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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 1934 
|          
|           |  | For the quarterly period ended September 30, 2005                                           
|          
|           |  | or                                                                                          
|          
|o          |  | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934
|          
|           |  | For the transition period
    from           to           .                                 

Commission file number: 001-32312


Novelis Inc.


(Exact name of registrant as specified in its charter)


|                                                                                                 |  |                                            
|------------------------------------------------------------------------------------------------ |  | -------------------------------------------
|Canada                                                                                           |  | 98-0442987                                 
|(State or other jurisdiction of
     incorporation or organization)                              |  | (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)


o þ


12b-2


o o þ


o þ












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EXPLANATORY NOTE






| |   |                                                             
| | - | ------------------------------------------------------------
| |  | the misapplication of GAAP related to liability recognition;
|
| |  | income tax accounting;                                      
|
| |  | other miscellaneous items; and                              
|
| |  | out-of-period adjustments.                                  





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##### 



Novelis Inc.


Index







|                                             |  |                                                                                           |  |                                                                                                                                            |    |  |   | 
|-------------------------------------------- |  | ----------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------ | -- |  | - | 
|                                             |  |                                                                                           |  | Page No.                                                                                                                                   |   
|                                             |  |                                                                                           |  |                                                                                                                                            |   
|PART I.                                      |  | FINANCIAL INFORMATION                                                                     |  |                                                                                                                                            |    | 
|Item 1.                                      |  | Financial Statements                                                                      |  |                                                                                                                                            | 2  | 
|                                             |  |                                                                                           |  | Unaudited Condensed Consolidated and
    Combined Statements of Income Third quarter and nine months
    ended September 30, 2005 and 2004 |    |  | 2 | 
|                                             |  |                                                                                           |  | Unaudited Condensed Consolidated and
    Combined Balance Sheets September 30, 2005 and
    December 31, 2004                              |    |  | 3 | 
|                                             |  |                                                                                           |  | Unaudited Condensed Consolidated and
    Combined Statements of Cash Flows Nine months ended
    September 30, 2005 and 2004               |    |  | 5 | 
|                                             |  |                                                                                           |  | Unaudited Condensed Consolidated and
    Combined Statement of Shareholders/ Invested Equity
    Nine months ended September 30, 2005     |    |  | 6 | 
|                                             |  |                                                                                           |  | Notes to the Unaudited Condensed
    Consolidated and Combined Financial Statements                                                        |    |  | 7 | 
|Item 2.                                      |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations |  |                                                                                                                                            | 52 | 
|Item 3.                                      |  | Quantitative and Qualitative Disclosures
    About Market Risk                            |  |                                                                                                                                            | 72 | 
|Item 4.                                      |  | Controls and Procedures                                                                   |  |                                                                                                                                            | 75 | 
|                                            
|PART II.                                     |  | OTHER INFORMATION                                                                         |  |                                                                                                                                            |    | 
|Item 1.                                      |  | Legal Proceedings                                                                         |  |                                                                                                                                            | 79 | 
|Item 6.                                      |  | Exhibits                                                                                  |  |                                                                                                                                            | 80 | 
|EX-31.1 SECTION 302 CERTIFICATION OF THE CEO
|EX-31.2 SECTION 302 CERTIFICATION OF THE CFO
|EX-32.1 SECTION 906 CERTIFICATION OF THE CEO
|EX-32.2 SECTION 906 CERTIFICATION OF THE CFO



1



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##### Table of Contents






PART I. FINANCIAL INFORMATION







|        |                     
|------- | --------------------
|Item 1. | Financial Statements

Novelis Inc.





CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF INCOME
(unaudited)


(in millions of US$, except per share amounts)


|                                                                                                                                                     |                   |               |       |       |             |  |       |       |  |  |       |       |   |  |       |       |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | ------------- | ----- | ----- | ----------- |  | ----- | ----- |  |  | ----- | ----- | - |  | ----- | ----- | -
|                                                                                                                                                     |                   | Third Quarter |       |       | Nine Months | 
|                                                                                                                                                     |                   |               |       |       |             | 
|Periods ended September 30                                                                                                                           |                   | 2005          |       |       | 2004        |  |       | 2005  |  |  | 2004  |      
|                                                                                                                                                     |                   |               |       |       |             |  |       |       |  |  |       |      
|Sales and operating revenues                                                                                                                         |                   |               |       |       |             |  |       |       |  |  |       |       |   |  |       |      
|                                                                                                                                                     |  third parties   |               |       | 2,053 |             |  |       | 1,893 |  |  |       | 6,337 |   |  |       | 5,416 |  
|                                                                                                                                                     |  related parties |               |       |      |             |  |       | 107   |  |  |       |      |   |  |       | 323   |  
|                                                                                                                                                     |                   |               |       |       |             |  |       |       |  |  |       |      
|                                                                                                                                                     |                   |               | 2,053 |       |             |  | 2,000 |       |  |  | 6,337 |       |   |  | 5,739 |      
|                                                                                                                                                     |                   |               |       |       |             |  |       |       |  |  |       |      
|Costs and expenses                                                                                                                                   |                   |               |       |       |             |  |       |       |  |  |       |       |   |  |       |      
|Cost of sales and operating expenses, excluding depreciation and
    amortization noted below                                                        |                   |               |       |       |             |  |       |       |  |  |       |       |   |  |       |      
|                                                                                                                                                     |  third parties   |               |       | 1,833 |             |  |       | 1,661 |  |  |       | 5,677 |   |  |       | 4,744 |  
|                                                                                                                                                     |  related parties |               |       |      |             |  |       | 96    |  |  |       |      |   |  |       | 288   |  
|Depreciation and amortization                                                                                                                        |                   |               | 56    |       |             |  | 60    |       |  |  | 173   |       |   |  | 178   |      
|Selling, general and administrative expenses                                                                                                         |                   |               | 79    |       |             |  | 72    |       |  |  | 243   |       |   |  | 182   |      
|Research and development expenses                                                                                                                    |                   |               | 10    |       |             |  | 3     |       |  |  | 29    |       |   |  | 13    |      
|Research and development expenses  related parties                                                                                                  |                   |               |      |       |             |  | 10    |       |  |  |      |       |   |  | 28    |      
|Other expenses (income)  net                                                                                                                        |                   |               |       |       |             |  |       |       |  |  |       |       |   |  |       |      
|                                                                                                                                                     |  third parties   |               |       | (27   | )           |  |       |      |  |  |       | (38   | ) |  |       | 8     |  
|                                                                                                                                                     |  related parties |               |       |      |             |  |       | 1     |  |  |       | (1    | ) |  |       | (21   | )
|Interest expense                                                                                                                                     |                   |               |       |       |             |  |       |       |  |  |       |       |   |  |       |      
|                                                                                                                                                     |  third parties   |               |       | 48    |             |  |       | 10    |  |  |       | 142   |   |  |       | 31    |  
|                                                                                                                                                     |  related parties |               |       |      |             |  |       | 7     |  |  |       |      |   |  |       | 24    |  
|                                                                                                                                                     |                   |               |       |       |             |  |       |       |  |  |       |      
|                                                                                                                                                     |                   |               | 1,999 |       |             |  | 1,920 |       |  |  | 6,225 |       |   |  | 5,475 |      
|                                                                                                                                                     |                   |               |       |       |             |  |       |       |  |  |       |      
|Income before income taxes and other items                                                                                                           |                   |               | 54    |       |             |  | 80    |       |  |  | 112   |       |   |  | 264   |      
|Income taxes                                                                                                                                         |                   |               | 37    |       |             |  | 45    |       |  |  | 67    |       |   |  | 111   |      
|                                                                                                                                                     |                   |               |       |       |             |  |       |       |  |  |       |      
|Income before other items                                                                                                                            |                   |               | 17    |       |             |  | 35    |       |  |  | 45    |       |   |  | 153   |      
|Equity in net income of non-consolidated affiliates                                                                                                  |                   |               | 2     |       |             |  | 1     |       |  |  | 6     |       |   |  | 4     |      
|Minority interests in earnings of consolidated affiliates                                                                                            |                   |               | (9    | )     |             |  | (2    | )     |  |  | (19   | )     |   |  | (9    | )    
|                                                                                                                                                     |                   |               |       |       |             |  |       |       |  |  |       |      
|Net income                                                                                                                                           |                   |               | 10    |       |             |  | 34    |       |  |  | 32    |       |   |  | 148   |      
|                                                                                                                                                     |                   |               |       |       |             |  |       |       |  |  |       |      
|Earnings per share                                                                                                                                   |                   |               |       |       |             |  |       |       |  |  |       |       |   |  |       |      
|Net income per share  basic                                                                                                                         |                   |               | 0.14  |       |             |  | 0.47  |       |  |  | 0.43  |       |   |  | 2.01  |      
|                                                                                                                                                     |                   |               |       |       |             |  |       |       |  |  |       |      
|Net income per share  diluted                                                                                                                       |                   |               | 0.14  |       |             |  | 0.47  |       |  |  | 0.43  |       |   |  | 2.00  |      
|                                                                                                                                                     |                   |               |       |       |             |  |       |       |  |  |       |      
|Dividends per common share                                                                                                                           |                   |               | 0.09  |       |             |  |      |       |  |  | 0.27  |       |   |  |      |      
|                                                                                                                                                     |                   |               |       |       |             |  |       |       |  |  |       |      
|Supplemental information for 2005:                                                                                                                   |                   |               |       |       |             |  |       |       |  |  |       |       |   |  |       |      
|Net income attributable to consolidated and combined results of
    Novelis from January 6 to September 30, 2005 
    increase to Retained earnings |                   |               | 10    |       |             |  |       |       |  |  | 61    |       |   |  |       |      
|Net loss attributable to the combined results of Novelis from
    January 1 to January 5, 2005  decrease to
    Owners net investment(A)           |                   |               |      |       |             |  |       |       |  |  | (29   | )     |   |  |       |      
|                                                                                                                                                     |                   |               |       |       |             |  |       |       |  |  |       |      
|Net income                                                                                                                                           |                   |               | 10    |       |             |  |       |       |  |  | 32    |       |   |  |       |      
|                                                                                                                                                     |                   |               |       |       |             |  |       |       |  |  |       |      






|    |                                                            
|--- | -----------------------------------------------------------
|(A) | Refer to Note 1  Background and Basis of
    Presentation.



2



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Novelis Inc.





CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS
(unaudited)


(in millions of US$, except number of shares)


|                                                                                      |                   |               |       |     |              |  |       |       | 
|------------------------------------------------------------------------------------- | ----------------- | ------------- | ----- | --- | ------------ |  | ----- | ----- | 
|                                                                                      |                   | September 30, |       |     | December 31, | 
|As of                                                                                 |                   | 2005          |       |     | 2004         | 
|                                                                                      |                   |               |       |     |              | 
|ASSETS                                                                               
|Current assets                                                                        |                   |               |       |     |              |  |       |      
|Cash and cash equivalents                                                             |                   |               | 124   |     |              |  | 31    |      
|Trade receivables (net of allowances of $28 in 2005 and $33 in
    2004)              |                   |               |       |     |              |  |       |      
|                                                                                      |  third parties   |               |       | 959 |              |  |       | 710   | 
|                                                                                      |  related parties |               |       |    |              |  |       | 87    | 
|Other receivables                                                                     |                   |               |       |     |              |  |       |      
|                                                                                      |  third parties   |               |       | 8   |              |  |       | 5     | 
|                                                                                      |  related parties |               |       | 30  |              |  |       | 846   | 
|Prepaid expenses                                                                      |                   |               | 52    |     |              |  | 36    |      
|Inventories                                                                           |                   |               |       |     |              |  |       |      
|                                                                                      | Aluminum          |               |       | 941 |              |  |       | 1,081 | 
|                                                                                      | Raw materials     |               |       | 20  |              |  |       | 20    | 
|                                                                                      | Other supplies    |               |       | 126 |              |  |       | 125   | 
|                                                                                      |                   |               |       |     |              | 
|                                                                                      |                   |               | 1,087 |     |              |  | 1,226 |      
|Other current assets                                                                  |                   |               | 181   |     |              |  | 77    |      
|                                                                                      |                   |               |       |     |              | 
|Total current assets                                                                  |                   |               | 2,441 |     |              |  | 3,018 |      
|Deferred charges and other assets                                                     |                   |               | 219   |     |              |  | 71    |      
|Long-term receivables from related parties                                            |                   |               | 77    |     |              |  | 104   |      
|Property, plant and equipment, net                                                    |                   |               | 2,170 |     |              |  | 2,348 |      
|Investments in non-consolidated affiliates                                            |                   |               | 100   |     |              |  | 122   |      
|Intangible assets (net of accumulated amortization of $10 in
    2005 and $9 in 2004) |                   |               | 29    |     |              |  | 35    |      
|Goodwill                                                                              |                   |               | 228   |     |              |  | 256   |      
|                                                                                      |                   |               |       |     |              | 
|Total assets                                                                          |                   |               | 5,264 |     |              |  | 5,954 |      
|                                                                                      |                   |               |       |     |              | 



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Novelis Inc.


CONDENSED CONSOLIDATED AND COMBINED BALANCE SHEETS
(unaudited)  (Continued)


(in millions of US$, except number of shares)


|                                                                                                                                                |                   |               |       |       |              |  |       |       | 
|----------------------------------------------------------------------------------------------------------------------------------------------- | ----------------- | ------------- | ----- | ----- | ------------ |  | ----- | ----- | 
|                                                                                                                                                |                   | September 30, |       |       | December 31, | 
|As of                                                                                                                                           |                   | 2005          |       |       | 2004         | 
|                                                                                                                                                |                   |               |       |       |              | 
|LIABILITIES AND SHAREHOLDERS/ INVESTED EQUITY                                                                                                 
|Current liabilities                                                                                                                             |                   |               |       |       |              |  |       |      
|Current portion of long-term debt                                                                                                               |                   |               |       |       |              |  |       |      
|                                                                                                                                                |  third parties   |               |       | 3     |              |  |       | 1     | 
|                                                                                                                                                |  related parties |               |       |      |              |  |       | 290   | 
|Short-term borrowings                                                                                                                           |                   |               |       |       |              |  |       |      
|                                                                                                                                                |  third parties   |               |       | 35    |              |  |       | 229   | 
|                                                                                                                                                |  related parties |               |       |      |              |  |       | 312   | 
|Accounts payable, trade                                                                                                                         |                   |               |       |       |              |  |       |      
|                                                                                                                                                |  third parties   |               |       | 752   |              |  |       | 496   | 
|                                                                                                                                                |  related parties |               |       | 38    |              |  |       | 401   | 
|Accrued expenses                                                                                                                                |                   |               | 418   |       |              |  | 339   |      
|Interest payable                                                                                                                                |                   |               | 22    |       |              |  | 2     |      
|Accrued income taxes                                                                                                                            |                   |               | 58    |       |              |  | 1     |      
|Other current liabilities                                                                                                                       |                   |               | 14    |       |              |  | 21    |      
|                                                                                                                                                |                   |               |       |       |              | 
|Total current liabilities                                                                                                                       |                   |               | 1,340 |       |              |  | 2,092 |      
|Long-term debt, net of current portion                                                                                                          |                   |               |       |       |              |  |       |      
|                                                                                                                                                |  third parties   |               |       | 2,647 |              |  |       | 139   | 
|                                                                                                                                                |  related parties |               |       |      |              |  |       | 2,307 | 
|Accrued post-retirement benefits                                                                                                                |                   |               | 307   |       |              |  | 284   |      
|Deferred credits and other liabilities                                                                                                          |                   |               | 224   |       |              |  | 188   |      
|Deferred income taxes                                                                                                                           |                   |               | 191   |       |              |  | 249   |      
|Commitments and contingencies                                                                                                                   |                   |               |       |       |              |  |       |      
|Minority interests in equity of consolidated affiliates                                                                                         |                   |               | 151   |       |              |  | 140   |      
|Shareholders/invested equity                                                                                                                   |                   |               |       |       |              |  |       |      
|Preferred shares  unlimited number of first preferred
    and second preferred shares authorized; none issued                                  |                   |               |      |       |              |  |      |      
|Common shares, no par value  unlimited number of
    shares authorized; issued and outstanding: 74,005,649 shares as
    of September 30, 2005 |                   |               |      |       |              |  |      |      
|Additional paid-in capital                                                                                                                      |                   |               | 433   |       |              |  |      |      
|Retained earnings                                                                                                                               |                   |               | 41    |       |              |  |      |      
|Accumulated other comprehensive income (loss)                                                                                                   |                   |               | (70   | )     |              |  | 88    |      
|Owners net investment                                                                                                                          |                   |               |      |       |              |  | 467   |      
|                                                                                                                                                |                   |               |       |       |              | 
|Total shareholders/invested equity                                                                                                             |                   |               | 404   |       |              |  | 555   |      
|                                                                                                                                                |                   |               |       |       |              | 
|Total liabilities and shareholders/invested equity                                                                                             |                   |               | 5,264 |       |              |  | 5,954 |      
|                                                                                                                                                |                   |               |       |       |              | 



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Novelis Inc.





CONDENSED CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(unaudited)


(in millions of US$)


|                                                                                |                                         |      |       |        |      |  |      |      |  
|------------------------------------------------------------------------------- | --------------------------------------- | ---- | ----- | ------ | ---- |  | ---- | ---- | -
|Nine Months Ended September 30                                                  |                                         | 2005 |       |        | 2004 | 
|                                                                                |                                         |      |       |        |      | 
|OPERATING ACTIVITIES                                                            |                                         |      |       |        |      |  |      |     
|Net cash provided by operating activities                                       |                                         |      | 366   |        |      |  | 292  |     
|                                                                                |                                         |      |       |        |      | 
|INVESTING ACTIVITIES                                                            |                                         |      |       |        |      |  |      |     
|Capital expenditures                                                            |                                         |      | (104  | )      |      |  | (95  | )   
|Proceeds from sales of fixed assets and investments                             |                                         |      | 9     |        |      |  | 8    |     
|Proceeds from loans receivable  net                                            |                                         |      |       |        |      |  |      |     
|                                                                                |  third parties                         |      |       | 19     |      |  |      |     |  
|                                                                                |  related parties                       |      |       | 373    |      |  |      | 501  |  
|Premiums paid on purchased derivatives                                          |                                         |      | (26   | )      |      |  |     |     
|Net proceeds from settlement of derivatives                                     |                                         |      | 96    |        |      |  |     |     
|                                                                                |                                         |      |       |        |      | 
|Net cash provided by investing activities                                       |                                         |      | 367   |        |      |  | 414  |     
|                                                                                |                                         |      |       |        |      | 
|FINANCING ACTIVITIES                                                            |                                         |      |       |        |      |  |      |     
|Proceeds from issuance of new debt  third parties                              |                                         |      | 2,750 |        |      |  | 443  |     
|Principal repayments                                                            |                                         |      |       |        |      |  |      |     
|                                                                                |  third parties                         |      |       | (1,742 | )    |  |      | (895 | )
|                                                                                |  related parties                       |      |       | (1,180 | )    |  |      |     |  
|Short-term borrowings  net                                                     |                                         |      |       |        |      |  |      |     
|                                                                                |  third parties                         |      |       | (137   | )    |  |      | (133 | )
|                                                                                |  related parties                       |      |       | (302   | )    |  |      | 4    |  
|Dividends  common shareholders                                                 |                                         |      | (20   | )      |      |  |     |     
|Dividends  minority interest                                                   |                                         |      | (7    | )      |      |  | (4   | )   
|Net receipts from (payments to) Alcan                                           |                                         |      | 72    |        |      |  | (121 | )   
|Debt issuance costs paid                                                        |                                         |      | (71   | )      |      |  |     |     
|                                                                                |                                         |      |       |        |      | 
|Net cash used in financing activities                                           |                                         |      | (637  | )      |      |  | (706 | )   
|                                                                                |                                         |      |       |        |      | 
|Net increase in cash and cash equivalents                                       |                                         |      | 96    |        |      |  |     |     
|Effect of exchange rate changes on cash balances held in foreign
    currencies |                                         |      | (3    | )      |      |  |     |     
|Cash and cash equivalents  beginning of period                                 |                                         |      | 31    |        |      |  | 27   |     
|                                                                                |                                         |      |       |        |      | 
|Cash and cash equivalents  end of period                                       |                                         |      | 124   |        |      |  | 27   |     
|                                                                                |                                         |      |       |        |      | 
|Supplemental schedule of 2005 non-cash investing and
    financing activities:  |                                         |      |       |        |      |  |      |     
|Spin-off transaction and post-closing adjustments                               |                                         |      |       |        |      |  |      |     
|                                                                                | Other receivables                       |      |       | 433    |      |  |      |      |  
|                                                                                | Short-term borrowings  related parties |      |       | (57    | )    |  |      |      |  
|                                                                                | Long-term debt  related parties        |      |       | 32     |      |  |      |      |  
|                                                                                | Capital lease obligation                |      |       | 52     |      |  |      |      |  
|                                                                                | Additional paid-in capital              |      |       | (98    | )    |  |      |      |  



5



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Novelis Inc.





CONDENSED CONSOLIDATED AND COMBINED STATEMENT OF


SHAREHOLDERS/INVESTED EQUITY (unaudited)


Nine Months Ended September 30, 2005


(in millions of US$, except number of shares which is in
thousands and per share amounts)


|                                                               |  |               |        |  |            |  |   |          |  |               |          |     |  |             |     |   |            |  |      |       |  |  |      |      |  |  |      |  
|-------------------------------------------------------------- |  | ------------- | ------ |  | ---------- |  | - | -------- |  | ------------- | -------- | --- |  | ----------- | --- | - | ---------- |  | ---- | ----- |  |  | ---- | ---- |  |  | ---- | -
|                                                               |  |               |        |  |            |  |   |          |  | Accumulated   |          |     |  |             |    
|                                                               |  |               |        |  |            |  |   | Other    |  |               |          |     | 
|                                                               |  | Common Shares |        |  | Additional |  |   |          |  | Comprehensive |          |     |  |             |    
|                                                               |  |               |        |  | Paid-in    |  |   | Retained |  |               | Income   |     |  | Owners Net |     |   |           
|                                                               |  | Shares        |        |  | Amount     |  |   | Capital  |  |               | Earnings |     |  | (Loss)      |     |   | Investment |  |      | Total | 
|                                                               |  |               |        |  |            |  |   |          |  |               |          |     |  |             |     |   |            |  |      |       | 
|Balance as of December 31, 2004                                |  |               |       |  |            |  |  |          |  |               |         |     |  |             |    |   |            |  | 88   |       |  |  | 467  |      |  |  | 555  |  
|2005 Activity:                                                 |  |               |        |  |            |  |   |          |  |               |          |     |  |             |     |   |            |  |      |       |  |  |      |      |  |  |      |  
|Net loss  January 1 to January 5                              |  |               |        |  |            |  |   |          |  |               |          |     |  |             |     |   |            |  |      |       |  |  | (29  | )(A) |  |  | (29  | )
|                                                               |  |               |        |  |            |  |   |          |  |               |          |     |  |             |     |   |            |  |      |       | 
|Adjusted Invested equity at spin-off date  January 6          |  |               |       |  |            |  |  |          |  |               |         |     |  |             |    |   |            |  | 88   |       |  |  | 438  | (B)  |  |  | 526  |  
|Issuance of common stock in connection with the spin-off       |  |               | 73,989 |  |            |  |  |          |  |               | 438      |     |  |             |     |   |            |  |      |       |  |  | (438 | )    |  |  |     |  
|Spin settlement and post-closing adjustments                   |  |               |        |  |            |  |   |          |  |               | 2        | (C) |  |             |     |   |            |  |      |       |  |  |      |      |  |  | 2    |  
|Issuance of common stock in connection with stock plans        |  |               | 17     |  |            |  |  |          |  |               |          |     |  |             |     |   |            |  |      |       |  |  |      |      |  |  |      |  
|Net income  January 6 to September 30                         |  |               |        |  |            |  |   |          |  |               |          |     |  |             | 61  |   |            |  |      |       |  |  |      |      |  |  | 61   |  
|Deferred translation adjustments                               |  |               |        |  |            |  |   |          |  |               |          |     |  |             |     |   |            |  | (146 | )     |  |  |      |      |  |  | (146 | )
|Change in minimum pension liability                            |  |               |        |  |            |  |   |          |  |               |          |     |  |             |     |   |            |  | (12  | )     |  |  |      |      |  |  | (12  | )
|Dividends on common shares ($0.27 per common share)            |  |               |        |  |            |  |   |          |  |               |          |     |  |             | (20 | ) |            |  |      |       |  |  |      |      |  |  | (20  | )
|Dividends on preferred stock shares of consolidated affiliates |  |               |        |  |            |  |   |          |  |               | (7       | )   |  |             |     |   |            |  |      |       |  |  |      |      |  |  | (7   | )
|                                                               |  |               |        |  |            |  |   |          |  |               |          |     |  |             |     |   |            |  |      |       | 
|Balance as of September 30, 2005                               |  |               | 74,006 |  |            |  |  |          |  |               | 433      |     |  |             | 41  |   |            |  | (70  | )     |  |  |     |      |  |  | 404  |  
|                                                               |  |               |        |  |            |  |   |          |  |               |          |     |  |             |     |   |            |  |      |       | 






|    |                                                            
|--- | -----------------------------------------------------------
|(A) | Refer to Note 1  Background and Basis of
    Presentation.



