##### Table of Contents



UNITED STATES SECURITIES AND
    EXCHANGE COMMISSION
 Washington, D.C.
    20549
  Form 10-Q
  (Mark one)þ

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    September 30, 2007oro

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

98-0442987(I.R.S. employer
    identification number)3399 Peachtree Road NE, Suite 1500
    Atlanta, Georgia(Address of principal
    executive offices)

30326(Zip
    Code)   Telephone:
    (404) 814-4200
 (Registrants telephone
    number, including area code)
   þ o
  Rule 12b-2
 þ o o
  Rule 12b-2 o þ




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##### 



TABLE OF
    CONTENTS
  PART I.


FINANCIAL INFORMATIONItem 1.


Financial StatementsCondensed Consolidated Statements of Operations
    and Comprehensive Income (Loss) (unaudited) Three Months Ended
    September 30, 2007 and 2006; May 16, 2007 Through
    September 30, 2007; April 1, 2007 Through May 15,
    2007; and Six Months Ended September 30, 2006


2Condensed Consolidated Balance Sheets (unaudited)
    As of September 30, 2007 and March 31, 2007


3Condensed Consolidated Statements of Cash Flows
    (unaudited) May 16, 2007 Through September 30, 2007;
    April 1, 2007 Through May 15, 2007; and Six Months
    Ended September 30, 2006


4Condensed Consolidated Statements of
    Shareholders Equity (unaudited) April 1, 2007 Through
    May 15, 2007 and May 16, 2007 Through
    September 30, 2007


5Notes to the Condensed Consolidated Financial
    Statements (unaudited)


6Item 2.


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


57Item 3.


Quantitative and Qualitative Disclosures About
    Market Risk


93Item 4.


Controls and Procedures


97PART II.


OTHER INFORMATIONItem 1.


Legal Proceedings


99Item 6.


Exhibits


102EX-10.1 ASSET-BASED LENDING CREDIT FACILITYEX-10.2 TERM LOAN FACILITYEX-10.3 INTERCREDITOR AGREEMENTEX-10.4 SECURITY AGREEMENTEX-10.5 SECURITY AGREEMENTEX-31.1 SECTION 302 CERTIFICATION OF THE PEOEX-31.2 SECTION 302 CERTIFICATION OF THE PFOEX-32.1 SECTION 906 CERTIFICATION OF THE PEOEX-32.2 SECTION 906 CERTIFICATION OF THE PFO   1




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##### Table of Contents



PART I.
    FINANCIAL INFORMATION
  Item 1.
    Financial
    Statements  Novelis
    Inc.
    CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND
    COMPREHENSIVE INCOME (LOSS) (unaudited)
    (in millions, except per share amounts)
  Three MonthsEnded


May 16, 2007



April 1, 2007


Six MonthsSeptember 30,


Through



Through


Ended2007



2006


September 30, 2007



May 15, 2007


September 30, 2006Successor



Predecessor


Successor



Predecessor


PredecessorNet sales

$
2,821



$
2,494


$
4,368



$
1,281


$
5,058Cost of goods sold (exclusive of depreciation and amortization
    shown below)


2,555




2,389



3,991




1,205



4,796Selling, general and administrative expenses


88




103



130




95



201Depreciation and amortization


102




57



155




28



116Research and development expenses


10




10



23




6



20Interest expense and amortization of debt issuance
    costs  net


56




52



81




26



101(Gain) loss on change in fair value of derivative
    instruments  net


36




37



22




(20
)


(4
)Equity in net (income) loss of non-consolidated affiliates


4




(5
)


5




(1
)


(9
)Sale transaction fees
















32



Other (income) expenses  net


(7
)



7



4




4



32,844




2,650



4,411




1,375



5,224Loss before provision (benefit) for taxes on loss and minority
    interests share


(23
)



(156
)


(43
)



(94
)


(166
)Provision (benefit) for taxes on loss


(36
)



(52
)







4



(72
)Income (loss) before minority interests share


13




(104
)


(43
)



(98
)


(94
)Minority interests share







2



2




1



(2
)Net income (loss)


13




(102
)


(41
)



(97
)


(96
)Other comprehensive income  net of tax Currency
    translation adjustment


30




11



28




35



68Change in fair value of effective portion of hedges 
    net


1




11



2




(1
)


(23
)Postretirement benefit plans Amortization of net actuarial loss
















(1
)


Change in minimum pension liability







(1
)











(4
)Other comprehensive income  net of tax


31




21



30




33



41Comprehensive income (loss)

$
44



$
(81
)

$
(11
)


$
(64
)

$
(55
)Dividends per common share

$
0.00



$
0.01


$
0.00



$
0.00


$
0.10    2




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##### Table of Contents



Novelis
    Inc.
  CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
 (in
    millions, except number of shares)
  As ofSeptember 30,



March 31,2007



2007Successor



PredecessorASSETSCurrent assetsCash and cash equivalents

$
181



$
128Accounts receivable (net of allowances of $1 as of
    September 30, 2007 and $29 as of March 31, 2007) third parties


1,355




1,350 related parties


27




25Inventories


1,494




1,483Prepaid expenses and other current assets


49




39Current portion of fair value of derivative instruments


51




92Deferred income tax assets


62




19Total current assets


3,219




3,136Property, plant and equipment  net


3,298




2,106Goodwill


2,344




239Intangible assets  net


854




20Investment in and advances to non-consolidated affiliates


757




153Fair value of derivative instruments  net of current
    portion


7




55Deferred income tax assets


62




102Other long-term assets third parties


86




105 related parties


46




54Total assets

$
10,673



$
5,970LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt

$
14



$
143Short-term borrowings


243




245Accounts payable third parties


1,454




1,614 related parties


53




49Accrued expenses and other current liabilities


807




480Deferred income tax liabilities


85




73Total current liabilities


2,656




2,604Long-term debt  net of current portion


2,559




2,157Deferred income tax liabilities


690




103Accrued postretirement benefits


443




427Other long-term liabilities


688




3527,036




5,643Commitments and contingenciesMinority interests in equity of consolidated affiliates


151




152Shareholders equityCommon stock, no par value; unlimited number of shares
    authorized; 77,459,658 and 75,357,660 shares issued and
    outstanding as of September 30, 2007 and March 31,
    2007, respectively







Additional paid-in capital


3,497




428Accumulated deficit


(41
)



(263
)Accumulated other comprehensive income


30




10Total shareholders equity


3,486




175Total liabilities and shareholders equity

$
10,673



$
5,970    3




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##### Table of Contents



Novelis
    Inc.
  CONDENSED
    CONSOLIDATED STATEMENTS OF CASH FLOWS
 (unaudited) (in millions)
  May 16, 2007



April 1, 2007


Six MonthsThrough



Through


EndedSeptember 30, 2007



May 15, 2007


September 30, 2006Successor



Predecessor


PredecessorOPERATING ACTIVITIESNet loss

$
(41
)


$
(97
)

$
(96
)Adjustments to determine net cash provided by (used in)
    operating activities:Depreciation and amortization


155




28



116(Gain) loss on change in fair value of derivative
    instruments  net


22




(20
)


(4
)Deferred income taxes


(46
)



(18
)


(111
)Amortization of debt issuance costs


7




1



5Write-off and amortization of fair value adjustments 
    net


(82
)







Provision for uncollectible accounts receivable


1








1Equity in net (income) loss of non-consolidated affiliates


5




(1
)


(9
)Dividends from non-consolidated affiliates







4



4Minority interests share


(2
)



(1
)


2Share-based compensation











1Gain on sales of businesses, investments and assets 
    net











2Changes in assets and liabilities (net of effects from
    acquisitions and divestitures):Accounts receivable third parties


54




(21
)


(25
) related parties











2Inventories


105




(76
)


(9
)Prepaid expenses and other current assets


(2
)



(7
)


13Other long-term assets


(2
)



(1
)


(12
)Accounts payable third parties


(126
)



(62
)


3 related parties


3








(3
)Accrued expenses and other current liabilities


(57
)



42



15Accrued postretirement benefits


8




1



10Other long-term liabilities


7




(2
)


6Net cash provided by (used in) operating activities


9




(230
)


(89
)INVESTING ACTIVITIESCapital expenditures


(57
)



(17
)


(56
)Cash advance received on pending transfer of rights











15Proceeds from sales of assets


1








1Changes to investment in and advances to non-consolidated
    affiliates


3




1



2Proceeds from loans receivable  net 
    related parties


10








20Net proceeds from settlement of derivative instruments


66




18



154Net cash provided by investing activities


23




2



136FINANCING ACTIVITIESProceeds from issuance of common stock


92








Proceeds from issuance of debt


960




150



20Principal repayments


(905
)



(1
)


(185
)Short-term borrowings  net


(65
)



60



78Dividends common shareholders











(7
) minority interests


(1
)



(7
)


(1
)Debt issuance costs


(35
)



(2
)


(8
)Proceeds from the exercise of stock options







1



Net cash provided by (used in) financing activities


46




201



(103
)Net increase (decrease) in cash and cash equivalents


78




(27
)


(56
)Effect of exchange rate changes on cash balances held in
    foreign currencies


1




1



3Cash and cash equivalents  beginning of period


102




128



124Cash and cash equivalents  end of period

$
181



$
102


$
71Supplemental disclosures of cash flow information:Interest paid

$
102



$
13


$
103Income taxes paid


31




9



12Supplemental schedule of non-cash investing and financing
    activities related to the Acquisition of Novelis Common Stock
    (Note 2):Property, plant and equipment

$
(1,244
)Goodwill


(2,097
)Intangible assets


(859
)Investment in and advances to non-consolidated affiliates


(610
)Debt


66Additional paid-in capital


(422
)    4




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##### Table of Contents



Novelis
    Inc.
  CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY
    (unaudited)
 (in
    millions, except number of common shares)
  AccumulatedAdditional





OtherCommon Stock


Paid-in


Accumulated


ComprehensiveShares


Amount


Capital


Deficit


Income


TotalPredecessor:Balance as of March 31, 2007


75,357,660


$



$
428


$
(263
)

$
10


$
175Activity April 1, 2007 through May 15, 2007Net loss














(97
)






(97
)Issuance of common stock from the exercise of stock options


57,876







1











1Conversion of share-based compensation plans from equity-based
    plans to liability-based plans










(7
)










(7
)Currency translation adjustment


















35



35Change in fair value of effective portion of hedges 
    net


















(1
)


(1
)Postretirement benefit plans:Amortization of net actuarial loss


















(1
)


(1
)Balance as of May 15, 2007


75,415,536


$



$
422


$
(360
)

$
43


$
105Successor:Balance as of May 16, 2007


75,415,536


$



$
3,405


$



$



$
3,405Activity May 16, 2007 through September 30, 2007Net loss














(41
)






(41
)Issuance of common stock


2,044,122







92











92Currency translation adjustment


















28



28Change in fair value of effective portion of hedges 
    net


















2



2Balance as of September 30, 2007


77,459,658


$



$
3,497


$
(41
)

$
30


$
3,486    5




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##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)
  1.
    Business
    and Summary of Significant Accounting Policies    Change in
    Fiscal Year End
  Form 10-Q Rule 13a-10
  Description
    of Business and Basis of Presentation
    Form 10-K Rule 10-01 Regulation S-X.
  Form 10-Q
  Predecessor
    and Successor Reporting
  Push Down Basis of Accounting Required in Certain Limited
    Circumstances Business
    Combinations
 6




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##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
      Reclassifications
    and Revisions
  Restructuring charges  net Impairment charges on long-lived assets Other (income) expenses  net Gain on change in fair value of derivative
    instruments  net Sale transaction fees Other (income)
    expenses  net
    Recently
    Issued Accounting Standards
  No. FIN 39-1, Amendment of FASB Interpretation No 39 FIN 39-1). FIN 39-1 Offsetting of Amounts
    Related to Certain Contracts FIN 39-1 FIN 39-1
  The Fair Value Option for Financial Assets and Financial
    Liabilities Fair Value
    Measurements Disclosures about Fair
    Value of Financial Instruments.
 7




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##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
    Fair Value Measurements
    2.
    Acquisition
    of Novelis Common Stock      Purchase
    Price Allocation and Goodwill
    Purchase of all outstanding 75,415,536 shares at $44.93 per
    share

$
3,388Direct transaction costs incurred by Hindalco


17Total consideration

$
3,405    8




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##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
      Assets acquired:Current assets

$
3,210Property, plant and equipment


3,350Goodwill


2,341Intangible assets


879Investment in and advances to non-consolidated affiliates


762Fair value of derivative instruments  net of current
    portion


3Deferred income tax assets


117Other long-term assets


110Total assets acquired


10,772Liabilities assumed:Accounts payable


(1,612
)Accrued expenses and other current liabilities


(738
)Debt, including current portion and short-term borrowings


(2,824
)Deferred income tax liabilities, including current portion


(874
)Accrued postretirement benefits


(430
)Other long-term liabilities


(736
)Minority interests in equity of consolidated affiliates


(153
)Total liabilities assumed


(7,367
)Total consideration

$
3,405   Research and development expenses
  Other long-term liabilities Accrued expenses and other liabilities Net sales
   9




