has no plans to distribute such earnings in the foreseeable future. It is

not practical to determine the deferred taxliability on these earnings.

Alcoa and its subsidiaries file income taxreturns in the U.S. federal jurisdiction and various states and foreign jurisdictions.

With a few minor exceptions, Alcoa is no longer subject to income taxexaminations by taxauthorities for years prior to 2002.

All U.S. taxyears prior to 2011 have been audited by the Internal Revenue Service. Various state and foreign jurisdiction tax

authorities are in the process of examining Alcoa’s income taxreturns for various taxyears through 2009.

A reconciliation of the beginning and ending amount of unrecognized taxbenefits (excluding interest and penalties) was as

follows:

December 31, 2011 2010 2009

Balance at beginning of year $ 46 $ 48 $ 24

Additions for taxpositions of the current year - - 1

Additions for taxpositions of prior years 13 30 24

Reductions for taxpositions of prior years (3) (5) -

Settlements with taxauthorities (4) (22) (5)

Expiration of the statute of limitations - (5) -

Foreign currency translation (1) - 4

Balance at end of year $ 51 $ 46 $ 48

For all periods presented, a portion of the balance at end of year pertains to state taxliabilities, which are presented before any

offset for federal taxbenefits. The effect of unrecognized taxbenefits, if recorded, that would impact the annual effective tax

rate for 2011, 2010, and 2009 would be approximately 2%, 4%, and 1%, respectively, of pretaxbook income. Alcoa does not

anticipate that changes in its unrecognized taxbenefits will have a material impact on the Statement of Consolidated Operations

during 2012.

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It is Alcoa’s policy to recognize interest and penalties related to income taxes as a component of the Provision for income taxes

on the accompanying Statement of Consolidated Operations. In 2011, 2010, and 2009, Alcoa recognized $2, $1, and $6,

respectively, in interest and penalties. Due to the expiration of the statute of limitations and settlements with taxauthorities,

Alcoa also recognized income of $2, $4, and $1 in 2011, 2010, and 2009, respectively, related to previously accrued interest and

penalties. As of December 31, 2011 and 2010, the amount accrued for the payment of interest and penalties was $12 and $13,

respectively.

U. Receivables

Sale of Receivables Programs

Alcoa had a programto sell a senior undivided interest in certain customer receivables, without recourse, on a continuous

basis to a third-party for cash (up to $250). This programwas renewed on October 29, 2009 and was due to expire on

October 28, 2010. On March 26, 2010, Alcoa terminated this programand repaid the $250 originally received in 2009. In light of

the adoption of accounting changes related to the transfer of financial assets, had the securitization programnot been

terminated, it would have resulted in a $250 increase in both Receivables fromcustomers and Short-termborrowings on the

accompanying Consolidated Balance Sheet (see the Recently Adopted Accounting Guidance section of Note A).

Also on March 26, 2010, Alcoa entered into two one-year arrangements (both were renewed in March 2011) with third parties to

sell certain customer receivables outright without recourse on a continuous basis. Additionally, in November 2011, Alcoa

entered into a five-year arrangement with another third party to sell additional customer receivables outright without recourse

on a continuous basis. As of December 31, 2011, $212 of the sold receivables under the three arrangements combined were

uncollected. Alcoa is servicing the customer receivables for the third parties at market rates; therefore, no servicing asset or

liability was recorded.

Allowance for Doubtful Accounts

The following table details the changes in the allowance for doubtful accounts related to customer receivables and other

receivables:

Customer receivables Other receivables

December 31, 2011 2010 2011 2010

Balance at beginning of year $ 46 $ 72 $ 87 $ 90

Provision for doubtful accounts 19 (8) 7 1

Write off of uncollectible accounts (14) (10) (3) (1)

Recoveries of prior write-offs (3) (4) (5) (3)

Other (2) (4) (7) -

Balance at end of year $ 46 $ 46 $ 79 $ 87

V. Interest Cost Components

2011 2010 2009

Amount charged to expense $ 524 $ 494 $ 470

Amount capitalized 101 96 165

$ 625 $ 590 $ 635

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W. Pension andOther Postretirement Benefits

Alcoa maintains pension plans covering most U.S. employees and certain employees in foreign locations. Pension benefits

generally depend on length of service, job grade, and remuneration. Substantially all benefits are paid through pension trusts

that are sufficiently funded to ensure that all plans can pay benefits to retirees as they become due. Most salaried and nonbargaining hourly U.S. employees hired after March 1, 2006 participate in a defined contribution plan instead of a defined

benefit plan.

Alcoa also maintains health care and life insurance benefit plans covering eligible U.S. retired employees and certain retirees

fromforeign locations. Generally, the medical plans pay a percentage of medical expenses, reduced by deductibles and other

coverages. These plans are generally unfunded, except for certain benefits funded through a trust. Life benefits are generally

provided by insurance contracts. Alcoa retains the right, subject to existing agreements, to change or eliminate these benefits.

Allsalaried and certain non-bargaining hourly U.S. employees hired after January 1, 2002 and certain bargaining hourly U.S.

employees hired after July 1, 2010 are not eligible for postretirement health care benefits. Allsalaried and certain hourly U.S.

employees that retire on or after April 1, 2008 are not eligible for postretirement life insurance benefits.

The funded status of all of Alcoa’s pension and other postretirement benefit plans are measured as of December 31.

On June 24, 2010, the United Steelworkers ratified a new four-year labor agreement covering approximately 5,400 employees at

11 U.S. locations; the previous labor agreement expired on May 31, 2010. In 2010, as a result of the preparation for and

ratification of the new agreement, Alcoa recognized $20 ($13 after-tax) in Cost of goods sold on the accompanying Statement of

Consolidated Operations for strike preparation costs, a one-time signing bonus for employees, and an increase to pension net

periodic benefit cost (see below). Additionally, as a result of the provisions of the new labor agreement, a significant plan

amendment was adopted by one of Alcoa’s U.S. pension plans. Accordingly, this plan was required to be remeasured, and

through this process, the discount rate was updated from6.15% at December 31, 2009 to 5.95% at May 31, 2010. The plan

remeasurement resulted in an increase to both Alcoa’s pension liability of $166 and the plan’s unrecognized net actuarial loss

(included in other comprehensive loss) of $108 (after-tax). The plan remeasurement also resulted in an increase to 2010 net

periodic benefit cost of $9.

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Obligations andFundedStatus

Pension benefits

Other

postretirement benefits

December 31, 2011 2010 2011 2010

Change in benefit obligation

Benefit obligation at beginning of year $12,343 $11,638 $ 2,902 $ 3,038

Service cost 183 152 17 21

Interest cost 687 691 159 175

Amendments 40 41 (1) 8

Actuarial losses (gains) 1,163 544 17 (75)

Settlements (32) (8) - (6)

Curtailments (7) (10) - -

Benefits paid, net of participants’ contributions (813) (799) (275) (287)

Medicare Part D subsidy receipts - - 25 26

Foreign currency translation impact (38) 94 - 2

Benefit obligation at end of year* $13,526 $12,343 $ 2,844 $ 2,902

Change in plan assets

Fair value of plan assets at beginning of year $ 9,451 $ 8,529 $ 58 $ 111

Actual return on plan assets 783 941 2 8

Employer contributions 945 718 - -

Participants’ contributions 35 30 - -

Benefits paid (805) (800) (52) (61)

Administrative expenses (38) (39) - -

Settlements (34) (8) - -

Foreign currency translation impact (26) 80 - -

Fair value of plan assets at end of year* $10,311 $ 9,451 $ 8 $ 58

Fundedstatus* $(3,215) $(2,892) $ (2,836) $ (2,844)

Less: Amounts attributed to joint venture partners (34) (26) (5) (5)

Net funded status $(3,181) $(2,866) $ (2,831) $ (2,839)

Amounts recognizedin the ConsolidatedBalance Sheet consist of:

Noncurrent assets $ 109 $ 84 $ - $ -

Current liabilities (29) (27) (248) (224)

Noncurrent liabilities (3,261) (2,923) (2,583) (2,615)

Net amount recognized $(3,181) $(2,866) $ (2,831) $ (2,839)

Amounts recognizedin AccumulatedOther Comprehensive Loss

consist of:

Net actuarial loss $ 5,191 $ 4,221 $ 511 $ 520

Prior service cost (benefit) 129 106 (92) (108)

Total, before taxeffect 5,320 4,327 419 412

Less: Amounts attributed to joint venture partners 46 36 (1) -

Net amount recognized, before taxeffect $ 5,274 $ 4,291 $ 420 $ 412

Other Changes in Plan Assets andBenefit Obligations Recognized

in Other Comprehensive (Loss) Income consist of:

Net actuarial loss (gain) $ 1,216 $ 470 $ 17 $ (78)

Amortization of accumulated net actuarial loss

(246) (181) (26) (33)

Prior service cost (benefit) 42 42 (1) 9

Amortization of prior service (cost) benefit (19) (17) 17 15

Total, before taxeffect 993 314 7 (87)

Less: Amounts attributed to joint venture partners 10 13 (1) (2)

Net amount recognized, before taxeffect $ 983 $ 301 $ 8 $ (85)
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* At December 31, 2011, the benefit obligation, fair value of plan assets, and funded status for U.S. pension plans were

$10,702, $7,988, and $(2,714), respectively. At December 31, 2010, the benefit obligation, fair value of plan assets, and

funded status for U.S. pension plans were $9,791, $7,242, and $(2,549), respectively.

Pension Plan Benefit Obligations

Pension benefits

2011 2010

The projected benefit obligation and accumulated benefit obligation for all defined benefit

pension plans was as follows:

Projected benefit obligation $13,526 $12,343

Accumulated benefit obligation 13,025 11,999

The aggregate projected benefit obligation and fair value of plan assets for pension plans with

projected benefit obligations in excess of plan assets was as follows:

Projected benefit obligation 12,828 11,531

Fair value of plan assets 9,470 8,518

The aggregate accumulated benefit obligation and fair value of plan assets for pension plans with

accumulated benefit obligations in excess of plan assets was as follows:

Accumulated benefit obligation 12,184 11,167

Fair value of plan assets 9,281 8,454

Components of Net Periodic Benefit Cost

Pension benefits Other postretirement benefits

2011 2010 2009 2011 2010 2009

Service cost $ 165 $ 148 $ 139 $ 17 $ 20 $ 21

Interest cost 678 682 682 158 174 184

Expected return on plan assets (806) (787) (758) (2) (7) (11)

Amortization of prior service cost (benefit) 19 17 16 (17) (15) (11)

Recognized net actuarial loss 247 181 111 26 33 41

Settlements 2 2 14 - (3) -

Curtailments (9) (10) 3 - - (1)

Net periodic benefit cost $ 296 $ 233 $ 207 $ 182 $ 202 $ 223

In 2011, 2010, and 2009, net periodic benefit cost for U.S pension plans was $190, $155, and $135, respectively.

In 2011, 2010, and 2009, net periodic benefit cost for other postretirement benefits reflects a reduction of $43, $39, and $42,

respectively, related to the recognition of the federalsubsidy awarded under Medicare Part D.

In all periods presented, settlements were due to the payment of significant lump sumbenefits and/or purchases of

annuity contracts.

In each period presented, curtailments were due to elimination of benefits, workforce reductions (see Note D), and/or

divestitures of the EES business (see Note F).

Amounts attributed to joint venture partners are not included.