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(B) | Represents the amount of Owners net investment as of
    January 6, 2005.                                                                                                                                                                                                                                                                                                                                                                                                   
|   
|(C) | In connection with the spin-off from Alcan, we entered into
    agreements which provide for various post-transaction
    adjustments. These adjustments, for the most part, have been and
    will be reflected as changes to shareholders equity and
    include items such as working capital, pension assets and
    liabilities, and adjustments to opening balance sheet accounts.
    This is further discussed in Note 1  Background
    and Basis of Presentation.



6



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##### Table of Contents



Novelis Inc.





NOTES TO THE CONDENSED CONSOLIDATED AND COMBINED FINANCIAL
STATEMENTS


(unaudited)


(in millions of US$, except where indicated)




|   |                                     
|-- | ------------------------------------
|1. | BACKGROUND AND BASIS OF PRESENTATION



| |           
| | ----------
| | Background



10-K








7



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




Related
Party Disclosures.




| |            
| | -----------
| | Restatement

10-Q 10-Q/ 10-Q




| |   |                                                             
| | - | ------------------------------------------------------------
| |  | the misapplication of GAAP related to liability recognition;
|
| |  | income tax accounting;                                      
|
| |  | other miscellaneous items; and                              
|
| |  | out-of-period
    adjustments.                              

out-of out-of




| |                             
| | ----------------------------
| | Post-Transaction Adjustments





| |                                     
| | ------------------------------------
| | Agreements between Novelis and Alcan





| |                      
| | ---------------------
| | Basis of Presentation



8



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




mark-to








| |                           
| | --------------------------
| | General Corporate Expenses





9



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




| |                                      
| | -------------------------------------
| | Pensions and Post-Retirement Benefits











| |             
| | ------------
| | Income Taxes





| |                
| | ---------------
| | Cash Management





10



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




| |                 
| | ----------------
| | Interest Expense







| |            
| | -----------
| | Derivatives





| |              
| | -------------
| | Stock Options





| |                   
| | ------------------
| | Earnings Per Share





|   |                    
|-- | -------------------
|2. | ACCOUNTING POLICIES



11



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




| |                          
| | -------------------------
| | Cash and Cash Equivalents





| |                            
| | ---------------------------
| | Principles of Consolidation





| |                    
| | -------------------
| | Debt Issuance Costs





| |                
| | ---------------
| | Dividend Policy





| |                                      
| | -------------------------------------
| | Pensions and Post-Retirement Benefits

Employers Accounting for
Pensions. Employers Accounting for Post-Retirement Benefits Other
than Pensions.


12



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




| |                                     
| | ------------------------------------
| | Recently Issued Accounting Standards

Share-Based Payment Accounting for Stock-Based Compensation Accounting
for Stock-Based Compensation  Transition and
Disclosure.


Accounting for Conditional Asset Retirement
Obligations  an interpretation of FASB Statement
No. 143.


00-19 Application of EITF Issue
No. 00-19 to
Freestanding Financial Instruments Originally Issued as Employee
Compensation. 00-19, Accounting for Derivative Financial Instruments Indexed to,
and Potentially Settled in, a Companys Own Stock


Accounting for Early Retirement or
Postemployment Programs with Specific Features (Such As Terms
Specified in Altersteilzeit Early Retirement Arrangements) 05-5). 05-5 05-5 05-5


143-1, Accounting for Electronic Equipment Waste Obligations. 143-1


13



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)


143-1 Accounting for Asset Retirement Obligations 143-1 143-1


Accounting by an Investor for Its Proportionate Share of
Accumulated Other Comprehensive Income of an Investee Accounted
for under the Equity Method in Accordance with APB Opinion
No. 18 upon a Loss of Significant Influence Accounting for Certain Investments
in Debt and Equity Securities


Accounting for Purchases and Sales of
Inventory with the Same Counterparty 04-13). 04-13 Accounting for Nonmonetary Transactions Exchanges of Nonmonetary Assets, an Amendment
of APB 29




14



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|   |                   
|-- | ------------------
|3. | ACCOUNTING CHANGES



| |                                                 
| | ------------------------------------------------
| | Stock Options and Other Stock-Based Compensation





| |                                            
| | -------------------------------------------
| | Consolidation of Variable Interest Entities

Consolidation of Variable Interest
Entities.






|   |                       
|-- | ----------------------
|4. | RESTRUCTURING PROGRAMS



| |                              
| | -----------------------------
| | 2005 Restructuring Activities







| |                              
| | -----------------------------
| | 2004 Restructuring Activities



15



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




| |         
| | --------
| | Pechiney







| |                                    
| | -----------------------------------
| | Other 2004 Restructuring Activities









| |                           
| | --------------------------
| | 2001 Restructuring Program







16



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|                                                                          |  |           |     |       |            |  |    |       |  |  |       |   |  |  |     |  
|------------------------------------------------------------------------- |  | --------- | --- | ----- | ---------- |  | -- | ----- |  |  | ----- | - |  |  | --- | -
|                                                                          |  |           |     | Asset |            |  |    |       | 
|                                                                          |  | Severance |     |       | Impairment |  |    |       |  | 
|                                                                          |  | Costs     |     |       | Provisions |  |    | Other |  |  | Total |  
|                                                                          |  |           |     |       |            |  |    |       |  |  |       |  
|Provision balance as of January 1, 2004                                   |  |           | 19  |       |            |  |   |       |  |  | 15    |   |  |  | 34  |  
|Year Ended December 31, 2004 activity:                                    |  |           |     |       |            |  |    |       |  |  |       |   |  |  |     |  
|Charges (recoveries) recorded in the statement of income                  |  |           | 10  |       |            |  | 8  |       |  |  | (1    | ) |  |  | 17  |  
|Liabilities recorded in the allocation of the Pechiney purchase
    price |  |           | 19  |       |            |  |   |       |  |  | 4     |   |  |  | 23  |  
|Cash payments  net                                                       |  |           | (14 | )     |            |  |   |       |  |  | (5    | ) |  |  | (19 | )
|Non-cash charges (recoveries)                                             |  |           |    |       |            |  | (8 | )     |  |  | 6     |   |  |  | (2  | )
|                                                                          |  |           |     |       |            |  |    |       |  |  |       |  
|Provision balance as of December 31, 2004                                 |  |           | 34  |       |            |  |   |       |  |  | 19    |   |  |  | 53  |  
|Nine Months Ended September 30, 2005 activity:                            |  |           |     |       |            |  |    |       |  |  |       |   |  |  |     |  
|Charges (recoveries) recorded in the statement of
    income              |  |           | (4  | )     |            |  | 4  |       |  |  | 8     |   |  |  | 8   |  
|Recoveries credited against Goodwill                                      |  |           | (4  | )     |            |  |   |       |  |  |      |   |  |  | (4  | )
|Cash payments  net                                                       |  |           | (16 | )     |            |  |   |       |  |  | (6    | ) |  |  | (22 | )
|Non-cash recoveries                                                       |  |           |    |       |            |  | (2 | )     |  |  |      |   |  |  | (2  | )
|Effect of exchange rate changes on ending provision
    balances          |  |           | (3  | )     |            |  |   |       |  |  | (2    | ) |  |  | (5  | )
|                                                                          |  |           |     |       |            |  |    |       |  |  |       |  
|Provision balance as of September 30, 2005                                |  |           | 7   |       |            |  | 2  |       |  |  | 19    |   |  |  | 28  |  
|                                                                          |  |           |     |       |            |  |    |       |  |  |       |  



| |                  
| | -----------------
| | Subsequent Events





17



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|   |                           
|-- | --------------------------
|5. | RELATED PARTY TRANSACTIONS

Related Party
Disclosures


|                                                                                               |                     |         |   |    |             |  |     |      |  |  |      |     |  |  |     |       | 
|---------------------------------------------------------------------------------------------- | ------------------- | ------- | - | -- | ----------- |  | --- | ---- |  |  | ---- | --- |  |  | --- | ----- | 
|                                                                                               |                     | Third   |   |    |            
|                                                                                               |                     | Quarter |   |    | Nine Months | 
|                                                                                               |                     |         |   |    |             | 
|Periods ended September 30                                                                     |                     | 2005    |   |    | 2004        |  |     | 2005 |  |  | 2004 |    
|                                                                                               |                     |         |   |    |             |  |     |      |  |  |      |    
|Sales and operating revenues                                                                   |                     |         |   |    |             |  |     |      |  |  |      |     |  |  |     |      
|Alcan(A)                                                                                       |                     |         |  |    |             |  | 107 |      |  |  |     |     |  |  | 323 |      
|                                                                                               |                     |         |   |    |             |  |     |      |  |  |      |    
|Cost of sales and operating expenses                                                           |                     |         |   |    |             |  |     |      |  |  |      |     |  |  |     |      
|Alcan(A)                                                                                       |                     |         |  |    |             |  | 96  |      |  |  |     |     |  |  | 288 |      
|                                                                                               |                     |         |   |    |             |  |     |      |  |  |      |    
|Research and development expenses                                                              |                     |         |   |    |             |  |     |      |  |  |      |     |  |  |     |      
|Alcan(B)                                                                                       |                     |         |  |    |             |  | 10  |      |  |  |     |     |  |  | 28  |      
|                                                                                               |                     |         |   |    |             |  |     |      |  |  |      |    
|Interest expense                                                                               |                     |         |   |    |             |  |     |      |  |  |      |     |  |  |     |      
|Alcan(C)                                                                                       |                     |         |  |    |             |  | 7   |      |  |  |     |     |  |  | 24  |      
|                                                                                               |                     |         |   |    |             |  |     |      |  |  |      |    
|Other expenses (income)  net                                                                  |                     |         |   |    |             |  |     |      |  |  |      |     |  |  |     |      
|Service fee income(D)                                                                          |                     |         |  |    |             |  |    |      |  |  |     |     |  |  | (27 | )    
|Service fee expense(E)                                                                         |                     |         |  |    |             |  | (2  | )    |  |  |     |     |  |  | 17  |      
|Interest income(F)                                                                             |                     |         |  |    |             |  | (6  | )    |  |  |     |     |  |  | (17 | )    
|Derivatives  realized gains (losses)(G)                                                       |                     |         |  |    |             |  | 10  |      |  |  |     |     |  |  | 2   |      
|Derivatives  unrealized gains (losses) on change in
    market value and reclassifications(G) |                     |         |  |    |             |  |    |      |  |  |     |     |  |  |    |      
|Other                                                                                          |                     |         |  |    |             |  | (1  | )    |  |  | (1   | )   |  |  | 5   |      
|                                                                                               |                     |         |   |    |             |  |     |      |  |  |      |    
|Total other expenses (income)  net arising from
    transactions with Alcan                   |                     |         |  |    |             |  | 1   |      |  |  | (1   | )   |  |  | (20 | )    
|Interest income from Aluminium Norf GmbH                                                       |                     |         |  |    |             |  |    |      |  |  |     |     |  |  | (1  | )    
|                                                                                               |                     |         |   |    |             |  |     |      |  |  |      |    
|Total other expenses (income)  net arising from
    transactions with all related parties     |                     |         |  |    |             |  | 1   |      |  |  | (1   | )   |  |  | (21 | )    
|                                                                                               |                     |         |   |    |             |  |     |      |  |  |      |    
|Purchase of inventory/tolling services                                                         |                     |         |   |    |             |  |     |      |  |  |      |     |  |  |     |      
|                                                                                               | Aluminium Norf GmbH |         |   | 52 |             |  |     | 51   |  |  |      | 154 |  |  |     | 147   | 
|                                                                                               |                     |         |   |    |             |  |     |      |  |  |      |    
|                                                                                               | Alcan(H)            |         |   |   |             |  |     | 502  |  |  |      |    |  |  |     | 1,485 | 
|                                                                                               |                     |         |   |    |             |  |     |      |  |  |      |    






|    |  |                                                                                                                        
|--- |  | -----------------------------------------------------------------------------------------------------------------------
|(A) |  | We purchase from and sell materials to Alcan in the ordinary
    course of business.                                   
|   
|(B) |  | These expenses represent an allocation of research and
    development expenses incurred by Alcan on behalf of Novelis.

18



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|    |  |                                                                                                                                                                                                                                                               
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(C) |  | As discussed further below and in Note 11 
    Short-Term Borrowings and Note 12  Long-Term
    Debt, we had various short-term borrowings and long-term debt
    payable to Alcan where interest was charged on both a fixed and
    a floating rate basis.
|   
|(D) |  | Service fee income arises from sales of research and development
    and other corporate services to Alcan.                                                                                                                                                   
|   
|(E) |  | Service fee expense arises from the purchase of corporate
    services from Alcan.                                                                                                                                                                            
|   
|(F) |  | Represents interest income earned on outstanding advances and
    loans to Alcan.                                                                                                                                                                             
|   
|(G) |  | Alcan was the counterparty to most of our metal and currency
    derivatives.                                                                                                                                                                                 
|   
|(H) |  | Alcan is our primary third party supplier of prime and sheet
    ingot. Refer to Note 14  Commitments and
    Contingencies.                                                                                                                                 



|                                       |  |               |    |  |              |  |       | 
|-------------------------------------- |  | ------------- | -- |  | ------------ |  | ----- | 
|                                       |  | September 30, |    |  | December 31, | 
|As of                                  |  | 2005          |    |  | 2004         | 
|                                       |  |               |    |  |              | 
|Trade receivables                      |  |               |    |  |              |  |       | 
|Alcan(A)                               |  |               |   |  |              |  | 87    | 
|                                       |  |               |    |  |              | 
|Other receivables                      |  |               |    |  |              |  |       | 
|Alcan(B)                               |  |               |   |  |              |  | 801   | 
|Aluminium Norf GmbH(C)                 |  |               | 30 |  |              |  | 45    | 
|                                       |  |               |    |  |              | 
|                                       |  |               | 30 |  |              |  | 846   | 
|                                       |  |               |    |  |              | 
|Long-term receivables                  |  |               |    |  |              |  |       | 
|Alcan                                  |  |               |   |  |              |  | 2     | 
|Aluminium Norf GmbH(C)                 |  |               | 77 |  |              |  | 102   | 
|                                       |  |               |    |  |              | 
|                                       |  |               | 77 |  |              |  | 104   | 
|                                       |  |               |    |  |              | 
|Current portion of long-term debt      |  |               |    |  |              |  |       | 
|Alcan(D)                               |  |               |   |  |              |  | 290   | 
|                                       |  |               |    |  |              | 
|Short-term borrowings                  |  |               |    |  |              |  |       | 
|Alcan(E)                               |  |               |   |  |              |  | 312   | 
|                                       |  |               |    |  |              | 
|Accounts payable, trade                |  |               |    |  |              |  |       | 
|Alcan(A)                               |  |               |   |  |              |  | 356   | 
|Aluminium Norf GmbH(A)                 |  |               | 38 |  |              |  | 45    | 
|                                       |  |               |    |  |              | 
|                                       |  |               | 38 |  |              |  | 401   | 
|                                       |  |               |    |  |              | 
|Long-term debt, net of current portion |  |               |    |  |              |  |       | 
|Alcan(D)                               |  |               |   |  |              |  | 2,307 | 
|                                       |  |               |    |  |              | 






|    |  |                                                                                                                                                                          
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) |  | We purchase from and sell materials to Alcan and we purchase
    services from an investee accounted for under the equity method,
    in the ordinary course of business.

19



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|    |  |                                                                                                                                                                                                                    
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(B) |  | The balance at December 31, 2004 includes various
    short-term floating rate notes totaling Euro 266 million
    and $55 maturing within one year that were settled by Alcan in
    2005 as part of our spin-off.
|   
|(C) |  | The balances represent current and non-current portions of a
    loan to an investee accounted for under the equity method.                                                                                        
|   
|(D) |  | We had various loans payable to Alcan as of December 31,
    2004 as described in Note 12  Long-Term Debt
    that were repaid in the first quarter of 2005.                                                      
|   
|(E) |  | The balance at December 31, 2004 is comprised of loans due
    to Alcan in various currencies including Euro 193 million
    and GBP 20 million that were repaid in 2005 as part of our
    spin-off.              



|   |                         
|-- | ------------------------
|6. | POST-RETIREMENT BENEFITS







| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) In the U.S., for our employees previously participating
    in the Alcancorp Pension Plan and the Alcan Supplemental
    Executive Retirement Plan, Alcan agreed to recognize up to one
    year of additional service in its plan as long as such employee
    worked for us and we paid to Alcan the normal cost (in the case
    of the Alcancorp Pension Plan) and the current service cost (in
    the case of the Alcan Supplemental Executive Retirement Plan);                               
|
| | b) In the U.K., the sponsorship of the Alusuisse Holdings
    U.K. Ltd Pension Plan was transferred from Alcan to us and
    renamed the Novelis U.K. Pension Plan. No new plan was
    established. Approximately 400 of our employees who previously
    participated in the British Alcan RILA Plan remained in that
    plan for 2005. We are responsible for remitting to Alcan both
    the employee and employer contributions as agreed with the
    trustees of the plan for the 2005 year; and
|
| | c) In Switzerland, we became a participating employer in
    the Alcan Swiss Pension Plans and our employees are
    participating in these plans for up to one year (or longer with
    Alcan approval) provided we make the required pension
    contributions.                                                                                                                                                                                                                                       





Novelis Pension Plan (Canada)


20



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)


Pension Plan for Officers






| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) New salaried employees (new as of January 1, 2005
    in the U.S. and as of January 1, 2006 in Canada and the
    U.K.) will participate in Defined Contribution
    (DC) retirement plan arrangements rather than Defined
    Benefit (DB) plans. The Novelis board of directors also
    approved the adoption of the Novelis Savings and Retirement Plan
    effective December 1, 2005 replacing the Alcancorp
    Employees Savings Plan (for U.S. salaried employees)
    and adding a retirement account feature to the plan;                                                                                                                                                                                              
|
| | b) As a result of the spin-off, account balances in the
    Alcancorp Employees Savings Plans (Salaried Plan and
    Hourly Plan) were transferred to the new Novelis Savings and
    Retirement Plan (for salaried employees) and the new Novelis
    Hourly Savings Plan (for hourly union employees). To
    accomplish this transfer, a freeze was placed on all account
    activity including loan requests, withdrawals, distributions,
    fund exchanges (transfers), contribution allocation changes and
    account balance inquiries during the transition period. The
    freeze began on December 2, 2005 and ended during the week
    of December 11, 2005; and                                                    
|
| | c) Pursuant to the Employee Matters Agreement
    (EMA) between Alcan and Novelis, active Novelis transferred
    employees continue to participate in the Alcancorp Pension Plan
    (ACPP) until December 31, 2005. Effective
    October 28, 2005, the Novelis board of directors approved
    the adoption of Novelis DB pension arrangements (to be called
    the Novelis Pension Plan (NPP) in the U.S.) for employees
    who participated in a DB with Alcan. Under the terms of the EMA
    and subject to Internal Revenue Service (IRS) requirements,
    assets and liabilities will be transferred from ACPP to the new
    NPP. Similar, but not identical, actions will occur in Canada
    and the U.K. for pensions.