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##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
      Sale
    transaction fees
  Unaudited
    Condensed Consolidated Pro Forma Results
    Three Months Ended


Six Months EndedSeptember 30, 2006


September 30, 2006Net sales

$
2,578


$
5,233Loss before provision for taxes and minority interests
    share

$
(129
)

$
(144
)Net loss

$
(75
)

$
(74
)   3.
    Restructuring
    Programs   10




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##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  Other (income) expenses  net
  EuropeOther Exit


TotalSeverance


Related


RestructuringReserves


Reserves


ReservesPredecessor:Balance as of March 31, 2007

$
18


$
18


$
36April 1, 2007 through May 15, 2007 Activity:Provisions  net


1







1Cash payments






(1
)


(1
)Adjustments  other






1



1Balance as of May 15, 2007


19



18



37Successor:May 16, 2007 through June 30, 2007 Activity:Provisions  net


1







1Cash payments


(2
)


(1
)


(3
)Balance as of June 30, 2007


18



17



35July 1, 2007 to September 30, 2007 Activity:Cash payments


(5
)


(1
)


(6
)Balance as of September 30, 2007

$
13


$
16


$
29   4.
    Inventories    As ofSeptember 30, 2007



March 31, 2007Successor



PredecessorFinished goods

$
368



$
369Work in process


396




359Raw materials


655




684Supplies


77




1201,496




1,532Allowances


(2
)



(49
)Inventories

$
1,494



$
1,483  11




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##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  5.  Property,
    Plant and Equipment
    As ofSeptember 30, 2007



March 31, 2007Successor



PredecessorLand and property rights

$
255




$   97Buildings


699




895Machinery and equipment


2,387




4,6993,341




5,691Accumulated depreciation and amortization


(142
)



(3,674
)3,199




2,017Construction in progress


99




89Property, plant and equipment  net

$
3,298




$2,106     May 16, 2007



April 1, 2007


Six MonthsThree Months Ended


Through



Through


EndedSeptember 30,


September 30,



May 15,


September 30,2007



2006


2007



2007


2006Successor



Predecessor


Successor



Predecessor


PredecessorDepreciation and amortization expense related to property, plant
    and equipment

$
92



$
56


$
141



$
28


$
115   6.
    Goodwill
    and Intangible Assets  Goodwill
    Successor



PredecessorBalance





Balance



Balance





Balanceas of


Cumulative


as of



as of


Cumulative


as ofMay 16,


Translation


September 30,



March 31,


Translation


May 15,Operating Segment

2007


Adjustment


2007



2007


Adjustment


2007North America

$
1,527


$



$
1,527



$



$



$
Europe


389



6



395




239



5



244Asia


162



(3
)


159












South America


263







263












$
2,341


$
3


$
2,344



$
239


$
5


$
244  12




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##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  Intangible
    Assets
    As ofSeptember 30, 2007



March 31, 2007Successor



PredecessorGross





Net


Weighted



Gross





Net


WeightedCarrying


Accumulated


Carrying


Average



Carrying


Accumulated


Carrying


AverageAmount


Amortization


Amount


Life



Amount


Amortization


Amount


LifeTradenames

$
83


$
(1
)

$
82



20 years



$
14


$
(6
)

$
8



15 yearsTechnology


171



(4
)


167



15 years




20



(8
)


12



15 yearsCustomer relationships


483



(9
)


474



20 years












Favorable energy supply contract


123



(5
)


118



9.5 years












Other favorable contracts


15



(2
)


13



3.3 years












$
875


$
(21
)

$
854



17.2 years



$
34


$
(14
)

$
20



15 years     Cost of goods sold
  Three Months

May 16, 2007


April 1, 2007

Six MonthsEnded

Through


Through

EndedSeptember 30,

September 30,


May 15,

September 30,2007


2006

2007


2007

2006Successor


Predecessor

Successor


Predecessor

PredecessorAmortization expense related to intangible assets

$
15



$
1


$
22



$



$
1     Fiscal Year Ending March 31,2008 (remaining six months)

$
312009


592010


572011


542012


53  13




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##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  7.
    Investment
    in and Advances to Non-Consolidated Affiliates and Related Party
    Transactions    OwnershipAffiliate Name

Ownership Structure

PercentageAluminium Norf GmbH

Corporation


50
%Consorcio Candonga

Unincorporated Joint Venture


50
%MiniMRF LLC

Limited Liability Company


50
%Deutsche Aluminium Verpackung Recycling GmbH

Corporation


30
%France Aluminium Recyclage S.A.

Public Limited Company


20
%         Three Months


May 16, 2007






Six MonthsEnded


Through



April 1, 2007


EndedSeptember 30,


September 30,



Through


September 30,2007



2006


2007



May 15, 2007


2006Successor



Predecessor


Successor



Predecessor


PredecessorNet sales

$
138



$
144


$
223



$
45


$
288Costs, expenses and provisions for taxes on income


130




129



211




43



268Net income

$
8



$
15


$
12



$
2


$
20    14




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##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
    Three Months


May 16, 2007






Six MonthsEnded


Through



April 1, 2007


EndedSeptember 30,


September 30,



Through


September 30,2007



2006


2007



May 15, 2007


2006Successor



Predecessor


Successor



Predecessor


PredecessorPurchases of tolling services and electricityAluminium Norf GmbH(A)

$
66



$
60


$
106



$
21


$
118Consorcio Candonga(B)

$
3



$
3


$
6



$
1


$
7Petrocoque(C)


n.a.



$
1



n.a.



$



$
1Interest incomeAluminium Norf GmbH(D)

$




$
1


$




$



$
1     n.a.
    
    not applicable  see (C).(A)
    
    We purchase tolling services (the conversion of customer-owned
    metal) from Aluminium Norf GmbH.(B)
    
    We purchase electricity from Consorcio Candonga for our
    operations in South America.(C)
    
    We purchase calcined-coke from Petrocoque for use in our
    smelting operation in South America. As previously discussed, we
    sold our interest in Petrocoque in November 2006. They are not
    considered a related party subsequent to the quarter ended
    December 31, 2006.(D)
    
    We earn interest income on a loan due from Aluminium Norf GmbH.    As ofSeptember 30, 2007



March 31, 2007Successor



PredecessorAccounts receivable(A)

$
27



$
25Other long-term receivables(A)

$
46



$
54Accounts payable(B)

$
53



$
49     (A)
    
    The balances represent current and non-current portions of a
    loan due from Aluminium Norf GmbH.(B)
    
    We purchase tolling services from Aluminium Norf GmbH and
    electricity from Consorcio Candonga. 15




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##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
   8.
    Accrued
    Expenses and Other Current Liabilities    As ofSeptember 30, 2007



March 31, 2007Successor



PredecessorAccrued compensation and benefits

$
123



$
138Accrued settlement of legal claim


39




39Accrued interest payable


15




24Accrued income taxes


33




9Current portion of unfavorable sales contracts


276




Current portion of fair value of derivative instruments


81




33Other current liabilities


240




237Accrued expenses and other current liabilities

$
807



$
480  16




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  9.
    Debt    As ofSeptember 30, 2007



March 31, 2007SuccessorInterest





UnamortizedRates





Fair Value


Carrying



Predecessor(A)


Principal


Adjustments (B)


Value



PrincipalNovelis Inc.Floating rate Term Loan, due July 2014


7.20
%

$
299


$



$
299



$
Floating rate Term Loan B(C)



















2597.25% Senior Notes, due February 2015


7.25
%


1,399



71



1,470




1,400Novelis CorporationFloating rate Term Loan, due July 2014


7.20
%


659







659




Floating rate Term Loan B(C)



















449Novelis Switzerland S.A.Capital lease obligation, due January 2020 (Swiss francs (CHF)
    55 million)


7.50
%


47



(4
)


43




46Capital lease obligation, due August 2011 (CHF 4 million)


2.49
%


3







3




4Novelis Korea LimitedBank loan, due December 2007


4.55
%


70



(1
)


69




70Bank loan (Korean won (KRW) 40 billion)(D)



















42Bank loan, due December 2007 (KRW 25 billion)


4.45
%


27







27




27Bank loans, due September 2008 through June 2011 (KRW
    1 billion)


3.92
%(E)


1







1




1OtherOther debt, due April 2008 through December 2012


2.21
%(E)


2







2




2Total debt






2,507



66



2,573




2,300Less: current portion






(14
)






(14
)



(143
)Long-term debt  net of current portion





$
2,493


$
66


$
2,559



$
2,157     (A)
    
    Interest rates are as of September 30, 2007 and exclude the
    effects of accretion/amortization of fair value adjustments as a
    result of the Arrangement.(B)
    
    Debt was recorded at fair value as a result of the Arrangement
    (see Note 2  Acquisition of Novelis Common
    Stock).(C)
    
    The Floating rate Term Loan B was refinanced in July 2007. See
    New Senior Secured Credit Facilities. 17




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
   (D)
    
    The Bank loan was refinanced in August 2007 with a short-term
    borrowing. See Korean Bank Loans.(E)
    
    Weighted average interest rate.  New
    Senior Secured Credit Facilities
    Other
    long-term assets  third parties
           18




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
        Other long-term assets 
    third parties Interest expense and amortization of
    debt issuance costs  net
  Old
    Senior Secured Credit Facilities
           19




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
    Other long-term
    assets  third parties Interest expense
    and amortization of debt issuance costs  net
  7.25% Senior
    Notes
  Other
    long-term assets  third parties Interest
    expense and amortization of debt issuance costs  net
  Interest expense and
    amortization of debt issuance costs  net
     20




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
    Tender
    Offer and Consent Solicitation for 7.25% Senior
    Notes
    Korean
    Bank Loans
        Other
    Agreements
  deposit-and-guarantee
  Interest
    Rate Swaps
  3-month
 21




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  Capital
    Lease Obligations
      Short
    Term Borrowings and Lines of Credit
      10.
    Accumulated
    Other Comprehensive Income    Three Months


May 16, 2007






Six MonthsEnded


Through



April 1, 2007


EndedSeptember 30,


September 30,



Through


September 30,2007



2006


2007



May 15, 2007


2006Successor



Predecessor


Successor



Predecessor


PredecessorNet change in foreign currency translation adjustments

$
27



$
11


$
14



$
31


$
68Net change in fair value of effective portion of hedges


2




11



4




(1
)


(23
)Postretirement benefit plans:Amortization of net actuarial loss
















(1
)


Net change in minimum pension liability







(1
)











(4
)Net other comprehensive income adjustments, before income tax
    effect


29




21



18




29



41Income tax effect


2








12




4



Other comprehensive income

$
31



$
21


$
30



$
33


$
41  22




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
    As ofSeptember 30, 2007



March 31, 2007Successor



PredecessorForeign currency translation adjustments

$
28



$
144Fair value of effective portion of hedges  net


2




(43
)Net actuarial loss







(82
)Net prior service cost







(8
)Net transition obligation







(1
)Accumulated other comprehensive income

$
30



$
10   11.
    Share-Based
    Compensation  Effect of
    Acquisition by Hindalco
    Shares/Units


Cash PaymentsPredecessor:

Settled


(In millions)Novelis 2006 Incentive Plan (stock options)


825,850


$
16Novelis 2006 Incentive Plan (stock appreciation rights)


378,360



7Novelis Conversion Plan of 2005


1,238,183



29Stock Price Appreciation Unit Plan


299,873



7Deferred Share Unit Plan for Non-Executive Directors


109,911



5Novelis Founders Performance Awards


180,400



8$
72   Selling,
    general and administrative expenses Additional paid-in capital
    Recognition
    Awards
   23




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
      Share-Based Payment
    WeightedNumber of


Average


AwardRecognition


Fair Value at


RedemptionAwards


Grant Date


PricePredecessor:Recognition Awards as of March 31, 2007


145,800


$
23.15Granted


Vested


Forfeited/Cancelled


Recognition Awards as of May 15, 2007


145,800






$
44.93Successor:Granted


Vested


Forfeited/Cancelled


(27,700
)Recognition Awards as of September 30, 2007


118,100






$
44.93     2006
    Stock Options
   24




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
      WeightedAverageWeighted


RemainingAverage


Contractual


AggregateNumber of


Exercise


Term


IntrinsicOptions


Price


(In Years)


ValuePredecessor:Options outstanding as of March 31, 2007


825,850


$
25.53Granted






Exercised






Forfeited/Cancelled






Expired






Settled as a result of the Arrangement


(825,850
)