Amounts Expectedto be Recognizedin Net Periodic Benefit Cost

Pension benefits Other postretirement benefits

2012 2012

Prior service cost (benefit) recognition $ 18 $ (16)

Net actuarial loss recognition 388 10

138

(1) (2)

(3)

(4)

(5)

(1)

(2)

(3)

(4)

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Assumptions

Weighted average assumptions used to determine benefit obligations for U.S. pension and other postretirement benefit plans

were as follows (assumptions for non-U.S plans did not differ materially):

December 31, 2011 2010

Discount rate 4.90% 5.75%

Rate of compensation increase 3.5 3.5

The discount rate is determined using a Company-specific yield curve model (above-median) developed with the assistance of

an external actuary. The cash flows of the plans’ projected benefit obligations are discounted using a single equivalent rate

derived fromyields on high quality corporate bonds, which represent a broad diversification of issuers in various sectors,

including finance and banking, manufacturing, transportation, insurance, and pharmaceutical, among others. The yield curve

model parallels the plans’ projected cash flows, which have an average duration of 10 years, and the underlying cash flows of

the bonds included in the model exceed the cash flows needed to satisfy the Company’s plans’ obligations multiple times.

The rate of compensation increase is based upon actual experience. For 2012, the rate of compensation increase will be 3.5%,

which approximates the five-year average.

Weighted average assumptions used to determine net periodic benefit cost for U.S. pension and other postretirement benefit

plans were as follows (assumptions for non-U.S plans did not differ materially):

2011 2010 2009

Discount rate* 5.75% 6.15% 6.40%

Expected long-termrate of return on plan assets 8.50 8.75 8.75

Rate of compensation increase 3.50 3.50 4.00

* In all periods presented, the respective discount rates were used to determine net periodic benefit cost for most U.S. pension

plans for the full annual period. However, the discount rates for a limited number of plans were updated during the respective

years to reflect the remeasurement of these plans due to new union labor agreements, settlements, and (or) curtailments. The

updated discount rates used were not significantly different fromthe discount rates presented.

The expected long-termrate of return on plan assets is generally applied to a five-year market-related value of plan assets (a

four-year average or the fair value at the plan measurement date is used for certain non-U.S. plans). The process used by

management to develop this assumption has expanded fromone that relied primarily on historical asset return information to

one that also incorporates forward-looking returns by asset class, as described below.

Prior to developing the expected long-termrate of return for calendar year 2009, management focused on historical actual

returns (annual, 10-year moving, and 20-year moving averages) when developing this assumption. Based on that process,

management utilized 9% for the expected long-termrate of return for several years through 2008. For calendar year 2009, the

expected long-termrate of return was reduced to 8.75% due to lower future expected market returns as a result of the then

global economic downturn. This was supported by the fact that, in 2008, the 10-year moving average of actual performance fell

below 9% for the first time in 20 years, although the 20-year moving average continued to exceed 9%.

For calendar year 2010, management expanded its process by incorporating expected future returns on current and planned

asset allocations using information fromvarious external investment managers and management’s own judgment. Management

considered this forward-looking analysis as well as the historical return information, and concluded the expected rate of return

for calendar 2010 would remain at 8.75%, which was between the 20-year moving average actual return performance and the

estimated future return developed by asset class.

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For calendar year 2011, management again incorporated both actual historical return information and expected future returns

into its analysis. Based on strategic asset allocation changes and estimates of future returns by asset class, management used

8.50% as its expected long-termrate of return for 2011. This rate again falls within the range of the 20-year moving average of

actual performance and the expected future return developed by asset class.

For calendar year 2012, management used the same methodology as it did for 2011 and determined that 8.50% will be the

expected long-termrate of return.

Assumed health care cost trend rates for U.S. other postretirement benefit plans were as follows (assumptions for non-U.S

plans did not differ materially):

2011 2010 2009

Health care cost trend rate assumed for next year 6.5% 6.5% 6.5%

Rate to which the cost trend rate gradually declines 5.0% 5.0% 5.0%

Year that the rate reaches the rate at which it is assumed to remain 2016 2015 2014

The assumed health care cost trend rate is used to measure the expected cost of gross eligible charges covered by Alcoa’s

other postretirement benefit plans. For 2012, the use of a 6.5% trend rate will continue, reflecting management’s best estimate of

the change in future health care costs covered by the plans. The plans’ actual annual health care cost trend experience over the

past three years has ranged from(2.1)% to 3.8%. Management does not believe this three-year range is indicative of expected

increases for future health care costs over the long-term.

Assumed health care cost trend rates have an effect on the amounts reported for the health care plan. A one-percentage point

change in these assumed rates would have the following effects:

1%

increase

1%

decrease

Effect on total of service and interest cost components $ 4 $ (4)

Effect on other postretirement benefit obligations 74 (66)

Plan Assets

Alcoa’s pension and other postretirement plans’ investment policy and weighted average asset allocations at December 31,

2011 and 2010, by asset class, were as follows:

Plan assets

at

December 31,

Asset class Policy range 2011 2010

Equity securities 20–55% 34% 36%

Debt securities 30–65% 50 52

Other 5–25% 16 12

Total 100% 100%

The principal objectives underlying the investment of the pension and other postretirement plans’ assets are to ensure that

Alcoa can properly fund benefit obligations as they become due under a broad range of potential economic and financial

scenarios, maximize the long-terminvestment return with an acceptable level of risk based on such obligations, and broadly

diversify investments across and within the capital markets to protect asset values against adverse movements. Specific

objectives for long-terminvestment strategy include reducing the volatility of pension assets relative to pension liabilities and

achieving risk factor diversification across the balance of the asset portfolio. A portion of the assets are matched to the interest

rate profile of the benefit obligation through long duration fixed income

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investments and exposure to broad equity risk has been decreased and diversified through investments in macro hedge funds,

equity long and short hedge funds, global and emerging market equities and gold. Investments are further diversified by

strategy, asset class, geography, and sector to enhance returns and mitigate downside risk. A large number of external

investment managers are used to gain broad exposure to the financial markets and to mitigate manager-concentration risk.

Investment practices comply with the requirements of the Employee Retirement Income Security Act of 1974 (ERISA) and any

other applicable laws and regulations. The use of derivative instruments is permitted where appropriate and necessary for

achieving overall investment policy objectives. Currently, the use of derivative instruments is not significant when compared to

the overall investment portfolio.

The following section describes the valuation methodologies used by the trustees to measure the fair value of pension and

other postretirement benefit plan assets, including an indication of the level in the fair value hierarchy in which each type of

asset is generally classified (see Note X for the definition of fair value and a description of the fair value hierarchy).

Equity Securities. These securities consist of direct investments in the stock of publicly traded companies and are valued

based on the closing price reported in an active market on which the individualsecurities are traded. As such, the direct

investments are generally classified in Level 1. Also, these securities consist of the plans’ share of commingled funds that are

invested in the stock of publicly traded companies and are valued at the net asset value of shares held at December 31. As

such, these securities are generally included in Level 2. Additionally, these securities include direct investments of private

equity and short and long equity hedge funds and are valued by investment managers based on the most recent financial

information available, which typically represents significant unobservable data. As such, these investments are generally

classified as Level 3.

Debt Securities. These securities consist of publicly traded U.S. and non-U.S. fixed interest obligations (principally corporate

bonds and debentures) and are valued through consultation and evaluation with brokers in the institutional market using

quoted prices and other observable market data. As such, a portion of these securities are included in both Level 1 and 2. Also,

these securities include cash and cash equivalents, which consist of government securities with maturities less than one year

and commingled funds, and are generally valued using quoted prices or observable market data. As such, these funds are

included in both Level 1 and 2. Additionally these securities consist of commercial and residential mortgage-backed securities

and are valued by investment managers based on the most recent financial information available, which typically represents

significant unobservable data. As such, these investments are generally classified as Level 3.

Other Investments. These investments include, among others, exchange traded funds, hedge funds, real estate investment

trusts, and direct investments of private real estate. Exchange traded funds, such as gold, and real estate investment trusts are

valued based on the closing price reported in an active market on which the investments are traded, and, therefore, are included

in Level 1. Direct investments of hedge funds and private real estate are valued by investment managers based on the most

recent financial information available, which typically represents significant unobservable data. As such, these investments are

generally classified as Level 3. If fair value is able to be determined through the use of quoted market prices of similar assets or

other observable market data, then the investments are classified in Level 2.

The fair value methods described above may not be indicative of net realizable value or reflective of future fair values.

Additionally, while Alcoa believes the valuation methods used by the plans’ trustees are appropriate and consistent with other

market participants, the use of different methodologies or assumptions to determine the fair value of certain financial

instruments could result in a different fair value measurement at the reporting date.

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The following table presents the fair value of pension and other postretirement plans’ assets classified under the appropriate

level of the fair value hierarchy:

December 31, 2011 Level 1 Level 2 Level 3 Total

Equity securities* $ 941 $ 1,166 $ 1,383 $ 3,490

Debt securities 1,223 3,880 211 5,314

Other investments 295 74 1,166 1,535

Total** $ 2,459 $ 5,120 $ 2,760 $10,339

December 31, 2010 Level 1 Level 2 Level 3 Total

Equity securities $ 1,348 $ 1,589 $ 504 $ 3,441

Debt securities 808 3,922 187 4,917

Other investments 268 52 808 1,128

Total** $ 2,424 $ 5,563 $ 1,499 $ 9,486

* At December 31, 2011, Level 1 equity securities include $36 of Alcoa common stock related to the January 2011 plan

contribution (see Funding and Cash Flows section below).

**As of December 31, 2011, the total fair value of pension and other postretirement plans’ assets excludes a net payable of $20,

which represents securities purchased not yet settled less interest and dividends earned on various investments. As of

December 31, 2010, the total fair value of pension and other postretirement plans’ assets excludes a net receivable of $23,

which represents interest and dividends earned on various investments less securities purchased not yet settled.

Pension and other postretirement benefit plans’ assets classified as Level 3 in the fair value hierarchy represent other

investments in which the trustees have used significant unobservable inputs in the valuation model. The following table

presents a reconciliation of activity for such investments:

2011 2010

Balance at beginning of year $1,499 $ 920

Realized gains 67 35

Unrealized gains 100 130

Purchases 1,221 497

Sales (124) (87)

Issuances - -

Settlements - -

Foreign currency translation impact (3) 4

Transfers in and (or) out of Level 3* - -

Balance at end of year $2,760 $1,499

* In 2011 and 2010, there were no transfers of financial instruments into or out of Level 3

Funding andCash Flows

It is Alcoa’s policy to fund amounts for pension plans sufficient to meet the minimumrequirements set forth in applicable

country benefits laws and taxlaws, including the Pension Protection Act of 2006 and the Worker, Retiree, and Employer

Recovery Act of 2008 for U.S. plans. Fromtime to time, Alcoa contributes additional amounts as deemed appropriate. In 2011

and 2010, cash contributions to Alcoa’s pension plans were $336 and $113. Also in both 2011 and 2010, Alcoa contributed

newly issued shares (see Note R) of its common stock (valued at $600) to a master trust that holds the assets of certain U.S.

defined benefit pension plans in a private placement transaction. These shares were issued to satisfy the estimated minimum

required funding and to provide additional funding towards maintaining an approximately 80% funded status of Alcoa’s U.S.

pension plans. The minimumrequired contribution to pension plans in 2012 is estimated to be $650, of which $115 is for nonU.S. plans.