21



---



##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|                              |  |                  |    |   |                |  |       |         |  |  |             |   |  |      |     |   |      |  |    |      |  |  |      |  |  |  |   |  |  |  |   | 
|----------------------------- |  | ---------------- | -- | - | -------------- |  | ----- | ------- |  |  | ----------- | - |  | ---- | --- | - | ---- |  | -- | ---- |  |  | ---- |  |  |  | - |  |  |  | - | 
|                              |  | Pension Benefits |    |   | Other Benefits | 
|                              |  |                  |    |   |                | 
|                              |  | Third            |    |   |                |  | Third |         |  | 
|                              |  | Quarter          |    |   | Nine Months    |  |       | Quarter |  |  | Nine Months |  
|                              |  |                  |    |   |                |  |       |         |  |  |             |  
|Periods ended September 30    |  | 2005             |    |   | 2004           |  |       | 2005    |  |  | 2004        |   |  | 2005 |     |   | 2004 |  |    | 2005 |  |  | 2004 | 
|                              |  |                  |    |   |                |  |       |         |  |  |             |   |  |      |     |   |      |  |    |      |  |  |      | 
|Service cost                  |  |                  | 5  |   |                |  | 4     |         |  |  | 14          |   |  |      | 14  |   |      |  | 1  |      |  |  | 1    |  |  |  | 3 |  |  |  | 2 | 
|Interest cost                 |  |                  | 7  |   |                |  | 7     |         |  |  | 22          |   |  |      | 21  |   |      |  | (1 | )    |  |  | 1    |  |  |  | 5 |  |  |  | 4 | 
|Expected return on assets     |  |                  | (3 | ) |                |  | (5    | )       |  |  | (15         | ) |  |      | (17 | ) |      |  |   |      |  |  |     |  |  |  |  |  |  |  |  | 
|Amortization                  |  |                  |    |   |                |  |       |         |  |  |             |   |  |      |     |   |      |  |    |      |  |  |      |  |  |  |   |  |  |  |   | 
| actuarial losses            |  |                  |   |   |                |  | 1     |         |  |  | 4           |   |  |      | 3   |   |      |  | 1  |      |  |  |     |  |  |  | 1 |  |  |  |  | 
| prior service cost          |  |                  |   |   |                |  | 1     |         |  |  | 2           |   |  |      | 3   |   |      |  |   |      |  |  |     |  |  |  |  |  |  |  |  | 
|Curtailment/ settlement gains |  |                  |   |   |                |  |      |         |  |  |            |   |  |      | (19 | ) |      |  |   |      |  |  |     |  |  |  |  |  |  |  |  | 
|                              |  |                  |    |   |                |  |       |         |  |  |             |   |  |      |     |   |      |  |    |      |  |  |      | 
|Net periodic benefit cost     |  |                  | 9  |   |                |  | 8     |         |  |  | 27          |   |  |      | 5   |   |      |  | 1  |      |  |  | 2    |  |  |  | 9 |  |  |  | 6 | 
|                              |  |                  |    |   |                |  |       |         |  |  |             |   |  |      |     |   |      |  |    |      |  |  |      | 



wind-up




| |                       
| | ----------------------
| | Employer Contributions





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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|   |                              
|-- | -----------------------------
|7. | OTHER EXPENSES (INCOME)  NET



|                                                                                      |  |         |     |   |             |  |     |      |  |  |      |   |  |  |     |  
|------------------------------------------------------------------------------------- |  | ------- | --- | - | ----------- |  | --- | ---- |  |  | ---- | - |  |  | --- | -
|                                                                                      |  | Third   |     |   |            
|                                                                                      |  | Quarter |     |   | Nine Months | 
|                                                                                      |  |         |     |   |             | 
|Periods ended September 30                                                            |  | 2005    |     |   | 2004        |  |     | 2005 |  |  | 2004 |  
|                                                                                      |  |         |     |   |             |  |     |      |  |  |      |  
|Restructuring costs (recoveries)  net                                                |  |         | 7   |   |             |  | 10  |      |  |  | 4    |   |  |  | 12  |  
|Asset impairment provisions                                                           |  |         | 4   |   |             |  | 9   |      |  |  | 5    |   |  |  | 9   |  
|Gain on disposals of fixed assets(A)                                                  |  |         |    |   |             |  |    |      |  |  | (11  | ) |  |  | (6  | )
|Interest income                                                                       |  |         | (3  | ) |             |  | (6  | )    |  |  | (7   | ) |  |  | (19 | )
|Realized gains on monetization of cross-currency interest rate
    swaps              |  |         |    |   |             |  |    |      |  |  | (45  | ) |  |  |    |  
|Realized losses (gains) on derivatives(B)                                             |  |         | 4   |   |             |  |    |      |  |  | (11  | ) |  |  |    |  
|Exchange losses (gains)                                                               |  |         | (4  | ) |             |  | 5   |      |  |  | 1    |   |  |  | 8   |  
|Unrealized gains on change in market value and reclassification
    of derivatives(C) |  |         | (43 | ) |             |  | (21 | )    |  |  |     |   |  |  | (36 | )
|Service fee expense  net                                                             |  |         |    |   |             |  | (11 | )    |  |  |     |   |  |  | (10 | )
|Bridge financing commitment fee                                                       |  |         |    |   |             |  |    |      |  |  | 11   |   |  |  |    |  
|Provisions for legal and environmental reserves                                       |  |         | 7   |   |             |  |    |      |  |  | 13   |   |  |  |    |  
|Other                                                                                 |  |         | 1   |   |             |  | 15  |      |  |  | 1    |   |  |  | 29  |  
|                                                                                      |  |         |     |   |             |  |     |      |  |  |      |  
|                                                                                      |  |         | (27 | ) |             |  | 1   |      |  |  | (39  | ) |  |  | (13 | )
|                                                                                      |  |         |     |   |             |  |     |      |  |  |      |  






|    |  |                                                                                                                                                                                                                                                                                                                       
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) |  | Included in the nine months ended September 30, 2005 is a
    gain on the sale of land in Asia of ($11).                                                                                                                                                                                                              
|   
|(B) |  | Includes metal, natural gas and energy derivatives.                                                                                                                                                                                                                                                                   
|   
|(C) |  | Included in the nine months ended September 30, 2005 is $43
    in pre-tax unrealized losses ($29 after-tax) on the change in
    market value of derivative contracts, primarily with Alcan, for
    the period from January 1 to January 5, 2005, as described
    in Note 1  Background and Basis of Presentation.



|   |             
|-- | ------------
|8. | INCOME TAXES



|                           |  |         |    |  |             |  |    |      |  |  |      |   |  |  |     | 
|-------------------------- |  | ------- | -- |  | ----------- |  | -- | ---- |  |  | ---- | - |  |  | --- | 
|                           |  | Third   |    |  |            
|                           |  | Quarter |    |  | Nine Months | 
|                           |  |         |    |  |             | 
|Periods ended September 30 |  | 2005    |    |  | 2004        |  |    | 2005 |  |  | 2004 |  
|                           |  |         |    |  |             |  |    |      |  |  |      |  
|Current                    |  |         | 6  |  |             |  | 38 |      |  |  | 73   |   |  |  | 89  | 
|Deferred                   |  |         | 31 |  |             |  | 7  |      |  |  | (6   | ) |  |  | 22  | 
|                           |  |         |    |  |             |  |    |      |  |  |      |  
|                           |  |         | 37 |  |             |  | 45 |      |  |  | 67   |   |  |  | 111 | 
|                           |  |         |    |  |             |  |    |      |  |  |      |  



23



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|                                           |                                                           |             |     |          |           |  |    |    |   
|------------------------------------------ | --------------------------------------------------------- | ----------- | --- | -------- | --------- |  | -- | -- | --
|                                           |                                                           | Nine Months |    
|                                           |                                                           |             |    
|                                           |                                                           |             |     | 2005     |          
|                                           |                                                           |             |     | Tax Rate |          
|Period ended September 30                  |                                                           | 2005        |     |          | Component | 
|                                           |                                                           |             |     |          |           | 
|Income before income taxes and other items |                                                           |             | 112 |          |           |  |    |   
|                                           |                                                           |             |     |          |           | 
|Income taxes at statutory rate             |                                                           |             | 37  |          |           |  | 33 | % 
|Adjustments to the statutory rate:         |                                                           |             |     |          |           |  |    |   
|                                           | Difference in effective tax rates of foreign subsidiaries |             |     | 1        |           |  |    | 1  | % 
|                                           | Unrealized benefit on losses                              |             |     | 8        |           |  |    | 7  | % 
|                                           | Out-of-period adjustments                                 |             |     | (7       | )         |  |    | (6 | )%
|                                           | Exchange translation items                                |             |     | 24       |           |  |    | 22 | % 
|                                           | Exchange on revaluation of deferred income taxes          |             |     | 6        |           |  |    | 5  | % 
|                                           | Taxes relating to the spin-off transaction                |             |     | (2       | )         |  |    | (2 | )%
|                                           | Reduced-rate or tax-exempt items                          |             |     | (6       | )         |  |    | (5 | )%
|                                           | Other  net                                               |             |     | 6        |           |  |    | 5  | % 
|                                           |                                                           |             |     |          |           | 
|Income taxes at effective rate             |                                                           |             | 67  |          |           |  | 60 | % 
|                                           |                                                           |             |     |          |           | 





|   |                   
|-- | ------------------
|9. | EARNINGS PER SHARE



|                                                   |                                               |         |      |       |             |  |      |       |  |  |      |       |  |  |      |       | 
|-------------------------------------------------- | --------------------------------------------- | ------- | ---- | ----- | ----------- |  | ---- | ----- |  |  | ---- | ----- |  |  | ---- | ----- | 
|                                                   |                                               | Third   |      |       |            
|                                                   |                                               | Quarter |      |       | Nine Months | 
|                                                   |                                               |         |      |       |             | 
|Periods ended September 30                         |                                               | 2005    |      |       | 2004        |  |      | 2005  |  |  | 2004 |      
|                                                   |                                               |         |      |       |             |  |      |       |  |  |      |      
|Numerator:                                         |                                               |         |      |       |             |  |      |       |  |  |      |       |  |  |      |      
|                                                   | Net income                                    |         |      | 10    |             |  |      | 34    |  |  |      | 32    |  |  |      | 148   | 
|                                                   |                                               |         |      |       |             |  |      |       |  |  |      |      
|Denominator (number of common shares in millions): |                                               |         |      |       |             |  |      |       |  |  |      |       |  |  |      |      
|                                                   | Weighted average number of outstanding shares |         |      | 74.00 |             |  |      | 73.99 |  |  |      | 73.99 |  |  |      | 73.99 | 
|                                                   | Effect of dilutive shares                     |         |      | 0.38  |             |  |      | 0.44  |  |  |      | 0.25  |  |  |      | 0.44  | 
|                                                   |                                               |         |      |       |             |  |      |       |  |  |      |      
|                                                   | Adjusted number of outstanding shares         |         |      | 74.38 |             |  |      | 74.43 |  |  |      | 74.24 |  |  |      | 74.43 | 
|                                                   |                                               |         |      |       |             |  |      |       |  |  |      |      
|Earnings per share  basic (in US$)                |                                               |         | 0.14 |       |             |  | 0.47 |       |  |  | 0.43 |       |  |  | 2.01 |      
|                                                   |                                               |         |      |       |             |  |      |       |  |  |      |      
|Earnings per share  diluted (in US$)              |                                               |         | 0.14 |       |             |  | 0.47 |       |  |  | 0.43 |       |  |  | 2.00 |      
|                                                   |                                               |         |      |       |             |  |      |       |  |  |      |      



24



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)








|    |                                                                  
|--- | -----------------------------------------------------------------
|10. | SALES, FORFAITING AND FACTORING OF TRADE ACCOUNTS
    RECEIVABLES







|                                                |  |         |    |  |             |  |    |      |  |  |      |  |  |  |     | 
|----------------------------------------------- |  | ------- | -- |  | ----------- |  | -- | ---- |  |  | ---- |  |  |  | --- | 
|                                                |  | Third   |    |  |            
|                                                |  | Quarter |    |  | Nine Months | 
|                                                |  |         |    |  |             | 
|Periods ended September 30                      |  | 2005    |    |  | 2004        |  |    | 2005 |  |  | 2004 | 
|                                                |  |         |    |  |             |  |    |      |  |  |      | 
|Receivables forfaited during the period         |  |         | 79 |  |             |  | 47 |      |  |  | 203  |  |  |  | 141 | 
|                                                |  |         |    |  |             |  |    |      |  |  |      | 
|Expense recognized due to forfaiting activities |  |         | 1  |  |             |  |   |      |  |  | 2    |  |  |  | 1   | 
|                                                |  |         |    |  |             |  |    |      |  |  |      | 

|                                  |  |                    |    |  |                   |  |    | 
|--------------------------------- |  | ------------------ | -- |  | ----------------- |  | -- | 
|As of                             |  | September 30, 2005 |    |  | December 31, 2004 | 
|                                  |  |                    |    |  |                   | 
|Forfaited receivables outstanding |  |                    | 57 |  |                   |  | 50 | 
|                                  |  |                    |    |  |                   | 



25



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|                                               |  |         |    |  |             |  |   |      |  |  |      |  |  |  |    | 
|---------------------------------------------- |  | ------- | -- |  | ----------- |  | - | ---- |  |  | ---- |  |  |  | -- | 
|                                               |  | Third   |    |  |            
|                                               |  | Quarter |    |  | Nine Months | 
|                                               |  |         |    |  |             | 
|Periods ended September 30                     |  | 2005    |    |  | 2004        |  |   | 2005 |  |  | 2004 | 
|                                               |  |         |    |  |             |  |   |      |  |  |      | 
|Receivables factored during the period         |  |         | 43 |  |             |  | 6 |      |  |  | 64   |  |  |  | 24 | 
|                                               |  |         |    |  |             |  |   |      |  |  |      | 
|Expense recognized due to factoring activities |  |         | 1  |  |             |  |  |      |  |  | 1    |  |  |  |   | 
|                                               |  |         |    |  |             |  |   |      |  |  |      | 

|                                 |  |                    |    |  |                   |  |   | 
|-------------------------------- |  | ------------------ | -- |  | ----------------- |  | - | 
|As of                            |  | September 30, 2005 |    |  | December 31, 2004 | 
|                                 |  |                    |    |  |                   | 
|Factored receivables outstanding |  |                    | 23 |  |                   |  |  | 
|                                 |  |                    |    |  |                   | 



|    |                      
|--- | ---------------------
|11. | SHORT-TERM BORROWINGS





26



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|    |               
|--- | --------------
|12. | LONG-TERM DEBT

|                                                                          |  |               |       |   |              |  |       |  
|------------------------------------------------------------------------- |  | ------------- | ----- | - | ------------ |  | ----- | -
|                                                                          |  | September 30, |       |   | December 31, | 
|As of                                                                     |  | 2005          |       |   | 2004         | 
|                                                                          |  |               |       |   |              | 
|DUE TO RELATED PARTIES                                                    |  |               |       |   |              |  |       |  
|Total related party debt(A)                                               |  |               |      |   |              |  | 2,597 |  
|Less: current portion                                                     |  |               |      |   |              |  | (290  | )
|                                                                          |  |               |       |   |              | 
|Long-term related party debt, net of current portion                      |  |               |      |   |              |  | 2,307 |  
|                                                                          |  |               |       |   |              | 
|DUE TO THIRD PARTIES                                                      |  |               |       |   |              |  |       |  
|Novelis Inc.                                                              |  |               |       |   |              |  |       |  
|Floating rate Term Loan B, due 2012(B)                                    |  |               | 371   |   |              |  |      |  
|7.25% Senior Notes, due 2015(D)                                           |  |               | 1,400 |   |              |  |      |  
|Novelis Corporation                                                       |  |               |       |   |              |  |       |  
|Floating rate Term Loan B, due 2012(B)(C)                                 |  |               | 644   |   |              |  |      |  
|Novelis Switzerland S.A.                                                  |  |               |       |   |              |  |       |  
|Capital lease obligation, due 2020 (Swiss Francs
    (CHF) 62 million)(E) |  |               | 48    |   |              |  |      |  
|Novelis Korea Limited(F)                                                  |  |               |       |   |              |  |       |  
|Bank loan, due 2008                                                       |  |               | 50    |   |              |  |      |  
|Bank loan, due 2007                                                       |  |               | 70    |   |              |  | 70    |  
|Bank loan, due 2007 (Korean won (KRW) 40 billion)                         |  |               | 39    |   |              |  | 39    |  
|Bank loan, due 2007 (KRW 25 billion)                                      |  |               | 24    |   |              |  | 24    |  
|Bank loans, due 2005/2011 (KRW 2 billion)                                 |  |               | 2     |   |              |  | 2     |  
|Other                                                                     |  |               |       |   |              |  |       |  
|Other debt, due 2009                                                      |  |               | 2     |   |              |  | 5     |  
|                                                                          |  |               |       |   |              | 
|Total third party debt                                                    |  |               | 2,650 |   |              |  | 140   |  
|Less: current portion                                                     |  |               | (3    | ) |              |  | (1    | )
|                                                                          |  |               |       |   |              | 
|Long-term third party debt, net of current portion                        |  |               | 2,647 |   |              |  | 139   |  
|                                                                          |  |               |       |   |              | 






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) |  | All of our related party debt of $2,597 as of December 31,
    2004 was payable to Alcan and was fully repaid in the first
    quarter of 2005. The related party debt was comprised of a
    combination of fixed and floating rate debt of $1,392 and fixed
    rate promissory notes (Alcan Notes) obtained in December 2004 of
    $1,205. The Alcan Notes as of December 31, 2004, plus
    additional Alcan Notes of $170 issued in January 2005 comprised
    the $1,375 bridge financing provided by Alcan as a result of the
    spin-off transaction described in Note 1 
    Background and Basis of Presentation. The Alcan Notes were
    repaid in February 2005 with the net proceeds from the $1,400
    10-year Senior Notes
    issued in February 2005 (note (D) below).
|   
|(B) |  | In connection with the spin-off transaction described in
    Note 1  Background and Basis of Presentation, we
    entered into senior secured credit facilities providing for
    aggregate borrowings of up to $1,800. These facilities consist
    of: (1) a $1,300 seven-year senior secured Term Loan B
    facility, bearing interest at LIBOR plus 1.75% (the effective
    rate at September 30, 2005 was 5.46% assuming the selection
    of 3-month LIBOR as our
    borrowing choice), all of which was borrowed on January 10,
    2005, and (2) a $500 five-year multi-currency revolving
    credit facility. The Term Loan B facility                                                                                                                                        

27



---



##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  | consists of an $825 Term Loan B in the U.S. and a $475 Term
    Loan B in Canada. The proceeds of the Term Loan B
    facility were used in connection with the spin-off transaction
    to refinance our related party debt with Alcan and to pay
    related fees and expenses. Debt issuance costs incurred in
    relation to these facilities have been recorded in Deferred
    charges and other assets and are being amortized over the life
    of the related borrowing in Interest using the effective
    interest amortization method.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|   
|    |  | The credit agreement relating to the senior secured credit
    facilities includes customary affirmative and negative
    covenants, as well as financial covenants relating to our
    maximum total leverage ratio, minimum interest coverage ratio,
    and minimum fixed charge coverage ratio.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|    |  | The credit agreement for the $1,800 facility requires that we
    deliver quarterly and audited annual financial statements to the
    lenders within a specified period of time. Due to the
    restatement of our unaudited condensed consolidated and combined
    financial statements for the quarter ended March 31, 2005
    and the quarter and six months ended June 30, 2005, we
    sought and obtained the consent from our lenders to extend the
    financial statement filing and reporting deadlines under the
    credit agreement to June 15, 2006 for our
    Form 10-Q for the
    quarter ended September 30, 2005; to September 29,
    2006 for our
    Form 10-K for the
    year ended December 31, 2005; to October 31, 2006 for
    our Form 10-Q for
    the quarter ended March 31, 2006; to November 30, 2006
    for our Form 10-Q
    for the quarter ending June 30, 2006; and to
    December 29, 2006 for our
    Form 10-Q for the
    quarter ending September 30, 2006.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|    |  | As of March 31, 2006, we had $855 outstanding under the
    credit agreement.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   
|(C) |  | We have entered into interest rate swaps to fix the interest
    rate on $310 of the Novelis Corporation floating rate Term
    Loan B debt at an effective weighted average interest rate
    of 5.5% for periods of up to three years.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|   
|(D) |  | On February 3, 2005, we issued $1,400 aggregate principal
    amount of senior unsecured debt securities (Senior Notes). The
    Senior Notes, which were priced at par, bear interest at 7.25%
    and will mature on February 15, 2015. The net proceeds of
    the Senior Notes were used to repay the Alcan Notes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|    |  | Under the indenture that governs the Senior Notes, we are
    subject to certain restrictive covenants applicable to incurring
    additional debt and providing additional guarantees, paying
    dividends beyond certain amounts and making other restricted
    payments, sales and transfer of assets, certain consolidations
    or mergers and certain transactions with affiliates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|   
|    |  | The indenture governing the Senior Notes provides that we file a
    registration statement for registered notes to be exchanged for
    the notes privately placed to the original investors. The
    registration statement was declared effective by the SEC on
    September 27, 2005. Under the indenture and the related
    registration rights agreement, we were required to complete an
    exchange offer for the Senior Notes by November 11, 2005.
    We did not complete the exchange offer by that date. As a
    result, we began to accrue additional special interest at a rate
    of 0.25% from November 11, 2005. In addition, the indenture
    and the registration rights agreement provide that the rate of
    additional special interest increases 0.25% during each
    subsequent 90-day
    period until the exchange offer closes, with the maximum amount
    of additional special interest being 1.00% per year. The
    rate of additional special interest is currently 0.75%. If we do
    not complete the exchange offer by August 8, 2006, the rate
    of additional special interest will increase to 1.00%. We expect
    to file a post-effective amendment to the registration statement
    registering the Senior Notes being issued in the exchange offer
    and complete the exchange as soon as practicable following the
    date we are current on our reporting requirements. We will cease
    paying additional special interest once the exchange offer is
    completed.

28



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  | Under the indenture, we are also required to deliver to the
    trustee a copy of our periodic reports filed with the SEC within
    time periods specified for filing by SEC rules. Our failure to
    timely file our quarterly report on
    Form 10-Q for the
    quarter ended September 30, 2005, our annual report on
    Form 10-K for the
    year ended December 31, 2005 and our quarterly report on
    Form 10-Q for the
    quarter ended March 31, 2006 gave certain rights to the trustee
    and the noteholders under the indenture to accelerate maturity
    of the Senior Notes if they provided us notice and we do not
    cure the breach within 60 days. However, neither the
    trustee nor the noteholders have provided us such a notice to
    date. As a result, we continue to classify the Senior Notes as
    long-term.
|   
|(E) |  | In connection with the spin-off, we entered into a fifteen-year
    capital lease agreement with Alcan for assets in Sierre,
    Switzerland, which has an implied interest rate of 7.5% and
    calls for fixed quarterly payments of $1 (1.7 million CHF).
    The following table presents future minimum payments under this
    capital lease in US$ as of September 30, 2005:                                                                                                                                                                                                                                                                                                                                                                                                                                                                       

|                                                          |  |  |     |  
|--------------------------------------------------------- |  |  | --- | -
|Payments in Year Ended December 31                        |  | 
|                                                          |  | 
|Remainder of 2005                                         |  |  | 1   |  
|2006                                                      |  |  | 5   |  
|2007                                                      |  |  | 5   |  
|2008                                                      |  |  | 5   |  
|2009                                                      |  |  | 6   |  
|2010                                                      |  |  | 6   |  
|Thereafter                                                |  |  | 51  |  
|                                                          |  |  |    
|Total payments                                            |  |  | 79  |  
|Less: interest portion                                    |  |  | (31 | )
|                                                          |  |  |    
|Total capital lease obligation included in long-term debt |  |  | 48  |  
|                                                          |  |  |    



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(F) |  | In 2004, Novelis Korea Limited (Novelis Korea), formerly Alcan
    Taihan Aluminium Limited, entered into a $70 floating rate
    long-term loan which was subsequently swapped for a 4.55% fixed
    rate KRW 73 billion loan and into two long-term floating
    rate loans of $39 (KRW 40 billion) and $24 (KRW
    25 billion), which were then swapped for fixed rate loans
    of 4.80% and 4.45%, respectively. In 2005, interest on another
    loan for $2 (KRW 2 billion) ranged from 3.00% to 4.47%
    (2004: 3.00% to 5.50%). In February 2005, Novelis Korea entered
    into a $50 million floating rate long-term loan which was
    subsequently swapped for a 5.30% fixed rate KRW 51 billion
    loan.





29



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)








|    |                                              
|--- | ---------------------------------------------
|13. | FINANCIAL INSTRUMENTS AND COMMODITY CONTRACTS

Related Party Disclosures.












| |                                   
| | ----------------------------------
| | Financial Instruments  Fair Value





|    |                              
|--- | -----------------------------
|14. | COMMITMENTS AND CONTINGENCIES





30



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)






| |                  
| | -----------------
| | Legal Proceedings



Reynolds Boat Case.






| |                      
| | ---------------------
| | Environmental Matters





31



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




clean-up




Oswego North Ponds.