$
25.53Options outstanding as of May 15, 2007





$







$
Options exercisable as of May 15, 2007





$







$
     Share-Based
    Payment
 25




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
    April 1, 2007ThroughMay 15, 2007PredecessorExpected volatility

42.20 to 46.40%Weighted average volatility

44.30%Dividend yield

0.16%Risk-free interest rate

4.68 to 4.71%Expected life

1.00 to 4.75 years     Novelis
    Conversion Plan of 2005
      WeightedAverageWeighted


RemainingAverage


Contractual


AggregateNumber of


Exercise


Term


IntrinsicOptions


Price


(In Years)


ValuePredecessor:Options outstanding as of March 31, 2007


1,296,952


$
21.74Granted






Exercised


(57,876
)

$
20.00Forfeited/Cancelled


(893
)

$
23.74Expired






Settled as a result of the Arrangement


(1,238,183
)

$
21.82Options outstanding as of May 15, 2007





$







$
Options exercisable as of May 15, 2007





$







$
    26




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
      April 1, 2007ThroughMay 15, 2007PredecessorExpected volatility

30.30%Weighted-average volatility

30.30%Dividend yield

1.56%Risk-free interest rate

2.88 to 3.73%Expected life

0.70 to 5.70 years       Stock
    Appreciation Rights
   27




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
    WeightedAverageWeighted


RemainingAverage


Contractual


AggregateNumber of


Exercise


Term


IntrinsicSARs


Price


(In Years)


ValuePredecessor:SARs outstanding as of March 31, 2007


380,000


$
25.53Granted






Exercised






Forfeited/Cancelled


(1,640
)

$
25.53Expired






Settled as a result of the Arrangement


(378,360
)

$
25.53SARs outstanding as of May 15, 2007





$







$
SARs exercisable as of May 15, 2007





$







$
         Stock
    Price Appreciation Unit Plan
   28




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
    WeightedAverageWeighted


RemainingAverage


Contractual


AggregateNumber of


Exercise


Term


IntrinsicSPAUs


Price


(In Years)


ValuePredecessor:SPAUs outstanding as of March 31, 2007


300,617


$
21.94Granted






Exercised






Forfeited/Cancelled


(744
)

$
21.49Expired






Settled as a result of the Arrangement


(299,873
)

$
21.94SPAUs outstanding as of May 15, 2007





$







$
SPAUs exercisable as of May 15, 2007





$







$
       Deferred
    Share Unit Plan for Non-Executive Directors
    and/or
 29




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
    AggregateNumber of


Redemption


IntrinsicDDSUs


Price


ValuePredecessor:DDSUs outstanding as of March 31, 2007


106,578


$
44.09Granted


3,333Exercised (paid out)


Forfeited


Expired/Cancelled


Settled as a result of the Arrangement


(109,911
)

$
44.93DDSUs outstanding as of May 15, 2007





$



$
     Novelis
    Founders Performance Awards
         30




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  Share-Based
    Compensation Expense
  Selling,
    general and administrative expenses
  Three MonthsEnded


May 16, 2007






Six MonthsSeptember 30,


Through



April 1, 2007


EndedSeptember 30,



Through


September 30,2007



2006


2007



May 15, 2007


2006Successor



Predecessor


Successor



Predecessor


PredecessorRecognition Awards

$
0.8



$



$
1.2



$
1.5


$
Novelis 2006 Incentive Plan (stock options)


n.a.








n.a.




14.5



Novelis 2006 Incentive Plan (stock appreciation rights)


n.a.








n.a.




5.6



Novelis Conversion Plan of 2005


n.a.




0.8



n.a.




23.8



1.5Stock Price Appreciation Unit Plan


n.a.




0.8



n.a.




(0.5
)


1.1Deferred Share Unit Plan for Non-Executive Directors


n.a.




0.5



n.a.




0.2



0.9Novelis Founders Performance Awards


n.a.




1.0



n.a.




0.1



1.3Total Shareholder Returns Performance Plan


n.a.




0.6



n.a.








1.0Total share-based compensation expense

$
0.8



$
3.7


$
1.2



$
45.2


$
5.8       12.
    Postretirement
    Benefit Plans    Three Months


May 16, 2007






Six MonthsEnded


Through



April 1, 2007


EndedSeptember 30,


September 30,



Through


September 30,Pension Benefit Plans

2007



2006


2007



May 15, 2007


2006Successor



Predecessor


Successor



Predecessor


PredecessorService cost

$
12



$
9


$
18



$
6


$
19Interest cost


12




11



18




6



22Expected return on assets


(11
)



(9
)


(16
)



(5
)


(19
)Amortization actuarial losses







1












3 prior service cost







1












1Net periodic benefit cost

$
13



$
13


$
20



$
7


$
26   31




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  Three Months


May 16, 2007






Six MonthsEnded


Through



April 1, 2007


EndedSeptember 30,


September 30,



Through


September 30,Other Postretirement Benefit Plans

2007



2006


2007



May 15, 2007


2006Successor



Predecessor


Successor



Predecessor


PredecessorService cost

$
1



$
1


$
2



$
1


$
2Interest cost


2




2



3




1



4Amortization actuarial losses







1












1Net periodic benefit cost

$
3



$
4


$
5



$
2


$
7     Employer
    Contributions to Plans
    Three Months


May 16, 2007






Six MonthsEnded


Through



April 1, 2007


EndedSeptember 30,


September 30,



Through


September 30,2007



2006


2007



May 15, 2007


2006Successor



Predecessor


Successor



Predecessor


PredecessorFunded pension plans

$
11



$
8


$
16



$
4


$
13Unfunded pension plans


4




3



6




2



6Savings and defined contribution pension plans


4




3



6




2



5Total contributions

$
19



$
14


$
28



$
8


$
24      32




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  13.
    Currency
    Losses (Gains)    Three Months


May 16, 2007






Six MonthsEnded


Through



April 1, 2007


EndedSeptember 30,


September 30,



Through


September 30,2007



2006


2007



May 15, 2007


2006Successor



Predecessor


Successor



Predecessor


PredecessorNet loss (gain) on change in fair value of currency derivative
    instruments(A)

$
(5
)


$
(6
)

$
(21
)


$
(10
)

$
2Net loss (gain) on translation of monetary assets and
    liabilities(B)


2




(5
)


9




4



(10
)Net currency losses (gains)

$
(3
)


$
(11
)

$
(12
)


$
(6
)

$
(8
)     (A)
    
    Included in (Gain) loss on change in fair value of derivative
    instruments  netin the accompanying condensed
    consolidated statements of operations.(B)
    
    Included in Other (income) expenses  netin
    the accompanying condensed consolidated statements of operations.  Accumulated
    other comprehensive income
  May 16, 2007



January 1, 2007Through



ThroughSeptember 30, 2007



March 31, 2007Successor



PredecessorCumulative currency translation adjustment  beginning
    of period

$




$
133Effect of changes in exchange rates


28




11Cumulative currency translation adjustment  end of
    period

$
28



$
144   14.
    Financial
    Instruments and Commodity Contracts    Accumulated other comprehensive
    income
  Prior to
    Completion of the Arrangement
   33




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
      Impact of
    the Arrangement and Purchase Accounting
  Accumulated other
    comprehensive income
  Subsequent
    to Completion of the Arrangement
  (Gain) loss on change in fair value of
    derivative instruments  net
     34




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
    As of September 30, 2007Maturity Dates







Net Fair(Fiscal Year)

Assets


Liabilities


ValueSuccessor:Foreign exchange forward contracts

2008 through 2012

$
34


$
(44
)

$
(10
)Cross-currency swaps

2008 through 2015






(141
)


(141
)Aluminum forward contracts

2008 through 2010


13



(29
)


(16
)Electricity swap

2017


4



(1
)


3Embedded derivative instruments

2008


7







7Natural gas swaps

2008 through 2009






(1
)


(1
)Total fair value




58



(216
)


(158
)Less: current portion(A)




51



(81
)


(30
)Noncurrent portion(A)



$
7


$
(135
)

$
(128
)   As of March 31, 2007Maturity Dates







Net Fair(Fiscal Year)

Assets


Liabilities


ValuePredecessor:Foreign exchange forward contracts

2008 through 2012

$
16


$
(20
)

$
(4
)Interest rate swaps

2008


2







2Cross-currency swaps

2008 through 2015


6



(90
)


(84
)Aluminum forward contracts

2008 through 2010


60



(8
)


52Aluminum options

2008


1







1Electricity swap

2017


60







60Embedded derivative instruments

2008


1







1Natural gas swaps

2008


1







1Total fair value




147



(118
)


29Less: current portion(A)




92



(33
)


59Noncurrent portion(A)



$
55


$
(85
)

$
(30
)     (A)
    
    The amounts of the current and long-term portions of fair values
    under assets are each presented in the accompanying condensed
    consolidated balance sheets. The amounts of the current and
    noncurrent portions of fair values under liabilities are
    included in Accrued expenses and other current liabilitiesand Other long-term liabilities, respectively, in the
    accompanying condensed consolidated balance sheets. 35




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
   15.
    Other
    (Income) Expenses  Net    Three Months


May 16, 2007






Six MonthsEnded


Through



April 1, 2007


EndedSeptember 30,


September 30,



Through


September 30,2007



2006


2007



May 15, 2007


2006Successor



Predecessor


Successor



Predecessor


PredecessorRestructuring charges  net

$




$
10


$
1



$
1


$
12Exchange (gains) losses  net


2




(5
)


9




4



(10
)Losses on disposals of property, plant and equipment
     net







2












2Other  net


(9
)







(6
)



(1
)


(1
)Other (income) expenses  net

$
(7
)


$
7


$
4



$
4


$
3   16.
    Income
    Taxes  Accounting for
    Income Interim Financial Reporting Accounting for Income Taxes in Interim Periods
  Provision (benefit) for taxes on loss Provision (benefit) for taxes on loss
 36




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
    May 16, 2007


April 1, 2007


Six MonthsThrough


Through


EndedThree Months Ended September 30,


September 30,


May 15,


September 30,2007



2006


2007


2007


2006Successor



Predecessor


Successor


Predecessor


PredecessorPre-tax loss before equity in net (income) loss of
    non-consolidated affiliates and minority interests share

$
(19
)


$
(161
)

$
(38
)

$
(95
)

$
(175
)Canadian statutory tax rate


33
%



33
%


33
%


33
%


33
%Income taxes (benefit) at the Canadian statutory rate

$
(6
)


$
(54
)

$
(12
)

$
(31
)

$
(58
)Increase (decrease) in tax rate resulting from:Exchange translation items


27




2



47



23



26Exchange remeasurement of deferred income taxes


4




(1
)


7



3



(1
)Change in valuation allowances


19




12



40



13



9Enacted tax rate changes


(74
)







(71
)


2



1Expense/income items with no tax effect  net


(10
)







(19
)


(11
)


(9
)Tax rate differences on foreign earnings


(2
)



(11
)






2



(40
)Other  net


6








8



3



Provision (benefit) for taxes on loss

$
(36
)


$
(52
)

$



$
4


$
(72
)Effective tax rate


189
%



32
%



%


(4
)%


41
%       May 16, 2007



April 1, 2007


Six MonthsThrough



Through


EndedThree Months Ended September 30,


September 30,



May 15,


September 30,2007



2006


2007



2007


2006Successor



Predecessor


Successor



Predecessor


PredecessorCash taxes paid

$
19



$
5


$
31



$
9


$
12  37




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  Adoption
    of FASB Interpretation No. 48
  Accounting for Uncertainty in Income Taxes. Accumulated deficit
  1999-2006.
  Other long-term assets  third
    parties
    Provision (benefit) for taxes on income (loss) Provision (benefit) for taxes
    on loss
  17.
    Commitments
    and Contingencies  Primary
    Supplier
    Three Months

May 16, 2007


April 1, 2007

Six MonthsEnded

Through


Through

EndedSeptember 30,

September 30,


May 15,

September 30,2007


2006

2007


2007

2006Successor


Predecessor

Successor


Predecessor

PredecessorPurchases from Alcan as a percentage of total combined prime and
    sheet ingot purchases


43
%



36
%


40
%



35
%


40
%  38




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  Legal
    Proceedings
  Reynolds Boat Case.
    Form 10-K Accrued expenses and
    other current liabilities Prepaid expenses and
    other current assets
  Accrued expenses
    and other current liabilities
    Coca-Cola
    Lawsuits. Coca-Cola Coca-Cola
 39




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  Coca-Cola Coca-Cola
  Coca-Cola Coca-Cola
    Anheuser-Busch Litigation.
        ARCO Aluminum Complaint.
   40




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
        Environmental
    Matters
  Oswego North Ponds.
    Brazil
    Tax Matters
  Other long-term assets  third parties
 41