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Benefit payments expected to be paid to pension and other postretirement benefit plans’ participants and expected Medicare

Part D subsidy receipts are as follows:

Year endedDecember 31,

Pension

benefits

Gross Other postretirement

benefits

Medicare Part D

subsidy receipts

Net Other postretirement

benefits

2012 $ 840 $ 285 $ 25 $ 260

2013 850 285 30 255

2014 850 280 30 250

2015 860 275 35 240

2016 870 270 35 235

2017 through 2021 4,470 1,265 190 1,075

$ 8,740 $ 2,660 $ 345 $ 2,315

DefinedContribution Plans

Alcoa sponsors savings and investment plans in several countries, including the U.S. and Australia. Expenses related to these

plans were $139 in 2011, $119 in 2010, and $97 in 2009. In the U.S., employees may contribute a portion of their compensation to

the plans, and Alcoa matches, mostly in company stock, a portion of these contributions. Effective in 2009, employees were

permitted to diversify all or any portion of their company stock match. In early 2009, Alcoa suspended employer-matching

contributions for U.S. salaried participants for one year.

X. Derivatives andOther Financial Instruments

Derivatives. Alcoa is exposed to certain risks relating to its ongoing business operations, including financial, market, political,

and economic risks. The following discussion provides information regarding Alcoa’s exposure to the risks of changing

commodity prices, interest rates, and foreign currency exchange rates.

Alcoa’s commodity and derivative activities are subject to the management, direction, and control of the Strategic Risk

Management Committee (SRMC). The SRMC is composed of the chief executive officer, the chief financial officer, and other

officers and employees that the chief executive officer selects. The SRMC reports to the Board of Directors on the scope of its

activities.

The aluminum, energy, interest rate, and foreign exchange contracts are held for purposes other than trading. They are used

primarily to mitigate uncertainty and volatility, and to cover underlying exposures. Alcoa is not involved in trading activities for

energy, weather derivatives, or other nonexchange commodity trading activities.

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The fair values of outstanding derivative contracts recorded as assets in the accompanying Consolidated Balance Sheet were

as follows:

Asset Derivatives

December 31,

2011

December 31,

2010

Derivatives designated as hedging instruments:

Prepaid expenses and other current assets:

Aluminumcontracts $ 56 $ 48

Foreign exchange contracts - 2

Interest rate contracts 8 19

Other noncurrent assets:

Aluminumcontracts 6 22

Energy contracts 2 9

Interest rate contracts 37 62

Total derivatives designated as hedging instruments $ 109 $ 162

Derivatives not designated as hedging instruments*:

Prepaid expenses and other current assets:

Aluminumcontracts $ 1 $ 3

Other noncurrent assets:

Aluminumcontracts 5 -

Foreign exchange contracts 1 1

Total derivatives not designated as hedging instruments $ 7 $ 4

Less margin held:

Prepaid expenses and other current assets:

Aluminumcontracts $ 7 $ 4

Interest rate contracts 8 13

Other noncurrent assets:

Interest rate contracts 7 2

Sub-total $ 22 $ 19

Total Asset Derivatives $ 94 $ 147

* See the “Other” section within Note X for additional information on Alcoa’s purpose for entering into derivatives not

designated as hedging instruments and its overall risk management strategies.

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The fair values of outstanding derivative contracts recorded as liabilities in the accompanying Consolidated Balance Sheet

were as follows:

Liability Derivatives

December 31,

2011

December 31,

2010

Derivatives designated as hedging instruments:

Other current liabilities:

Aluminumcontracts $ 79 $ 89

Other noncurrent liabilities and deferred credits:

Aluminumcontracts 574 647

Total derivatives designated as hedging instruments $ 653 $ 736

Derivatives not designated as hedging instruments*:

Other current liabilities:

Aluminumcontracts $ 35 $ 52

Energy contracts - 62

Other noncurrent liabilities and deferred credits:

Aluminumcontracts 22 33

Embedded credit derivative 28 23

Total derivatives not designated as hedging instruments $ 85 $ 170

Less margin posted:

Other current liabilities:

Aluminumcontracts $ 1 $ 4

Energy contracts - 37

Sub-total $ 1 $ 41

Total Liability Derivatives $ 737 $ 865

* See the “Other” section within Note X for additional information on Alcoa’s purpose for entering into derivatives not

designated as hedging instruments and its overall risk management strategies.

The following table shows the net fair values of outstanding derivative contracts at December 31, 2011 and the effect on these

amounts of a hypothetical change (increase or decrease of 10%) in the market prices or rates that existed at December 31, 2011:

Fair value

asset/(liability)

Index change

of + / - 10%

Aluminumcontracts $ (648) $ 137

Embedded credit derivative (28) 9

Energy contracts 2 375

Foreign exchange contracts 1 -

Interest rate contracts 30 2

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction

between market participants at the measurement date. The fair value hierarchy distinguishes between (1) market participant

assumptions developed based on market data obtained fromindependent sources (observable inputs) and (2) an entity’s own

assumptions about market participant assumptions developed based on the best information available in the circumstances

(unobservable inputs). The fair value hierarchy consists of three broad levels, which gives the highest priority to unadjusted

quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level

3). The three levels of the fair value hierarchy are described below:

• Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical,

unrestricted assets or liabilities.

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• Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either

directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for

identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are

observable for the asset or liability (e.g., interest rates); and inputs that are derived principally fromor corroborated

by observable market data by correlation or other means.

• Level 3—Inputs that are both significant to the fair value measurement and unobservable.

The following section describes the valuation methodologies used by Alcoa to measure derivative contracts at fair value,

including an indication of the level in the fair value hierarchy in which each instrument is generally classified. Where

appropriate, the description includes details of the valuation models, the key inputs to those models, and any significant

assumptions.

Derivative contracts are valued using quoted market prices and significant other observable and unobservable inputs. Such

financial instruments consist of aluminum, energy, interest rate, and foreign exchange contracts. The fair values for the majority

of these derivative contracts are based upon current quoted market prices. These financial instruments are typically exchangetraded and are generally classified within Level 1 or Level 2 of the fair value hierarchy depending on whether the exchange is

deemed to be an active market or not.

For certain derivative contracts whose fair values are based upon trades in liquid markets, such as interest rate swaps,

valuation model inputs can generally be verified and valuation techniques do not involve significant management judgment.

The fair values of such financial instruments are generally classified within Level 2 of the fair value hierarchy.

Alcoa has other derivative contracts that do not have observable market quotes. For these financial instruments, management

uses significant other observable inputs (e.g., information concerning time premiums and volatilities for certain option type

embedded derivatives and regional premiums for aluminumcontracts). For periods beyond the termof quoted market prices for

aluminum, Alcoa uses a model that estimates the long-termprice of aluminumby extrapolating the 10-year London Metal

Exchange (LME) forward curve. For periods beyond the termof quoted market prices for energy, management has developed a

forward curve based on independent consultant market research. Where appropriate, valuations are adjusted for various

factors such as liquidity, bid/offer spreads, and credit considerations. Such adjustments are generally based on available

market evidence (Level 2). In the absence of such evidence, management’s best estimate is used (Level 3).

The following table presents Alcoa’s derivative contract assets and liabilities that are measured and recognized at fair value on

a recurring basis classified under the appropriate level of the fair value hierarchy (there were no transfers in or out of Levels 1

and 2 during the periods presented):

December 31, 2011 2010

Assets:

Level 1 $ 57 $ 76

Level 2 47 81

Level 3 12 9

Margin held* (22) (19)

Total $ 94 $ 147

Liabilities:

Level 1 $ 64 $ 35

Level 2 44 83

Level 3 630 788

Margin posted* (1) (41)

Total $ 737 $ 865

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* Margin held represents cash collateral received related to aluminumcontracts included in Level 1 and interest rate contracts

included in Level 2 and margin posted represents cash collateral paid related to aluminumcontracts included in Level 1. At

December 31, 2010, margin posted also represents cash collateral paid related to energy contracts included in Level 3. Alcoa

elected to net the margin held and posted against the fair value amounts recognized for derivative instruments executed with

the same counterparties under master netting arrangements.

Financial instruments classified as Level 3 in the fair value hierarchy represent derivative contracts in which management has

used at least one significant unobservable input in the valuation model. The following table presents a reconciliation of activity

for such derivative contracts on a net basis:

2011 2010

Balance at beginning of year $ 779 $ 831

Total gains or losses (realized and unrealized) included in:

Sales—(decrease) (63) (38)

Cost of goods sold—(increase) (15) (20)

Other (income) expenses, net—(increase) decrease (43) 25

Other comprehensive (loss) income—(increase) (35) (19)

Purchases, sales, issuances, and settlements* (5) -

Transfers into and (or) out of Level 3** - -

Balance at end of year $ 618 $ 779

Total gains or losses included in earnings attributable to the change in unrealized gains or losses relating

to derivative contracts still held at December 31, 2011 and 2010:

Sales $ - $ -

Cost of goods sold - -

Other (income) expenses, net—(increase) decrease (5) 22

* In 2011, there was an issuance of a Level 3 financial instrument related to a natural gas supply contract (see below). There

were no purchases, sales, or settlements of Level 3 financial instruments in 2011 and 2010.

**In 2011 and 2010, there were no transfers of financial instruments into or out of Level 3.

As reflected in the table above, the net unrealized loss on derivative contracts using Level 3 valuation techniques was $618 and

$779 as of December 31, 2011 and 2010, respectively. These losses were mainly attributed to embedded derivatives in power

contracts that indexthe price of power to the LME price of aluminum. These embedded derivatives are primarily valued using

observable market prices. However, due to the length of the contracts, the valuation model also requires management to

estimate the long-termprice of aluminumbased upon an extrapolation of the 10-year LME forward curve. The embedded

derivatives have been designated as hedges of forward sales of aluminumand their realized gains and losses were included in

Sales on the accompanying Statement of Consolidated Operations.

In 2011, Alcoa entered into a six-year natural gas supply contract, which has an LME-linked ceiling. This contract is valued

using probabilities of future LME aluminumprices and the price of Brent crude oil (priced on Platts), including the

interrelationships between the two commodities subject to the ceiling. At inception, this contract had a fair value of $5.

Unrealized gains and losses fromthis contract were included in Other (income) expenses, net on the accompanying Statement

of Consolidated Operations, while realized gains and losses will be included in Cost of goods sold on the accompanying

Statement of Consolidated Operations as gas purchases are made under the contract.

Also, included within Level 3 measurements are derivative financial instruments that hedge the cost of electricity. Transactions

involving on-peak power are observable as there is an active market. However, there are certain off-peak times when there is

not an actively traded market for electricity. Therefore, management utilizes market prices, historical relationships, and various

forecast services to determine the fair value. Management utilizes these same valuation techniques for an existing power

contract associated with a smelter in the U.S. that no longer qualified for the

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normal purchase normalsale exception under derivative accounting in late 2009. Unrealized gains and losses for this physical

power contract were included in Other (income) expenses, net on the accompanying Statement of Consolidated Operations,

while realized gains and losses were included in Cost of goods sold on the accompanying Statement of Consolidated

Operations. Additionally, a financial contract related to the same U.S. smelter utilized by management to hedge the price of

electricity of the aforementioned power contract no longer qualified for cash flow hedge accounting near the end of 2009.