32



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)


Borgofranco.




| |                  
| | -----------------
| | Judicial Deposits





| |                                               
| | ----------------------------------------------
| | Guarantees for Trade Payables to Third Parties







|                          |  |                  |    |  |                |  |   |             |  |  |                 |  |  |  |   | 
|------------------------- |  | ---------------- | -- |  | -------------- |  | - | ----------- |  |  | --------------- |  |  |  | - | 
|                          |  | Maximum          |    |  |                |  |   |             | 
|                          |  | Potential Future |    |  | Liability      |  |   | Fair Market |  |  | Assets Held for | 
|Type of Entity            |  | Payment          |    |  | Carrying Value |  |   | Value       |  |  | Collateral      | 
|                          |  |                  |    |  |                |  |   |             |  |  |                 | 
|Wholly-Owned Subsidiaries |  |                  | 11 |  |                |  | 3 |             |  |  |                |  |  |  |  | 
|Aluminium Norf GmbH       |  |                  | 12 |  |                |  |  |             |  |  |                |  |  |  |  | 





33



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|    |                            
|--- | ---------------------------
|15. | COMPREHENSIVE INCOME (LOSS)



|                                   |                                                                                                                                                                                   |         |    |   |             |  |    |      |   |  |      |      |   |  |     |     |  
|---------------------------------- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------- | -- | - | ----------- |  | -- | ---- | - |  | ---- | ---- | - |  | --- | --- | -
|                                   |                                                                                                                                                                                   | Third   |    |   |            
|                                   |                                                                                                                                                                                   | Quarter |    |   | Nine Months | 
|                                   |                                                                                                                                                                                   |         |    |   |             | 
|Periods ended September 30         |                                                                                                                                                                                   | 2005    |    |   | 2004        |  |    | 2005 |   |  | 2004 |     
|                                   |                                                                                                                                                                                   |         |    |   |             |  |    |      |   |  |      |     
|Net income                         |                                                                                                                                                                                   |         | 10 |   |             |  | 34 |      |   |  | 32   |      |   |  | 148 |    
|Other comprehensive income (loss): |                                                                                                                                                                                   |         |    |   |             |  |    |      |   |  |      |      |   |  |     |    
|                                   | Net change in deferred translation adjustments                                                                                                                                    |         |    |  |             |  |    | (9   | ) |  |      | (146 | ) |  |     | (53 | )
|                                   | Net change in minimum pension liability (net of taxes of nil and
    ($7)), respectively, for the third quarter and nine months ended
    September 30, 2005 (2004: nil and nil)) |         |    | 1 |             |  |    |     |   |  |      | (12  | ) |  |     |    |  
|                                   |                                                                                                                                                                                   |         |    |   |             |  |    |      |   |  |      |     
|Comprehensive income (loss)        |                                                                                                                                                                                   |         | 11 |   |             |  | 25 |      |   |  | (126 | )    |   |  | 95  |    
|                                   |                                                                                                                                                                                   |         |    |   |             |  |    |      |   |  |      |     



|                                              |  |                    |     |   |                   |  |     |  
|--------------------------------------------- |  | ------------------ | --- | - | ----------------- |  | --- | -
|As of                                         |  | September 30, 2005 |     |   | December 31, 2004 | 
|                                              |  |                    |     |   |                   | 
|Deferred translation adjustments              |  |                    | (26 | ) |                   |  | 120 |  
|Minimum pension liability                     |  |                    | (44 | ) |                   |  | (32 | )
|                                              |  |                    |     |   |                   | 
|Accumulated other comprehensive income (loss) |  |                    | (70 | ) |                   |  | 88  |  
|                                              |  |                    |     |   |                   | 



|    |                                  
|--- | ---------------------------------
|16. | INFORMATION BY OPERATING SEGMENTS







| |                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) BGP excluded restructuring costs related only to major
    corporate-wide acquisitions or initiatives whereas Regional
    Income excludes all restructuring costs;                                                                                                           
|
| | b) BGP included pension costs based on the normal current
    service cost with all actuarial gains, losses and other
    adjustments being included in Intersegment and other. Regional
    Income includes all these pension costs in the applicable
    operating segment; and

34



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




| |                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | c) BGP excluded certain corporate non-operating costs
    incurred by an operating segment and included such costs in
    Intersegment and other. Under the current management structure,
    these costs remain in the operating segment.









| |                      
| | ---------------------
| | Novelis North America





| |               
| | --------------
| | Novelis Europe





| |             
| | ------------
| | Novelis Asia





| |                      
| | ---------------------
| | Novelis South America





| |          
| | ---------
| | Corporate





| |                   
| | ------------------
| | Risk Concentration



35



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




| |                                       
| | --------------------------------------
| | Selected Segment Operating Information



|                                                |  |         |     |   |             |  |     |      |  |  |      |   |  |  |     |  
|----------------------------------------------- |  | ------- | --- | - | ----------- |  | --- | ---- |  |  | ---- | - |  |  | --- | -
|                                                |  | Third   |     |   |            
|                                                |  | Quarter |     |   | Nine Months | 
|                                                |  |         |     |   |             | 
|Periods ended September 30                      |  | 2005    |     |   | 2004        |  |     | 2005 |  |  | 2004 |  
|                                                |  |         |     |   |             |  |     |      |  |  |      |  
|Sales and operating revenues 
    intersegment |  |         |     |   |             |  |     |      |  |  |      |   |  |  |     |  
|Novelis North America                           |  |         | 1   |   |             |  |    |      |  |  | 2    |   |  |  | 5   |  
|Novelis Europe                                  |  |         | 2   |   |             |  | 13  |      |  |  | 30   |   |  |  | 26  |  
|Novelis Asia                                    |  |         | 1   |   |             |  | 3   |      |  |  | 6    |   |  |  | 7   |  
|Novelis South America                           |  |         | 7   |   |             |  | 16  |      |  |  | 37   |   |  |  | 43  |  
|Eliminations                                    |  |         | (11 | ) |             |  | (32 | )    |  |  | (75  | ) |  |  | (81 | )
|                                                |  |         |     |   |             |  |     |      |  |  |      |  
|                                                |  |         |    |   |             |  |    |      |  |  |     |   |  |  |    |  
|                                                |  |         |     |   |             |  |     |      |  |  |      |  



|                                            |  |               |       |   |             |  |       |      |  |  |       |   |  |  |       |  
|------------------------------------------- |  | ------------- | ----- | - | ----------- |  | ----- | ---- |  |  | ----- | - |  |  | ----- | -
|                                            |  | Third Quarter |       |   | Nine Months | 
|                                            |  |               |       |   |             | 
|Periods ended September 30                  |  | 2005          |       |   | 2004        |  |       | 2005 |  |  | 2004  |  
|                                            |  |               |       |   |             |  |       |      |  |  |       |  
|Sales and operating revenues                |  |               |       |   |             |  |       |      |  |  |       |   |  |  |       |  
|Novelis North America                       |  |               | 836   |   |             |  | 810   |      |  |  | 2,500 |   |  |  | 2,229 |  
|Novelis Europe                              |  |               | 737   |   |             |  | 766   |      |  |  | 2,376 |   |  |  | 2,289 |  
|Novelis Asia                                |  |               | 328   |   |             |  | 292   |      |  |  | 1,025 |   |  |  | 858   |  
|Novelis South America                       |  |               | 157   |   |             |  | 134   |      |  |  | 448   |   |  |  | 369   |  
|Equity-accounted joint ventures adjustments |  |               | (5    | ) |             |  | (2    | )    |  |  | (12   | ) |  |  | (6    | )
|                                            |  |               |       |   |             |  |       |      |  |  |       |  
|                                            |  |               | 2,053 |   |             |  | 2,000 |      |  |  | 6,337 |   |  |  | 5,739 |  
|                                            |  |               |       |   |             |  |       |      |  |  |       |  

36



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|                                                                 |  |         |     |   |             |  |     |      |  |  |      |   |  |  |      |  
|---------------------------------------------------------------- |  | ------- | --- | - | ----------- |  | --- | ---- |  |  | ---- | - |  |  | ---- | -
|                                                                 |  | Third   |     |   |            
|                                                                 |  | Quarter |     |   | Nine Months | 
|                                                                 |  |         |     |   |             | 
|Periods ended September 30                                       |  | 2005    |     |   | 2004        |  |     | 2005 |  |  | 2004 |  
|                                                                 |  |         |     |   |             |  |     |      |  |  |      |  
|Regional Income                                                  |  |         |     |   |             |  |     |      |  |  |      |   |  |  |      |  
|Novelis North America                                            |  |         | 54  |   |             |  | 67  |      |  |  | 141  |   |  |  | 208  |  
|Novelis Europe                                                   |  |         | 52  |   |             |  | 64  |      |  |  | 161  |   |  |  | 162  |  
|Novelis Asia                                                     |  |         | 23  |   |             |  | 19  |      |  |  | 80   |   |  |  | 62   |  
|Novelis South America                                            |  |         | 24  |   |             |  | 34  |      |  |  | 86   |   |  |  | 106  |  
|                                                                 |  |         |     |   |             |  |     |      |  |  |      |  
|Total Regional Income                                            |  |         | 153 |   |             |  | 184 |      |  |  | 468  |   |  |  | 538  |  
|Corporate                                                        |  |         | (17 | ) |             |  | (11 | )    |  |  | (11  | ) |  |  | (31  | )
|Depreciation and amortization                                    |  |         | (56 | ) |             |  | (60 | )    |  |  | (173 | ) |  |  | (178 | )
|Adjustments for equity-accounted joint ventures                  |  |         | (11 | ) |             |  | (11 | )    |  |  | (33  | ) |  |  | (32  | )
|Change in market value of derivatives                            |  |         | 43  |   |             |  | 15  |      |  |  | 1    |   |  |  | 37   |  
|Restructuring, rationalization and impairment recoveries (costs) |  |         | (10 | ) |             |  | (20 | )    |  |  | 2    |   |  |  | (15  | )
|Interest expense                                                 |  |         | (48 | ) |             |  | (17 | )    |  |  | (142 | ) |  |  | (55  | )
|                                                                 |  |         |     |   |             |  |     |      |  |  |      |  
|Income before income taxes and other items                       |  |         | 54  |   |             |  | 80  |      |  |  | 112  |   |  |  | 264  |  
|                                                                 |  |         |     |   |             |  |     |      |  |  |      |  



|                                              |  |               |       |   |              |  |       |  
|--------------------------------------------- |  | ------------- | ----- | - | ------------ |  | ----- | -
|                                              |  | September 30, |       |   | December 31, | 
|As of                                         |  | 2005          |       |   | 2004         | 
|                                              |  |               |       |   |              | 
|Novelis North America                         |  |               | 1,388 |   |              |  | 1,406 |  
|Novelis Europe                                |  |               | 2,129 |   |              |  | 2,885 |  
|Novelis Asia                                  |  |               | 971   |   |              |  | 954   |  
|Novelis South America                         |  |               | 780   |   |              |  | 779   |  
|Corporate, eliminations and other adjustments |  |               | (4    | ) |              |  | (70   | )
|                                              |  |               |       |   |              | 
|                                              |  |               | 5,264 |   |              |  | 5,954 |  
|                                              |  |               |       |   |              | 



|    |                          
|--- | -------------------------
|17. | SUPPLEMENTARY INFORMATION



|                           |  |         |    |  |             |  |    |      |  |  |      |  |  |  |    | 
|-------------------------- |  | ------- | -- |  | ----------- |  | -- | ---- |  |  | ---- |  |  |  | -- | 
|                           |  | Third   |    |  |            
|                           |  | Quarter |    |  | Nine Months | 
|                           |  |         |    |  |             | 
|Periods ended September 30 |  | 2005    |    |  | 2004        |  |    | 2005 |  |  | 2004 | 
|                           |  |         |    |  |             |  |    |      |  |  |      | 
|Interest paid              |  |         | 76 |  |             |  | 18 |      |  |  | 119  |  |  |  | 56 | 
|Income taxes paid          |  |         | 7  |  |             |  | 51 |      |  |  | 35   |  |  |  | 87 | 

37



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|    |                            
|--- | ---------------------------
|18. | PREFERRED AND COMMON SHARES



| |                                         
| | ----------------------------------------
| | Authorized and Outstanding Share Capital





|                 |  |                   |           |  |                    |  |            |                   |  |  |      | 
|---------------- |  | ----------------- | --------- |  | ------------------ |  | ---------- | ----------------- |  |  | ---- | 
|                 |  | Outstanding as of |          
|                 |  |                   |          
|                 |  | Authorized        |           |  | September 30, 2005 |  |            | December 31, 2004 | 
|                 |  |                   |           |  |                    |  |            |                   | 
|Preferred Shares |  |                   | Unlimited |  |                    |  | None       |                   |  |  | None | 
|Common Shares    |  |                   | Unlimited |  |                    |  | 74,005,649 |                   |  |  | None | 



| |                                
| | -------------------------------
| | Description of Preferred Shares





| |                             
| | ----------------------------
| | Description of Common Shares









38



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




| |                        
| | -----------------------
| | Shareholder Rights Plan







|    |                                                 
|--- | ------------------------------------------------
|19. | STOCK OPTIONS AND OTHER STOCK-BASED COMPENSATION



| |              
| | -------------
| | Stock Options



Accounting
for Stock-Based Compensation.


|                           |  |      |       |  |      |  |       | 
|-------------------------- |  | ---- | ----- |  | ---- |  | ----- | 
|                           |  | 2005 |       |  | 2004 | 
|                           |  |      |       |  |      | 
|Dividend yield(%)          |  |      | 1.56  |  |      |  | 1.85  | 
|Expected volatility(%)     |  |      | 30.30 |  |      |  | 27.87 | 
|Risk-free interest rate(%) |  |      | 3.73  |  |      |  | 4.56  | 
|Expected life (years)      |  |      | 5.47  |  |      |  | 6.00  | 

39



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




| |                                   
| | ----------------------------------
| | Compensation To Be Settled in Cash



| |                                   
| | ----------------------------------
| | Stock Price Appreciation Unit Plan





| |                                           
| | ------------------------------------------
| | Total Shareholder Returns Performance Plan





| |                                                     
| | ----------------------------------------------------
| | Deferred Share Unit Plan For Non-Executive Directors





| |                                    
| | -----------------------------------
| | Novelis Founders Performance Awards



40



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONDENSED CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)






| |                          
| | -------------------------
| | Deferred Share Agreements





| |                  
| | -----------------
| | Compensation Cost





|    |                                   
|--- | ----------------------------------
|20. | SUPPLEMENTAL GUARANTOR INFORMATION





41



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##### Table of Contents



NOVELIS INC.


CONDENSED CONSOLIDATING STATEMENT OF INCOME (unaudited)


(in millions of US$)


|                                                                                              |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |      |      |   |  |       |       |  
|--------------------------------------------------------------------------------------------- | ----------------- | -------------------------------------- | --- | ---- | ---------- |  | ----- | ---------- | - |  | ------------ | --- | - | ------------ | ---- | ---- | - |  | ----- | ----- | -
|                                                                                              |                   | Third Quarter Ended September 30, 2005 |    
|                                                                                              |                   |                                        |    
|                                                                                              |                   |                                        |     | Non- |            |  |      
|                                                                                              |                   | Parent                                 |     |      | Guarantors |  |       | Guarantors |   |  | Eliminations |     |   | Consolidated |     
|                                                                                              |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |     
|Sales and operating revenues                                                                  |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |      |      |   |  |       |      
|                                                                                              |  third parties   |                                        |     | 71   |            |  |       | 1,440      |   |  |              | 542 |   |              |      |     |   |  |       | 2,053 |  
|                                                                                              |  related parties |                                        |     | 262  |            |  |       | 257        |   |  |              | 37  |   |              |      | (556 | ) |  |       |      |  
|                                                                                              |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |     
|                                                                                              |                   |                                        | 333 |      |            |  | 1,697 |            |   |  | 579          |     |   |              | (556 | )    |   |  | 2,053 |      
|                                                                                              |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |     
|Costs and expenses                                                                            |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |      |      |   |  |       |      
|Cost of sales and operating expenses, excluding depreciation and
    amortization noted below |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |      |      |   |  |       |      
|                                                                                              |  third parties   |                                        |     | 59   |            |  |       | 1,265      |   |  |              | 509 |   |              |      |     |   |  |       | 1,833 |  
|                                                                                              |  related parties |                                        |     | 262  |            |  |       | 257        |   |  |              | 37  |   |              |      | (556 | ) |  |       |      |  
|Depreciation and amortization                                                                 |                   |                                        | 3   |      |            |  | 39    |            |   |  | 14           |     |   |              |     |      |   |  | 56    |      
|Selling, general and administrative expenses                                                  |                   |                                        | 19  |      |            |  | 43    |            |   |  | 17           |     |   |              |     |      |   |  | 79    |      
|Research and development expenses                                                             |                   |                                        | 6   |      |            |  | 4     |            |   |  |             |     |   |              |     |      |   |  | 10    |      
|Other expenses (income)  net                                                                 |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |      |      |   |  |       |      
|                                                                                              |  third parties   |                                        |     | 9    |            |  |       | (39        | ) |  |              | 3   |   |              |      |     |   |  |       | (27   | )
|                                                                                              |  related parties |                                        |     | (21  | )          |  |       | (2         | ) |  |              | (2  | ) |              |      | 25   |   |  |       |      |  
|Interest                                                                                      |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |      |      |   |  |       |      
|                                                                                              |  third parties   |                                        |     | 32   |            |  |       | 13         |   |  |              | 3   |   |              |      |     |   |  |       | 48    |  
|                                                                                              |  related parties |                                        |     | 1    |            |  |       | 19         |   |  |              | 5   |   |              |      | (25  | ) |  |       |      |  
|                                                                                              |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |     
|                                                                                              |                   |                                        | 370 |      |            |  | 1,599 |            |   |  | 586          |     |   |              | (556 | )    |   |  | 1,999 |      
|                                                                                              |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |     
|Income (loss) before income taxes and other items                                             |                   |                                        | (37 | )    |            |  | 98    |            |   |  | (7           | )   |   |              |     |      |   |  | 54    |      
|Income taxes (benefit)                                                                        |                   |                                        | 3   |      |            |  | 43    |            |   |  | (9           | )   |   |              |     |      |   |  | 37    |      
|                                                                                              |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |     
|Income (loss) before other items                                                              |                   |                                        | (40 | )    |            |  | 55    |            |   |  | 2            |     |   |              |     |      |   |  | 17    |      
|Equity in net income of non-consolidated affiliates                                           |                   |                                        | 50  |      |            |  | 2     |            |   |  |             |     |   |              | (50  | )    |   |  | 2     |      
|Minority interests in earnings of consolidated affiliates                                     |                   |                                        |    |      |            |  |      |            |   |  | (9           | )   |   |              |     |      |   |  | (9    | )    
|                                                                                              |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |     
|Net income (loss)                                                                             |                   |                                        | 10  |      |            |  | 57    |            |   |  | (7           | )   |   |              | (50  | )    |   |  | 10    |      
|                                                                                              |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |     

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NOVELIS INC.


CONDENSED CONSOLIDATING STATEMENT OF INCOME (unaudited)


(in millions of US$)


|                                                                                              |                   |                                      |       |      |            |  |       |            |   |  |              |       |   |              |        |        |   |  |       |       |  
|--------------------------------------------------------------------------------------------- | ----------------- | ------------------------------------ | ----- | ---- | ---------- |  | ----- | ---------- | - |  | ------------ | ----- | - | ------------ | ------ | ------ | - |  | ----- | ----- | -
|                                                                                              |                   | Nine Months Ended September 30, 2005 |      
|                                                                                              |                   |                                      |      
|                                                                                              |                   |                                      |       | Non- |            |  |      
|                                                                                              |                   | Parent                               |       |      | Guarantors |  |       | Guarantors |   |  | Eliminations |       |   | Consolidated |       
|                                                                                              |                   |                                      |       |      |            |  |       |            |   |  |              |       |   |              |       
|Sales and operating revenues                                                                  |                   |                                      |       |      |            |  |       |            |   |  |              |       |   |              |        |        |   |  |       |      
|                                                                                              |  third parties   |                                      |       | 180  |            |  |       | 4,429      |   |  |              | 1,728 |   |              |        |       |   |  |       | 6,337 |  
|                                                                                              |  related parties |                                      |       | 780  |            |  |       | 789        |   |  |              | 107   |   |              |        | (1,676 | ) |  |       |      |  
|                                                                                              |                   |                                      |       |      |            |  |       |            |   |  |              |       |   |              |       
|                                                                                              |                   |                                      | 960   |      |            |  | 5,218 |            |   |  | 1,835        |       |   |              | (1,676 | )      |   |  | 6,337 |      
|                                                                                              |                   |                                      |       |      |            |  |       |            |   |  |              |       |   |              |       
|Costs and expenses                                                                            |                   |                                      |       |      |            |  |       |            |   |  |              |       |   |              |        |        |   |  |       |      
|Cost of sales and operating expenses, excluding depreciation and
    amortization noted below |                   |                                      |       |      |            |  |       |            |   |  |              |       |   |              |        |        |   |  |       |      
|                                                                                              |  third parties   |                                      |       | 153  |            |  |       | 3,928      |   |  |              | 1,596 |   |              |        |       |   |  |       | 5,677 |  
|                                                                                              |  related parties |                                      |       | 780  |            |  |       | 789        |   |  |              | 107   |   |              |        | (1,676 | ) |  |       |      |  
|Depreciation and amortization                                                                 |                   |                                      | 8     |      |            |  | 119   |            |   |  | 46           |       |   |              |       |        |   |  | 173   |      
|Selling, general and administrative expenses                                                  |                   |                                      | 52    |      |            |  | 142   |            |   |  | 49           |       |   |              |       |        |   |  | 243   |      
|Research and development expenses                                                             |                   |                                      | 19    |      |            |  | 9     |            |   |  | 1            |       |   |              |       |        |   |  | 29    |      
|Other expenses (income)  net                                                                 |                   |                                      |       |      |            |  |       |            |   |  |              |       |   |              |        |        |   |  |       |      
|                                                                                              |  third parties   |                                      |       | (20  | )          |  |       | (24        | ) |  |              | 6     |   |              |        |       |   |  |       | (38   | )
|                                                                                              |  related parties |                                      |       | (57  | )          |  |       | (7         | ) |  |              | (5    | ) |              |        | 68     |   |  |       | (1    | )
|Interest                                                                                      |                   |                                      |       |      |            |  |       |            |   |  |              |       |   |              |        |        |   |  |       |      
|                                                                                              |  third parties   |                                      |       | 91   |            |  |       | 41         |   |  |              | 10    |   |              |        |       |   |  |       | 142   |  
|                                                                                              |  related parties |                                      |       | 1    |            |  |       | 54         |   |  |              | 13    |   |              |        | (68    | ) |  |       |      |  
|                                                                                              |                   |                                      |       |      |            |  |       |            |   |  |              |       |   |              |       
|                                                                                              |                   |                                      | 1,027 |      |            |  | 5,051 |            |   |  | 1,823        |       |   |              | (1,676 | )      |   |  | 6,225 |      
|                                                                                              |                   |                                      |       |      |            |  |       |            |   |  |              |       |   |              |       
|Income (loss) before income taxes and other items                                             |                   |                                      | (67   | )    |            |  | 167   |            |   |  | 12           |       |   |              |       |        |   |  | 112   |      
|Income taxes (benefit)                                                                        |                   |                                      | (10   | )    |            |  | 83    |            |   |  | (6           | )     |   |              |       |        |   |  | 67    |      
|                                                                                              |                   |                                      |       |      |            |  |       |            |   |  |              |       |   |              |       
|Income (loss) before other items                                                              |                   |                                      | (57   | )    |            |  | 84    |            |   |  | 18           |       |   |              |       |        |   |  | 45    |      
|Equity in net income of non-consolidated affiliates                                           |                   |                                      | 89    |      |            |  | 6     |            |   |  |             |       |   |              | (89    | )      |   |  | 6     |      
|Minority interests in earnings of consolidated affiliates                                     |                   |                                      |      |      |            |  |      |            |   |  | (19          | )     |   |              |       |        |   |  | (19   | )    
|                                                                                              |                   |                                      |       |      |            |  |       |            |   |  |              |       |   |              |       
|Net income (loss)                                                                             |                   |                                      | 32    |      |            |  | 90    |            |   |  | (1           | )     |   |              | (89    | )      |   |  | 32    |      
|                                                                                              |                   |                                      |       |      |            |  |       |            |   |  |              |       |   |              |       