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  Other long-term liabilities
    Guarantees
    of Indebtedness
    
    certain of our wholly-owned and majority-owned
    subsidiaries; and
    Aluminium Norf GmbH, which is a fifty percent (50%) owned joint
    venture that does not meet the requirements for consolidation
    under FASB Interpretation No. 46 (Revised),
    Consolidation of Variable Interest Entities.        Maximum Potential


Liability CarryingType of Entity

Future Payment


ValueWholly-owned subsidiaries

$
64


$
55Majority-owned subsidiaries


3



Aluminium Norf GmbH


14



   18.
    Segment
    and Major Customer Information      Disclosure About the Segments of
    an Enterprise and Related Information.
 42




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
    Form 10-K
  (Gain) loss on change in fair
    value of derivative instruments  net.
    Selected
    Segment Financial Information
  Adjustment toEliminateNorth








South


Proportional


CorporateTotal Assets

America


Europe


Asia


America


Consolidation


and Other


TotalSeptember 30, 2007 (Successor)

$
4,468


$
3,388


$
1,363


$
1,353


$
(34
)

$
135


$
10,673March 31, 2007 (Predecessor)

$
1,566


$
2,543


$
1,110


$
821


$
(114
)

$
44


$
5,970   Comparison
    of Three Month Data:
  Adjustment toEliminateSelected Operating Results

North








South


Proportional


CorporateThree Months Ended September 30, 2007

America


Europe


Asia


America


Consolidation


and Other


Total(Successor)Net sales (to third parties)

$
1,050


$
1,092


$
438


$
241


$



$



$
2,821Intersegment sales


2



1



4



11







(18
)


Segment Income


89



67



18



46











220Depreciation and amortization


39



39



16



14



(7
)


1



102Capital expenditures


8



16



6



7



(3
)


1



35   43




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  Adjustment toEliminateSelected Operating Results

North








South


Proportional


CorporateThree Months Ended September 30, 2006

America


Europe


Asia


America


Consolidation


and Other


Total(Predecessor)Net sales (to third parties)

$
954


$
940


$
388


$
216


$
(4
)

$



$
2,494Intersegment sales






2



4



21







(27
)


Segment Income (Loss)


(18
)


68



16



37











103Depreciation and amortization


17



21



14



11



(7
)


1



57Capital expenditures


6



8



6



5



(3
)






22   Comparison
    of Six Month Data:
  Adjustment toEliminateSelected Operating Results

America








South


Proportional


CorporateMay 16, 2007 Through September 30, 2007

North


Europe


Asia


America


Consolidation


and Other


Total(Successor)Net sales (to third parties)

$
1,624


$
1,686


$
683


$
375


$



$



$
4,368Intersegment sales


3



1



6



27







(37
)


Segment Income


112



110



17



68











307Depreciation and amortization


60



61



24



22



(13
)


1



155Capital expenditures


14



25



11



8



(3
)


2



57   Adjustment toEliminateSelected Operating Results

America








South


Proportional


CorporateApril 1, 2007 Through May 15, 2007

North


Europe


Asia


America


Consolidation


and Other


Total(Predecessor)Net sales (to third parties)

$
446


$
510


$
216


$
109


$



$



$
1,281Intersegment sales










1



7







(8
)


Segment Income (Loss)


(24
)


32



6



18











32Depreciation and amortization


7



11



7



5



(3
)


1



28Capital expenditures


4



8



4



3



(3
)


1



17   Adjustment toEliminateSelected Operating Results

North








South


Proportional


CorporateSix Months Ended September 30, 2006

America


Europe


Asia


America


Consolidation


and Other


Total(Predecessor)Net sales (to third parties)

$
1,946


$
1,862


$
841


$
417


$
(8
)

$



$
5,058Intersegment sales


1



2



9



32







(44
)


Segment Income


7



146



40



80











273Depreciation and amortization


35



45



27



22



(15
)


2



116Capital expenditures


16



17



14



13



(5
)


1



56  44




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
    Three Months


May 16,



April 1, 2007Ended


2007 Through



Through


Six Months EndedSeptember 30,


September 30,



May 15,


September 30,2007



2006


2007



2007


2006Successor



Predecessor


Successor



Predecessor


PredecessorTotal Segment Income

$
220



$
103


$
307



$
32


$
273Interest expense and amortization of debt issuance
    costs  net


(56
)



(52
)


(81
)



(26
)


(101
)Unrealized gains (losses) on change in fair value of derivative
    instruments  net(A)


(87
)



(98
)


(102
)



5



(133
)Realized gains (losses) on corporate derivative
    instruments  net


29








37




(3
)


Depreciation and amortization


(102
)



(57
)


(155
)



(28
)


(116
)Minority interests share







2



2




1



(2
)Adjustment to eliminate proportional consolidation(B)


(17
)



(9
)


(26
)



(7
)


(16
)Restructuring charges  net







(10
)


(1
)



(1
)


(12
)Gains or (losses) on disposal of property, plant, and
    equipment  net







(2
)











(2
)Corporate selling, general and administrative expenses


(16
)



(33
)


(26
)



(35
)


(63
)Other costs  net


6




2



4




1



4Sale transaction fees
















(32
)


Benefit (provision) for taxes on loss


36




52








(4
)


72Net income (loss)

$
13



$
(102
)

$
(41
)


$
(97
)

$
(96
)     (A)
    
    Unrealized gains (losses) on change in fair value of derivative
    instruments  net represents the portion of gains
    (losses) that were not settled in cash during the period. Total
    realized and unrealized gains (losses) are shown in the table
    below and are included in the aggregate each period in (Gain)
    loss on change in fair value of derivative
    instruments  neton our condensed consolidated
    statements of operations.  45




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  Three Months


May 16, 2007






Six MonthsEnded


Through



April 1, 2007


EndedSeptember 30,


September 30,



Through


September 30,2007



2006


2007



May 15, 2007


2006Successor



Predecessor


Successor



Predecessor


Predecessor(Gain) loss on change in fair value of derivative
    instruments  net:Realized and included in Segment Income

$
(22
)


$
(61
)

$
(43
)


$
(18
)

$
(137
)Realized on corporate derivative instruments


(29
)







(37
)



3



Unrealized


87




98



102




(5
)


133(Gain) loss on change in fair value of derivative
    instruments  net

$
36



$
37


$
22



$
(20
)

$
(4
)   (B)
    
    Our financial information for our segments (including Segment
    Income) includes the results of our non-consolidated affiliates
    on a proportionately consolidated basis, which is consistent
    with the way we manage our business segments. However, under
    GAAP, these non-consolidated affiliates are accounted for using
    the equity method of accounting. Therefore, in order to
    reconcile Total Segment Income to Net income (loss), the
    proportional Segment Income of these non-consolidated affiliates
    is removed from Total Segment Income, net of our share of their
    net after-tax results, which is reported as Equity in net
    (income) loss of non-consolidated affiliateson our
    condensed consolidated statements of operations. See
    Note 7  Investment in and Advances to
    Non-Consolidated Affiliates and Related Party Transactions for
    further information about these non-consolidated affiliates.  Major
    Customer Information
    Three Months

May 16, 2007




Six MonthsEnded

Through


April 1, 2007

EndedSeptember 30,

September 30,


Through

September 30,2007


2006

2007


May 15, 2007

2006Successor


Predecessor

Successor


Predecessor

PredecessorNet sales to Rexam as a percentage of total net sales


15.6
%



14.3
%


14.7
%



13.5
%


13.8
%   19.
    Supplemental
    Guarantor Information     46




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  Novelis
    Inc.
  Consolidating
    Statement of Operations
 (In millions)
  Three Months Ended September 30, 2007
    (Successor)Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedNet sales

$
369


$
2,400


$
736


$
(684
)

$
2,821Cost of goods sold (exclusive of depreciation and amortization
    shown below)


366



2,183



697



(691
)


2,555Selling, general and administrative expenses


8



62



18







88Depreciation and amortization


5



74



23







102Research and development expenses


7



2



1







10Interest expense and amortization of debt issuance
    costs  net


15



35



6







56Loss on change in fair value of derivative
    instruments  net


1



27



8







36Equity in net income (loss) of affiliates


(40
)


4







40



4Other (income) expenses  net


(10
)


4



(2
)


1



(7
)352



2,391



751



(650
)


2,844Income (loss) before provision for taxes on income (loss) and
    minority interests share


17



9



(15
)


(34
)


(23
)Provision (benefit) for taxes on income (loss)


4



(40
)










(36
)Income (loss) before minority interests share


13



49



(15
)


(34
)


13Minority interests share


















Net income (loss)

$
13


$
49


$
(15
)

$
(34
)

$
13  47




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  Novelis
    Inc.
  Consolidating
    Statement of Operations
 (In millions)
  Three Months Ended September 30, 2006
    (Predecessor)Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedNet sales

$
415


$
2,176


$
657


$
(754
)

$
2,494Cost of goods sold (exclusive of depreciation and amortization
    shown below)


404



2,121



625



(761
)


2,389Selling, general and administrative expenses


13



70



20







103Depreciation and amortization


4



37



16







57Research and development expenses


7



2



1







10Interest expense and amortization of debt issuance
    costs  net


12



35



5







52Loss on change in fair value of derivative
    instruments  net


9



23



5







37Equity in net (income) loss of affiliates


70



(5
)






(70
)


(5
)Other (income) expenses  net


(5
)


14



(2
)






7514



2,297



670



(831
)


2,650Loss before provision (benefit) for taxes on loss and minority
    interests share


(99
)


(121
)


(13
)


77



(156
)Provision (benefit) for taxes on loss


3



(55
)










(52
)Loss before minority interests share


(102
)


(66
)


(13
)


77



(104
)Minority interests share










2







2Net loss

$
(102
)

$
(66
)

$
(11
)

$
77


$
(102
)  48




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  Novelis
    Inc.
  Consolidating
    Statement of Operations
 (In millions)
  May 16, 2007 Through September 30, 2007
    (Successor)Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedNet sales

$
614


$
3,747


$
1,155


$
(1,148
)

$
4,368Cost of goods sold (exclusive of depreciation and amortization
    shown below)


612



3,434



1,099



(1,154
)


3,991Selling, general and administrative expenses


13



87



30







130Depreciation and amortization


8



112



35







155Research and development expenses


9



9



5







23Interest expense and amortization of debt issuance
    costs  net


18



55



8







81(Gain) loss on change in fair value of derivative instruments
     net


(12
)


23



11







22Equity in net income (loss) of affiliates


(5
)


5







5



5Other (income) expenses  net


(14
)


18



(1
)


1



4629



3,743



1,187



(1,148
)


4,411Income (loss) before provision for taxes on income (loss) and
    minority interests share


(15
)


4



(32
)






(43
)Provision (benefit) for taxes on income (loss)


26



(26
)










Income (loss) before minority interests share


(41
)


30



(32
)






(43
)Minority interests share










2







2Net income (loss)

$
(41
)

$
30


$
(30
)

$



$
(41
)  49




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  Novelis
    Inc.
  Consolidating
    Statement of Operations
 (In millions)
  April 1, 2007 Through May 15, 2007
    (Predecessor)Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedNet sales

$
129


$
1,020


$
359


$
(227
)

$
1,281Cost of goods sold (exclusive of depreciation and amortization
    shown below)


131



961



340



(227
)


1,205Selling, general and administrative expenses


29



51



15







95Depreciation and amortization


2



18



8







28Research and development expenses


5



1











6Interest expense and amortization of debt issuance
    costs  net


3



20



3







26(Gain) loss on change in fair value of derivative instruments
     net


(2
)


(19
)


1







(20
)Equity in net (income) loss of affiliates


29



(1
)






(29
)


(1
)Sale transaction fees


32















32Other (income) expenses  net


(3
)


9



(2
)






4226



1,040



365



(256
)


1,375Loss before provision for taxes on loss and minority
    interests share


(97
)


(20
)


(6
)


29



(94
)Provision for taxes on loss






3



1







4Loss before minority interests share


(97
)


(23
)


(7
)


29



(98
)Minority interests share










1







1Net loss

$
(97
)

$
(23
)

$
(6
)

$
29


$
(97
)  50




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  Novelis
    Inc.
  Consolidating
    Statement of Operations
 (In millions)
  Six Months Ended September 30, 2006
    (Predecessor)Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedNet sales

$
834


$
4,349


$
1,413


$
(1,538
)

$
5,058Cost of goods sold (exclusive of depreciation and amortization
    shown below)


809



4,195



1,334



(1,542
)


4,796Selling, general and administrative expenses


34



130



37







201Depreciation and amortization


7



76



33







116Research and development expenses


14



5



1







20Interest expense and amortization of debt issuance
    costs  net


22



70



9







101(Gain) loss on change in fair value of derivative
    instruments  net


9



(19
)


6







(4
)Equity in net (income) loss of affiliates


44



(9
)






(44
)


(9
)Other (income) expenses  net


(13
)