Realized gains and losses of this financial contract were included in Cost of goods sold on the accompanying Statement of

Consolidated Operations. In periods prior to January 1, 2010, unrealized gains and losses were included in Other

comprehensive (loss) income; in periods subsequent to December 31, 2009, such changes were included in Other (income)

expenses, net on the accompanying Statement of Consolidated Operations. Both the physical power contract and the financial

contract related to this U.S. smelter expired in September 2011.

In 2010, Alcoa entered into contracts to hedge the anticipated power requirements at two smelters in Australia. These

derivatives hedge forecasted power purchases through December 2036. Beyond the termwhere market information is available,

management has developed a forward curve, for valuation purposes, based on independent consultant market research. The

effective portion of gains and losses on these contracts were recorded in Other comprehensive (loss) income on the

accompanying Consolidated Balance Sheet until the designated hedge periods begin in 2014 and 2016. Once the hedge periods

begin, realized gains and losses will be recorded in Cost of goods sold.

Additionally, an embedded derivative in a power contract that indexes the difference between the long-termdebt ratings of

Alcoa and the counterparty fromany of the three major credit rating agencies is included in Level 3. Management uses market

prices, historical relationships, and forecast services to determine fair value. Realized gains and losses for this embedded

derivative were included in Other (income) expenses, net on the accompanying Statement of Consolidated Operations.

Fair Value Hedges

For derivative instruments that are designated and qualify as fair value hedges, the gain or loss on the derivative as well as the

loss or gain on the hedged itemattributable to the hedged risk are recognized in current earnings. The gain or loss on the

hedged items are included in the same line items as the loss or gain on the related derivative contracts as follows (there were no

contracts that ceased to qualify as a fair value hedge in 2011, 2010, or 2009):

Derivatives in Fair Value

Hedging Relationships

Location of Gain or (Loss)

Recognizedin Earnings on

Derivatives

Amount of Gain or (Loss)

Recognizedin Earnings on Derivatives

2011 2010 2009

Aluminumcontracts Sales $ (126) $ 38 $ 214

Interest rate contracts Interest expense 64 90 61

Total $ (62) $ 128 $ 275

HedgedItems in Fair

Value Hedging

Relationships

Location of Gain or (Loss)

Recognizedin Earnings on

Hedged

Items

Amount of Gain or (Loss)

Recognizedin Earnings on HedgedItems

2011 2010 2009

Aluminumcontracts Sales $ 133 $ (41) $ (227)

Interest rate contracts Interest expense (31) (62) (61)

Total $ 102 $ (103) $ (288)

Aluminum. Alcoa is a leading global producer of primary aluminumand fabricated aluminumproducts. As a condition of sale,

customers often require Alcoa to enter into long-term, fixed-price commitments. These commitments expose Alcoa to the risk of

fluctuating aluminumprices between the time the order is committed and the time that the order is shipped. Alcoa’s aluminum

commodity risk management policy is to manage, principally through the use of futures and contracts, the aluminumprice risk

associated with a portion of its firmcommitments. These contracts cover

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known exposures, generally within three years. As of December 31, 2011, Alcoa had 419 kmt of aluminumfutures designated as

fair value hedges. The effects of this hedging activity will be recognized over the designated hedge periods in 2012 to 2014.

Interest Rates. Alcoa uses interest rate swaps to help maintain a strategic balance between fixed- and floating-rate debt and to

manage overall financing costs. As of December 31, 2011, the Company had pay floating, receive fixed interest rate swaps that

were designated as fair value hedges. These hedges effectively convert the interest rate fromfixed to floating on $515 of debt

through 2018 (see Note K). In 2011, Alcoa terminated interest rate swaps with a notional amount of $550 in conjunction with the

early retirement of the related debt (see Note K). At the time of termination, the swaps were “in-the-money” resulting in a gain

of $33, which was recorded in Interest expense on the accompanying Statement of Consolidated Operations. In 2010, Alcoa

terminated all or a portion of various interest rate swaps with a notional amount of $825 in conjunction with the early retirement

of the related debt (see Note K). At the time of termination, the swaps were “in-the-money” resulting in a gain of $28, which

was recorded in Interest expense on the accompanying Statement of Consolidated Operations.

Cash FlowHedges

For derivative instruments that are designated and qualify as cash flow hedges, the effective portion of the gain or loss on the

derivative is reported as a component of other comprehensive income (OCI) and reclassified into earnings in the same period or

periods during which the hedged transaction affects earnings. Gains and losses on the derivative representing either hedge

ineffectiveness or hedge components excluded fromthe assessment of effectiveness are recognized in current earnings.

Derivatives in Cash

Flow Hedging

Relationships

Amount of Gain or

(Loss) Recognized in

OCI on Derivatives

(Effective Portion)

Location of Gain or

(Loss) Reclassified

from Accumulated

OCI into Earnings

(Effective Portion)

Amount of Gain or

(Loss) Reclassified

from Accumulated

OCI into Earnings

(Effective Portion)*

Location of Gain

or (Loss)

Recognized in

Earnings on

Derivatives

(Ineffective

Portion and

Amount Excluded

from Effectiveness

Testing)

Amount of Gain or

(Loss) Recognized

in Earnings on

Derivatives

(Ineffective

Portion and

Amount Excluded

from Effectiveness

Testing)**

2011 2010 2009 2011 2010 2009 2011 2010 2009

Aluminumcontracts $72 $ (6) $(589) Sales $(114) $(106) $ (4) Other (income)

expenses, net

$ 2 $ - $ 3

Aluminumcontracts - - 13 Other (income)

expenses, net

- - 49 Other (income)

expenses, net

- - -

Energy contracts (3) (10) (29) Cost of goods sold (8) (25) (37) Other (income)

expenses, net

- - -

Foreign exchange

contracts

1 (3) (2) Sales 4 (6) 3 Other (income)

expenses, net

- - -

Interest rate contracts (2) (1) - Interest expense - (1) - Other (income)

expenses, net

- - -

Interest rate contracts (5) (1) (2) Other (income)

expenses, net

(3) - - Other (income)

expenses, net

- - -

Total $63 $(21) $(609) $(121) $(138) $ 11 $ 2 $ - $ 3

* Assuming market rates remain constant with the rates at December 31, 2011, a gain of $22 is expected to be recognized in

earnings over the next 12 months.

**In 2011, 2010, and 2009, the amount of gain or (loss) recognized in earnings represents $(1), less than $1, and $3, respectively,

related to the ineffective portion of the hedging relationships. There was also $3 recognized in earnings related to the

amount excluded fromthe assessment of hedge effectiveness in 2011.

Aluminum andEnergy. Alcoa anticipates the continued requirement to purchase aluminumand other commodities, such as

electricity, natural gas, and fuel oil, for its operations. Alcoa enters into futures and forward contracts to reduce volatility in the

price of these commodities. Alcoa has also entered into power supply and other contracts that contain

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pricing provisions related to the LME aluminumprice. The LME-linked pricing features are considered embedded derivatives. A

majority of these embedded derivatives have been designated as cash flow hedges of future sales of aluminum.

In 2010, Alcoa entered into contracts to hedge the anticipated power requirements at two smelters in Australia. These

derivatives hedge forecasted power purchases through December 2036.

On March 31, 2009, Alcoa acquired an embedded derivative in a power contract, which is linked to the LME, in the Elkem

transaction (see Note F).

Interest Rates. Alcoa had no outstanding cash flow hedges of interest rate exposures as of December 31, 2011, 2010, or 2009.

An investment accounted for on the equity method by Alcoa has entered into interest rate contracts, which are designated as

cash flow hedges. Alcoa’s share of the activity of these cash flow hedges is reflected in the table above.

Foreign Exchange. Alcoa is subject to exposure fromfluctuations in foreign currency exchange rates. These contracts may be

used fromtime to time to hedge the variability in cash flows fromthe forecasted payment or receipt of currencies other than the

functional currency. These contracts covered periods consistent with known or expected exposures through 2011. On

March 31, 2009, Alcoa acquired foreign currency derivatives in the Elkemtransaction (see Note F) which covered anticipated

foreign currency exposures through 2011.

Alcoa had the following outstanding forward contracts that were entered into to hedge forecasted transactions:

December 31, 2011 2010

Aluminumcontracts (kmt) 1,294 1,285

Energy contracts (electricity—megawatt hours) 100,578,295 100,578,295

Foreign exchange contracts $ - $ 20

Other

Alcoa has also entered into certain derivatives to minimize its price risk related to other customer sales and pricing

arrangements. Alcoa has not qualified these contracts for hedge accounting treatment and, therefore, the fair value gains and

losses on these contracts are recorded in earnings as follows:

Derivatives Not Designatedas

Hedging

Instruments

Location of Gain or (Loss)

Recognizedin Earnings on

Derivatives

Amount of Gain or (Loss)

Recognizedin Earnings

on Derivatives

2011 2010 2009

Aluminumcontracts Sales $ (13) $ 5 $ (9)

Aluminumcontracts Other (income)

expenses, net

13 (18) (38)

Embedded credit derivative Other (income)

expenses, net

(5) (2) -

Energy contract Other (income)

expenses, net

47 (23) (30)

Foreign exchange contracts Other (income)

expenses, net

(3) 6 6

Total $ 39 $ (32) $ (71)

The embedded credit derivative relates to a power contract that indexes the difference between the long-termdebt ratings of

Alcoa and the counterparty fromany of the three major credit rating agencies. If the counterparty’s lowest credit rating is

greater than one rating category above Alcoa’s credit ratings, an independent investment banker would

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be consulted to determine a hypothetical interest rate for both parties. The two interest rates would be netted and the resulting

difference would be multiplied by Alcoa’s equivalent percentage of the outstanding principal of the counterparty’s debt

obligation as of December 31 of the year preceding the calculation date. This differential would be added to the cost of power

in the period following the calculation date.

In late 2009, an existing power contract associated with a smelter in the U.S. no longer qualified for the normal purchase normal

sale exception under derivative accounting. The change in the classification of this contract was due to the fact that Alcoa

negotiated a new power contract that did not replace the existing contract, resulting in Alcoa receiving more power than it

requires for this smelter (the terms of the new power contract were favorable compared to the existing power contract and

management determined that is was beneficial to enter into the new contract while fulfilling its obligation under the existing

contract as opposed to waiting closer to the end of the existing contract to negotiate a new power contract). As a result, the

existing contract was required to be accounted for as a derivative. Under the derivative classification, this contract did not

qualify as a fair value or cash flow hedge. Additionally, a financial contract related to the same U.S. smelter utilized by

management to hedge the price of electricity of the aforementioned power contract no longer qualified for cash flow hedge

accounting. As such, the existing power contract and the financial contract were marked to market through earnings beginning

in December 2009. Alcoa’s obligations under the existing power contract and financial contract expired in September 2011.

In 2009, Alcoa entered into a forward contract to purchase $57 (C$58) to mitigate the foreign currency risk related to a

Canadian-denominated loan due in 2014. All other foreign exchange contracts were entered into and settled within each of the

periods presented.

Material Limitations

The disclosures with respect to commodity prices, interest rates, and foreign currency exchange risk do not take into account

the underlying commitments or anticipated transactions. If the underlying items were included in the analysis, the gains or

losses on the futures contracts may be offset. Actual results will be determined by a number of factors that are not under

Alcoa’s control and could vary significantly fromthose factors disclosed.