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THE NOVELIS GROUP


CONDENSED CONSOLIDATING STATEMENT OF INCOME (unaudited)


(in millions of US$)


|                                                                                              |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |      |      |   |  |       |       | 
|--------------------------------------------------------------------------------------------- | ----------------- | -------------------------------------- | --- | ---- | ---------- |  | ----- | ---------- | - |  | ------------ | --- | - | ------------ | ---- | ---- | - |  | ----- | ----- | 
|                                                                                              |                   | Third Quarter Ended September 30, 2004 |    
|                                                                                              |                   |                                        |    
|                                                                                              |                   |                                        |     | Non- |            |  |      
|                                                                                              |                   | Parent                                 |     |      | Guarantors |  |       | Guarantors |   |  | Eliminations |     |   | Consolidated |     
|                                                                                              |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |     
|Sales and operating revenues                                                                  |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |      |      |   |  |       |      
|                                                                                              |  third parties   |                                        |     | 45   |            |  |       | 1,383      |   |  |              | 465 |   |              |      |     |   |  |       | 1,893 | 
|                                                                                              |  related parties |                                        |     | 263  |            |  |       | 289        |   |  |              | 95  |   |              |      | (540 | ) |  |       | 107   | 
|                                                                                              |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |     
|                                                                                              |                   |                                        | 308 |      |            |  | 1,672 |            |   |  | 560          |     |   |              | (540 | )    |   |  | 2,000 |      
|                                                                                              |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |     
|Costs and expenses                                                                            |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |      |      |   |  |       |      
|Cost of sales and operating expenses, excluding depreciation and
    amortization noted below |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |      |      |   |  |       |      
|                                                                                              |  third parties   |                                        |     | 32   |            |  |       | 1,195      |   |  |              | 434 |   |              |      |     |   |  |       | 1,661 | 
|                                                                                              |  related parties |                                        |     | 263  |            |  |       | 288        |   |  |              | 85  |   |              |      | (540 | ) |  |       | 96    | 
|Depreciation and amortization                                                                 |                   |                                        | 3   |      |            |  | 40    |            |   |  | 17           |     |   |              |     |      |   |  | 60    |      
|Selling, general and administrative expenses                                                  |                   |                                        | (9  | )    |            |  | 65    |            |   |  | 16           |     |   |              |     |      |   |  | 72    |      
|Research and development expenses                                                             |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |      |      |   |  |       |      
|                                                                                              |  third parties   |                                        |     |     |            |  |       | 3          |   |  |              |    |   |              |      |     |   |  |       | 3     | 
|                                                                                              |  related parties |                                        |     |     |            |  |       | 10         |   |  |              |    |   |              |      |     |   |  |       | 10    | 
|Other expenses (income)  net                                                                 |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |      |      |   |  |       |      
|                                                                                              |  third parties   |                                        |     | 1    |            |  |       | (1         | ) |  |              |    |   |              |      |     |   |  |       |      | 
|                                                                                              |  related parties |                                        |     | 10   |            |  |       | (9         | ) |  |              | (2  | ) |              |      | 2    |   |  |       | 1     | 
|Interest                                                                                      |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |      |      |   |  |       |      
|                                                                                              |  third parties   |                                        |     |     |            |  |       | 6          |   |  |              | 4   |   |              |      |     |   |  |       | 10    | 
|                                                                                              |  related parties |                                        |     |     |            |  |       | 7          |   |  |              | 2   |   |              |      | (2   | ) |  |       | 7     | 
|                                                                                              |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |     
|                                                                                              |                   |                                        | 300 |      |            |  | 1,604 |            |   |  | 556          |     |   |              | (540 | )    |   |  | 1,920 |      
|                                                                                              |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |     
|Income before income taxes and other items                                                    |                   |                                        | 8   |      |            |  | 68    |            |   |  | 4            |     |   |              |     |      |   |  | 80    |      
|Income taxes (benefit)                                                                        |                   |                                        | (2  | )    |            |  | 45    |            |   |  | 2            |     |   |              |     |      |   |  | 45    |      
|                                                                                              |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |     
|Income before other items                                                                     |                   |                                        | 10  |      |            |  | 23    |            |   |  | 2            |     |   |              |     |      |   |  | 35    |      
|Equity in net income of non-consolidated affiliates                                           |                   |                                        | 24  |      |            |  | 1     |            |   |  |             |     |   |              | (24  | )    |   |  | 1     |      
|Minority interests in earnings of consolidated affiliates                                     |                   |                                        |    |      |            |  |      |            |   |  | (2           | )   |   |              |     |      |   |  | (2    | )    
|                                                                                              |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |     
|Net income                                                                                    |                   |                                        | 34  |      |            |  | 24    |            |   |  |             |     |   |              | (24  | )    |   |  | 34    |      
|                                                                                              |                   |                                        |     |      |            |  |       |            |   |  |              |     |   |              |     

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THE NOVELIS GROUP


CONDENSED CONSOLIDATING STATEMENT OF INCOME (unaudited)


(in millions of US$)


|                                                                                              |                   |                                      |     |      |            |  |       |            |  |  |              |       |  |              |        |        |   |  |       |       |  
|--------------------------------------------------------------------------------------------- | ----------------- | ------------------------------------ | --- | ---- | ---------- |  | ----- | ---------- |  |  | ------------ | ----- |  | ------------ | ------ | ------ | - |  | ----- | ----- | -
|                                                                                              |                   | Nine Months Ended September 30, 2004 |    
|                                                                                              |                   |                                      |    
|                                                                                              |                   |                                      |     | Non- |            |  |      
|                                                                                              |                   | Parent                               |     |      | Guarantors |  |       | Guarantors |  |  | Eliminations |       |  | Consolidated |       
|                                                                                              |                   |                                      |     |      |            |  |       |            |  |  |              |       |  |              |       
|Sales and operating revenues                                                                  |                   |                                      |     |      |            |  |       |            |  |  |              |       |  |              |        |        |   |  |       |      
|                                                                                              |  third parties   |                                      |     | 131  |            |  |       | 3,839      |  |  |              | 1,446 |  |              |        |       |   |  |       | 5,416 |  
|                                                                                              |  related parties |                                      |     | 716  |            |  |       | 941        |  |  |              | 161   |  |              |        | (1,495 | ) |  |       | 323   |  
|                                                                                              |                   |                                      |     |      |            |  |       |            |  |  |              |       |  |              |       
|                                                                                              |                   |                                      | 847 |      |            |  | 4,780 |            |  |  | 1,607        |       |  |              | (1,495 | )      |   |  | 5,739 |      
|                                                                                              |                   |                                      |     |      |            |  |       |            |  |  |              |       |  |              |       
|Costs and expenses                                                                            |                   |                                      |     |      |            |  |       |            |  |  |              |       |  |              |        |        |   |  |       |      
|Cost of sales and operating expenses, excluding depreciation and
    amortization noted below |                   |                                      |     |      |            |  |       |            |  |  |              |       |  |              |        |        |   |  |       |      
|                                                                                              |  third parties   |                                      |     | 92   |            |  |       | 3,311      |  |  |              | 1,341 |  |              |        |       |   |  |       | 4,744 |  
|                                                                                              |  related parties |                                      |     | 717  |            |  |       | 915        |  |  |              | 151   |  |              |        | (1,495 | ) |  |       | 288   |  
|Depreciation and amortization                                                                 |                   |                                      | 8   |      |            |  | 121   |            |  |  | 49           |       |  |              |       |        |   |  | 178   |      
|Selling, general and administrative expenses                                                  |                   |                                      | 32  |      |            |  | 110   |            |  |  | 40           |       |  |              |       |        |   |  | 182   |      
|Research and development expenses                                                             |                   |                                      |     |      |            |  |       |            |  |  |              |       |  |              |        |        |   |  |       |      
|                                                                                              |  third parties   |                                      |     |     |            |  |       | 13         |  |  |              |      |  |              |        |       |   |  |       | 13    |  
|                                                                                              |  related parties |                                      |     |     |            |  |       | 28         |  |  |              |      |  |              |        |       |   |  |       | 28    |  
|Other expenses (income)  net                                                                 |                   |                                      |     |      |            |  |       |            |  |  |              |       |  |              |        |        |   |  |       |      
|                                                                                              |  third parties   |                                      |     | 4    |            |  |       | 4          |  |  |              |      |  |              |        |       |   |  |       | 8     |  
|                                                                                              |  related parties |                                      |     | (37  | )          |  |       | 14         |  |  |              |      |  |              |        | 2      |   |  |       | (21   | )
|Interest                                                                                      |                   |                                      |     |      |            |  |       |            |  |  |              |       |  |              |        |        |   |  |       |      
|                                                                                              |  third parties   |                                      |     |     |            |  |       | 17         |  |  |              | 14    |  |              |        |       |   |  |       | 31    |  
|                                                                                              |  related parties |                                      |     |     |            |  |       | 24         |  |  |              | 2     |  |              |        | (2     | ) |  |       | 24    |  
|                                                                                              |                   |                                      |     |      |            |  |       |            |  |  |              |       |  |              |       
|                                                                                              |                   |                                      | 816 |      |            |  | 4,557 |            |  |  | 1,597        |       |  |              | (1,495 | )      |   |  | 5,475 |      
|                                                                                              |                   |                                      |     |      |            |  |       |            |  |  |              |       |  |              |       
|Income before income taxes and other items                                                    |                   |                                      | 31  |      |            |  | 223   |            |  |  | 10           |       |  |              |       |        |   |  | 264   |      
|Income taxes (benefit)                                                                        |                   |                                      | (6  | )    |            |  | 113   |            |  |  | 4            |       |  |              |       |        |   |  | 111   |      
|                                                                                              |                   |                                      |     |      |            |  |       |            |  |  |              |       |  |              |       
|Income before other items                                                                     |                   |                                      | 37  |      |            |  | 110   |            |  |  | 6            |       |  |              |       |        |   |  | 153   |      
|Equity in net income of non-consolidated affiliates                                           |                   |                                      | 111 |      |            |  | 4     |            |  |  |             |       |  |              | (111   | )      |   |  | 4     |      
|Minority interests in earnings of consolidated affiliates                                     |                   |                                      |    |      |            |  |      |            |  |  | (9           | )     |  |              |       |        |   |  | (9    | )    
|                                                                                              |                   |                                      |     |      |            |  |       |            |  |  |              |       |  |              |       
|Net income (loss)                                                                             |                   |                                      | 148 |      |            |  | 114   |            |  |  | (3           | )     |  |              | (111   | )      |   |  | 148   |      
|                                                                                              |                   |                                      |     |      |            |  |       |            |  |  |              |       |  |              |       

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NOVELIS INC.


CONDENSED CONSOLIDATING BALANCE SHEET (unaudited)


As of September 30, 2005


(in millions of US$)


|                                                                         |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |        |      |   |  |       |     | 
|------------------------------------------------------------------------ | ----------------- | ------ | ----- | --- | ---------- | ---- | ----- | ---------- |  |  | ------------ | --- |  | ------------ | ------ | ---- | - |  | ----- | --- | 
|                                                                         |                   |        |       |     |            | Non- |       |            |  |  |             
|                                                                         |                   | Parent |       |     | Guarantors |      |       | Guarantors |  |  | Eliminations |     |  | Consolidated |       
|                                                                         |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |       
|ASSETS                                                                  
|Current assets                                                           |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |        |      |   |  |       |    
|Cash and cash equivalents                                                |                   |        | 2     |     |            |      | 82    |            |  |  | 40           |     |  |              |       |      |   |  | 124   |    
|Trade receivables                                                        |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |        |      |   |  |       |    
|                                                                         |  third parties   |        |       | 34  |            |      |       | 638        |  |  |              | 287 |  |              |        |     |   |  |       | 959 | 
|                                                                         |  related parties |        |       | 5   |            |      |       | 53         |  |  |              | 6   |  |              |        | (64  | ) |  |       |    | 
|Other receivables                                                        |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |        |      |   |  |       |    
|                                                                         |  third parties   |        |       | 2   |            |      |       | 5          |  |  |              | 1   |  |              |        |     |   |  |       | 8   | 
|                                                                         |  related parties |        |       | 213 |            |      |       | 231        |  |  |              | 123 |  |              |        | (537 | ) |  |       | 30  | 
|Prepaid expenses                                                         |                   |        | 3     |     |            |      | 42    |            |  |  | 7            |     |  |              |       |      |   |  | 52    |    
|Inventories                                                              |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |        |      |   |  |       |    
|                                                                         | Aluminum          |        |       | 43  |            |      |       | 609        |  |  |              | 289 |  |              |        |     |   |  |       | 941 | 
|                                                                         | Raw materials     |        |       |    |            |      |       | 19         |  |  |              | 1   |  |              |        |     |   |  |       | 20  | 
|                                                                         | Other supplies    |        |       | 6   |            |      |       | 79         |  |  |              | 41  |  |              |        |     |   |  |       | 126 | 
|                                                                         |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |       
|                                                                         |                   |        | 49    |     |            |      | 707   |            |  |  | 331          |     |  |              |       |      |   |  | 1,087 |    
|Other current assets                                                     |                   |        | 52    |     |            |      | 91    |            |  |  | 38           |     |  |              |       |      |   |  | 181   |    
|                                                                         |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |       
|Total current assets                                                     |                   |        | 360   |     |            |      | 1,849 |            |  |  | 833          |     |  |              | (601   | )    |   |  | 2,441 |    
|Deferred charges and other assets                                        |                   |        | 35    |     |            |      | 139   |            |  |  | 45           |     |  |              |       |      |   |  | 219   |    
|Long-term receivables from related parties                               |                   |        | 1,114 |     |            |      | 88    |            |  |  |             |     |  |              | (1,125 | )    |   |  | 77    |    
|Property, plant and equipment, net                                       |                   |        | 117   |     |            |      | 1,284 |            |  |  | 769          |     |  |              |       |      |   |  | 2,170 |    
|Investments in non-consolidated affiliates and divisional net
    assets |                   |        | 700   |     |            |      | 146   |            |  |  |             |     |  |              | (746   | )    |   |  | 100   |    
|Intangible assets                                                        |                   |        |      |     |            |      | 27    |            |  |  | 2            |     |  |              |       |      |   |  | 29    |    
|Goodwill                                                                 |                   |        |      |     |            |      | 26    |            |  |  | 202          |     |  |              |       |      |   |  | 228   |    
|                                                                         |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |       
|Total assets                                                             |                   |        | 2,326 |     |            |      | 3,559 |            |  |  | 1,851        |     |  |              | (2,472 | )    |   |  | 5,264 |    
|                                                                         |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |       

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NOVELIS INC.


CONDENSED CONSOLIDATING BALANCE SHEET
(unaudited)  (Continued)


As of September 30, 2005


(in millions of US$)


|                                                        |                   |        |       |       |            |      |       |            |  |  |              |     |  |              |        |        |   |  |       |       | 
|------------------------------------------------------- | ----------------- | ------ | ----- | ----- | ---------- | ---- | ----- | ---------- |  |  | ------------ | --- |  | ------------ | ------ | ------ | - |  | ----- | ----- | 
|                                                        |                   |        |       |       |            | Non- |       |            |  |  |             
|                                                        |                   | Parent |       |       | Guarantors |      |       | Guarantors |  |  | Eliminations |     |  | Consolidated |       
|                                                        |                   |        |       |       |            |      |       |            |  |  |              |     |  |              |       
|LIABILITIES AND SHAREHOLDERS EQUITY                   
|Current liabilities                                     |                   |        |       |       |            |      |       |            |  |  |              |     |  |              |        |        |   |  |       |      
|Current portion of long-term debt                       |                   |        |      |       |            |      | 2     |            |  |  | 1            |     |  |              |       |        |   |  | 3     |      
|Short-term borrowings                                   |                   |        |       |       |            |      |       |            |  |  |              |     |  |              |        |        |   |  |       |      
|                                                        |  third parties   |        |       |      |            |      |       | 2          |  |  |              | 33  |  |              |        |       |   |  |       | 35    | 
|                                                        |  related parties |        |       | 40    |            |      |       | 434        |  |  |              | 63  |  |              |        | (537   | ) |  |       |      | 
|Accounts payable, trade                                 |                   |        |       |       |            |      |       |            |  |  |              |     |  |              |        |        |   |  |       |      
|                                                        |  third parties   |        |       | 12    |            |      |       | 454        |  |  |              | 286 |  |              |        |       |   |  |       | 752   | 
|                                                        |  related parties |        |       | 9     |            |      |       | 54         |  |  |              | 39  |  |              |        | (64    | ) |  |       | 38    | 
|Accrued expenses                                        |                   |        | 27    |       |            |      | 294   |            |  |  | 97           |     |  |              |       |        |   |  | 418   |      
|Interest payable                                        |                   |        | 16    |       |            |      | 6     |            |  |  |             |     |  |              |       |        |   |  | 22    |      
|Accrued income taxes                                    |                   |        | 1     |       |            |      | 54    |            |  |  | 3            |     |  |              |       |        |   |  | 58    |      
|Other current liabilities                               |                   |        |      |       |            |      | 5     |            |  |  | 9            |     |  |              |       |        |   |  | 14    |      
|                                                        |                   |        |       |       |            |      |       |            |  |  |              |     |  |              |       
|Total current liabilities                               |                   |        | 105   |       |            |      | 1,305 |            |  |  | 531          |     |  |              | (601   | )      |   |  | 1,340 |      
|Long-term debt, net of current portion                  |                   |        |       |       |            |      |       |            |  |  |              |     |  |              |        |        |   |  |       |      
|                                                        |  third parties   |        |       | 1,771 |            |      |       | 690        |  |  |              | 186 |  |              |        |       |   |  |       | 2,647 | 
|                                                        |  related parties |        |       |      |            |      |       | 938        |  |  |              | 187 |  |              |        | (1,125 | ) |  |       |      | 
|Accrued post-retirement benefits                        |                   |        | 8     |       |            |      | 216   |            |  |  | 83           |     |  |              |       |        |   |  | 307   |      
|Deferred credits and other liabilities                  |                   |        | 39    |       |            |      | 156   |            |  |  | 29           |     |  |              |       |        |   |  | 224   |      
|Deferred income taxes                                   |                   |        | (1    | )     |            |      | 181   |            |  |  | 11           |     |  |              |       |        |   |  | 191   |      
|Commitments and contingencies                           |                   |        |       |       |            |      |       |            |  |  |              |     |  |              |        |        |   |  |       |      
|Minority interests in equity of consolidated affiliates |                   |        |      |       |            |      |      |            |  |  | 151          |     |  |              |       |        |   |  | 151   |      
|Shareholders equity                                    |                   |        |       |       |            |      |       |            |  |  |              |     |  |              |        |        |   |  |       |      
|Common shares                                           |                   |        |      |       |            |      |      |            |  |  |             |     |  |              |       |        |   |  |      |      
|Additional paid-in capital                              |                   |        | 433   |       |            |      |      |            |  |  |             |     |  |              |       |        |   |  | 433   |      
|Retained earnings                                       |                   |        | 41    |       |            |      |      |            |  |  |             |     |  |              |       |        |   |  | 41    |      
|Other comprehensive income (loss)                       |                   |        | (70   | )     |            |      | 115   |            |  |  | (23          | )   |  |              | (92    | )      |   |  | (70   | )    
|Owners net investment                                  |                   |        |      |       |            |      | (42   | )          |  |  | 696          |     |  |              | (654   | )      |   |  |      |      
|                                                        |                   |        |       |       |            |      |       |            |  |  |              |     |  |              |       
|Total shareholders equity                              |                   |        | 404   |       |            |      | 73    |            |  |  | 673          |     |  |              | (746   | )      |   |  | 404   |      
|                                                        |                   |        |       |       |            |      |       |            |  |  |              |     |  |              |       
|Total liabilities and shareholders equity              |                   |        | 2,326 |       |            |      | 3,559 |            |  |  | 1,851        |     |  |              | (2,472 | )      |   |  | 5,264 |      
|                                                        |                   |        |       |       |            |      |       |            |  |  |              |     |  |              |       

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THE NOVELIS GROUP


CONDENSED CONSOLIDATING BALANCE SHEET (unaudited)