21



(5
)






3926



4,469



1,415



(1,586
)


5,224Loss before provision for taxes on income (loss) and minority
    interests share


(92
)


(120
)


(2
)


48



(166
)Provision (benefit) for taxes on income (loss)


4



(62
)


(14
)






(72
)Income (loss) before minority interests share


(96
)


(58
)


12



48



(94
)Minority interests share










(2
)






(2
)Net income (loss)

$
(96
)

$
(58
)

$
10


$
48


$
(96
)  51




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  Novelis
    Inc.
  Consolidating
    Balance Sheet
 (In millions)
  As of September 30, 2007 (Successor)Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedASSETSCurrent assetsCash and cash equivalents

$
9


$
128


$
44


$



$
181Accounts receivable  net of allowances third parties


33



893



429







1,355 related parties


504



280



24



(781
)


27Inventories


70



1,010



407



7



1,494Prepaid expenses and other current assets


7



29



13







49Current portion of fair value of derivative instruments


3



44



4







51Deferred income tax assets






58



4







62Total current assets


626



2,442



925



(774
)


3,219Property, plant and equipment  net


110



2,404



784







3,298Goodwill






1,975



369







2,344Intangible assets  net






774



80







854Investments


3,723



1,611



(1
)


(4,576
)


757Fair value of derivative instruments  net of current
    portion






7











7Deferred income tax assets






25



37







62Other long-term assets


1,226



193



132



(1,419
)


132Total assets

$
5,685


$
9,431


$
2,326


$
(6,769
)

$
10,673LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt

$
3


$
10


$
1


$



$
14Short-term borrowings third parties






185



58







243 related parties


42



403



51



(496
)


Accounts payable third parties


86



817



551







1,454 related parties


65



215



58



(285
)


53Accrued expenses and other current liabilities


49



661



97







807Deferred income tax liabilities






84



1







85Total current liabilities


245



2,375



817



(781
)


2,656Long-term debt  net of current portion third parties


1,766



695



98







2,559 related parties






1,159



260



(1,419
)


Deferred income tax liabilities


1



635



54







690Accrued postretirement benefits


22



307



114







443Other long-term liabilities


165



505



20



(2
)


6882,199



5,676



1,363



(2,202
)


7,036Commitments and contingenciesMinority interests in equity of consolidated affiliates










151







151Shareholders equityCommon stock


















Additional paid-in capital


3,497















3,497(Accumulated deficit)/retained earnings/owners net
    investment


(41
)


2,751



519



(3,270
)


(41
)Accumulated other comprehensive income


30



1,004



293



(1,297
)


30Total shareholders equity


3,486



3,755



812



(4,567
)


3,486Total liabilities and shareholders equity

$
5,685


$
9,431


$
2,326


$
(6,769
)

$
10,673  52




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  Novelis
    Inc.
  Consolidating
    Balance Sheet
 (In millions)
  As of March 31, 2007 (Predecessor)Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedASSETSCurrent assetsCash and cash equivalents

$
6


$
71


$
51


$



$
128Accounts receivable  net of allowances third parties


36



903



411







1,350 related parties


416



500



58



(949
)


25Inventories


65



1,004



417



(3
)


1,483Prepaid expenses and other current assets


3



26



10







39Current portion of fair value of derivative instruments






88



4







92Deferred income tax assets


3



12



4







19Total current assets


529



2,604



955



(952
)


3,136Property, plant and equipment  net


112



1,229



765







2,106Goodwill






29



210







239Intangible assets  net






18



2







20Investments


362



153







(362
)


153Fair value of derivative instruments  net of current
    portion






55











55Deferred income tax assets


1



66



35







102Other long-term assets


1,231



160



132



(1,364
)


159Total assets

$
2,235


$
4,314


$
2,099


$
(2,678
)

$
5,970LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt

$



$
3


$
140


$



$
143Short-term borrowings third parties






241



4







245 related parties


15



529



61



(605
)


Accounts payable third parties


116



938



560







1,614 related parties


69



240



84



(344
)


49Accrued expenses and other current liabilities


63



317



100







480Deferred income tax liabilities






73











73Total current liabilities


263



2,341



949



(949
)


2,604Long-term debt  net of current portion third parties


1,659



496



2







2,157 related parties






1,116



248



(1,364
)


Deferred income tax liabilities






89



14







103Accrued postretirement benefits


19



293



115







427Other long-term liabilities


119



214



19







3522,060



4,549



1,347



(2,313
)


5,643Commitments and contingenciesMinority interests in equity of consolidated affiliates










152







152Shareholders equityCommon stock


















Additional paid-in capital


428















428(Accumulated deficit)/retained earnings/owners net
    investment


(263
)


(458
)


575



(117
)


(263
)Accumulated other comprehensive income


10



223



25



(248
)


10Total shareholders equity


175



(235
)


600



(365
)


175Total liabilities and shareholders equity

$
2,235


$
4,314


$
2,099


$
(2,678
)

$
5,970  53




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  Novelis
    Inc.
  Consolidating
    Statement of Cash Flows
 (In millions)
  May 16, 2007 Through September 30, 2007
    (Successor)Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedOPERATING ACTIVITIESNet cash provided by (used in) operating activities

$
125


$
(123
)

$
7


$



$
9INVESTING ACTIVITIESCapital expenditures


(5
)


(47
)


(5
)






(57
)Proceeds from sales of assets










1







1Changes to investment in and advances to non-consolidated
    affiliates


(40
)


3







40



3Proceeds from loans receivable  net related parties






10











10Net proceeds from settlement of derivative instruments


26



42



(2
)






66Net cash provided by (used in) investing activities


(19
)


8



(6
)


40



23FINANCING ACTIVITIESProceeds from issuance of common stock


92



40







(40
)


92Proceeds from issuance of debt


300



660











960Principal repayments


(260
)


(603
)


(42
)






(905
)Short-term borrowings  net third parties


(45
)


(67
)


47







(65
) related parties


(157
)


139



18







Dividends minority interests










(1
)






(1
)Debt issuance costs


(35
)














(35
)Net cash provided by (used in) financing activities


(105
)


169



22



(40
)


46Net increase in cash and cash equivalents


1



54



23







78Effect of exchange rate changes on cash balances held in
    foreign currencies










1







1Cash and cash equivalents  beginning of period


8



74



20







102Cash and cash equivalents  end of period

$
9


$
128


$
44


$



$
181  54




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  Novelis
    Inc.
  Consolidating
    Statement of Cash Flows
 (In millions)
  April 1, 2007 Through May 15, 2007
    (Predecessor)Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedOPERATING ACTIVITIESNet cash used in operating activities

$
(21
)

$
(181
)

$
(28
)

$



$
(230
)INVESTING ACTIVITIESCapital expenditures


(1
)


(10
)


(6
)






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






1











1Net proceeds from settlement of derivative instruments


(5
)


23











18Net cash provided by (used in) investing activities


(6
)


14



(6
)






2FINANCING ACTIVITIESProceeds from issuance of debt






150











150Principal repayments






(1
)










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


45



9



6







60 related parties


(15
)


11



4







Dividends minority interests










(7
)






(7
)Debt issuance costs


(2
)














(2
)Proceeds from the exercise of stock options


1















1Net cash provided by financing activities


29



169



3







201Net increase (decrease) in cash and cash equivalents


2



2



(31
)






(27
)Effect of exchange rate changes on cash balances held in
    foreign currencies






1











1Cash and cash equivalents  beginning of period


6



71



51







128Cash and cash equivalents  end of period

$
8


$
74


$
20


$



$
102  55




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO THE CONDENSED CONSOLIDATED
    FINANCIAL STATEMENTS (unaudited)  (Continued)
  Novelis
    Inc.
  Consolidating
    Statement of Cash Flows
 (In
    millions)
  Six Months Ended September 30, 2006
    (Predecessor)Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedOPERATING ACTIVITIESNet cash provided by (used in) operating activities

$
138


$
(143
)

$
(13
)

$
(71
)

$
(89
)INVESTING ACTIVITIESCapital expenditures


(2
)


(36
)


(18
)






(56
)Cash advance received on pending transfer of rights






15











15Proceeds from sales of assets






1











1Changes to investment in and advances to non-consolidated
    affiliates






2











2Proceeds from loans receivable  net
     related parties


(7
)


(36
)


(1
)


64



20Net proceeds from settlement of derivative instruments






153



1







154Net cash provided by (used in) investing activities


(9
)


99



(18
)


64



136FINANCING ACTIVITIESProceeds from issuance of debt third parties










20







20 related parties






199







(199
)


Principal repayments third parties


(53
)


(92
)


(40
)






(185
) related parties


(73
)


(59
)


(3
)


135



Short-term borrowings  net third parties


5



49



24







78 related parties


(20
)


9



11







Dividends common shareholders


(7
)


(70
)


(1
)


71



(7
) minority interests










(1
)






(1
)Debt issuance costs


(8
)














(8
)Net cash provided by (used in) financing activities


(156
)


36



10



7



(103
)Net decrease in cash and cash equivalents


(27
)


(8
)


(21
)






(56
)Effect of exchange rate changes on cash balances held in
    foreign currencies






2



1







3Cash and cash equivalents  beginning of period


29



55



40







124Cash and cash equivalents  end of period

$
2


$
49


$
20


$



$
71  56




---



##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  FORWARD
    LOOKING STATEMENTS
  The following information should be read together with our
    unaudited condensed consolidated financial statements and
    accompanying notes included elsewhere in this quarterly report
    for a more complete understanding of our financial condition and
    results of operations. The following discussion contains
    forward-looking statements that reflect our plans, estimates and
    beliefs. Our actual results could differ materially from those
    discussed in these forward-looking statements. Factors that
    could cause or contribute to these differences include, but are
    not limited to, those discussed below, particularly in
    SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND
    MARKET DATA.
  REFERENCES
    Form 10-K Form 10-K
  GENERAL
    Acquisition
    of Novelis Common Stock
      Push Down Basis of
    Accounting Required in Certain Limited Circumstances
 57




---



##### Table of Contents



Business Combinations
  CHANGE IN
    FISCAL YEAR END
  Form 10-Q
  NOTE REGARDING
    COMBINED RESULTS OF OPERATIONS AND SELECTED FINANCIAL AND
    OPERATING INFORMATION DUE TO THE ACQUISITION
      May 16, 2007



April 1, 2007


Six MonthsThrough



Through


EndedSeptember 30, 2007



May 15, 2007


September 30, 2007Successor



Predecessor


CombinedCombined Shipments:Shipments (kt)(A):Rolled products(B)


1,156




348



1,504Ingot products(C)


66




15



81Total shipments


1,222




363



1,585     (A)
    One kilotonne (kt) is 1,000 metric tonnes. One metric tonne is
    equivalent to 2,204.6 pounds.  (B)
    Rolled products include tolling (the conversion of
    customer-owned metal).(C)
    Ingot products include primary ingot in Brazil, foundry products
    in Korea and Europe, secondary ingot in Europe and other
    miscellaneous recyclable aluminum. 58




---



##### Table of Contents



May 16, 2007



April 1, 2007


Six MonthsThrough



Through


EndedSeptember 30, 2007



May 15, 2007


September 30,2007Successor



Predecessor


CombinedCombined Results of Operations
    ($ in millions)Net sales

$
4,368



$
1,281


$
5,649Cost of goods sold (exclusive of depreciation and amortization
    shown below)


3,991




1,205



5,196Selling, general and administrative expenses


130




95



225Depreciation and amortization


155




28



183Research and development expenses


23




6



29Interest expense and amortization of debt issuance
    costs  net


81




26



107(Gain) loss on change in fair value of derivative
    instruments  net


22




(20
)


2Equity in net (income) loss of non-consolidated affiliates


5




(1
)


4Sale transaction fees







32



32Other expenses  net


4




4



84,411




1,375



5,786Loss before provision for taxes on loss and minority
    interests share


(43
)



(94
)


(137
)Provision for taxes on loss







4



4Loss before minority interests share


(43
)



(98
)


(141
)Minority interests share


2




1



3Net loss

$
(41
)


$
(97
)

$
(138
)  59




---



##### Table of Contents



HIGHLIGHTS
    
    Shipments and selected financial information are as follows
    ($ in millions):  Quarter Ended


Six Months EndedSeptember 30,


September 30,2007



2006


2007


2006Predecessor


Combined


PredecessorSuccessorShipments (kt):Rolled products


747




737



1,504



1,490Ingot products


42




37



81



84Total shipments


789




774



1,585



1,574Net sales

$
2,821



$
2,494


$
5,649


$
5,058Net income (loss)

$
13



$
(102
)

$
(138
)

$
(96
)Net increase (decrease) in total debt(A)

$
(43
)


$
(37
)

