##### Table of Contents



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

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
    SECURITIES EXCHANGE ACT OF 1934For the quarterly period ended
    September 30,
    2009Oro

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

98-0442987(I.R.S. Employer
    Identification Number)3399 Peachtree Road NE, Suite 1500
    Atlanta, Georgia(Address of principal
    executive offices)

30326(Zip
    Code)   Telephone:
    (404) 814-4200
 (Registrants telephone
    number, including area code)
  þ o
  Regulation S-T o o
  Rule 12b-2
  Large
    accelerated
    filer o
    Accelerated
    filer o
    Non-accelerated
    filer þ
    Smaller
    reporting
    company o   Rule 12b-2 o þ




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##### 



TABLE OF
    CONTENTS
   
 PART I. FINANCIAL INFORMATIONItem 1.


Financial StatementsCondensed Consolidated Statements of Operations
    Three and Six Months Ended September 30, 2009 and 2008
    (unaudited)


2Condensed Consolidated Balance Sheets
    September 30, 2009 and March 31, 2009 (unaudited)


3Condensed Consolidated Statements of Cash Flows
    Six Months Ended September 30, 2009 and 2008 (unaudited)


4Condensed Consolidated Statement of
    Shareholders Equity Six Months Ended September 30,
    2009 (unaudited)


5Condensed Consolidated Statements of
    Comprehensive Income Three and Six Months Ended
    September 30, 2009 (unaudited)


6Notes to the Condensed Consolidated Financial
    Statements (unaudited)


7Item 2.


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


42Item 3.


Quantitative and Qualitative Disclosures About
    Market Risk


68Item 4.


Controls and Procedures


71PART II. OTHER INFORMATIONItem 1.


Legal Proceedings


74Item 1A.


Risk Factors


74Item 6.


Exhibits


75EX-31.1EX-31.2EX-32.1EX-32.2   1




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##### Table of Contents



PART I.
    FINANCIAL INFORMATION  Item 1.
    Financial
    Statements  Novelis
    Inc.CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
    (unaudited)(In millions)
  Three Months


Six MonthsEnded


EndedSeptember 30,


September 30,2009


2008


2009


2008Net sales

$
2,181


$
2,959


$
4,141


$
6,062Cost of goods sold (exclusive of depreciation and amortization
    shown below)


1,728



2,791



3,261



5,622Selling, general and administrative expenses


83



89



161



173Depreciation and amortization


92



107



192



223Research and development expenses


9



10



17



22Interest expense and amortization of debt issuance costs


44



46



87



91Interest income


(3
)


(5
)


(6
)


(10
)(Gain) loss on change in fair value of derivative instruments,
    net


(80
)


185



(152
)


120Restructuring charges, net


3







6



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


10



(2
)


20



Other (income) expenses, net


(6
)


10



(19
)


331,880



3,231



3,567



6,273Income (loss) before income taxes


301



(272
)


574



(211
)Income tax provision (benefit)


87



(168
)


199



(133
)Net income (loss)


214



(104
)


375



(78
)Net income attributable to noncontrolling interests


19







37



2Net income (loss) attributable to our common shareholder

$
195


$
(104
)

$
338


$
(80
)    2




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##### Table of Contents



Novelis
    Inc.CONDENSED CONSOLIDATED BALANCE SHEETS
    (unaudited)(In millions, except number of
    shares)
  September 30,


March 31,2009


2009ASSETSCurrent assetsCash and cash equivalents

$
246


$
248Accounts receivable (net of allowances of $4 and $2 as of
    September 30, 2009 and March 31, 2009, respectively) third parties


1,206



1,049 related parties


13



25Inventories


929



793Prepaid expenses and other current assets


50



51Fair value of derivative instruments


171



119Deferred income tax assets


37



216Total current assets


2,652



2,501Property, plant and equipment, net


2,769



2,799Goodwill


611



582Intangible assets, net


786



787Investment in and advances to non-consolidated affiliates


764



719Fair value of derivative instruments, net of current portion


48



72Deferred income tax assets


5



4Other long-term assets third parties


95



80 related parties


24



23Total assets

$
7,754


$
7,567LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt

$
49


$
51Short-term borrowings


177



264Accounts payable third parties


881



725 related parties


55



48Fair value of derivative instruments


145



640Accrued expenses and other current liabilities


428



516Deferred income tax liabilities


12



Total current liabilities


1,747



2,244Long-term debt, net of current portion third parties


2,596



2,417 related parties






91Deferred income tax liabilities


518



469Accrued postretirement benefits


528



495Other long-term liabilities


354



342Total liabilities


5,743



6,058Commitments and contingenciesShareholders equityCommon stock, no par value; unlimited number of shares
    authorized; 77,459,658 shares issued and outstanding as of
    September 30, 2009 and March 31, 2009