Alcoa is exposed to credit loss in the event of nonperformance by counterparties on the above instruments, as well as credit or

performance risk with respect to its hedged customers’ commitments. Although nonperformance is possible, Alcoa does not

anticipate nonperformance by any of these parties. Contracts are with creditworthy counterparties and are further supported by

cash, treasury bills, or irrevocable letters of credit issued by carefully chosen banks. In addition, various master netting

arrangements are in place with counterparties to facilitate settlement of gains and losses on these contracts.

Other Financial Instruments. The carrying values and fair values of Alcoa’s other financial instruments were as follows:

December 31,

2011 2010

Carrying

value

Fair

value

Carrying

value

Fair

value

Cash and cash equivalents $ 1,939 $1,939 $ 1,543 $1,543

Restricted cash 25 25 1 1

Noncurrent receivables 30 30 23 23

Available-for-sale securities 92 92 93 93

Short-termborrowings 62 62 92 92

Commercial paper 224 224 - -

Long-termdebt due within one year 445 445 231 231

Long-termdebt, less amount due within one year 8,640 9,274 8,842 9,882

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The following methods were used to estimate the fair values of other financial instruments:

Cash andcash equivalents, Restrictedcash, Short-term borrowings, Commercial paper, andLong-term debt due within one

year. The carrying amounts approximate fair value because of the short maturity of the instruments.

Noncurrent receivables. The fair value of noncurrent receivables was based on anticipated cash flows, which approximates

carrying value.

Available-for-sale securities. The fair value of such securities was based on quoted market prices. These financial instruments

consist of exchange-traded fixed income and equity securities, which are carried at fair value and were classified in Level 1 of

the fair value hierarchy.

Long-term debt, less amount due within one year. The fair value was based on quoted market prices for public debt and on

interest rates that are currently available to Alcoa for issuance of debt with similar terms and maturities for non-public debt.

Y. Subsequent Events

Management evaluated all activity of Alcoa and concluded that no subsequent events have occurred that would require

recognition in the Consolidated Financial Statements or disclosure in the Notes to the Consolidated Financial Statements,

except as described below.

In January 2012, Alcoa repaid the $322 in outstanding principal of its 6% Notes as scheduled using available cash on hand.

Also in January 2012, Alcoa entered into two termloan agreements, totaling $350, with two separate financial institutions and a

revolving credit agreement, providing a $100 credit facility, with a third financial institution. In February 2012, Alcoa entered

into another revolving credit agreement, providing a $100 credit facility, with a fourth financial institution. The purpose of any

borrowings under all four arrangements will be to provide working capital and for other general corporate purposes, including

contributions to Alcoa’s pension plans ($95 was contributed in January 2012). The two termloans were fully drawn on the

same dates as the agreements and are subject to an interest rate equivalent to the 3-month LIBOR plus a 1.5% margin. In

February 2012, Alcoa borrowed the $100 under the first credit facility. This borrowing is subject to an interest rate equivalent to

the 6-month LIBOR plus a 1.25% margin. The two termloans mature in July 2012 and the two revolving credit facilities expire in

December 2012. The covenants contained in all four arrangements are the same as Alcoa’s Credit Agreement (see Note K).

Furthermore in January 2012, Alcoa’s subsidiary, Alumínio, borrowed $280 in new loans with a weighted-average interest rate

of 2.32% and a weighted-average maturity of 172 days fromtwo financial institutions. The purpose of these borrowings is to

support Alumínio’s export operations.

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Supplemental Financial Information (unaudited)

Quarterly Data

(in millions, except per-share amounts)

First Second Third Fourth Year

2011

Sales $5,958 $ 6,585 $6,419 $ 5,989 $24,951

Amounts attributable to Alcoa common shareholders:

Income (loss) fromcontinuing operations $ 309 $ 326 $ 172 $ (193) $ 614

(Loss) income fromdiscontinued operations (1) (4) - 2 (3)

Net income (loss) $ 308 $ 322 $ 172 $ (191) $ 611

Earnings per share attributable to Alcoa common shareholders*:

Basic:

Income (loss) fromcontinuing operations $ 0.29 $ 0.31 $ 0.16 $ (0.18) $ 0.58

(Loss) income fromdiscontinued operations - (0.01) - - (0.01)

Net income (loss) $ 0.29 $ 0.30 $ 0.16 $ (0.18) $ 0.57

Diluted:

Income (loss) fromcontinuing operations $ 0.27 $ 0.28 $ 0.15 $ (0.18) $ 0.55

(Loss) income fromdiscontinued operations - - - - -

Net income (loss) $ 0.27 $ 0.28 $ 0.15 $ (0.18) $ 0.55

2010

Sales $4,887 $ 5,187 $5,287 $ 5,652 $21,013

Amounts attributable to Alcoa common shareholders:

(Loss) income fromcontinuing operations $ (194) $ 137 $ 61 $ 258 $ 262

Loss fromdiscontinued operations (7) (1) - - (8)

Net (loss) income $ (201) $ 136 $ 61 $ 258 $ 254

Earnings per share attributable to Alcoa common shareholders*:

Basic:

(Loss) income fromcontinuing operations $(0.19) $ 0.13 $ 0.06 $ 0.25 $ 0.25

Loss fromdiscontinued operations (0.01) - - - -

Net (loss) income $(0.20) $ 0.13 $ 0.06 $ 0.25 $ 0.25

Diluted:

(Loss) income fromcontinuing operations $(0.19) $ 0.13 $ 0.06 $ 0.24 $ 0.25

Loss fromdiscontinued operations (0.01) - - - (0.01)

Net (loss) income $(0.20) $ 0.13 $ 0.06 $ 0.24 $ 0.24

* Per share amounts are calculated independently for each period presented; therefore, the sumof the quarterly per share

amounts may not equal the per share amounts for the year.

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Item 9. Changes in andDisagreements with Accountants on Accounting andFinancial Disclosure.

None.

Item 9A. Controls andProcedures.

(a) Evaluation of Disclosure Controls and Procedures

Alcoa’s Chief Executive Officer and Chief Financial Officer have evaluated the company’s disclosure controls and procedures,

as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as of the end of the period covered by this

report, and they have concluded that these controls and procedures are effective.

(b) Management’s Annual Report on Internal Control over Financial Reporting

Management’s Report on Internal Control over Financial Reporting is included in Part II, Item8 of this Form10-K beginning on

page 74.

(c) Attestation Report of the Registered Public Accounting Firm

The effectiveness of Alcoa’s internal control over financial reporting as of December 31, 2011 has been audited by

PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report, which is included in

Part II, Item8 of this Form10-K on page 75.

(d) Changes in Internal Control over Financial Reporting

There have been no changes in internal control over financial reporting during the fourth quarter of 2011, that have materially

affected, or are reasonably likely to materially affect, the company’s internal control over financial reporting.

Item 9B. Other Information.

None.

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PART III

Item 10. Directors, Executive Officers andCorporate Governance.

The information required by Item401 of Regulation S-K regarding directors is contained under the caption “Item1 —Election of

Directors” of the Proxy Statement and is incorporated by reference. The information required by Item401 of Regulation S-K

regarding executive officers is set forth in Part I, Item1 of this report under “Executive Officers of the Registrant”.

The information required by Item405 of Regulation S-K is contained under the caption “Alcoa Stock Ownership —

Section 16(a) Beneficial Ownership Reporting Compliance” of the Proxy Statement and is incorporated by reference.

The company’s Code of Ethics for the CEO, CFO and Other Financial Professionals is publicly available on the company’s

Internet website at http://www.alcoa.comunder the section “About Alcoa — Corporate Governance.” The remaining

information required by Item406 of Regulation S-K is contained under the captions “Corporate Governance” and “Corporate

Governance — Business Conduct Policies and Code of Ethics” of the Proxy Statement and is incorporated by reference.

The information required by Items 407(c)(3), (d)(4) and (d)(5) of Regulation S-K is included under the captions “Nominating

Candidates for Election to the Board” and “Corporate Governance — Committees of the Board — Audit Committee” of the

Proxy Statement and is incorporated by reference.

Item 11. Executive Compensation.

The information required by Item402 of Regulation S-K is contained under the captions “Executive Compensation” (excluding

the information under the caption “— Compensation Committee Report”), “Director Compensation for 2011”, and “Corporate

Governance — Recovery of Incentive Compensation” of the Proxy Statement. Such information is incorporated by reference.

The information required by Items 407(e)(4) and (e)(5) of Regulation S-K is contained under the captions “Corporate

Governance — Compensation Committee Interlocks and Insider Participation” and “Executive Compensation — Compensation

Committee Report” of the Proxy Statement. Such information (other than the Compensation Committee Report, which shall not

be deemed to be “filed”) is incorporated by reference.

Item 12. Security Ownershipof Certain Beneficial Owners andManagement andRelatedStockholder Matters.

The following table gives information about Alcoa’s common stock that could be issued under the company’s equity

compensation plans as of December 31, 2011.

Plan Category

Number of securities to

be issuedupon exercise of

outstanding options,

warrants andrights

(a)

Weighted-average

exercise price of

outstanding options,

warrants andrights

(b)

Number of securities

remaining available for

future issuance under

equity compensation

plans (excluding

securities reflectedin

column (a))

(c)

Equity compensation plans

approved by security

holders 56,066,741 $ 17.41 36,491,489

Equity compensation plans

not approved by security

holders 0 0 0

Total 56,066,741 $ 17.41 36,491,489

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Includes the 2009 Alcoa Stock Incentive Plan (approved by shareholders in May 2009) (2009 ASIP), 2004 Alcoa Stock

Incentive Plan (approved by shareholders in April 2004) (2004 ASIP), Alcoa Stock Incentive Plan (approved by

shareholders in 1999) and the former Alcoa Long TermStock Incentive Plan (last approved by shareholders in 1992 and

amendments thereto approved by shareholders in 1995). Table amounts are comprised of the following:

• 39,963,475 stock options

• 6,790,799 performance options

• 6,397,724 restricted share units

• 2,914,743 performance share awards (1,275,230 granted at target)

The 2009 ASIP authorizes, in addition to stock options, other types of stock-based awards in the formof stock

appreciation rights, restricted shares, restricted share units, performance awards and other awards. The shares that remain

available for issuance under the 2009 ASIP may be issued in connection with any one of these awards. Up to 35 million

shares may be issued under the plan. Any award other than an option or a stock appreciation right shall count as 1.75

shares. Options and stock appreciation rights shall be counted as one share for each option or stock appreciation right. In

addition, the 2009 ASIP provides the following are available to grant under the 2009 ASIP: (i) shares that are issued under

the 2009 ASIP, which are subsequently forfeited, cancelled or expire in accordance with the terms of the award and

(ii) shares that had previously been issued under prior plans that are outstanding as of the date of the 2009 ASIP which

are subsequently forfeited, cancelled or expire in accordance with the terms of the award.

The information required by Item403 of Regulation S-K is contained under the captions “Alcoa Stock Ownership—Stock

Ownership of Certain Beneficial Owners” and “—Stock Ownership of Directors and Executive Officers” of the Proxy Statement

and is incorporated by reference.

Item 13. Certain Relationships andRelatedTransactions, andDirector Independence.

The information required by Item404 of Regulation S-K is contained under the captions “Executive Compensation” (excluding

the information under the caption “Compensation Committee Report”), “Corporate Governance—Transactions with Directors’

Companies” and “Transactions with Related Persons” of the Proxy Statement and is incorporated by reference.