$
205


$
(81
)     (A)
    Net increase (decrease) in total debt is measured comparing the
    period-end amounts of our total outstanding debt (including
    short-term borrowings) as shown in our condensed consolidated
    balance sheets. For the three and six months ended
    September 30, 2007, the net increase (decrease) in total
    debt excludes the change in unamortized fair value adjustments
    recorded as part of the Arrangement.  
    Rolled products shipments increased during the second quarter
    and on a year to date basis in all regions except North America
    primarily as a result of increased demand in their respective
    regional can markets. Compared to the prior year, the North
    American demand for rolled products has declined across all
    product groups, most notably in the industrial and distributor
    markets partially due to a slowdown in housing construction. In
    addition, a strike at a key can customer in North America
    contributed to lower shipments year over year.
    London Metal Exchange (LME) pricing for aluminum (metal) was an
    average of 2.7% and 3.3% higher during the second quarter and
    six months ended September 30, 2007 than the comparable
    prior year periods. However, cash prices have trended down this
    fiscal year and cash prices as of March 31, 2007;
    June 30, 2007 and September 30, 2007 were $2,792;
    $2,686 and $2,440, respectively. This trend negatively impacted
    our fiscal 2008 second quarter and six month results as
    described more fully below under Metal Price Lag.
    Net sales for the second quarter and six months ended
    September 30, 2007 increased from the comparable prior year
    periods due primarily to increased volume and prices, lower
    exposure to metal price ceilings, a strengthening euro and a
    rise in average LME prices. The benefit of higher LME prices was
    limited by metal price ceilings in sales contracts representing
    approximately 10% of our total shipments during both the quarter
    and six months ended September 30, 2007, compared to 20% of
    our total shipments in the same prior year periods. During the
    second quarter of fiscal 2008 and the comparable prior year
    quarter, we were unable to pass through approximately
    $60 million and $115 million, respectively, of metal
    purchase costs associated with sales under these contracts, for
    a net favorable comparable impact of approximately
    $55 million.   60




---



##### Table of Contents




    Compared to the six months ended September 30, 2006, net
    loss for the six months ended September 30, 2007 was
    impacted by the following items associated with or triggered by
    the Arrangement: (1) $43 million (pre-tax) of
    incremental stock compensation expense,
    (2) $32 million (pre-tax) of sale transaction fees and
    (3) $10 million (pre-tax) of incremental income
    (described below) associated with push down accounting and the
    preliminary fair value allocation of purchase price.
    During the second quarter of fiscal 2008 we reduced our total
    debt by $43 million; however, on a year to date basis, our
    total debt increased $205 million (excluding unamortized
    fair value adjustments recorded as part of the acquisition by
    Hindalco) as a result of our need to fund additional working
    capital requirements and certain costs associated with the
    Arrangement, including sale transaction fees and share-based
    compensation.
    As described more fully in Note 2  Acquisition
    of Novelis Common Stock in the accompanying condensed and
    consolidated financial statements, the consideration paid by
    Hindalco to acquire Novelis has been pushed down to us and
    initially allocated to the assets acquired and liabilities
    assumed based on our preliminary estimates of fair value, using
    methodologies and assumptions that we believe are reasonable.
    This preliminary allocation of fair value results in additional
    charges or income to our post-acquisition consolidated
    statements of operations. A summary of the pre-tax impacts of
    these items on the second quarter and six months ended
    September 30, 2007 is shown below (in millions).  Quarter Ended


Six Months EndedSeptember 30, 2007


September 30, 2007Increase (Decrease) to:


Increase (Decrease) to:Pre-Tax


Segment


Pre-Tax


SegmentIncome


Income(A)


Income


Income(A)Favorable/unfavorable contracts

$
83


$
83


$
126


$
126Depreciation and amortization


(43
)






(65
)


In-process research and development










(9
)


(9
)Inventory


(6
)


(6
)


(35
)


(35
)Equity investments


(8
)






(11
)


Fair value of debt


3







4



Total impact

$
29


$
77


$
10


$
82     (A)
    We use Segment Income to measure the profitability and financial
    performance of our operating segments, as discussed below in
    OPERATING SEGMENT REVIEW FOR THE QUARTER ENDED SEPTEMBER 30,
    2007 COMPARED TO THE QUARTER ENDED SEPTEMBER 30, 2006.  OUR
    BUSINESS
  Business
    Model and Key Concepts
    Metal
    Price Ceilings
   61




---



##### Table of Contents



Metal
    Price Lag
      Risk
    Mitigation
    and/or
 62




---



##### Table of Contents



Accounting for Derivative Instruments and Hedging Activities.
  Internal
    Controls
  Form 10-K
  Spin-Off
    From Alcan
    Post-Transaction
    Adjustments
   63




---



##### Table of Contents



Agreements
    between Novelis and Alcan
  Form 10-K
  OPERATIONS
    AND SEGMENT REVIEW
    Quarter Ended





Six Months EndedSeptember 30,


Percent


September 30,


Percent2007



2006


Change


2007


2006


ChangeSuccessor



Predecessor





Combined


PredecessorShipments (kt):Rolled products, including tolling (the conversion of
    customer-owned metal)


747




737



1.4
%


1,504



1,490



0.9
%Ingot products, including primary and secondary ingot and
    recyclable aluminum


42




37



13.5
%


81



84



(3.6
)%Total shipments


789




774



1.9
%


1,585



1,574



0.7
%   64




---



##### Table of Contents



Quarter Ended





Six Months EndedSeptember 30,


Percent


September 30,


Percent2007



2006


Change


2007


2006


ChangeSuccessor



Predecessor





Combined


PredecessorResults of Operations($ in millions)Net sales

$
2,821



$
2,494



13.1
%

$
5,649


$
5,058



11.7
%Cost of goods sold (exclusive of depreciation and amortization
    shown below)


2,555




2,389



6.9
%


5,196



4,796



8.3
%Selling, general and administrative expenses


88




103



(14.6
)%


225



201



11.9
%Depreciation and amortization


102




57



78.9
%


183



116



57.8
%Research and development expenses


10




10




%


29



20



45.0
%Interest expense and amortization of debt issuance
    costs  net


56




52



7.7
%


107



101



5.9
%(Gain) loss on change in fair value of derivatives 
    net


36




37



(2.7
)%


2



(4
)


(150.0
)%Equity in net (income) loss of non-consolidated affiliates


4




(5
)


(180.0
)%


4



(9
)


(144.4
)%Sale transaction fees












%


32







n.m.Other (income) expenses  net


(7
)



7



(200.0
)%


8



3



166.7
%2,844




2,650



7.3
%


5,786



5,224



10.8
%Loss before provision (benefit) for taxes on loss and minority
    interests share


(23
)



(156
)


(85.3
)%


(137
)


(166
)


(17.5
)%Provision (benefit) for taxes on loss


(36
)



(52
)


(30.8
)%


4



(72
)


(105.6
)%Income (loss) before minority interests share


13




(104
)


(112.5
)%


(141
)


(94
)


50.0
%Minority interests share







2



(100.0
)%


3



(2
)


(250.0
)%Net income (loss)

$
13



$
(102
)


(112.7
)%

$
(138
)

$
(96
)


43.8
%       65




---



##### Table of Contents



Quarter Ended





Six Months EndedSeptember 30,


Percent


September 30,


Percent2007



2006


Change


2007


2006


ChangeSuccessor



Predecessor





Combined


PredecessorLondon Metal Exchange PricesAluminum (per metric tonne, and presented in U.S. dollars):Closing cash price as of end of period

$
2,440



$
2,572



(5.1
)%

$
2,440


$
2,572



(5.1
)%Average cash price during the period

$
2,547



$
2,481



2.7
%

$
2,654


$
2,568



3.3
%   Quarter Ended


U.S. Dollar


Six Months Ended


U.S. DollarSeptember 30,


Strengthen/


September 30,


Strengthen/2007



2006


(Weaken)


2007


2006


(Weaken)Successor



Predecessor





Combined


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


1.386




1.275



(8.7
)%


1.370



1.275



(7.5
)%Brazilian real per U.S. dollar


1.891




2.161



(12.5
)%


1.926



2.173



(11.4
)%South Korean won per U.S. dollar


924




954



(3.1
)%


925



950



(2.6
)%Canadian dollar per U.S. dollar


1.039




1.118



(7.1
)%


1.060



1.115



(4.9
)%   Quarter Ended





Six Months EndedSeptember 30,


Percent


September 30,


Percent2007



2006


Change


2007


2006


ChangeSuccessor



Predecessor





Combined


PredecessorNew York Mercantile Exchange  Energy Price
    QuotationsLight Sweet CrudeAverage settlement price (per barrel)

$
71.08



$
71.55



(0.7
)%

$
66.39


$
69.40



(4.3
)%Natural GasAverage Henry Hub contract settlement price (per MMBTU)(A)

$
6.16



$
6.58



(6.4
)%

$
6.85


$
6.68



2.5
%     (A)
    One MMBTU is the equivalent of one decatherm, or one million
    British Thermal Units.  RESULTS OF OPERATIONS FOR THE QUARTER ENDED SEPTEMBER 30,
    2007 COMPARED TO THE QUARTER ENDED SEPTEMBER 30, 2006
  Shipments
   66




---



##### Table of Contents



Net
    sales
      Costs
    and expenses
    Quarter Ended September 30,2007



2006% of






% of$ in millions


net sales



$ in millions


net salesSuccessor



PredecessorCost of goods sold (exclusive of depreciation and amortization
    shown below)

$
2,555



90.5
%


$
2,389



95.8
%Selling, general and administrative expenses


88



3.1
%



103



4.1
%Depreciation and amortization


102



3.6
%



57



2.3
%Research and development expenses


10



0.4
%



10



0.4
%Interest expense and amortization of debt issuance
    costs  net


56



2.0
%



52



2.1
%Loss on change in fair value of derivative
    instruments  net


36



1.3
%



37



1.5
%Equity in net income (loss) of non-consolidated affiliates


4



0.1
%



(5
)


(0.2
)%Other (income) expenses  net


(7
)


(0.2
)%



7



0.3
%$
2,844



100.8
%


$
2,650



106.3
%   Cost of goods sold.
  Selling, general and administrative expenses
    (SG&A).
  Depreciation and amortization.
 67




---



##### Table of Contents



Other (income) expenses  net.
  Provision
    (benefit) for taxes on loss
      Net
    income
    OPERATING SEGMENT REVIEW FOR THE QUARTER ENDED SEPTEMBER 30,
    2007 COMPARED TO THE QUARTER ENDED SEPTEMBER 30, 2006
      Disclosure About the Segments of
    an Enterprise and Related Information.
 68




---



##### Table of Contents



Form 10-K
    Reconciliation
    Quarter EndedSeptember 30,2007



2006Successor



PredecessorSegment Income (Loss)North America

$
89



$
(18
)Europe


67




68Asia


18




16South America


46




37Total Segment Income


220




103Interest expense and amortization of debt issuance
    costs  net


(56
)



(52
)Unrealized gains (losses) on change in fair value of derivative
    instruments  net(A)


(87
)



(98
)Realized gains (losses) on corporate derivative
    instruments  net


29




Depreciation and amortization


(102
)



(57
)Minority interests share







2Adjustment to eliminate proportional consolidation(B)


(17
)



(9
)Restructuring charges  net







(10
)Gains or (losses) on disposal of property, plant, and
    equipment  net







(2
)Corporate selling, general and administrative expenses


(16
)



(33
)Other costs  net


6




2Benefit for taxes on loss


36




52Net income (loss)

$
13



$
(102
)     (A)
    Unrealized gains (losses) on change in fair value of derivative
    instruments  net represents the portion of gains
    (losses) that were not settled in cash during the period.  (B)
    Our financial information for our segments (including Segment
    Income) includes the results of our non-consolidated affiliates
    on a proportionately consolidated basis, which is consistent
    with the way we manage our business segments. However, under
    GAAP, these non-consolidated affiliates are accounted for using
    the equity method of accounting. Therefore, in order to
    reconcile Total Segment Income to Net income (loss), the
    proportional Segment Income of these non-consolidated affiliates
    is removed from Total Segment Income, net of our share of their
    net after-tax results, which is reported as Equity in net
    (income) loss of non-consolidated affiliates on our condensed
    consolidated statements of operations. See
    Note 7  Investment in and Advances to
    Non-Consolidated Affiliates and Related Party Transactions for
    further information about these non-consolidated affiliates. 69




---



##### Table of Contents



OPERATING
    SEGMENT RESULTS
  North
    America
      Quarter EndedSeptember 30,


Percent2007



2006


ChangeSuccessor



PredecessorShipments (kt):Rolled products


279




296



(5.7
)%Ingot products


17




17




%Total shipments


296




313



(5.4
)%Net sales

$
1,050



$
954



10.1
%Segment Income (Loss)

$
89



$
(18
)