As of December 31, 2004


(in millions of US$)


|                                                                         |                   |        |       |    |            |      |       |            |  |  |              |     |  |              |        |      |   |  |       |       | 
|------------------------------------------------------------------------ | ----------------- | ------ | ----- | -- | ---------- | ---- | ----- | ---------- |  |  | ------------ | --- |  | ------------ | ------ | ---- | - |  | ----- | ----- | 
|                                                                         |                   |        |       |    |            | Non- |       |            |  |  |             
|                                                                         |                   | Parent |       |    | Guarantors |      |       | Guarantors |  |  | Eliminations |     |  | Consolidated |       
|                                                                         |                   |        |       |    |            |      |       |            |  |  |              |     |  |              |       
|ASSETS                                                                  
|Current assets                                                           |                   |        |       |    |            |      |       |            |  |  |              |     |  |              |        |      |   |  |       |      
|Cash and cash equivalents                                                |                   |        |      |    |            |      | 12    |            |  |  | 19           |     |  |              |       |      |   |  | 31    |      
|Trade receivables                                                        |                   |        |       |    |            |      |       |            |  |  |              |     |  |              |        |      |   |  |       |      
|                                                                         |  third parties   |        |       | 1  |            |      |       | 399        |  |  |              | 310 |  |              |        |     |   |  |       | 710   | 
|                                                                         |  related parties |        |       | 84 |            |      |       | 156        |  |  |              | 7   |  |              |        | (160 | ) |  |       | 87    | 
|Other receivables                                                        |                   |        |       |    |            |      |       |            |  |  |              |     |  |              |        |      |   |  |       |      
|                                                                         |  third parties   |        |       |   |            |      |       | 4          |  |  |              | 1   |  |              |        |     |   |  |       | 5     | 
|                                                                         |  related parties |        |       | 45 |            |      |       | 849        |  |  |              | 30  |  |              |        | (78  | ) |  |       | 846   | 
|Prepaid expenses                                                         |                   |        | 2     |    |            |      | 10    |            |  |  | 24           |     |  |              |       |      |   |  | 36    |      
|Inventories                                                              |                   |        |       |    |            |      |       |            |  |  |              |     |  |              |        |      |   |  |       |      
|                                                                         | Aluminum          |        |       | 44 |            |      |       | 705        |  |  |              | 332 |  |              |        |     |   |  |       | 1,081 | 
|                                                                         | Raw materials     |        |       |   |            |      |       | 18         |  |  |              | 2   |  |              |        |     |   |  |       | 20    | 
|                                                                         | Other supplies    |        |       | 6  |            |      |       | 78         |  |  |              | 41  |  |              |        |     |   |  |       | 125   | 
|                                                                         |                   |        |       |    |            |      |       |            |  |  |              |     |  |              |       
|                                                                         |                   |        | 50    |    |            |      | 801   |            |  |  | 375          |     |  |              |       |      |   |  | 1,226 |      
|Other current assets                                                     |                   |        |      |    |            |      | 56    |            |  |  | 21           |     |  |              |       |      |   |  | 77    |      
|                                                                         |                   |        |       |    |            |      |       |            |  |  |              |     |  |              |       
|Total current assets                                                     |                   |        | 182   |    |            |      | 2,287 |            |  |  | 787          |     |  |              | (238   | )    |   |  | 3,018 |      
|Deferred charges and other assets                                        |                   |        |      |    |            |      | 32    |            |  |  | 39           |     |  |              |       |      |   |  | 71    |      
|Long-term receivables from related parties                               |                   |        | 210   |    |            |      | 104   |            |  |  |             |     |  |              | (210   | )    |   |  | 104   |      
|Property, plant and equipment, net                                       |                   |        | 112   |    |            |      | 1,405 |            |  |  | 831          |     |  |              |       |      |   |  | 2,348 |      
|Investments in non-consolidated affiliates and divisional net
    assets |                   |        | 1,242 |    |            |      | 168   |            |  |  |             |     |  |              | (1,288 | )    |   |  | 122   |      
|Intangible assets                                                        |                   |        |      |    |            |      | 31    |            |  |  | 4            |     |  |              |       |      |   |  | 35    |      
|Goodwill                                                                 |                   |        |      |    |            |      | 28    |            |  |  | 228          |     |  |              |       |      |   |  | 256   |      
|                                                                         |                   |        |       |    |            |      |       |            |  |  |              |     |  |              |       
|Total assets                                                             |                   |        | 1,746 |    |            |      | 4,055 |            |  |  | 1,889        |     |  |              | (1,736 | )    |   |  | 5,954 |      
|                                                                         |                   |        |       |    |            |      |       |            |  |  |              |     |  |              |       

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THE NOVELIS GROUP


CONDENSED CONSOLIDATING BALANCE SHEET
(unaudited)  (Continued)


As of December 31, 2004


(in millions of US$)


|                                                        |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |        |      |   |  |       |       | 
|------------------------------------------------------- | ----------------- | ------ | ----- | --- | ---------- | ---- | ----- | ---------- |  |  | ------------ | --- |  | ------------ | ------ | ---- | - |  | ----- | ----- | 
|                                                        |                   |        |       |     |            | Non- |       |            |  |  |             
|                                                        |                   | Parent |       |     | Guarantors |      |       | Guarantors |  |  | Eliminations |     |  | Consolidated |       
|                                                        |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |       
|LIABILITIES AND INVESTED EQUITY                        
|Current liabilities                                     |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |        |      |   |  |       |      
|Current portion of long-term debt                       |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |        |      |   |  |       |      
|                                                        |  third parties   |        |       |    |            |      |       |           |  |  |              | 1   |  |              |        |     |   |  |       | 1     | 
|                                                        |  related parties |        |       | 290 |            |      |       |           |  |  |              |    |  |              |        |     |   |  |       | 290   | 
|Short-term borrowings                                   |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |        |      |   |  |       |      
|                                                        |  third parties   |        |       |    |            |      |       | 122        |  |  |              | 107 |  |              |        |     |   |  |       | 229   | 
|                                                        |  related parties |        |       |    |            |      |       | 231        |  |  |              | 152 |  |              |        | (71  | ) |  |       | 312   | 
|Accounts payable, trade                                 |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |        |      |   |  |       |      
|                                                        |  third parties   |        |       | 6   |            |      |       | 160        |  |  |              | 330 |  |              |        |     |   |  |       | 496   | 
|                                                        |  related parties |        |       | 79  |            |      |       | 429        |  |  |              | 60  |  |              |        | (167 | ) |  |       | 401   | 
|Accrued expenses                                        |                   |        | 16    |     |            |      | 213   |            |  |  | 110          |     |  |              |       |      |   |  | 339   |      
|Interest payable                                        |                   |        |      |     |            |      | 1     |            |  |  | 1            |     |  |              |       |      |   |  | 2     |      
|Accrued income taxes                                    |                   |        |      |     |            |      |      |            |  |  | 1            |     |  |              |       |      |   |  | 1     |      
|Other current liabilities                               |                   |        |      |     |            |      | 4     |            |  |  | 17           |     |  |              |       |      |   |  | 21    |      
|                                                        |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |       
|Total current liabilities                               |                   |        | 391   |     |            |      | 1,160 |            |  |  | 779          |     |  |              | (238   | )    |   |  | 2,092 |      
|Long-term debt, net of current portion                  |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |        |      |   |  |       |      
|                                                        |  third parties   |        |       |    |            |      |       |           |  |  |              | 139 |  |              |        |     |   |  |       | 139   | 
|                                                        |  related parties |        |       | 749 |            |      |       | 1,751      |  |  |              | 17  |  |              |        | (210 | ) |  |       | 2,307 | 
|Accrued post-retirement benefits                        |                   |        |      |     |            |      | 199   |            |  |  | 85           |     |  |              |       |      |   |  | 284   |      
|Deferred credits and other liabilities                  |                   |        | 8     |     |            |      | 174   |            |  |  | 6            |     |  |              |       |      |   |  | 188   |      
|Deferred income taxes                                   |                   |        | 43    |     |            |      | 183   |            |  |  | 23           |     |  |              |       |      |   |  | 249   |      
|Commitments and contingencies                           |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |        |      |   |  |       |      
|Minority interests in equity of consolidated affiliates |                   |        |      |     |            |      |      |            |  |  | 140          |     |  |              |       |      |   |  | 140   |      
|Invested equity                                         |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |        |      |   |  |       |      
|Owners net investment                                  |                   |        | 467   |     |            |      | 529   |            |  |  | 671          |     |  |              | (1,200 | )    |   |  | 467   |      
|Other comprehensive income                              |                   |        | 88    |     |            |      | 59    |            |  |  | 29           |     |  |              | (88    | )    |   |  | 88    |      
|                                                        |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |       
|Total invested equity                                   |                   |        | 555   |     |            |      | 588   |            |  |  | 700          |     |  |              | (1,288 | )    |   |  | 555   |      
|                                                        |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |       
|Total liabilities and invested equity                   |                   |        | 1,746 |     |            |      | 4,055 |            |  |  | 1,889        |     |  |              | (1,736 | )    |   |  | 5,954 |      
|                                                        |                   |        |       |     |            |      |       |            |  |  |              |     |  |              |       

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NOVELIS INC.


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(unaudited)


Nine Months Ended September 30, 2005


(in millions of US$)


|                                                                                |                   |        |        |        |            |      |        |            |   |  |              |     |   |              |        |       |  |  |        |      |  
|------------------------------------------------------------------------------- | ----------------- | ------ | ------ | ------ | ---------- | ---- | ------ | ---------- | - |  | ------------ | --- | - | ------------ | ------ | ----- |  |  | ------ | ---- | -
|                                                                                |                   |        |        |        |            | Non- |        |            |   |  |             
|                                                                                |                   | Parent |        |        | Guarantors |      |        | Guarantors |   |  | Eliminations |     |   | Consolidated |       
|                                                                                |                   |        |        |        |            |      |        |            |   |  |              |     |   |              |       
|OPERATING ACTIVITIES                                                            |                   |        |        |        |            |      |        |            |   |  |              |     |   |              |        |       |  |  |        |     
|Net cash provided by (used in) operating activities                             |                   |        | 440    |        |            |      | 262    |            |   |  | (208         | )   |   |              | (128   | )     |  |  | 366    |     
|                                                                                |                   |        |        |        |            |      |        |            |   |  |              |     |   |              |       
|INVESTING ACTIVITIES                                                            |                   |        |        |        |            |      |        |            |   |  |              |     |   |              |        |       |  |  |        |     
|Capital expenditures                                                            |                   |        | (12    | )      |            |      | (67    | )          |   |  | (25          | )   |   |              |       |       |  |  | (104   | )   
|Proceeds from sales of fixed assets and investments                             |                   |        | 1      |        |            |      |       |            |   |  | 8            |     |   |              |       |       |  |  | 9      |     
|Proceeds from (payments on) loans receivable  net                              |                   |        |        |        |            |      |        |            |   |  |              |     |   |              |        |       |  |  |        |     
|                                                                                |  third parties   |        |        |       |            |      |        | 4          |   |  |              | 15  |   |              |        |      |  |  |        | 19   |  
|                                                                                |  related parties |        |        | (1,019 | )          |      |        | (112       | ) |  |              |    |   |              |        | 1,504 |  |  |        | 373  |  
|Premiums paid on purchased derivatives                                          |                   |        |       |        |            |      | (26    | )          |   |  |             |     |   |              |       |       |  |  | (26    | )   
|Net proceeds from settlement of derivatives                                     |                   |        |       |        |            |      | 96     |            |   |  |             |     |   |              |       |       |  |  | 96     |     
|                                                                                |                   |        |        |        |            |      |        |            |   |  |              |     |   |              |       
|Net cash provided by (used in) investing activities                             |                   |        | (1,030 | )      |            |      | (105   | )          |   |  | (2           | )   |   |              | 1,504  |       |  |  | 367    |     
|                                                                                |                   |        |        |        |            |      |        |            |   |  |              |     |   |              |       
|FINANCING ACTIVITIES                                                            |                   |        |        |        |            |      |        |            |   |  |              |     |   |              |        |       |  |  |        |     
|Proceeds from issuance of new debt from third parties                           |                   |        | 1,875  |        |            |      | 2,000  |            |   |  | 379          |     |   |              | (1,504 | )     |  |  | 2,750  |     
|Principal repayments                                                            |                   |        | (1,316 | )      |            |      | (1,512 | )          |   |  | (94          | )   |   |              |       |       |  |  | (2,922 | )   
|Short-term borrowings  net                                                     |                   |        |        |        |            |      |        |            |   |  |              |     |   |              |        |       |  |  |        |     
|                                                                                |  third parties   |        |        | 2      |            |      |        | (68        | ) |  |              | (71 | ) |              |        |      |  |  |        | (137 | )
|                                                                                |  related parties |        |        |       |            |      |        | (304       | ) |  |              | 2   |   |              |        |      |  |  |        | (302 | )
|Proceeds from issuing preference shares                                         |                   |        |       |        |            |      |       |            |   |  | 32           |     |   |              | (32    | )     |  |  |       |     
|Dividends  common shareholders                                                 |                   |        | (20    | )      |            |      | (158   | )          |   |  | (2           | )   |   |              | 160    |       |  |  | (20    | )   
|Dividends  minority interest                                                   |                   |        |       |        |            |      |       |            |   |  | (7           | )   |   |              |       |       |  |  | (7     | )   
|Net receipts from (payments to) Alcan                                           |                   |        | 100    |        |            |      | (21    | )          |   |  | (7           | )   |   |              |       |       |  |  | 72     |     
|Debt issuance costs paid                                                        |                   |        | (49    | )      |            |      | (22    | )          |   |  |             |     |   |              |       |       |  |  | (71    | )   
|                                                                                |                   |        |        |        |            |      |        |            |   |  |              |     |   |              |       
|Net cash provided by (used in) financing activities                             |                   |        | 592    |        |            |      | (85    | )          |   |  | 232          |     |   |              | (1,376 | )     |  |  | (637   | )   
|                                                                                |                   |        |        |        |            |      |        |            |   |  |              |     |   |              |       
|Net increase in cash and cash equivalents                                       |                   |        | 2      |        |            |      | 72     |            |   |  | 22           |     |   |              |       |       |  |  | 96     |     
|Effect of exchange rate changes on cash balances held in foreign
    currencies |                   |        |       |        |            |      | (2     | )          |   |  | (1           | )   |   |              |       |       |  |  | (3     | )   
|Cash and cash equivalents  beginning of period                                 |                   |        |       |        |            |      | 12     |            |   |  | 19           |     |   |              |       |       |  |  | 31     |     
|                                                                                |                   |        |        |        |            |      |        |            |   |  |              |     |   |              |       
|Cash and cash equivalents  end of period                                       |                   |        | 2      |        |            |      | 82     |            |   |  | 40           |     |   |              |       |       |  |  | 124    |     
|                                                                                |                   |        |        |        |            |      |        |            |   |  |              |     |   |              |       

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THE NOVELIS GROUP


CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
(unaudited)


Nine Months Ended September 30, 2004


(in millions of US$)


|                                                      |                   |        |     |   |            |      |      |            |   |  |              |    |   |              |   |   |  |  |      |      |  
|----------------------------------------------------- | ----------------- | ------ | --- | - | ---------- | ---- | ---- | ---------- | - |  | ------------ | -- | - | ------------ | - | - |  |  | ---- | ---- | -
|                                                      |                   |        |     |   |            | Non- |      |            |   |  |             
|                                                      |                   | Parent |     |   | Guarantors |      |      | Guarantors |   |  | Eliminations |    |   | Consolidated |  
|                                                      |                   |        |     |   |            |      |      |            |   |  |              |    |   |              |  
|OPERATING ACTIVITIES                                  |                   |        |     |   |            |      |      |            |   |  |              |    |   |              |   |   |  |  |      |     
|Net cash provided by (used in) operating activities   |                   |        | (13 | ) |            |      | 161  |            |   |  | 144          |    |   |              |  |   |  |  | 292  |     
|                                                      |                   |        |     |   |            |      |      |            |   |  |              |    |   |              |  
|INVESTING ACTIVITIES                                  |                   |        |     |   |            |      |      |            |   |  |              |    |   |              |   |   |  |  |      |     
|Capital expenditures                                  |                   |        | (3  | ) |            |      | (51  | )          |   |  | (41          | )  |   |              |  |   |  |  | (95  | )   
|Proceeds from sales of fixed assets and investments   |                   |        |    |   |            |      | 8    |            |   |  |             |    |   |              |  |   |  |  | 8    |     
|Proceeds from (payments on) loans receivable  net    |                   |        |    |   |            |      | 507  |            |   |  | (6           | )  |   |              |  |   |  |  | 501  |     
|                                                      |                   |        |     |   |            |      |      |            |   |  |              |    |   |              |  
|Net cash provided by (used in) investing activities   |                   |        | (3  | ) |            |      | 464  |            |   |  | (47          | )  |   |              |  |   |  |  | 414  |     
|                                                      |                   |        |     |   |            |      |      |            |   |  |              |    |   |              |  
|FINANCING ACTIVITIES                                  |                   |        |     |   |            |      |      |            |   |  |              |    |   |              |   |   |  |  |      |     
|Proceeds from issuance of new debt from third parties |                   |        |    |   |            |      | 440  |            |   |  | 3            |    |   |              |  |   |  |  | 443  |     
|Principal repayments                                  |                   |        |    |   |            |      | (845 | )          |   |  | (50          | )  |   |              |  |   |  |  | (895 | )   
|Short-term borrowings  net                           |                   |        |     |   |            |      |      |            |   |  |              |    |   |              |   |   |  |  |      |     
|                                                      |  third parties   |        |     |  |            |      |      | (128       | ) |  |              | (5 | ) |              |   |  |  |  |      | (133 | )
|                                                      |  related parties |        |     |  |            |      |      | (19        | ) |  |              | 23 |   |              |   |  |  |  |      | 4    |  
|Dividends  common shareholders                       |                   |        | (23 | ) |            |      | 29   |            |   |  | (6           | )  |   |              |  |   |  |  |     |     
|Dividends  minority interest                         |                   |        |    |   |            |      |     |            |   |  | (4           | )  |   |              |  |   |  |  | (4   | )   
|Net receipts from (payments to) Alcan                 |                   |        | 39  |   |            |      | (100 | )          |   |  | (60          | )  |   |              |  |   |  |  | (121 | )   
|                                                      |                   |        |     |   |            |      |      |            |   |  |              |    |   |              |  
|Net cash provided by (used in) financing activities   |                   |        | 16  |   |            |      | (623 | )          |   |  | (99          | )  |   |              |  |   |  |  | (706 | )   
|                                                      |                   |        |     |   |            |      |      |            |   |  |              |    |   |              |  
|Net increase (decrease) in cash and cash equivalents  |                   |        |    |   |            |      | 2    |            |   |  | (2           | )  |   |              |  |   |  |  |     |     
|Cash and cash equivalents  beginning of period       |                   |        |    |   |            |      | 8    |            |   |  | 19           |    |   |              |  |   |  |  | 27   |     
|                                                      |                   |        |     |   |            |      |      |            |   |  |              |    |   |              |  
|Cash and cash equivalents  end of period             |                   |        |    |   |            |      | 10   |            |   |  | 17           |    |   |              |  |   |  |  | 27   |     
|                                                      |                   |        |     |   |            |      |      |            |   |  |              |    |   |              |  

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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 2. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

The following information should be read together with our
unaudited condensed consolidated and combined 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.


OVERVIEW






|                                  |  |                    |       |  |                   |  |       |          |  |  |      |    |  |      |       |  |          |  |       |  |  |  |     |   
|--------------------------------- |  | ------------------ | ----- |  | ----------------- |  | ----- | -------- |  |  | ---- | -- |  | ---- | ----- |  | -------- |  | ----- |  |  |  | --- | --
|                                  |  | Three Months Ended |       |  | Nine Months Ended | 
|                                  |  | September 30       |       |  | September 30      | 
|                                  |  |                    |       |  |                   | 
|                                  |  | 2005               |       |  | 2004              |  |       | % Change |  |  | 2005 |    |  | 2004 |       |  | % Change | 
|                                  |  |                    |       |  |                   |  |       |          |  |  |      |    |  |      |       |  |          | 
|                                  |  | ($ in millions)    |      
|Sales and operating revenues      |  |                    | 2,053 |  |                   |  | 2,000 |          |  |  | 3    | %  |  |      | 6,337 |  |          |  | 5,739 |  |  |  | 10  | % 
|Regional Income(A)                |  |                    | 153   |  |                   |  | 184   |          |  |  | (17  | )% |  |      | 468   |  |          |  | 538   |  |  |  | (13 | )%
|Net income                        |  |                    | 10    |  |                   |  | 34    |          |  |  | (71  | )% |  |      | 32    |  |          |  | 148   |  |  |  | (78 | )%
|Rolled products shipments (kt)(B) |  |                    | 725   |  |                   |  | 722   |          |  |  |     |    |  |      | 2,168 |  |          |  | 2,114 |  |  |  | 3   | % 
|Total assets                      |  |                    | 5,264 |  |                   |  | 6,084 |          |  |  | (13  | )% |  |      | 5,264 |  |          |  | 6,084 |  |  |  | (13 | )%
|Free cash flow(C)                 |  |                    | 84    |  |                   |  | 164   |          |  |  | (49  | )% |  |      | 305   |  |          |  | 193   |  |  |  | 58  | % 






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) |  | Regional Income comprises earnings before interest, income
    taxes, equity income, minority interests, depreciation and
    amortization and excludes certain items, such as corporate,
    restructuring costs, impairment and other rationalization
    charges. These items are managed by our corporate head office,
    which focuses on strategy development and oversees governance,
    policy, legal compliance, human resources and finance matters.
    Regional Income is the measure by which management evaluates the
    profitability and financial performance of our operating
    segments. A discussion of Regional Income and a reconciliation
    of Regional Income to Income before income taxes and other items
    can be found under the caption Operating Segment
    Review  Reconciliation.
|   
|    |  | Financial information for the regional groups includes the
    results of certain joint ventures on a proportionately
    consolidated basis, which is consistent with the way the
    regional groups are managed. Under GAAP, these joint ventures
    are accounted for under the equity method. Therefore, in order
    to reconcile Regional Income to Income before income taxes and
    other items, the Regional Income attributable to these joint
    ventures is removed from Regional Income for us and the net
    after-tax results are reported as equity income.                                                                                                                                                                                                                                              
|   
|    |  | The change in the fair market value of derivatives, with the
    exception of unrealized gains or losses on certain cash flow
    hedges, has been removed from individual regional results and is
    shown on a separate line in the reconciliation between total
    Regional Income and Income before income taxes and other items.
    This presentation provides a portrayal of our underlying
    regional group results that is in line with our portfolio
    approach to risk management.                                                                                                                                                                                                                                                                                                                           
|   
|(B) |  | Rolled product shipments include conversion of customer-owned
    metal (tolling) and are presented in kilotonnes (kt). One
    kt is equal to 1,000 metric tonnes. One metric tonne is the
    equivalent of 2,204.6 pounds.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

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|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(C) |  | Free cash flow (which is a non-GAAP financial measure) consists
    of cash provided by operating activities plus or minus capital
    expenditures, premiums paid and net proceeds on derivatives and
    dividends. Dividends include those paid by our less than
    wholly-owned subsidiaries to their minority shareholders and
    dividends paid by us to our common shareholders. Management
    believes that free cash flow is relevant to investors as it
    provides a measure of the cash generated internally that is
    available for debt service and other value creation
    opportunities. However, free cash flow does not necessarily
    represent cash available for discretionary activities, as
    certain debt service obligations must be funded out of free cash
    flow. Our method of calculating free cash flow may not be
    consistent with that of other companies. We believe the line on
    our unaudited condensed consolidated and combined statement of
    cash flows entitled Net cash provided by operating
    activities is the most directly comparable GAAP measure to
    free cash flow. A reconciliation of Cash provided by operating
    activities to free cash flow can be found under the caption
    Liquidity and Capital Resources  Operating
    Activities.

HIGHLIGHTS


Net Income.


Shipments.


Regional Income.


Financing Activity. year-to


Restatement. 10-Q 10-Q/ 10-Q




| |   |                                                             
| | - | ------------------------------------------------------------
| |  | the misapplication of GAAP related to liability recognition;
|
| |  | income tax accounting;                                      
|
| |  | other miscellaneous items; and                              
|
| |  | out-of-period
    adjustments.                              