The information required by Item407(a) of Regulation S-K regarding director independence is contained under the captions

“Item1—Election of Directors,” “Corporate Governance,” “Corporate Governance—Where to Find Corporate Governance

Information,” “Corporate Governance—Director Independence,” “Corporate Governance—Committees of the Board” and

“Corporate Governance—Transactions with Directors’ Companies” and “Transactions with Related Persons” of the Proxy

Statement and is incorporated by reference.

Item 14. Principal Accounting Fees andServices.

The information required by Item9(e) of Schedule 14A is contained under the captions “Item2—Proposal to Ratify the

Independent Auditor—Audit and Non-Audit Fees” and “ 2012 Report of the Audit Committee” of the Proxy Statement and in

Attachment A (Pre-Approval Policies and Procedures adopted by the Audit Committee for Audit and Non-Audit Services)

thereto and is incorporated by reference.

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PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a) The consolidated financialstatements and exhibits listed below are filed as part of this report.

(1) The company’s consolidated financialstatements, the notes thereto and the report of the Independent

Registered Public Accounting Firmare on pages 75 through 153 of this report.

(2) Financialstatement schedules have been omitted because they are not applicable, not required, or the

required information is included in the consolidated financialstatements or notes thereto.

(3) Exhibits.

Exhibit

Number Description*

3(a). Articles of the Registrant as amended April 2010, incorporated by reference to exhibit 3(a) to the company’s

Current Report on Form8-K dated April 27, 2010.

3(b). By-Laws of the Registrant, as amended effective January 20, 2012, incorporated by reference to exhibit 3 to the

company’s Current Report on Form8-K dated January 26, 2012.

4(a). Articles. See Exhibit 3(a) above.

4(b). By-Laws. See Exhibit 3(b) above.

4(c). Formof Indenture, dated as of September 30, 1993, between Alcoa Inc. and The Bank of New York Trust

Company, N.A., as successor to J. P. Morgan Trust Company, National Association (formerly Chase

Manhattan Trust Company, National Association), as successor Trustee to PNC Bank, National Association,

as Trustee (undated formof Indenture incorporated by reference to exhibit 4(a) to Registration Statement No.

33-49997 on FormS-3).

4(c)(1). First Supplemental Indenture, dated as of January 25, 2007, between Alcoa Inc. and The Bank of New York

Trust Company, N.A., as successor to J.P. Morgan Trust Company, National Association (formerly Chase

Manhattan Trust Company, National Association), as successor Trustee to PNC Bank, National Association,

as Trustee, incorporated by reference to exhibit 99.4 to the company’s Current Report on Form8-K

(Commission file number 1-3610) dated January 25, 2007.

4(c)(2). Second Supplemental Indenture, dated as of July 15, 2008, between Alcoa Inc. and The Bank of New York

Mellon Trust Company, N.A., as successor in interest to J. P. Morgan Trust Company, National Association

(formerly Chase Manhattan Trust Company, National Association, as successor to PNC Bank, National

Association), as Trustee, incorporated by reference to exhibit 4(c) to the company’s Current Report on Form8-

K dated July 15, 2008.

4(c)(3). Third Supplemental Indenture, dated as of March 24, 2009, between Alcoa Inc. and The Bank of New York

Mellon Trust Company, N.A., as successor in interest to J.P. Morgan Trust Company, National Association

(formerly Chase Manhattan Trust Company, National Association, as successor to PNC Bank, National

Association), as Trustee, incorporated by reference to exhibit 4.2 to the company’s Current Report on Form8-

K dated March 24, 2009.

4(d). Formof 5.55% Notes Due 2017, incorporated by reference to exhibit 4(d) to the company’s Annual Report on

Form10-K for the year ended December 31, 2008.

4(e). Formof 5.90% Notes Due 2027, incorporated by reference to exhibit 4(d) to the company’s Annual Report on

Form10-K for the year ended December 31, 2008.
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4(f). Formof 5.95% Notes Due 2037, incorporated by reference to exhibit 4(d) to the company’s Annual Report on

Form10-K for the year ended December 31, 2008.

4(g). Formof 6.00% Notes Due 2013, incorporated by reference to exhibit 4(a) to the company’s Current Report on

Form8-K dated July 15, 2008.

4(h). Formof 6.75% Notes Due 2018, incorporated by reference to exhibit 4(b) to the company’s Current Report on

Form8-K dated July 15, 2008.

4(i). Formof 5.25% Convertible Notes due 2014, incorporated by reference to exhibit 4.1 to the company’s Current

Report on Form8-K dated March 24, 2009.

4(j). Formof 6.150% Notes due 2020, incorporated by reference to exhibit 4 to the company’s Current Report on

Form8-K dated August 3, 2010.

4(k). Formof 5.40% Notes due 2021, incorporated by reference to Exhibit 4 to the company’s Current Report on

Form8-K, dated April 21, 2011

4(l). Alcoa Retirement Savings Plan for Fastener Systems and Commercial Windows Employees, incorporated by

reference to exhibit 4(c) to the company’s FormS-8 Registration Statement dated November 23, 2010.

4(m). Alcoa Retirement Savings Plan for Mill Products Employees, incorporated by reference to exhibit 4(d) to the

company’s FormS-8 Registration Statement dated November 23, 2010.

4(n). Alcoa Retirement Savings Plan for Bargaining Employees, incorporated by reference to exhibit 4(a) to the

company’s Post-Effective Amendment No. 6 to FormS-8 Registration Statement dated November 30, 2010.

4(o). Alcoa Retirement Savings Plan for Salaried Employees, incorporated by reference to exhibit 4(b) to the

company’s Post-Effective Amendment No. 6 to FormS-8 Registration Statement dated November 30, 2010.

4(p). Alcoa Retirement Savings Plan for Hourly Non-Bargaining Employees, incorporated by reference to exhibit

4(c) to the company’s Post-Effective Amendment No. 6 to FormS-8 Registration Statement dated November

30, 2010.

10(a). Alcoa’s Summary of the Key Terms of the AWAC Agreements, incorporated by reference to exhibit 99.2 to the

company’s Current Report on Form8-K (Commission file number 1-3610) dated November 28, 2001.

10(b). Charter of the Strategic Council executed December 21, 1994, incorporated by reference to exhibit 99.3 to the

company’s Current Report on Form8-K (Commission file number 1-3610) dated November 28, 2001.

10(c). Amended and Restated Limited Liability Company Agreement of Alcoa Alumina & Chemicals, L.L.C. dated as

of December 31, 1994, incorporated by reference to exhibit 99.4 to the company’s Current Report on Form8-K

(Commission file number 1-3610) dated November 28, 2001.

10(d). Shareholders Agreement dated May 10, 1996 between Alcoa International Holdings Company and WMC

Limited, incorporated by reference to exhibit 99.5 to the company’s Current Report on Form8-K (Commission

file number 1-3610) dated November 28, 2001.

10(e). Side Letter of May 16, 1995 clarifying transfer restrictions, incorporated by reference to exhibit 99.6 to the

company’s Current Report on Form8-K (Commission file number 1-3610) dated November 28, 2001.

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10(f). Enterprise Funding Agreement, dated September 18, 2006, between Alcoa Inc., certain of its affiliates and

Alumina Limited, incorporated by reference to exhibit 10(f) to the company’s Annual Report on Form10-K

(Commission file number 1-3610) for the year ended December 31, 2006.

10(f)(1). Amendments to Enterprise Funding Agreement, effective January 25, 2008, between Alcoa Inc., certain of its

affiliates and Alumina Limited, incorporated by reference to exhibit 10(f)(1) to the company’s Annual Report

on Form10-K for the year ended December 31, 2007.

10(g). Five-Year Revolving Credit Agreement, dated as of July 25, 2011, among Alcoa Inc., the Lenders and Issuers

named therein, Citibank, N.A., as Administrative Agent for the Lenders and Issuers, and JPMorgan Chase

Bank, N.A., as Syndication Agent, incorporated by reference to exhibit 10 to the company’s Current Report on

Form8-K dated July 28, 2011.

10(h). AluminumProject Framework Shareholders’ Agreement, dated December 20, 2009, between Alcoa Inc. and

Saudi Arabian Mining Company (Ma’aden), incorporated by reference to exhibit 10(i) to the company’s

Annual Report on Form10-K for the year ended December 31, 2009.

10(h)(1). First Supplemental Agreement, dated March 30, 2010, to the AluminiumProject Framework Shareholders

Agreement, dated December 20, 2009, between Saudi Arabian Mining Company (Ma’aden) and Alcoa Inc.,

incorporated by reference to exhibit 10(c) to company’s Quarterly Report on Form10-Q for the quarter ended

March 31, 2010.

10(i). Closing Memorandum, dated December 20, 2009, between Alcoa Inc. and AluminumFinancing Limited,

incorporated by reference to exhibit 10(j) to the company’s Annual Report on Form10-K for the year ended

December 31, 2009.

10(i)(1). Parent Guarantee, dated December 20, 2009, between Abdullah Abunayyan Trading Corp. and Alcoa Inc.,

incorporated by reference to exhibit 10(j)(1) to the company’s Annual Report on Form10-K for the year ended

December 31, 2009.

10(i)(2). Parent Guarantee, dated December 20, 2009, between Alcoa Inc. and AluminumFinancing Limited,

incorporated by reference to exhibit 10(j)(2) to the company’s Annual Report on Form10-K for the year ended

December 31, 2009.

10(j). Purchase Agreement, dated March 30, 2010, between Alcoa Inc., AluminumFinancing Limited, and Abdullah

Abunayyan Trading Corp., incorporated by reference to exhibit 10(d) to company’s Quarterly Report on Form

10-Q for the quarter ended March 31, 2010.

10(k). Registration Rights Agreement, dated as of January 24, 2011, by and between Alcoa Inc. and Evercore Trust

Company, N.A., solely in its capacity as duly appointed and acting investment manager of a segregated

account held in the Alcoa Master Retirement Plans Trust, incorporated by reference to exhibit 10 to the

company’s Current Report on Form8-K dated January 24, 2011.

10(l). Employees’ Excess Benefits Plan, Plan A, incorporated by reference to exhibit 10(b) to the company’s Annual

Report on Form10-K (Commission file number 1-3610) for the year ended December 31, 1980.

10(l)(1). Amendments to Employees’ Excess Benefits Plan, Plan A, effective January 1, 2000, incorporated by reference

to exhibit 10(b)(1) to the company’s Annual Report on Form10-K (Commission file number 1-3610) for the year

ended December 31, 2000.

10(l)(2). Amendments to Employees’ Excess Benefits Plan, Plan A, effective January 1, 2002, incorporated by reference

to exhibit 10(j)(2) to the company’s Annual Report on Form10-K (Commission file number 1-3610) for the year

ended December 31, 2002.

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10(l)(3). Amendments to Employees’ Excess Benefits Plan, Plan A, effective December 31, 2007, incorporated by

reference to exhibit 10(j)(3) to the company’s Annual Report on Form10-K for the year ended December 31,

2007.

10(l)(4). Amendments to Employees’ Excess Benefits Plan, Plan A, effective December 29, 2008, incorporated by

reference to exhibit 10(j)(4) to company’s Annual Report on Form10-K for the year ended December 31, 2008.

10(l)(5). Amendment to Employees’ Excess Benefits Plan A, effective December 18, 2009, incorporated by reference to

exhibit 10(m)(5) to the company’s Annual Report on Form10-K for the year ended December 31, 2009.

10(l)(6). Amendment to Employees’ Excess Benefits Plan A, effective January 1, 2011, incorporated by reference to

exhibit 10(n)(6) to the company’s Annual Report on Form10-K for the year ended December 31, 2010.