(594.4
)%Total assets

$
4,468



$
1,487



200.5
%   Shipments
    Net
    sales
    Segment
    Income (Loss)
    Total
    assets
   70




---



##### Table of Contents



Europe
      Quarter EndedSeptember 30,


Percent2007



2006


ChangeSuccessor



PredecessorShipments (kt):Rolled products


275




265



3.8
%Ingot products


8




4



100.0
%Total shipments


283




269



5.2
%Net sales

$
1,092



$
940



16.2
%Segment Income

$
67



$
68



(1.5
)%Total assets

$
3,388



$
2,392



41.6
%   Shipments
    Net
    sales
    Segment
    Income
    Total
    assets
    Asia
   71




---



##### Table of Contents



Quarter EndedSeptember 30,


Percent2007



2006


ChangeSuccessor



PredecessorShipments (kt):Rolled products


116




106



9.4
%Ingot products


10




9



11.1
%Total shipments


126




115



9.6
%Net sales

$
438



$
388



12.9
%Segment Income

$
18



$
16



12.5
%Total assets

$
1,363



$
1,021



33.5
%   Shipments
    Net
    sales
    Segment
    Income
    Total
    assets
    South
    America
   72




---



##### Table of Contents



Quarter EndedSeptember 30,


Percent2007



2006


ChangeSuccessor



PredecessorShipments (kt):Rolled products


77




70



10.0
%Ingot products


7




7




%Total shipments


84




77



9.1
%Net sales

$
241



$
216



11.6
%Segment Income

$
46



$
37



24.3
%Total assets

$
1,353



$
814



66.2
%   Shipments
    Net
    sales
    Segment
    Income
    Total
    assets
    RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30,
    2007 (ON A COMBINED NON-GAAP BASIS) COMPARED TO THE SIX
    MONTHS ENDED SEPTEMBER 30, 2006
   73




---



##### Table of Contents



Shipments
    Net
    sales
      Costs
    and expenses
    Six Months Ended September 30,2007


2006% of





% of$ in millions


net sales


$ in millions


net salesCombined


PredecessorCost of goods sold (exclusive of depreciation and amortization
    shown below)

$
5,196



92.0
%

$
4,796



94.8
%Selling, general and administrative expenses


225



4.0
%


201



4.0
%Depreciation and amortization


183



3.2
%


116



2.3
%Research and development expenses


29



0.5
%


20



0.4
%Interest expense and amortization of debt issuance
    costs  net


107



1.9
%


101



2.0
%(Gain) loss on change in fair value of derivative
    instruments  net


2




%


(4
)


(0.1
)%Equity in net income (loss) of non-consolidated affiliates


4



0.1
%


(9
)


(0.2
)%Sale transaction fees


32



0.6
%







%Other expenses  net


8



0.1
%


3



0.1
%$
5,786



102.4
%

$
5,224



103.3
%   Cost of goods sold.
 74




---



##### Table of Contents



Selling, general and administrative
    expenses.
  Depreciation and amortization.
  Research and development expenses.
  Sale transaction fees.
  Provision
    (benefit) for taxes on loss
      Net
    loss
    OPERATING SEGMENT REVIEW FOR THE SIX MONTHS ENDED SEPTEMBER
    30, 2007 (ON A COMBINED NON-GAAP BASIS) COMPARED TO THE SIX
    MONTHS ENDED SEPTEMBER 30, 2006
   75




---



##### Table of Contents



Net
    sales
    May 16, 2007






Six MonthsThrough



April 1, 2007


EndedSeptember 30,



Through


September 30,2007



May 15, 2007


2007Successor



Predecessor


CombinedCombined Net sales by Operating Segment:North America

$
1,624



$
446


$
2,070Europe


1,686




510



2,196Asia


683




216



899South America


375




109



484Total Net sales

$
4,368



$
1,281


$
5,649   Segment
    Income
    76




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##### Table of Contents



May 16, 2007






Six MonthsThrough



April 1, 2007


EndedSeptember 30,



Through


September 30,2007



May 15, 2007


2007Successor



Predecessor


CombinedCombined Results by Operating Segment:Segment Income (Loss)North America

$
112



$
(24
)

$
88Europe


110




32



142Asia


17




6



23South America


68




18



86Total Segment Income


307




32



339Interest expense and amortization of debt issuance
    costs  net


(81
)



(26
)


(107
)Unrealized gains (losses) on change in fair value of derivative
    instruments  net


(102
)



5



(97
)Realized gains (losses) on corporate derivative
    instruments  net


37




(3
)


34Depreciation and amortization


(155
)



(28
)


(183
)Minority interests share


2




1



3Adjustment to eliminate proportional consolidation


(26
)



(7
)


(33
)Restructuring charges  net


(1
)



(1
)


(2
)Corporate selling, general and administrative expenses


(26
)



(35
)


(61
)Other costs  net


4




1



5Sale transaction fees







(32
)


(32
)Provision for taxes on loss







(4
)


(4
)Net loss

$
(41
)


$
(97
)

$
(138
)  77




---



##### Table of Contents



Reconciliation
    Six Months EndedSeptember 30,2007


2006Combined


PredecessorSegment IncomeNorth America

$
88


$
7Europe


142



146Asia


23



40South America


86



80Total Segment Income


339



273Interest expense and amortization of debt issuance
    costs  net


(107
)


(101
)Unrealized losses on change in fair value of derivative
    instruments  net


(97
)


(133
)Realized gains on corporate derivative instruments 
    net


34



Depreciation and amortization


(183
)


(116
)Minority interests share


3



(2
)Adjustment to eliminate proportional consolidation


(33
)


(16
)Restructuring charges  net


(2
)


(12
)Gains or (losses) on disposal of property, plant, and
    equipment  net






(2
)Corporate selling, general and administrative expenses


(61
)


(63
)Other corporate costs  net


5



4Sale transaction fees


(32
)


Benefit (provision) for taxes on loss


(4
)


72Net loss

$
(138
)

$
(96
)   OPERATING
    SEGMENT RESULTS
  North
    America
    Six Months EndedSeptember 30,


Percent2007


2006


ChangeCombined


PredecessorShipments (kt):Rolled products


557



594



(6.2
)%Ingot products


33



42



(21.4
)%Total shipments


590



636



(7.2
)%Net sales

$
2,070


$
1,946



6.4
%Segment Income

$
88


$
7



1,157.1
%   Shipments
   78




---



##### Table of Contents



Net
    sales
    Segment
    Income
    Europe
    Six Months EndedSeptember 30,


Percent2007


2006


ChangeCombined


PredecessorShipments (kt):Rolled products


559



531



5.3
%Ingot products


12



7



71.4
%Total shipments


571



538



6.1
%Net sales

$
2,196


$
1,862



17.9
%Segment Income

$
142


$
146



(2.7
)%   Shipments
    Net
    sales
   79




---



##### Table of Contents



Segment
    Income
    Asia
    Six Months EndedSeptember 30,


Percent2007


2006


ChangeCombined


PredecessorShipments (kt):Rolled products


234



229



2.2
%Ingot products


22



22




%Total shipments


256



251



2.0
%Net sales

$
899


$
841



6.9
%Segment Income

$
23


$
40



(42.5
)%   Shipments
    Net
    sales
    Segment
    Income
   80




---



##### Table of Contents



South
    America
    Six Months EndedSeptember 30,


Percent2007


2006


ChangeCombined


PredecessorShipments (kt):Rolled products


154



136



13.2
%Ingot products


14



13



7.7
%Total shipments


168



149



12.8
%Net sales

$
484


$
417



16.1
%Segment Income

$
86


$
80



7.5
%   Shipments
    Net
    sales
    Segment
    Income
    LIQUIDITY
    AND CAPITAL RESOURCES
   81




---



##### Table of Contents



May 16, 2007






Six MonthsThrough



April 1, 2007


EndedSeptember 30,



Through


September 30,2007



May 15, 2007


2007Successor



Predecessor


CombinedOPERATING ACTIVITIESNet cash provided by (used in) operating activities

$
9



$
(230
)

$
(221
)INVESTING ACTIVITIESCapital expenditures


(57
)



(17
)


(74
)Proceeds from sales of assets


1








1Changes to investment in and advances to non-consolidated
    affiliates


3




1



4Proceeds from loans receivable  net 
    related parties


10








10Net proceeds from settlement of derivative instruments


66




18



84Net cash provided by investing activities


23




2



25FINANCING ACTIVITIESProceeds from issuance of common stock


92








92Proceeds from issuance of debt


960




150



1,110Principal repayments


(905
)



(1
)


(906
)Short-term borrowings  net


(65
)



60



(5
)Dividends  minority interests


(1
)



(7
)


(8
)Debt issuance costs


(35
)



(2
)


(37
)Proceeds from the exercise of stock options







1



1Net cash provided by financing activities


46




201



247Net increase (decrease) in cash and cash equivalents


78




(27
)


51Effect of exchange rate changes on cash balances held in
    foreign currencies


1




1



2Cash and cash equivalents  beginning of period


102




128



128Cash and cash equivalents  end of period

$
181



$
102


$
181   Operating
    Activities
   82




---



##### Table of Contents



Six Months Ended September 30,2007


2006


ChangeCombined


Predecessor($ in millions)Net cash used in operating activities

$
(221
)

$
(89
)

$
(132
)Dividends


(8
)


(8
)


Capital expenditures


(74
)


(56
)


(18
)Net proceeds from settlement of derivative instruments


84



154



(70
)Free cash flow

$
(219
)

$
1


$
(220
)   As ofSeptember 30,


March 31,2007


2007

ChangeSuccessor


PredecessorEnding balances of cash and cash equivalents

$
181



$
128


$
53     Financing
    Activities
  Overview
   83




---



##### Table of Contents



New
    Senior Secured Credit Facilities
    Other
    long-term assets  third parties
             84




---



##### Table of Contents



Other long-term assets 
    third parties Interest expense and amortization of
    debt issuance costs  net
  Old
    Senior Secured Credit Facilities
              Other long-term
    assets  third parties Interest expense
    and amortization of debt issuance costs
 85




---



##### Table of Contents



 net
  7.25% Senior
    Notes
  Other
    long-term assets  third parties Interest
    expense and amortization of debt issuance costs  net
  Interest expense and
    amortization of debt issuance costs  net
      Tender
    Offer and Consent Solicitation for 7.25% Senior
    Notes
    Korean
    Bank Loans
   86




---



##### Table of Contents



Short
    Term Borrowings and Lines of Credit
      Issuance
    of Additional Common Stock
    Investing
    Activities
    Six Months EndedSeptember 30,2007


2006


ChangeCombined


PredecessorNet proceeds from settlement of derivative instruments

$
84


$
154


$
(70
)Capital expenditures


(74
)


(56
)


(18
)Cash advance received on pending transfer of rights






15



(15
)Proceeds from loans receivable  net


10



20



(10
)Changes to investment in and advances to non-consolidated
    affiliates


4



2



2Proceeds from sales of assets


1



1



Net cash provided by investing activities

$
25


$
136


$
(111
)  87




---



##### Table of Contents



OFF-BALANCE
    SHEET ARRANGEMENTS
    
    any obligation under certain guarantees or contracts;
    a retained or contingent interest in assets transferred to an
    unconsolidated entity or similar entity or similar arrangement
    that serves as credit, liquidity or market risk support to that
    entity for such assets;
    any obligation under certain derivative instruments; and
    any obligation under a material variable interest held by the
    registrant in an unconsolidated entity that provides financing,
    liquidity, market risk or credit risk support to the registrant,
    or engages in leasing, hedging or research and development
    services with the registrant.    Derivative
    Instruments
  Form 10-Q.
      Prior to
    Completion of the Arrangement
   88




---



##### Table of Contents



Impact of
    the Arrangement and Purchase Accounting
    Subsequent
    to Completion of the Arrangement
  (Gain) loss on change in fair value of
    derivative instruments  net
        As of September 30, 2007Maturity Dates







Net FairSuccessor:

(Fiscal Year)

Assets


Liabilities


ValueForeign exchange forward contracts

2008 through 2012

$
34


$
(44
)

$
(10
)Cross-currency swaps

2008 through 2015






(141
)


(141
)Aluminum forward contracts

2008 through 2010


13



(29
)


(16
)Electricity swap

2017


4



(1
)


3Embedded derivative instruments

2008


7







7Natural gas swaps

2008 through 2009






(1
)


(1
)Total fair value




58



(216
)


(158
)Less: current portion




51



(81
)


(30
)Noncurrent portion



$
7


$
(135
)

$
(128
)  89




---



##### Table of Contents



Guarantees
    of Indebtedness
    Maximum


LiabilityPotential Future


CarryingType of Entity

Payment


ValueWholly-owned subsidiaries

$
64


$
55Majority-owned subsidiaries


3



Aluminium Norf GmbH


14



   deposit-and-guarantee
    Other
    CONTRACTUAL
    OBLIGATIONS
  Form 10-K
      DIVIDENDS
   90