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out-of out-of


RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
SEPTEMBER 30, 2005 COMPARED TO THE THREE MONTHS ENDED
SEPTEMBER 30, 2004






| |           
| | ----------
| | Net Income





| |   |                                                                                                                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Unrealized gains on the change in market value of derivatives of
    $28 million in 2005, compared to unrealized gains in 2004
    of $16 million;                                                                                                                               
|
| |  | Foreign currency balance sheet translation losses of
    $21 million in 2005, mainly in Canada and South America,
    compared to a loss of $8 million in 2004;                                                                                                                  
|
| |  | Restructuring, rationalization and impairment charges of
    $12 million in 2005 relating mainly to the closure of the
    Borgofranco, Italy, recycling plant, compared to charges in 2004
    of $13 million, mainly related to the closure of the
    Falkirk, U.K. plant; and
|
| |  | As a stand-alone company, our interest expense was
    $20 million higher in 2005 than in the 2004 carve-out
    allocation of interest expense from Alcan.                                                                                                                      





| |                                           
| | ------------------------------------------
| | Sales and Operating Revenues and Shipments



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| |                   
| | ------------------
| | Costs and Expenses













| |             
| | ------------
| | Income Taxes



55



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OPERATING SEGMENT REVIEW










| |                                                                                                                                                                                                                                                                                  
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) BGP excluded restructuring costs related only to major
    corporate-wide acquisitions or initiatives whereas Regional
    Income excludes all restructuring costs;                                                                                                           
|
| | b) BGP included pension costs based on the normal current
    service cost with all actuarial gains, losses and other
    adjustments being included in Intersegment and other. Regional
    Income includes all these pension costs in the applicable
    operating segment; and
|
| | c) BGP excluded certain corporate non-operating costs
    incurred by an operating segment and included such costs in
    Intersegment and other. Under the current management structure,
    these costs remain in the operating segment.                                       



| |               
| | --------------
| | Reconciliation



|                                           |                                                     |                 |     |     |      |  |     |          |   |  |     |     |   
|------------------------------------------ | --------------------------------------------------- | --------------- | --- | --- | ---- |  | --- | -------- | - |  | --- | --- | --
|                                           |                                                     | Third           |     |     |     
|                                           |                                                     | Quarter         |     |     |     
|                                           |                                                     |                 |     |     |     
|                                           |                                                     | 2005            |     |     | 2004 |  |     | % Change |  
|                                           |                                                     |                 |     |     |      |  |     |          |  
|                                           |                                                     | ($ in millions) |    
|Regional Income                            |                                                     |                 |     |     |      |  |     |          |   |  |     |    
|                                           | Novelis North America                               |                 |     | 54  |      |  |     | 67       |   |  |     | (19 | )%
|                                           | Novelis Europe                                      |                 |     | 52  |      |  |     | 64       |   |  |     | (19 | )%
|                                           | Novelis Asia                                        |                 |     | 23  |      |  |     | 19       |   |  |     | 21  | % 
|                                           | Novelis South America                               |                 |     | 24  |      |  |     | 34       |   |  |     | (29 | )%
|                                           |                                                     |                 |     |     |      |  |     |          |  
|Total Regional Income                      |                                                     |                 | 153 |     |      |  | 184 |          |   |  | (17 | )% 
|                                           | Corporate                                           |                 |     | (17 | )    |  |     | (11      | ) |  |     | 55  | % 
|                                           | Depreciation and amortization                       |                 |     | (56 | )    |  |     | (60      | ) |  |     | (7  | )%
|                                           | Adjustments for equity-accounted joint ventures(A)  |                 |     | (11 | )    |  |     | (11      | ) |  |     |    |   
|                                           | Change in market value of derivatives               |                 |     | 43  |      |  |     | 15       |   |  |     | 187 | % 
|                                           | Restructuring, rationalization and impairment costs |                 |     | (10 | )    |  |     | (20      | ) |  |     | (50 | )%
|                                           | Interest expense                                    |                 |     | (48 | )    |  |     | (17      | ) |  |     | 182 | % 
|                                           |                                                     |                 |     |     |      |  |     |          |  
|Income before income taxes and other items |                                                     |                 | 54  |     |      |  | 80  |          |   |  | (33 | )% 
|                                           |                                                     |                 |     |     |      |  |     |          |  






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) |  | Our financial information for our segments includes the results
    of certain joint ventures on a proportionately consolidated
    basis, which is consistent with the way the business groups are
    managed. However, under GAAP, these joint ventures are accounted
    for under the equity method. Therefore, in order to reconcile to
    Income before income taxes and other items, the Regional Income
    of these joint ventures is removed from our Regional Income and
    the net after-tax results are reported as equity income.

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| |                      
| | ---------------------
| | Novelis North America



|                                    |  |                 |       |  |      |  |       |          |  |  |     |   
|----------------------------------- |  | --------------- | ----- |  | ---- |  | ----- | -------- |  |  | --- | --
|                                    |  | Third           |       |  |     
|                                    |  | Quarter         |       |  |     
|                                    |  |                 |       |  |     
|North America                       |  | 2005            |       |  | 2004 |  |       | % Change | 
|                                    |  |                 |       |  |      |  |       |          | 
|                                    |  | ($ in millions) |      
|Sales and operating revenues        |  |                 | 836   |  |      |  | 810   |          |  |  | 3   | % 
|Regional Income                     |  |                 | 54    |  |      |  | 67    |          |  |  | (19 | )%
|Rolled product shipments (kt)       |  |                 | 285   |  |      |  | 296   |          |  |  | (4  | )%
|Regional Income per tonne ($/tonne) |  |                 | 189   |  |      |  | 226   |          |  |  | (16 | )%
|Depreciation                        |  |                 | 18    |  |      |  | 18    |          |  |  |    |   
|Capital expenditures                |  |                 | 14    |  |      |  | 3     |          |  |  | 367 | % 
|Total assets                        |  |                 | 1,388 |  |      |  | 1,975 |          |  |  | (30 | )%









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| |               
| | --------------
| | Novelis Europe



|                                    |  |                 |       |  |      |  |       |          |  |  |     |   
|----------------------------------- |  | --------------- | ----- |  | ---- |  | ----- | -------- |  |  | --- | --
|                                    |  | Third           |       |  |     
|                                    |  | Quarter         |       |  |     
|                                    |  |                 |       |  |     
|Europe                              |  | 2005            |       |  | 2004 |  |       | % Change | 
|                                    |  |                 |       |  |      |  |       |          | 
|                                    |  | ($ in millions) |      
|Sales and operating revenues        |  |                 | 737   |  |      |  | 766   |          |  |  | (4  | )%
|Regional Income                     |  |                 | 52    |  |      |  | 64    |          |  |  | (19 | )%
|Rolled product shipments (kt)       |  |                 | 252   |  |      |  | 251   |          |  |  |    |   
|Regional Income per tonne ($/tonne) |  |                 | 206   |  |      |  | 255   |          |  |  | (19 | )%
|Depreciation                        |  |                 | 23    |  |      |  | 27    |          |  |  | (15 | )%
|Capital expenditures                |  |                 | 17    |  |      |  | 19    |          |  |  | (11 | )%
|Total assets                        |  |                 | 2,129 |  |      |  | 2,458 |          |  |  | (13 | )%









| |             
| | ------------
| | Novelis Asia



|                                    |  |                 |     |  |      |  |     |          |  |  |     |   
|----------------------------------- |  | --------------- | --- |  | ---- |  | --- | -------- |  |  | --- | --
|                                    |  | Third           |     |  |     
|                                    |  | Quarter         |     |  |     
|                                    |  |                 |     |  |     
|Asia                                |  | 2005            |     |  | 2004 |  |     | % Change | 
|                                    |  |                 |     |  |      |  |     |          | 
|                                    |  | ($ in millions) |    
|Sales and operating revenues        |  |                 | 328 |  |      |  | 292 |          |  |  | 12  | % 
|Regional Income                     |  |                 | 23  |  |      |  | 19  |          |  |  | 21  | % 
|Rolled product shipments (kt)       |  |                 | 119 |  |      |  | 111 |          |  |  | 7   | % 
|Regional Income per tonne ($/tonne) |  |                 | 193 |  |      |  | 171 |          |  |  | 13  | % 
|Depreciation and amortization       |  |                 | 12  |  |      |  | 11  |          |  |  | 9   | % 
|Capital expenditures                |  |                 | 5   |  |      |  | 9   |          |  |  | (44 | )%
|Total assets                        |  |                 | 971 |  |      |  | 941 |          |  |  | 3   | % 



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| |                      
| | ---------------------
| | Novelis South America



|                                    |  |                 |     |  |      |  |     |          |  |  |     |   
|----------------------------------- |  | --------------- | --- |  | ---- |  | --- | -------- |  |  | --- | --
|                                    |  | Third           |     |  |     
|                                    |  | Quarter         |     |  |     
|                                    |  |                 |     |  |     
|South America                       |  | 2005            |     |  | 2004 |  |     | % Change | 
|                                    |  |                 |     |  |      |  |     |          | 
|                                    |  | ($ in millions) |    
|Sales and operating revenues        |  |                 | 157 |  |      |  | 134 |          |  |  | 17  | % 
|Regional Income                     |  |                 | 24  |  |      |  | 34  |          |  |  | (29 | )%
|Rolled product shipments (kt)       |  |                 | 68  |  |      |  | 64  |          |  |  | 6   | % 
|Regional Income per tonne ($/tonne) |  |                 | 353 |  |      |  | 531 |          |  |  | (34 | )%
|Depreciation and amortization       |  |                 | 11  |  |      |  | 12  |          |  |  | (8  | )%
|Capital expenditures                |  |                 | 5   |  |      |  | 5   |          |  |  |    |   
|Total assets                        |  |                 | 780 |  |      |  | 804 |          |  |  | (3  | )%







RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 2005 COMPARED TO THE NINE MONTHS ENDED
SEPTEMBER 30, 2004






| |           
| | ----------
| | Net Income





| |   |                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------
| |  | Gain on the monetization of cross-currency interest swaps of
    intercompany debt amounting to $37 million in 2005;

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| |   |                                                                                                                                                                                                                                                                              
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Gain on the sale of land in Asia of $11 million in 2005
    while there was a gain on the sale of land in Europe of
    $5 million in 2004;                                                                                                                                  
|
| |  | Unrealized losses on the change in market value of derivatives
    of $1 million in 2005, compared to unrealized gains in 2004
    of $24 million;                                                                                                                           
|
| |  | Foreign currency balance sheet translation losses of
    $42 million in 2005, compared to $3 million in 2004;                                                                                                                                                                
|
| |  | Start-up and
    spin-related costs amounting to $13 million in 2005;                                                                                                                                                                                                        
|
| |  | Restructuring, rationalization and impairment charges of
    $12 million in 2005 relating mainly to the closure of the
    Borgofranco, Italy, recycling plant, compared to charges in 2004
    of $13 million, mainly related to the closure of the
    Falkirk, U.K. plant;
|
| |  | Gain in 2004 of $13 million on a change in our South
    American pension plan;                                                                                                                                                                                              
|
| |  | As a stand-alone company, our interest expense was
    $57 million higher in 2005 than the 2004 carve-out
    allocations from Alcan; and                                                                                                                                    
|
| |  | Out-of-period
    adjustments resulting in an increase to net income of
    $2 million.                                                                                                                                                                                      





| |                                           
| | ------------------------------------------
| | Sales and Operating Revenues and Shipments





| |                   
| | ------------------
| | Costs and Expenses





start-up




60



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| |             
| | ------------
| | Income Taxes

out-of


OPERATING SEGMENT REVIEW




|                                           |                                                                  |                 |     |      |      |  |     |          |   |  |     |      |   
|------------------------------------------ | ---------------------------------------------------------------- | --------------- | --- | ---- | ---- |  | --- | -------- | - |  | --- | ---- | --
|                                           |                                                                  | Nine Months     |     |      |     
|                                           |                                                                  |                 |     |      |     
|                                           |                                                                  | 2005            |     |      | 2004 |  |     | % Change |  
|                                           |                                                                  |                 |     |      |      |  |     |          |  
|                                           |                                                                  | ($ in millions) |    
|Regional Income                            |                                                                  |                 |     |      |      |  |     |          |   |  |     |     
|                                           | Novelis North America                                            |                 |     | 141  |      |  |     | 208      |   |  |     | (32  | )%
|                                           | Novelis Europe                                                   |                 |     | 161  |      |  |     | 162      |   |  |     | (1   | )%
|                                           | Novelis Asia                                                     |                 |     | 80   |      |  |     | 62       |   |  |     | 29   | % 
|                                           | Novelis South America                                            |                 |     | 86   |      |  |     | 106      |   |  |     | (19  | )%
|                                           |                                                                  |                 |     |      |      |  |     |          |  
|Total Regional Income                      |                                                                  |                 | 468 |      |      |  | 538 |          |   |  | (13 | )%  
|                                           | Corporate(A)                                                     |                 |     | (11  | )    |  |     | (31      | ) |  |     | (65  | )%
|                                           | Depreciation and amortization                                    |                 |     | (173 | )    |  |     | (178     | ) |  |     | (3   | )%
|                                           | Adjustments for equity-accounted joint ventures(B)               |                 |     | (33  | )    |  |     | (32      | ) |  |     | 3    | % 
|                                           | Change in market value of derivatives                            |                 |     | 1    |      |  |     | 37       |   |  |     | (97  | )%
|                                           | Restructuring, rationalization and impairment recoveries (costs) |                 |     | 2    |      |  |     | (15      | ) |  |     | (113 | )%
|                                           | Interest expense                                                 |                 |     | (142 | )    |  |     | (55      | ) |  |     | 158  | % 
|                                           |                                                                  |                 |     |      |      |  |     |          |  
|Income before income taxes and other items |                                                                  |                 | 112 |      |      |  | 264 |          |   |  | (58 | )%  
|                                           |                                                                  |                 |     |      |      |  |     |          |  

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|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) |  | Corporate includes the $45 million gain realized on the
    monetization of cross-currency interest rate swaps in the second
    quarter of 2005.                                                                                                                                                                                                                                                                                                                                                                                                 
|   
|(B) |  | Our financial information for our segments includes the results
    of certain joint ventures on a proportionately consolidated
    basis, which is consistent with the way the business groups are
    managed. However, under GAAP, these joint ventures are accounted
    for under the equity method. Therefore, in order to reconcile to
    income before income taxes and other items, the Regional Income
    of these joint ventures is removed from our Regional Income and
    the net after-tax results are reported as equity income.



| |                      
| | ---------------------
| | Novelis North America



|                                    |  |                 |       |  |      |  |       |          |  |  |     |   
|----------------------------------- |  | --------------- | ----- |  | ---- |  | ----- | -------- |  |  | --- | --
|                                    |  | Nine Months     |       |  |     
|                                    |  |                 |       |  |     
|North America                       |  | 2005            |       |  | 2004 |  |       | % Change | 
|                                    |  |                 |       |  |      |  |       |          | 
|                                    |  | ($ in millions) |      
|Sales and operating revenues        |  |                 | 2,500 |  |      |  | 2,229 |          |  |  | 12  | % 
|Regional Income                     |  |                 | 141   |  |      |  | 208   |          |  |  | (32 | )%
|Rolled product shipments (kt)       |  |                 | 852   |  |      |  | 859   |          |  |  | (1  | )%
|Regional Income per tonne ($/tonne) |  |                 | 165   |  |      |  | 242   |          |  |  | (32 | )%
|Depreciation and amortization       |  |                 | 54    |  |      |  | 52    |          |  |  | 4   | % 
|Capital expenditures                |  |                 | 37    |  |      |  | 20    |          |  |  | 85  | % 
|Total assets                        |  |                 | 1,388 |  |      |  | 1,975 |          |  |  | (30 | )%









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| |               
| | --------------
| | Novelis Europe



|                                    |  |                 |       |  |      |  |       |          |  |  |     |   
|----------------------------------- |  | --------------- | ----- |  | ---- |  | ----- | -------- |  |  | --- | --
|                                    |  | Nine Months     |       |  |     
|                                    |  |                 |       |  |     
|Europe                              |  | 2005            |       |  | 2004 |  |       | % Change | 
|                                    |  |                 |       |  |      |  |       |          | 
|                                    |  | ($ in millions) |      
|Sales and operating revenues        |  |                 | 2,376 |  |      |  | 2,289 |          |  |  | 4   | % 
|Regional Income                     |  |                 | 161   |  |      |  | 162   |          |  |  | (1  | )%
|Rolled product shipments (kt)       |  |                 | 768   |  |      |  | 756   |          |  |  | 2   | % 
|Regional Income per tonne ($/tonne) |  |                 | 210   |  |      |  | 214   |          |  |  | (2  | )%
|Depreciation                        |  |                 | 74    |  |      |  | 79    |          |  |  | (6  | )%
|Capital expenditures                |  |                 | 39    |  |      |  | 51    |          |  |  | (24 | )%
|Total assets                        |  |                 | 2,129 |  |      |  | 2,458 |          |  |  | (13 | )%









| |             
| | ------------
| | Novelis Asia



|                                    |  |                 |       |  |      |  |     |          |  |  |     |   
|----------------------------------- |  | --------------- | ----- |  | ---- |  | --- | -------- |  |  | --- | --
|                                    |  | Nine Months     |       |  |     
|                                    |  |                 |       |  |     
|Asia                                |  | 2005            |       |  | 2004 |  |     | % Change | 
|                                    |  |                 |       |  |      |  |     |          | 
|                                    |  | ($ in millions) |      
|Sales and operating revenues        |  |                 | 1,025 |  |      |  | 858 |          |  |  | 19  | % 
|Regional Income                     |  |                 | 80    |  |      |  | 62  |          |  |  | 29  | % 
|Rolled product shipments (kt)       |  |                 | 356   |  |      |  | 334 |          |  |  | 7   | % 
|Regional Income per tonne ($/tonne) |  |                 | 225   |  |      |  | 186 |          |  |  | 21  | % 
|Depreciation and amortization       |  |                 | 37    |  |      |  | 34  |          |  |  | 9   | % 
|Capital expenditures                |  |                 | 15    |  |      |  | 17  |          |  |  | (12 | )%
|Total assets                        |  |                 | 971   |  |      |  | 941 |          |  |  | 3   | % 





63



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| |                      
| | ---------------------
| | Novelis South America



|                                    |  |                 |     |  |      |  |     |          |  |  |     |   
|----------------------------------- |  | --------------- | --- |  | ---- |  | --- | -------- |  |  | --- | --
|                                    |  | Nine Months     |     |  |     
|                                    |  |                 |     |  |     
|South America                       |  | 2005            |     |  | 2004 |  |     | % Change | 
|                                    |  |                 |     |  |      |  |     |          | 
|                                    |  | ($ in millions) |    
|Sales and operating revenues        |  |                 | 448 |  |      |  | 369 |          |  |  | 21  | % 
|Regional Income                     |  |                 | 86  |  |      |  | 106 |          |  |  | (19 | )%
|Rolled product shipments (kt)       |  |                 | 191 |  |      |  | 165 |          |  |  | 16  | % 
|Regional Income per tonne ($/tonne) |  |                 | 450 |  |      |  | 642 |          |  |  | (30 | )%
|Depreciation and amortization       |  |                 | 33  |  |      |  | 36  |          |  |  | (8  | )%
|Capital expenditures                |  |                 | 13  |  |      |  | 12  |          |  |  | 8   | % 
|Total assets                        |  |                 | 780 |  |      |  | 804 |          |  |  | (3  | )%







LIQUIDITY AND CAPITAL RESOURCES




64



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| |                     
| | --------------------
| | Operating Activities



|                                              |  |                 |      |   |      |  |     |  
|--------------------------------------------- |  | --------------- | ---- | - | ---- |  | --- | -
|                                              |  | Nine Months     |     
|                                              |  |                 |     
|Free Cash Flow                                |  | 2005            |      |   | 2004 | 
|                                              |  |                 |      |   |      | 
|                                              |  | ($ in millions) |     
|Net income                                    |  |                 | 32   |   |      |  | 148 |  
|Unrealized losses (gains) on derivatives      |  |                 |     |   |      |  | (36 | )
|Other non-cash income items(A)                |  |                 | 87   |   |      |  | 206 |  
|Increase (decrease) in interest payable       |  |                 | 19   |   |      |  | (1  | )
|Increase (decrease) in accrued income taxes   |  |                 | 59   |   |      |  | (18 | )
|Other changes in assets and liabilities(B)    |  |                 | 169  |   |      |  | (7  | )
|                                              |  |                 |      |   |      | 
|Net cash provided by operating activities     |  |                 | 366  |   |      |  | 292 |  
|Dividends                                     |  |                 | (27  | ) |      |  | (4  | )
|Premiums paid and net proceeds on derivatives |  |                 | 70   |   |      |  |    |  
|Capital expenditures                          |  |                 | (104 | ) |      |  | (95 | )
|                                              |  |                 |      |   |      | 
|Free cash flow(C)                             |  |                 | 305  |   |      |  | 193 |  
|                                              |  |                 |      |   |      | 
|Ending cash balance                           |  |                 | 124  |   |      |  | 27  |  
|                                              |  |                 |      |   |      | 






|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) |  | Other non-cash income items comprise: Depreciation and
    amortization, Deferred income taxes, Write-off and amortization
    of debt issue costs, Provision for uncollectible accounts, Gains
    from sale of fixed assets, Equity in net income of
    non-consolidated affiliates, Provision for asset impairments,
    Stock option compensation and realized losses (gains) on
    derivatives.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
|   
|(B) |  | Other changes in assets and liabilities comprise: increases or
    decreases in Accounts receivable (third and related parties),
    Prepaid expenses, Inventories, Other current assets, Accounts
    payable trade (third and related parties), Accrued expenses,
    Deferred charges and other assets, Deferred credits and other
    liabilities and other items  net.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   
|(C) |  | Free cash flow (which is a non-GAAP measure) consists of cash
    provided by operating activities plus or minus capital
    expenditures, premiums paid and net proceeds on derivatives and
    dividends. Dividends include those paid by our less than
    wholly-owned subsidiaries to their minority shareholders and
    dividends to our common shareholders. Management believes that
    free cash flow is relevant to investors as it provides a measure
    of the cash generated internally that is available for debt
    service and other value creation opportunities. However, free
    cash flow does not necessarily represent cash available for
    discretionary activities, as certain debt service obligations
    must be funded out of free cash flow. We believe the line on our
    unaudited condensed consolidated and combined statement of cash
    flows entitled Cash provided by operating activities
    is the most directly comparable measure to free cash flow. Our
    method of calculating free cash flow may not be consistent with
    that of other companies.

th th


65



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| |                     
| | --------------------
| | Investing Activities



|                                      |  |                 |     |   |      |  |     |          |  |  |    |   
|------------------------------------- |  | --------------- | --- | - | ---- |  | --- | -------- |  |  | -- | --
|                                      |  | Nine Months     |     |   |     
|                                      |  |                 |     |   |     
|Capital Expenditures and Depreciation |  | 2005            |     |   | 2004 |  |     | % Change | 
|                                      |  |                 |     |   |      |  |     |          | 
|                                      |  | ($ in millions) |    
|Capital expenditures                  |  |                 | 104 |   |      |  | 95  |          |  |  | 9  | % 
|Depreciation and amortization expense |  |                 | 173 |   |      |  | 178 |          |  |  | (3 | )%
|Capital reinvestment rate(A)          |  |                 | 60  | % |      |  | 53  | %        |  |  |    |   
|                                      |  |                 |     |   |      |  |     |          | 






|    |  |                                                                                   
|--- |  | ----------------------------------------------------------------------------------
|(A) |  | Capital expenditures as a percentage of depreciation and
    amortization expense.





| |                     
| | --------------------
| | Financing Activities

year-to


10-year


3-month




66



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10-K




| |                                       
| | --------------------------------------
| | Restatement Effects on Debt Agreements

10-Q 10-K 10-Q


10-Q 10-K 10-Q 10-Q 10-Q






67



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##### Table of Contents



90-day


10-Q 10-K 10-Q


COMMODITY PRICE RISKS










CONTRACTUAL OBLIGATIONS


3-5


10-K,


68



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##### Table of Contents



ACCOUNTING POLICIES


10-K


RECENTLY ISSUED ACCOUNTING STANDARDS


Share-Based Payment Accounting for Stock-Based
Compensation Accounting for Stock-Based
Compensation  Transition and Disclosure.