10(l)(7). Amendment to Employees’ Excess Benefits Plan A, effective January 1, 2012.

10(m). Alcoa Internal Revenue Code Section 162(m) Compliant Annual Cash Incentive Compensation Plan,

incorporated by reference to Attachment D to the company’s Definitive Proxy Statement on FormDEF 14A,

filed March 7, 2011.

10(n). 2004 Summary Description of the Alcoa Incentive Compensation Plan, incorporated by reference to

exhibit 10(g) to the company’s Quarterly Report on Form10-Q (Commission file number 1-3610) for the quarter

ended September 30, 2004.

10(n)(1). Incentive Compensation Plan of Alcoa Inc., as revised and restated effective November 8, 2007, incorporated

by reference to exhibit 10(k)(1) to the company’s Annual Report on Form10-K for the year ended December 31,

2007.

10(n)(2). Amendment to Incentive Compensation Plan of Alcoa Inc., effective December 18, 2009, incorporated by

reference to exhibit 10(n)(2) to the company’s Annual Report on Form10-K for the year ended December 31,

2009.

10(o). Employees’ Excess Benefits Plan, Plan C, as amended and restated effective December 31, 2007, incorporated

by reference to exhibit 10(l) to the company’s Annual Report on Form10-K for the year ended December 31,

2007.

10(o)(1). Amendments to Employees’ Excess Benefits Plan, Plan C, effective December 29, 2008, incorporated by

reference to exhibit 10(l)(1) to company’s Annual Report on Form10-K for the year ended December 31, 2008.

10(o)(2). Amendment to Employees’ Excess Benefits Plan C, effective December 18, 2009, incorporated by reference to

exhibit 10(o)(2) to the company’s Annual Report on Form10-K for the year ended December 31, 2009.

10(o)(3). Amendment to Employees’ Excess Benefits Plan C, effective January 1, 2011, incorporated by reference to

exhibit 10(p)(3) to the company’s Annual Report on Form10-K for the year ended December 31, 2010.

10(o)(4). Amendment to Employees’ Excess Benefits Plan C, effective January 1, 2012.

10(p). Deferred Fee Plan for Directors, as amended effective July 9, 1999, incorporated by reference to exhibit 10(g)(1)

to the company’s Quarterly Report on Form10-Q (Commission file number 1-3610) for the quarter ended

June 30, 1999.

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10(q). Restricted Stock Plan for Non-Employee Directors, as amended effective March 10, 1995, incorporated by

reference to exhibit 10(h) to the company’s Annual Report on Form10-K (Commission file number 1-3610) for

the year ended December 31, 1994.

10(q)(1). Amendment to Restricted Stock Plan for Non-Employee Directors, effective November 10, 1995, incorporated

by reference to exhibit 10(h)(1) to the company’s Annual Report on Form10-K (Commission file number 1-

3610) for the year ended December 31, 1995.

10(r). Description of Changes to Non-Employee Director Compensation and Stock Ownership Guidelines, effective

January 1, 2011, incorporated by reference to exhibit 10(b) to company’s Quarterly Report on Form10-Q for the

quarter ended September 30, 2010.

10(s). Fee Continuation Plan for Non-Employee Directors, incorporated by reference to exhibit 10(k) to the

company’s Annual Report on Form10-K (Commission file number 1-3610) for the year ended December 31,

1989.

10(s)(1). Amendment to Fee Continuation Plan for Non-Employee Directors, effective November 10, 1995, incorporated

by reference to exhibit 10(i)(1) to the company’s Annual Report on Form10-K (Commission file number 1-3610)

for the year ended December 31, 1995.

10(s)(2). Second Amendment to the Fee Continuation Plan for Non-Employee Directors, effective September 15, 2006,

incorporated by reference to exhibit 10.2 to the company’s Current Report on Form8-K (Commission file

number 1-3610) dated September 20, 2006.

10(t). Deferred Compensation Plan, as amended effective October 30, 1992, incorporated by reference to exhibit 10(k)

to the company’s Annual Report on Form10-K (Commission file number 1-3610) for the year ended

December 31, 1992.

10(t)(1). Amendments to Deferred Compensation Plan, effective January 1, 1993, February 1, 1994 and January 1, 1995,

incorporated by reference to exhibit 10(j)(1) to the company’s Annual Report on Form10-K (Commission file

number 1-3610) for the year ended December 31, 1994.

10(t)(2). Amendment to Deferred Compensation Plan, effective June 1, 1995, incorporated by reference to exhibit 10(j)(2)

to the company’s Annual Report on Form10-K (Commission file number 1-3610) for the year ended December

31, 1995.

10(t)(3). Amendment to Deferred Compensation Plan, effective November 1, 1998, incorporated by reference to

exhibit 10(j)(3) to the company’s Annual Report on Form10-K (Commission file number 1-3610) for the year

ended December 31, 1999.

10(t)(4). Amendments to Deferred Compensation Plan, effective January 1, 1999, incorporated by reference to exhibit

10(j)(4) to the company’s Annual Report on Form10-K (Commission file number 1-3610) for the year ended

December 31, 1999.

10(t)(5). Amendments to Deferred Compensation Plan, effective January 1, 2000, incorporated by reference to exhibit

10(j)(5) to the company’s Annual Report on Form10-K (Commission file number 1-3610) for the year ended

December 31, 2000.

10(t)(6). Amendments to Deferred Compensation Plan, effective January 1, 2005, incorporated by reference to exhibit

10(q)(6) to the company’s Annual Report on Form10-K (Commission file number 1-3610) for the year ended

December 31, 2005.

10(t)(7). Amendments to Deferred Compensation Plan, effective November 1, 2007 incorporated by reference to exhibit

10(p)(7) to the company’s Annual Report on Form10-K for the year ended December 31, 2007.
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10(t)(8). Amendments to Deferred Compensation Plan, effective December 29, 2008, incorporated by reference to

exhibit 10(p)(8) to the company’s Annual Report on Form10-K for the year ended December 31, 2008.

10(t)(9). Amendment to Deferred Compensation Plan, effective April 1, 2009, incorporated by reference to exhibit 10(s)

(9) to the company’s Annual Report on Form10-K for the year ended December 31, 2009.

10(t)(10). Amendment to Deferred Compensation Plan, effective December 18, 2009, incorporated by reference to exhibit

10(s)(10) to the company’s Annual Report on Form10-K for the year ended December 31, 2009.

10(t)(11). Amendment to Deferred Compensation Plan, effective January 1, 2011, incorporated by reference to exhibit

10(u)(11) to the company’s Annual Report on Form10-K for the year ended December 31, 2010.

10(u). Summary of the Executive Split Dollar Life Insurance Plan, dated November 1990, incorporated by reference to

exhibit 10(m) to the company’s Annual Report on Form10-K (Commission file number 1-3610) for the year

ended December 31, 1990.

10(v). Amended and Restated Dividend Equivalent Compensation Plan, effective January 1, 1997, incorporated by

reference to exhibit 10(h) to the company’s Quarterly Report on Form10-Q (Commission file number 1-3610)

for the quarter ended September 30, 2004.

10(w). Formof Indemnity Agreement between the company and individual directors or officers, incorporated by

reference to exhibit 10(j) to the company’s Annual Report on Form10-K (Commission file number 1-3610) for

the year ended December 31, 1987.

10(x). 2004 Alcoa Stock Incentive Plan, as amended through November 11, 2005, incorporated by reference to exhibit

10.1 to the company’s Current Report on Form8-K (Commission file number 1-3610) dated November 16, 2005.

10(y). 2009 Alcoa Stock Incentive Plan, incorporated by reference to Attachment C to the company’s Definitive

Proxy Statement on FormDEF 14A filed March 16, 2009.

10(y)(1). Amended and Restated 2009 Alcoa Stock Incentive Plan, dated February 15, 2011, incorporated by reference

to exhibit 10(z)(1) to the company’s Annual Report on Form10-K for the year ended December 31, 2010.

10(z). Terms and Conditions for Special Retention Awards under the 2009 Alcoa Stock Incentive Plan, effective

January 1, 2010, incorporated by reference to exhibit 10(e) to company’s Quarterly Report on Form10-Q for the

quarter ended March 31, 2010.

10(aa). Alcoa Supplemental Pension Plan for Senior Executives, as amended and restated effective December 31, 2007,

incorporated by reference to exhibit 10(u) to the company’s Annual Report on Form10-K for the year ended

December 31, 2007.

10(aa)(1). Amendment to Alcoa Supplemental Pension Plan for Senior Executives, effective December 29, 2008,

incorporated by reference to exhibit 10(u)(1) to company’s Annual Report on Form10-K for the year ended

December 31, 2008.

10(aa)(2). Amendment to Alcoa Supplemental Pension Plan for Senior Executives, effective December 16, 2009,

incorporated by reference to exhibit 10(y)(2) to the company’s Annual Report on Form10-K for the year ended

December 31, 2009.

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10(aa)(3). Amendment to Alcoa Supplemental Pension Plan for Senior Executives, effective December 18, 2009,

incorporated by reference to exhibit 10(y)(3) to the company’s Annual Report on Form10-K for the year ended

December 31, 2009.

10(aa)(4). Amendment to Alcoa Supplemental Pension Plan for Senior Executives, effective January 1, 2011, incorporated

by reference to exhibit 10(bb)(4) to the company’s Annual Report on Form10-K for the year ended December

31, 2010.

10(aa)(5). Amendment to Alcoa Supplemental Pension Plan for Senior Executives, effective January 1, 2012.

10(bb). Deferred Fee Estate Enhancement Plan for Directors, effective July 10, 1998, incorporated by reference to

exhibit 10(r) to the company’s Annual Report on Form10-K (Commission file number 1-3610) for the year

ended December 31, 1998.

10(cc). Alcoa Inc. Change in Control Severance Plan, as amended and restated effective November 8, 2007,

incorporated by reference to exhibit 10(x) to the company’s Annual Report on Form10-K for the year ended

December 31, 2007.

10(cc)(1). Amendment to Alcoa Inc. Change in Control Severance Plan, effective December 16, 2009, incorporated by

reference to exhibit 10(bb)(1) to the company’s Annual Report on Form10-K for the year ended December 31,

2009.

10(dd). Formof Agreement for Stock Option Awards, effective January 1, 2004, incorporated by reference to exhibit

10(a) to the company’s Quarterly Report on Form10-Q (Commission file number 1-3610) for the quarter ended

September 30, 2004.

10(ee). Formof Agreement for Stock Awards, effective January 1, 2004, incorporated by reference to exhibit 10(b) to

the company’s Quarterly Report on Form10-Q (Commission file number 1-3610) for the quarter ended

September 30, 2004.

10(ff). Formof Agreement for Performance Share Awards, effective January 1, 2004, incorporated by reference to

exhibit 10(c) to the company’s Quarterly Report on Form10-Q (Commission file number 1-3610) for the quarter

ended September 30, 2004.

10(gg). Stock Option Award Rules, revised January 1, 2004, incorporated by reference to exhibit 10(d) to the

company’s Quarterly Report on Form10-Q (Commission file number 1-3610) for the quarter ended

September 30, 2004.

10(hh). Stock Awards Rules, effective January 1, 2004, incorporated by reference to exhibit 10(e) to the company’s

Quarterly Report on Form10-Q (Commission file number 1-3610) for the quarter ended September 30, 2004.