---



##### Table of Contents



CRITICAL
    ACCOUNTING POLICIES AND ESTIMATES
  Form 10-K
  RECENT
    ACCOUNTING STANDARDS
  No. FIN 39-1, Amendment of FASB Interpretation No 39 FIN 39-1). FIN 39-1 Offsetting of Amounts
    Related to Certain Contracts FIN 39-1 FIN 39-1
  The Fair Value Option for Financial Assets and Financial
    Liabilities Fair Value
    Measurements Disclosures about Fair
    Value of Financial Instruments.
  Fair Value Measurements
    SPECIAL
    NOTE REGARDING
    FORWARD-LOOKING
    STATEMENTS AND MARKET DATA  Form 10-Q
 91




---



##### Table of Contents




    the level of our indebtedness and our ability to generate cash;
    changes in the prices and availability of aluminum (or premiums
    associated with such prices) or other materials and raw
    materials we use;
    the effect of metal price ceilings in certain of our sales
    contracts;
    the effectiveness of our metal hedging activities, including our
    internal used beverage can (UBC) and smelter hedges;
    relationships with, and financial and operating conditions of,
    our customers, suppliers and our ultimate parent, Hindalco;
    fluctuations in the supply of, and prices for, energy in the
    areas in which we maintain production facilities;
    our ability to access financing for future capital requirements;
    continuing obligations and other relationships resulting from
    our spin-off from Alcan;
    changes in the relative values of various currencies;
    factors affecting our operations, such as litigation,
    environmental remediation and
    clean-up
    costs, labor relations and negotiations, breakdown of equipment
    and other events;
    economic, regulatory and political factors within the countries
    in which we operate or sell our products, including changes in
    duties or tariffs;
    competition from other aluminum rolled products producers as
    well as from substitute materials such as steel, glass, plastic
    and composite materials;
    changes in general economic conditions;
    our ability to improve and maintain effective internal control
    over financial reporting and disclosure controls and procedures
    in the future;
    changes in the fair value of derivative instruments;
    cyclical demand and pricing within the principal markets for our
    products as well as seasonality in certain of our
    customers industries;
    changes in government regulations, particularly those affecting
    taxes, environmental, health or safety compliance;
    changes in interest rates that have the effect of increasing the
    amounts we pay under our principal credit agreement and other
    financing agreements; and
    the effect of taxes and changes in tax rates. 92




---



##### Table of Contents



Form 10-K
  Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk          Commodity
    Price Risks
    Aluminum
         93




---



##### Table of Contents



and/or
      Sensitivities
    Pre-TaxDecline in

Loss inRate/Price

Fair Value($ In millions)Aluminum Forward Contracts


10
%

$
(56
)Aluminum Put Options


10
%


   Electricity
    and Natural Gas
       94




---



##### Table of Contents



Sensitivities
    Pre-TaxDecline in

Loss inRate/Price

Fair Value($ In millions)Electricity


10
%

$
(15
)Natural Gas


10
%


   Foreign
    Currency Exchange Risks
    non-U.S. dollar
    Form 10-K
 95




---



##### Table of Contents



Sensitivities
    Pre-TaxIncrease (Decrease) ian


Loss inExchange Rate


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


(10
)%

$
(26
)Korean won


(10
)%


(19
)Brazilian real


10
%


(22
)Canadian dollar


10
%


(3
)British pound


(10
)%


(1
)Swiss franc


(10
)%


(28
)       Pre-TaxIncrease in


Loss inRate


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


10
%

$
(80
)British pound


10
%


(15
)Swiss franc


10
%


(4
)   Interest
    Rate Risks
       96




---



##### Table of Contents



Sensitivities
    Pre-TaxDecrease

Loss inin Rate

Fair Value($ In millions)Interest Rate Swap ContractsAsia


(10
)%


   Item 4.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
    Form 10-Q Rule 13a-15(e) Form 10-K
  Changes
    in Internal Control Over Financial Reporting
  Rule 13a-15(f)
   97




---



##### Table of Contents



Remediation
    Plan for Material Weakness Existing as of September 30,
    2007
  Form 10-K
 98




---



##### Table of Contents



PART II.
    OTHER INFORMATION
  Item 1.
    Legal
    Proceedings  Reynolds Boat Case.
    Form 10-K
      Coca-Cola
    Lawsuits. Coca-Cola Coca-Cola Coca-Cola Coca-Cola
 99




---



##### Table of Contents



Coca-Cola Coca-Cola
    Anheuser-Busch Litigation.
        ARCO Aluminum Complaint.
 100




---



##### Table of Contents



101




---



##### Table of Contents



Item 6.
    Exhibits  ExhibitNo.

Description2
.1

Arrangement Agreement by and among Hindalco Industries Limited,
    AV Aluminum Inc. and Novelis Inc., dated as of February 10,
    2007 (incorporated by reference to Exhibit 2.1 to our
    Current Report on
    Form 8-K
    filed on February 13, 2007)3
.1

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

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

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

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

Form of Note for
    71/4% Senior
    Notes due 2015 (incorporated by reference to Exhibit 4.1 to
    the
    Form S-4
    filed by Novelis Inc. on August 3, 2005 (File
    No. 331-127139))4
.4

First Amendment to the Shareholder Rights Agreement between
    Novelis Inc. and CIBC Mellon Trust Company, dated as of
    February 10, 2007 (incorporated by reference to our Current
    Report on
    Form 8-K
    file on February 13, 2007)10
.1

$800 million asset-based lending credit facility (ABL
    Facility) dated as of July 6, 2007 among Novelis
    Inc., Novelis Corporation as U.S. Borrower, the other U.S.
    Subsidiaries of Novelis Inc., Novelis UK Ltd, Novelis AG, AV
    Aluminum Inc. as parent guarantor, the other guarantors party
    thereto, with the lenders party thereto, ABN AMRO Bank N.V., as
    U.S./European issuing bank, swingline lender and administrative
    agent, LaSalle Business Credit, LLC, as collateral agent and
    funding agent, UBS Securities LLC, as syndication agent, Bank of
    America, N.A., National City Business Credit, Inc. and CIT
    Business Credit Canada Inc., as documentation agents, ABN AMRO
    Bank N.V. Canada Branch, as Canadian issuing bank, Canadian
    funding agent and Canadian administrative agent, and ABN AMRO
    Incorporated and UBS Securities LLC, as joint lead
    arrangers and joint book managers10
.2

$960 million term loan facility (Term Loan
    Facility) dated as of July 6, 2007 among Novelis
    Inc., Novelis Corporation as U.S. Borrower, AV Aluminum Inc., As
    Holdings, and the other guarantors party thereto, with the
    lenders party thereto, UBS AG, Stamford Branch, as
    administrative agent and as collateral agent, UBS Securities
    LLC, as syndication agent, ABN AMRO Incorporated, as
    documentation agent, and UBS Securities LLC and ABN AMRO
    Incorporated as joint lead arrangers and joint book managers10
.3

Intercreditor Agreement dated as of July 6, 2007 by and
    among Novelis Inc., Novelis Corporation, Novelis PAE
    Corporation, Novelis Finances USA LLC, Novelis South America
    Holdings LLC, Aluminum Upstream Holdings LLC, Novelis UK Ltd,
    Novelis AG, AV Aluminum Inc., and the subsidiary guarantors
    party thereto, as grantors, ABN AMRO BANK N.V., as revolving
    credit administrative agent ABN AMRO Bank N.A., acting through
    its Canadian branch, as revolving credit Canadian administrative
    agent and as revolving credit Canadian funding agent,
    La Salle Business Credit, LLC, as revolving credit
    collateral agent and as revolving credit funding agent, and UBS
    AG, Stamford Branch, as Term Loan administrative agent, and Term
    Loan collateral agent10
.4

Security Agreement made by Novelis Inc., as Canadian Borrower,
    Novelis Corporation, as U.S. Borrower and the guarantors from
    time to time party thereto in favor of UBS AG, Stamford branch,
    as collateral agent dated as of July 6, 200710
.5

Security Agreement made by Novelis Inc., as Canadian Borrower,
    Novelis Corporation, Novelis PAE Corporation, Novelis
    Finances USA LLC, Novelis South America Holdings LLC, Aluminum
    Upstream Holdings LLC, as U.S. Borrowers and the guarantors from
    time to time party thereto in favor of La Salle Business
    Credit, LLC, as collateral agent dated as of July 6, 200731
.1

Section 302 Certification of Principal Executive Officer31
.2

Section 302 Certification of Principal Financial Officer32
.1

Section 906 Certification of Principal Executive Officer32
.2

Section 906 Certification of Principal Financial Officer  102




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##### Table of Contents



SIGNATURES
      By:
    /s/  Steven
    Fisher      By:
    /s/  Jeffrey
    Schwaneke       103




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##### Table of Contents



EXHIBIT INDEX
  ExhibitNo.

Description2
.1

Arrangement Agreement by and among Hindalco Industries Limited,
    AV Aluminum Inc. and Novelis Inc., dated as of February 10, 2007
    (incorporated by reference to Exhibit 2.1 to our Current Report
    on Form 8-K filed on February 13, 2007)3
.1

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

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

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

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

Form of Note for
    71/4% Senior
    Notes due 2015 (incorporated by reference to Exhibit 4.1 to the
    Form S-4 filed by Novelis Inc. on August 3, 2005 (File No.
    331-127139))4
.4

First Amendment to the Shareholder Rights Agreement between
    Novelis Inc. and CIBC Mellon Trust Company, dated as of February
    10, 2007 (incorporated by reference to our Current Report on
    Form 8-K file on  February 13, 2007)10
.1

$800 million asset-based lending credit facility (ABL
    Facility) dated as of July 6, 2007 among Novelis Inc.,
    Novelis Corporation as U.S. Borrower, the other U.S.
    Subsidiaries of Novelis Inc., Novelis UK Ltd, Novelis AG, AV
    Aluminum Inc. as parent guarantor, the other guarantors party
    thereto, with the lenders party thereto, ABN AMRO Bank N.V., as
    U.S./European issuing bank, swingline lender and administrative
    agent, LaSalle Business Credit, LLC, as collateral agent and
    funding agent, UBS Securities LLC, as syndication agent, Bank of
    America, N.A., National City Business Credit, Inc. and CIT
    Business Credit Canada Inc., as documentation agents, ABN AMRO
    Bank N.V. Canada Branch, as Canadian issuing bank, Canadian
    funding agent and Canadian administrative agent, and ABN AMRO
    Incorporated and UBS Securities LLC, as joint lead
    arrangers and joint book managers10
.2

$960 million term loan facility (Term Loan Facility)
    dated as of July 6, 2007 among Novelis Inc., Novelis Corporation
    as U.S. Borrower, AV Aluminum Inc., As Holdings, and the other
    guarantors party thereto, with the lenders party thereto, UBS
    AG, Stamford Branch, as administrative agent and as collateral
    agent, UBS Securities LLC, as syndication agent, ABN AMRO
    Incorporated, as documentation agent, and UBS Securities LLC and
    ABN AMRO Incorporated as joint lead arrangers and joint book
    managers10
.3

Intercreditor Agreement dated as of July 6, 2007by and among
    Novelis Inc., Novelis Corporation, Novelis PAE Corporation,
    Novelis Finances USA LLC, Novelis South America Holdings LLC,
    Aluminum Upstream Holdings LLC, Novelis UK Ltd, Novelis AG, AV
    Aluminum Inc., and the subsidiary guarantors party thereto, as
    grantors, ABN AMRO BANK N.V., as revolving credit administrative
    agent ABN AMRO Bank N.A., acting through its Canadian branch, as
    revolving credit Canadian administrative agent and as revolving
    credit Canadian funding agent, La Salle Business Credit,
    LLC, as revolving credit collateral agent and as revolving
    credit funding agent, and UBS AG, Stamford Branch, as Term Loan
    administrative agent, and Term Loan collateral agent10
.4

Security Agreement made by Novelis Inc., as Canadian Borrower,
    Novelis Corporation, as U.S. Borrower and the guarantors from
    time to time party thereto in favor of UBS AG, Stamford branch,
    as collateral agent dated as of July 6, 200710
.5

Security Agreement made by Novelis Inc., as Canadian Borrower,
    Novelis Corporation, Novelis PAE Corporation, Novelis
    Finances USA LLC, Novelis South America Holdings LLC, Aluminum
    Upstream Holdings LLC, as U.S. Borrowers and the guarantors from
    time to time party thereto in favor of La Salle Business
    Credit, LLC, as collateral agent dated as of July 6, 200731
.1

Section 302 Certification of Principal Executive Officer31
.2

Section 302 Certification of Principal Financial Officer32
.1

Section 906 Certification of Principal Executive Officer32
.2

Section 906 Certification of Principal Financial Officer  104