Accounting for Conditional Asset Retirement
Obligations  an interpretation of FASB Statement
No. 143.


00-19 Application of EITF Issue
No. 00-19 to
Freestanding Financial Instruments Originally Issued as Employee
Compensation. 00-19, Accounting for Derivative Financial Instruments Indexed to,
and Potentially Settled in, a Companys Own Stock


Accounting for Early Retirement or
Postemployment Programs with Specific Features (Such As Terms
Specified in Altersteilzeit Early Retirement Arrangements) 05-5). 05-5


69



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##### Table of Contents



05-5 05-5


143-1, Accounting for Electronic Equipment Waste Obligations. 143-1 143-1 Accounting for Asset Retirement Obligations, 143-1 143-1


Accounting by an Investor for Its Proportionate Share of
Accumulated Other Comprehensive Income of an Investee Accounted
for under the Equity Method in Accordance with APB Opinion
No. 18 upon a Loss of Significant Influence Accounting for Certain
Investments in Debt and Equity Securities


Accounting for Purchases and Sales of
Inventory with the Same Counterparty 04-13). 04-13 Accounting for Nonmonetary Transactions Exchanges of Nonmonetary Assets, an Amendment
of APB 29




70



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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND
MARKET DATA








| |   |                                                                                                                                                              
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | continuing obligations and other relationships resulting from
    our spin-off from Alcan;                                                                   
|
| |  | the level of our indebtedness and our ability to generate cash;                                                                                              
|
| |  | relationships with, and financial and operating conditions of,
    our customers and suppliers;                                                              
|
| |  | changes in the prices and availability of aluminum (or premiums
    associated with such price) or other raw materials we use;                               
|
| |  | 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;                                                                                             
|
| |  | changes in the relative values of various currencies;                                                                                                        
|
| |  | factors affecting our operations, such as litigation, 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;                                                                                                                      
|
| |  | changes to and volatility of metal prices;                                                                                                                   
|
| |  | our ability to improve and maintain effective internal control
    over financial reporting and disclosure controls and procedures
    in the future;        
|
| |  | our ability to properly account for adjustments made to arrive
    at our opening balance sheet as of January 6, 2005;                                       

71



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| |   |                                                                                                                                                      
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes in market value of derivatives;                                                                                                              
|
| |  | the effectiveness of our hedging activities, including our
    internal used beverage can (UBC) and smelter hedges;                                  
|
| |  | cyclical demand and pricing within the principal markets for our
    products as well as seasonality in certain of our
    customers industries; and
|
| |  | changes in government regulations, particularly those affecting
    environmental, health or safety compliance.                                      

S-4,







|        |                                                               
|------- | --------------------------------------------------------------
|Item 3. | Quantitative and Qualitative Disclosures about Market
    Risk

(in millions of US$, except foreign currency denominations
and LME prices)




Interest Rates


10-K








72



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##### Table of Contents





10-K




73



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##### Table of Contents



Foreign Currency Derivatives




|                                             |                       |                                       |    |         |      |  |     |      |  |      |      |      |          |        |   |      |        |  |    |       |  |  |     |  |  |  |    |   | 
|-------------------------------------------- | --------------------- | ------------------------------------- | -- | ------- | ---- |  | --- | ---- |  | ---- | ---- | ---- | -------- | ------ | - | ---- | ------ |  | -- | ----- |  |  | --- |  |  |  | -- | - | 
|                                             |                       |                                       |    |         |      |  |     |      |  | 2009 |      |      | Total    |        |   |     
|                                             |                       |                                       |    |         |      |  |     |      |  | and  |      |      | Notional |        |   | Fair |       
|                                             |                       | 2005                                  |    |         | 2006 |  |     | 2007 |  |      | 2008 |      |          | Beyond |   |      | Amount |  |    | Value | 
|                                             |                       |                                       |    |         |      |  |     |      |  |      |      |      |          |        |   |      |        |  |    |       | 
|                                             |                       | (Notional amounts in millions of US$) |   
|FORWARD CONTRACTS                            |                       |                                       |    |         |      |  |     |      |  |      |      |      |          |        |   |      |        |  |    |       |  |  |     |  |  |  |    |  
|To purchase USD against the foreign currency
|CHF Notional Amount                          |                       |                                       | 5  |         |      |  | 11  |      |  |      | 2    |      |          |        | 2 |      |        |  | 1  |       |  |  | 21  |  |  |  | (1 | )
|                                             | Average contract rate |                                       |    | 1.31    |      |  |     | 1.35 |  |      |      | 1.29 |          |        |   | 1.26 |        |  |    | 1.24  |  |  |     |  |  |  |    |   | 
|To sell USD against the foreign currency    
|CHF Notional Amount                          |                       |                                       | 21 |         |      |  |    |      |  |      |     |      |          |        |  |      |        |  |   |       |  |  | 21  |  |  |  |   |  
|                                             | Average contract rate |                                       |    | 1.29    |      |  |     |     |  |      |      |     |          |        |   |     |        |  |    |      |  |  |     |  |  |  |    |   | 
|KRW Notional Amount                          |                       |                                       | 58 |         |      |  |    |      |  |      |     |      |          |        |  |      |        |  |   |       |  |  | 58  |  |  |  |   |  
|                                             | Average contract rate |                                       |    | 1,029.2 |      |  |     |     |  |      |      |     |          |        |   |     |        |  |    |      |  |  |     |  |  |  |    |   | 
|To purchase EUR against the foreign currency
|GBP Notional Amount                          |                       |                                       | 13 |         |      |  | 5   |      |  |      | 5    |      |          |        |  |      |        |  | 33 |       |  |  | 56  |  |  |  |   |  
|                                             | Average contract rate |                                       |    | 0.69    |      |  |     | 0.70 |  |      |      | 0.71 |          |        |   |     |        |  |    | 0.74  |  |  |     |  |  |  |    |   | 
|USD Notional Amount                          |                       |                                       | 4  |         |      |  |    |      |  |      |     |      |          |        |  |      |        |  |   |       |  |  | 4   |  |  |  |   |  
|                                             | Average contract rate |                                       |    | 1.21    |      |  |     |     |  |      |      |     |          |        |   |     |        |  |    |      |  |  |     |  |  |  |    |   | 
|CHF Notional Amount                          |                       |                                       | 5  |         |      |  |    |      |  |      |     |      |          |        |  |      |        |  |   |       |  |  | 5   |  |  |  |   |  
|                                             | Average contract rate |                                       |    | 1.56    |      |  |     |     |  |      |      |     |          |        |   |     |        |  |    |      |  |  |     |  |  |  |    |   | 
|To sell EUR against the foreign currency    
|GBP Notional Amount                          |                       |                                       | 57 |         |      |  | 21  |      |  |      | 1    |      |          |        |  |      |        |  |   |       |  |  | 79  |  |  |  | 1  |  
|                                             | Average contract rate |                                       |    | 0.69    |      |  |     | 0.70 |  |      |      | 0.71 |          |        |   |     |        |  |    |      |  |  |     |  |  |  |    |   | 
|CHF Notional Amount                          |                       |                                       | 7  |         |      |  | 8   |      |  |      | 4    |      |          |        | 4 |      |        |  | 3  |       |  |  | 26  |  |  |  | (1 | )
|                                             | Average contract rate |                                       |    | 1.52    |      |  |     | 1.50 |  |      |      | 1.46 |          |        |   | 1.44 |        |  |    | 1.43  |  |  |     |  |  |  |    |   | 
|USD Notional Amount                          |                       |                                       | 79 |         |      |  | 163 |      |  |      | 78   |      |          |        |  |      |        |  | 5  |       |  |  | 325 |  |  |  | 8  |  
|                                             | Average contract rate |                                       |    | 1.27    |      |  |     | 1.25 |  |      |      | 1.27 |          |        |   |     |        |  |    | 1.13  |  |  |     |  |  |  |    |   | 
|CAD Notional Amount                          |                       |                                       | 1  |         |      |  |    |      |  |      |     |      |          |        |  |      |        |  |   |       |  |  | 1   |  |  |  |   |  
|                                             | Average contract rate |                                       |    | 1.47    |      |  |     |     |  |      |      |     |          |        |   |     |        |  |    |      |  |  |     |  |  |  |    |   | 
|To purchase GBP against the foreign currency
|CHF Notional Amount                          |                       |                                       | 1  |         |      |  |    |      |  |      |     |      |          |        |  |      |        |  |   |       |  |  | 1   |  |  |  |   |  
|                                             | Average contract rate |                                       |    | 2.17    |      |  |     |     |  |      |      |     |          |        |   |     |        |  |    |      |  |  |     |  |  |  |    |   | 
|USD Notional Amount                          |                       |                                       | 33 |         |      |  | 15  |      |  |      | 3    |      |          |        | 1 |      |        |  |   |       |  |  | 52  |  |  |  |   |  
|                                             | Average contract rate |                                       |    | 1.77    |      |  |     | 1.78 |  |      |      | 1.80 |          |        |   | 1.79 |        |  |    |      |  |  |     |  |  |  |    |   | 
|To sell GBP against the foreign currency    
|CHF Notional Amount                          |                       |                                       | 16 |         |      |  |    |      |  |      |     |      |          |        |  |      |        |  |   |       |  |  | 16  |  |  |  |   |  
|                                             | Average contract rate |                                       |    | 2.25    |      |  |     |     |  |      |      |     |          |        |   |     |        |  |    |      |  |  |     |  |  |  |    |   | 
|USD Notional Amount                          |                       |                                       | 31 |         |      |  | 5   |      |  |      | 1    |      |          |        |  |      |        |  |   |       |  |  | 37  |  |  |  | 1  |  
|                                             | Average contract rate |                                       |    | 1.80    |      |  |     | 1.81 |  |      |      | 1.81 |          |        |   |     |        |  |    |      |  |  |     |  |  |  |    |   | 



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10-K


Derivative Commodity Contracts











|        |                        
|------- | -----------------------
|Item 4. | Controls and Procedures

Restatement


10-Q 10-Q/ 10-Q 10-K 10-Q




Evaluation of disclosure controls and procedures


10-Q, 13a-15(e) 15d-15(e)


75



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Material weaknesses




Internal Control-Integrated Framework






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Lack of sufficient resources in our accounting and finance
    organization. We lacked a sufficient complement of personnel
    with a level of financial reporting expertise commensurate with
    our financial reporting requirements, which resulted in our not
    maintaining effective controls over the financial statement
    close and reporting process. Specifically, as a result of our
    separation from Alcan, which involved a series of complex
    transactions, including corporate restructurings and refinancing
    activities, we lacked sufficient resources to properly perform
    the quarterly financial statement close processes, including the
    review of certain account reconciliations and financial
    statement preparation and disclosures. Further, we did not
    maintain an effective internal audit function. Following our
    separation from Alcan, there was a lack of leadership of the
    internal audit function and lack of independence of internal
    audit personnel from the finance and accounting function due to
    the lines of reporting, which impacted the effectiveness of the
    monitoring of our internal control over financial reporting.
    This control deficiency contributed to the material weaknesses
    discussed below.
|
| |  | Inadequate monitoring of non-routine and non-systematic
    transactions. We did not have effective controls in place to
    monitor and accurately record non-routine and non-systematic
    transactions. Specifically, the accounting for the spin-related
    capital and debt transactions required to form Novelis was
    not adequately monitored to ensure that these transactions were
    appropriately accounted for in accordance with GAAP. This
    control deficiency primarily affected Additional paid-in
    capital, Deferred translation adjustments and Income taxes.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|
| |  | Accounting for accrued expenses. We did not maintain
    effective controls over the completeness and accuracy of certain
    of our accrued liabilities and related expense accounts, in
    particular, the ongoing monitoring of developments affecting our
    accrued liabilities. Specifically, lines of communication
    between our internal legal department and external counsel in
    Brazil were inadequate to timely identify and accurately report
    new developments in legal proceedings to ensure they were
    accounted for in accordance with GAAP. In addition, we did not
    maintain effective controls to ensure that liabilities related
    to Brazilian labor claims were accurately presented and
    appropriately reviewed to ensure recognition in the proper
    period in accordance with GAAP. These matters primarily affected
    Deferred credits and other liabilities, Cost of sales and
    operating expenses and Other expenses (income)  net.                                                                                                                                                                                                                                                                                                                 
|
| |  | Accounting for income taxes. We did not maintain
    effective controls over the completeness, accuracy, presentation
    and disclosure of our accounting for income taxes, including the
    determination of income tax expense, income taxes payable and
    deferred income tax assets and liabilities. Specifically, we did
    not maintain effective controls to (1) timely record
    additional income taxes related to the deemed disposal of
    goodwill, (2) account for income taxes on the currency
    translations related to intercompany loans to our European
    subsidiaries, (3) ensure that                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   | proper allocation of currency gains/losses between capital and
    operating were used in calculating the quarterly effective tax
    rate, and (4) account for the income taxes on the currency
    impact of spin-related debt repayments. This control deficiency
    affected Income taxes, Accrued income taxes, Deferred income
    taxes and Accumulated other comprehensive income.                                                                                              
|
| |  | Accounting for certain derivative transactions. We did
    not maintain effective controls over the evaluation,
    documentation and accounting for certain derivative
    transactions, including transactions that we attempted to
    qualify for hedge accounting, in compliance with GAAP, which
    affected the accounting for Cost of sales and operating
    expenses, Other expenses (income)  net, Other
    comprehensive income (loss) and related balance sheet accounts.



10-Q


Remediation efforts






| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. Efforts to strengthen accounting and finance
    department through additional professional staff. We have
    hired a number of additional professional staff over the past
    several months with the skills and experience needed for a
    global public company of our size and complexity, including an
    individual with expertise in and responsibility for derivative
    accounting. We will continue to seek to strengthen our
    accounting and finance department and strive to appropriately
    balance the allocation of full-time staff and consultants. In
    addition, our global tax director will be relocating from Europe
    to our corporate headquarters in Atlanta, Georgia, in the third
    quarter of 2006 to strengthen our tax reporting at the corporate
    and regional levels. The development of adequate corporate level
    accounting and finance oversight is still ongoing. We are still
    recruiting accounting and finance personnel and do not yet have
    permanent resources in place sufficient to close our books
    without significant reliance on third-party contractors.
|
| | 2. Hiring of chief internal auditor. In January
    2006, a new chief internal auditor was hired. The new chief
    internal auditor reports to our Audit Committee and has been
    charged with the responsibility of improving the overall
    effectiveness of the internal audit function. In addition, the
    new chief internal auditor has been charged with overseeing our
    Section 404 evaluation of internal control over financial
    reporting, which will include evaluating and recommending
    improvements in the existing system of internal control at both
    the entity and business group level and establishing a mechanism
    to monitor the effectiveness of internal controls on an ongoing
    basis.                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | 3. Use of outside consultants and advisors. While we
    ultimately intend to reduce our reliance on outside consultants,
    for the near term we have engaged additional outside consultants
    and advisors to assist management in oversight and preparation
    of our financial statements, periodic reports filed with the SEC
    and related matters. As we strengthen our accounting and finance
    department, we intend to transition more of these functions to
    full-time staff.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|
| | 4. Increased communication internally and with outside
    advisors. We have increased communication by and among
    senior management, external advisors and other third parties
    relevant to the                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

77



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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | disclosure process. Specifically, the chief executive officer
    meets weekly with his management team to review operational
    developments and he receives written departmental reports from
    his executive team monthly. The board of directors receives
    timely and regular updates on issues of importance. The chief
    executive officer also prepares a monthly report to the board of
    directors highlighting operational and financial results which
    is also distributed to his executive team.                                                                                                                                                                                                                                                   
|
| | 5. Centralized accounting and finance group. We
    began in May 2005 to relocate the corporate financial
    consolidation group, which includes key accounting and finance
    personnel, to Atlanta, Georgia, with our executive officers and
    other key corporate level functions, to improve coordination of
    our financial reporting processes. The relocation process was
    completed in July 2005.                                                                                                                                                                                                                                                                                                                                                          
|
| | 6. Enhanced efforts to identify non-routine
    transactions. We have initiated monthly meetings to identify
    non-routine transactions and their related accounting treatment
    at an early stage.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|
| | 7. Disclosure controls and procedures improvements.
    With respect to the preparation of periodic reports to be filed
    with the SEC, we have instituted more regular meetings of key
    personnel involved in the process and developed detailed
    checklists and timetables with appropriate responsibilities and
    structural processes. In addition, we are utilizing a system of
    uniform document management (e.g., numbering, dating, and
    red-lining drafts) and improved coordination of the drafting
    process with respect to our earnings releases and periodic
    reports.                                                                                                                                                                   
|
| | 8. Corporate level review. Several corporate level
    accounting and finance review practices have been implemented to
    improve oversight into regional accounting issues, including a
    global review of balance sheet accounts requiring judgment and
    estimates, reconciliation of Additional paid-in capital accounts
    and Deferred translation adjustments and global reconciliation
    of movements in the fair market value of derivatives. We have
    also implemented enhanced reporting procedures within our legal,
    accounting and finance departments to improve the timeliness and
    effectiveness of reporting of legal matters (and the details
    surrounding our legal proceedings) through our accounting and
    finance department.





Changes in internal control over financial reporting and
related matters


10-Q 10-Q/A 10-Q/A




78



---



##### Table of Contents






PART II. OTHER INFORMATION







|        |                   
|------- | ------------------
|Item 1. | Legal Proceedings.

10-K


Oswego North Ponds.




Reynolds Boat Case.


79



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|        |          
|------- | ---------
|Item 6. | Exhibits.

|            |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|----------- | -- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    | Description
|            |    |            
|            | 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          |  | Specimen Certificate of Novelis Inc. Common Shares (incorporated
    by reference to Exhibit 4.2 to the Form 10 filed by Novelis
    Inc. on December 27, 2004 (File No. 001-32312))                                                                                                                                                                                                                                                                                                                                  
|           
|            | 4  | .3          |  | Indenture, relating to the Senior Notes, dated as of
    February 3, 2005, between Novelis, 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  | .4          |  | Registration Rights Agreement, dated as of February 3,
    2005, among Novelis, the guarantors named on the signature pages
    thereto, Citigroup Global Markets Inc., Morgan
    Stanley & Co. Incorporated and UBS Securities LLC, as
    Representatives of the Initial Purchasers (incorporated by
    reference to Exhibit 4.2 to our Current Report on
    Form 8-K filed on February 3, 2005 (File No.
    001-32312))                                                                                        
|           
|            | 10 | .1          |  | Amendment No. 1 dated as of September 19, 2005 to the
    Credit Agreement dated as of January 7, 2005 among Novelis
    Inc., Novelis Corporation, Novelis Deutschland GMBH,
    Novelis UK Limited, Novelis AG, the Lenders and Issuers
    party thereto and Citicorp North America, Inc. as administrative
    agent and collateral agent for the Lenders and the Issuers
    (incorporated by reference to Exhibit 10.1 to the
    Form 8-K filed by Novelis Inc. on September 20, 2005)
    (File No. 001-32312)
|           
|            | 10 | .2          |  | Amendment No. 1 dated as of July 27, 2005 to the
    Deferred Share Agreement between Alcancorp and Martha F. Brooks
    dated July 1, 2002, incorporated herein by reference to
    Exhibit 10.2 of Novelis Current Report on
    Form 8-K, filed on August 1, 2005.                                                                                                                                                                                                                                                
|           
|            | 11 |             |  | Computation of per share earnings (provided in Note 9 to
    the Notes to the Unaudited Condensed Consolidated and Combined
    Financial Statements included in this report under the caption
    Earnings Per Share)                                                                                                                                                                                                                                                                                              
|           
|            | 31 | .1          |  | Certificate of the Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                              
|           
|            | 31 | .2          |  | Certificate of the Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                              
|           
|            | 32 | .1          |  | Certificate of the Chief Executive Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                           
|            | 32 | .2          |  | Certification of the Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                         

80



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SIGNATURES






| |             
| | ------------
| | NOVELIS INC.



| |     |                     
| | --- | --------------------
| | By: | /s/ Geoffrey P. Batt

| |                              
| | -----------------------------
| |                              
| | Geoffrey P. Batt             
| | Chief Financial Officer      
| | (Principal Financial Officer)



| |     |                     
| | --- | --------------------
| | By: | /s/ Jo-Ann Longworth

| |                             
| | ----------------------------
| |                             
| | Jo-Ann Longworth            
| | Principal Accounting Officer



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##### Table of Contents



EXHIBIT INDEX


|            |    |             |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|----------- | -- | ----------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    | Description
|            |    |            
|            | 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          |  | Specimen Certificate of Novelis Inc. Common Shares (incorporated
    by reference to Exhibit 4.2 to the Form 10 filed by Novelis
    Inc. on December 27, 2004 (File No. 001-32312))                                                                                                                                                                                                                                                                                                                                  
|           
|            | 4  | .3          |  | Indenture, relating to the Senior Notes, dated as of
    February 3, 2005, between Novelis, 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  | .4          |  | Registration Rights Agreement, dated as of February 3,
    2005, among Novelis, the guarantors named on the signature pages
    thereto, Citigroup Global Markets Inc., Morgan
    Stanley & Co. Incorporated and UBS Securities LLC, as
    Representatives of the Initial Purchasers (incorporated by
    reference to Exhibit 4.2 to our Current Report on
    Form 8-K filed on February 3, 2005 (File No.
    001-32312))                                                                                        
|           
|            | 10 | .1          |  | Amendment No. 1 dated as of September 19, 2005 to the
    Credit Agreement dated as of January 7, 2005 among Novelis
    Inc., Novelis Corporation, Novelis Deutschland GMBH,
    Novelis UK Limited, Novelis AG, the Lenders and Issuers
    party thereto and Citicorp North America, Inc. as administrative
    agent and collateral agent for the Lenders and the Issuers
    (incorporated by reference to Exhibit 10.1 to the
    Form 8-K filed by Novelis Inc. on September 20, 2005)
    (File No. 001-32312)
|           
|            | 10 | .2          |  | Amendment No. 1 dated as of July 27, 2005 to the
    Deferred Share Agreement between Alcancorp and Martha F. Brooks
    dated July 1, 2002, incorporated herein by reference to
    Exhibit 10.2 of Novelis Current Report on
    Form 8-K, filed on August 1, 2005.                                                                                                                                                                                                                                                
|           
|            | 11 |             |  | Computation of per share earnings (provided in Note 9 to
    the Notes to the Unaudited Condensed Consolidated and Combined
    Financial Statements included in this report under the caption
    Earnings Per Share)                                                                                                                                                                                                                                                                                              
|           
|            | 31 | .1          |  | Certificate of the Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                              
|           
|            | 31 | .2          |  | Certificate of the Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                                                                              
|           
|            | 32 | .1          |  | Certificate of the Chief Executive Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                           
|           
|            | 32 | .2          |  | Certification of the Chief Financial Officer pursuant to
    18 U.S.C. Section 1350, as adopted pursuant to
    Section 906 of the Sarbanes-Oxley Act of 2002                                                                                                                                                                                                                                                                                                                                                         

82