10(ii). Performance Share Awards Rules, effective January 1, 2004, incorporated by reference to exhibit 10(f) to the

company’s Quarterly Report on Form10-Q (Commission file number 1-3610) for the quarter ended

September 30, 2004.

10(jj). 2005 Deferred Fee Plan for Directors, as amended, effective May 5, 2011, incorporated by reference to exhibit

10(d) to the company’s Quarterly Report on Form10-Q for the quarter ended June 30, 2011.

10(kk). Global Pension Plan, effective January 1, 1998, incorporated by reference to exhibit 10(jj) to the company’s

Annual Report on Form10-K (Commission file number 1-3610) for the year ended December 31, 2004.

10(kk)(1). Amendments to Global Pension Plan, incorporated by reference to exhibit 10(jj)(1) to the company’s Annual

Report on Form10-K (Commission file number 1-3610) for the year ended December 31, 2004.

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10(kk)(2). Amendments to Global Pension Plan, effective January 1, 2005, incorporated by reference to exhibit 10(gg)(2)

to the company’s Annual Report on Form10-K (Commission file number 1-3610) for the year ended

December 31, 2005.

10(kk)(3). Amendments to Global Pension Plan, effective December 1, 2005, incorporated by reference to exhibit 10(gg)

(3) to the company’s Annual Report on Form10-K (Commission file number 1-3610) for the year ended

December 31, 2005.

10(kk)(4). Amendments to Global Pension Plan, effective December 29, 2008, incorporated by reference to exhibit 10(ff)

(4) to the company’s Annual Report on Form10-K for the year ended December 31, 2008.

10(kk)(5). Amendments to Global Pension Plan, effective July 1, 2009, incorporated by reference to exhibit 10(jj)(5) to the

company’s Annual Report on Form10-K for the year ended December 31, 2009.

10(kk)(6). Amendments to Global Pension Plan, effective December 18, 2009, incorporated by reference to exhibit 10(jj)(6)

to the company’s Annual Report on Form10-K for the year ended December 31, 2009.

10(kk)(7). Amendment to Global Pension Plan, effective January 1, 2011, incorporated by reference to exhibit 10(mm)(7)

to the company’s Annual Report on Form10-K for the year ended December 31, 2010.

10(ll). Executive Severance Agreement, as amended and restated effective December 8, 2008, between Alcoa Inc. and

Klaus Kleinfeld, incorporated by reference to exhibit 10(gg) to the company’s Annual Report on Form10-K for

the year ended December 31, 2008.

10(ll)(1). Executive Severance Agreement, as amended and restated effective December 8, 2008, between Alcoa Inc. and

Charles D. McLane, Jr., incorporated by reference to exhibit 10(gg)(2) to the company’s Annual Report on

Form10-K for the year ended December 31, 2008.

10(ll)(2). Executive Severance Agreement, as amended and restated effective December 8, 2008, between Alcoa Inc. and

Helmut Wieser, incorporated by reference to exhibit 10(gg)(5) to the company’s Annual Report on Form10-K

for the year ended December 31, 2008.

10(ll)(3). Description of Additional Executive Severance Benefit for Helmut Wieser, effective December 1, 2011.

10(ll)(4). Executive Severance Agreement, effective July 28, 2009, between Alcoa Inc. and Nicholas J. DeRoma,

incorporated by reference to exhibit 10(c) to the company’s Quarterly Report on Form10-Q for the quarter

ended September 30, 2009.

10(ll)(5). Executive Severance Agreement, dated February 19, 2010, between Alcoa Inc. and John Thuestad,

incorporated by reference to exhibit 10 to company’s Quarterly Report on Form10-Q for the quarter ended

June 30, 2010.

10(ll)(6). Formof Executive Severance Agreement between the company and new officers entered into after July 22,

2010, incorporated by reference to exhibit 10(a) to company’s Quarterly Report on Form10-Q for the quarter

ended September 30, 2010.

10(mm). Consulting Agreement, dated February 22, 2010, between Alcoa Inc. and Bernt Reitan, effective August 1,

2010, incorporated by reference to exhibit 10(b) to company’s Quarterly Report on Form10-Q for the quarter

ended March 31, 2010.

10(nn). Description of Non-Employee Director Compensation incorporated by reference to exhibit 10 to the

company’s Quarterly Report on Form10-Q for the quarter ended June 30, 2007.

10(oo). Formof Award Agreement for Stock Options, effective January 1, 2006, incorporated by reference to

exhibit 10.2 to the company’s Current Report on Form8-K (Commission file number 1-3610) dated November
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16, 2005.

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10(pp). Formof Award Agreement for Stock Awards, effective January 1, 2006, incorporated by reference to exhibit

10.3 to the company’s Current Report on Form8-K (Commission file number 1-3610) dated November 16, 2005.

10(qq). Formof Award Agreement for Performance Share Awards, effective January 1, 2006, incorporated by reference

to exhibit 10.4 to the company’s Current Report on Form8-K (Commission file number 1-3610) dated

November 16, 2005.

10(rr). Formof Award Agreement for Performance Stock Options, effective January 1, 2006, incorporated by reference

to exhibit 10.5 to the company’s Current Report on Form8-K (Commission file number 1-3610) dated

November 16, 2005.

10(ss). Formof Award Agreement for Stock Options, effective May 8, 2009, incorporated by reference to exhibit 10.2

to the company’s Current Report on Form8-K dated May 13, 2009.

10(tt). Terms and Conditions for Stock Options, effective January 1, 2011, incorporated by reference to exhibit 10(c)

to the company’s Quarterly Report on Form10-Q for the quarter ended June 30, 2011.

10(uu). Formof Award Agreement for Restricted Share Units, effective May 8, 2009, incorporated by reference to

exhibit 10.3 to the Company’s Current Report on Form8-K dated May 13, 2009.

10(vv). Terms and Conditions for Restricted Share Units, effective January 1, 2011, incorporated by reference to

exhibit 10(b) to the company’s Quarterly Report on Form10-Q for the quarter ended June 30, 2011.

10(ww). Summary Description of Equity Choice Programfor Performance Equity Award Participants, dated November

2005, incorporated by reference to exhibit 10.6 to the company’s Current Report on Form8-K (Commission file

number 1-3610) dated November 16, 2005.

10(xx). Reynolds Metals Company Benefit Restoration Plan for New Retirement Program, as amended through

December 31, 2005, incorporated by reference to exhibit 10(rr) to the company’s Annual Report on Form10-K

(Commission file number 1-3610) for the year ended December 31, 2005.

10(xx)(1). Amendments to the Reynolds Metals Company Benefit Restoration Plan for New Retirement Program,

effective December 18, 2009, incorporated by reference to exhibit 10(tt)(1) to the company’s Annual Report on

Form10-K for the year ended December 31, 2009.

10(xx)(2). Amendments to the Reynolds Metals Company Benefit Restoration Plan for New Retirement Program,

effective January 1, 2012.

10(yy). Global Expatriate Employee Policy (pre-January 1, 2003), incorporated by reference to exhibit 10(uu) to the

company’s Annual Report on Form10-K (Commission file number 1-3610) for the year ended December 31,

2005.

10(zz). Formof Special Retention Stock Award Agreement, effective July 14, 2006, incorporated by reference to exhibit

10.3 to the company’s Current Report on Form8-K (Commission file number 1-3610) dated September 20, 2006.

10(aaa). Omnibus Amendment to Rules and Terms and Conditions of all Awards under the 2004 Alcoa Stock Incentive

Plan, effective January 1, 2007, incorporated by reference to exhibit 10(tt) to the company’s Annual Report on

Form10-K for the year ended December 31, 2007.

10(bbb). Summary of Terms of Relocation for Helmut Wieser, effective January 1, 2007, incorporated by reference to

exhibit 10(vv) to the company’s Annual Report on Form10-K (Commission file number 1-3610) for the year

ended December 31, 2006.

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10(ccc). Description of Terms of Relocation for John Thuestad, effective June 15, 2011, incorporated by reference to

exhibit 10(e) to the company’s Quarterly Report on Form10-Q for the quarter ended June 30, 2011.

10(ddd). Letter Agreement, dated August 14, 2007, between Alcoa Inc. and Klaus Kleinfeld, incorporated by reference

to exhibit 10(b) to the company’s Quarterly Report on Form10-Q for the quarter ended September 30, 2007.

10(eee). Letter Agreement, effective July 24, 2009, between Franklin A. Thomas, Lead Director, and Alain J. P. Belda,

Chairman of the Board, incorporated by reference to exhibit 10 to the company’s Current Report on Form8-K

dated July 29, 2009.

10(fff). Employment Offer Letter, dated July 28, 2009, between Alcoa Inc. and Nicholas J. DeRoma, incorporated by

reference to exhibit 10(b) to the company’s Quarterly Report on Form10-Q for the quarter ended September 30,

2009.

10(ggg). Director Plan: You Make a Difference Award, incorporated by reference to exhibit 10(uu) to the company’s

Annual Report on Form10-K for the year ended December 31, 2008.

10(hhh). Formof Award Agreement for Stock Options, effective January 1, 2010, incorporated by reference to exhibit

10(ddd) to the company’s Annual Report on Form10-K for the year ended December 31, 2009.

12. Computation of Ratio of Earnings to Fixed Charges.

21. Subsidiaries of the Registrant.

23. Consent of Independent Registered Public Accounting Firm.

24. Power of Attorney for certain directors.

31. Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32. Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

95. Mine Safety Disclosure.

101. INS XBRL Instance Document.

101. SCH XBRL Taxonomy Extension Schema Document.

101. CAL XBRL Taxonomy Extension Calculation Linkbase Document.

101. DEF XBRL Taxonomy Extension Definition Linkbase Document.

101. LAB XBRL Taxonomy Extension Label Linkbase Document.

101. PRE XBRL Taxonomy Extension Presentation Linkbase Document.

* Exhibit Nos. 10(l) through 10(hhh) are management contracts or compensatory plans required to be filed as Exhibits to this

Form10-K.

Amendments and modifications to other Exhibits previously filed have been omitted when in the opinion of the registrant such

Exhibits as amended or modified are no longer material or, in certain instances, are no longer required to be filed as Exhibits.

No other instruments defining the rights of holders of long-termdebt of the registrant or its subsidiaries have been filed as

Exhibits because no such instruments met the threshold materiality requirements under Regulation S-K. The registrant agrees,

however, to furnish a copy of any such instruments to the Commission upon request.

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this

report to be signed on its behalf by the undersigned, thereunto duly authorized.

ALCOA INC.

February 16, 2012 By /s/ Graeme W. Bottger

Graeme W. Bottger

Vice President and Controller

(Also signing as Principal Accounting Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following

persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature Title Date

/s/ Klaus Kleinfeld

Klaus Kleinfeld

Chairman and Chief Executive Officer

(Principal Executive Officer and Director)

February 16, 2012

/s/ Charles D. McLane, Jr.

Charles D. McLane, Jr.

Executive Vice President and Chief

Financial Officer (Principal Financial

Officer)

February 16, 2012

Arthur D. Collins, Jr., Kathryn S. Fuller, Judith M. Gueron, Michael G. Morris, E. Stanley O’Neal, James W. Owens, Patricia F.

Russo, Ratan N. Tata and Ernesto Zedillo, each as a Director, on February 16, 2012, by Donna C. Dabney, their Attorney-inFact.*

*By /s/ Donna C. Dabney

Donna C. Dabney

Attorney-in-Fact

167