Additional paid-in capital


3,497



3,497Accumulated deficit


(1,592
)


(1,930
)Accumulated other comprehensive loss


(22
)


(148
)Total Novelis shareholders equity


1,883



1,419Noncontrolling interests


128



90Total equity


2,011



1,509Total liabilities and shareholders equity

$
7,754


$
7,567    3




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##### Table of Contents



Novelis
    Inc.CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
    (unaudited)(In millions)
  Six Months EndedSeptember 30,2009


2008OPERATING ACTIVITIESNet income (loss)

$
375


$
(78
)Adjustments to determine net cash provided by (used in)
    operating activities:Depreciation and amortization


192



223(Gain) loss on change in fair value of derivative instruments,
    net


(152
)


120Deferred income taxes


196



(183
)Write-off and amortization of fair value adjustments, net


(98
)


(124
)Equity in net (income) loss of non-consolidated affiliates


20



Foreign exchange remeasurement of debt


(15
)


17Gain on reversal of accrued legal claim






(26
)Other, net


5



3Changes in assets and liabilities:Accounts receivable


(97
)


(183
)Inventories


(84
)


(71
)Accounts payable


109



(24
)Other current assets


4



(25
)Other current liabilities


(4
)


(74
)Other noncurrent assets


(14
)


9Other noncurrent liabilities


27



26Net cash provided by (used in) operating activities


464



(390
)INVESTING ACTIVITIESCapital expenditures


(46
)


(70
)Proceeds from sales of assets


4



2Changes to investment in and advances to non-consolidated
    affiliates


2



13Proceeds from related party loans receivable, net


14



13Net proceeds (outflow) from settlement of derivative instruments


(416
)


94Net cash provided by (used in) investing activities


(442
)


52FINANCING ACTIVITIESProceeds from issuance of debt, third parties


177



Proceeds from issuance of debt, related parties


3



Principal payments, third parties


(16
)


(7
)Principal payments, related parties


(94
)


Short-term borrowings, net


(96
)


263Dividends, noncontrolling interest


(13
)


(5
)Net cash provided by (used in) financing activities


(39
)


251Net decrease in cash and cash equivalents


(17
)


(87
)Effect of exchange rate changes on cash balances held in
    foreign currencies


15



(20
)Cash and cash equivalents  beginning of period


248



326Cash and cash equivalents  end of period

$
246


$
219    4




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##### Table of Contents



Novelis
    Inc.CONDENSED CONSOLIDATED STATEMENT OF
    SHAREHOLDERS EQUITY (unaudited)(In millions, except number of
    shares)
  Novelis Inc. ShareholderAccumulatedRetained


OtherAdditional


Earnings


Comprehensive


Non-Common Stock


Paid-in


(Accumulated


Income (Loss)


controlling


TotalShares


Amount


Capital


Deficit)


(AOCI)


Interests


EquityBalance as of March 31, 2009


77,459,658


$



$
3,497


$
(1,930
)

$
(148
)

$
90


$
1,509Net income attributable to our common shareholder














338











338Net income attributable to noncontrolling interests






















37



37Currency translation adjustment, net of tax provision of $6
    included in AOCI


















124



14



138Change in fair value of effective portion of hedges, net of tax
    benefit of $2 included in AOCI


















(2
)






(2
)Postretirement benefit plans:Change in pension and other benefits, net of tax provision of $2
    included in AOCI


















4







4Noncontrolling interests cash dividends






















(13
)


(13
)Balance as of September 30, 2009


77,459,658


$



$
3,497


$
(1,592
)

$
(22
)

$
128


$
2,011    5




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##### Table of Contents



Novelis
    Inc.CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE
    INCOME (unaudited)(In millions)
  Three Months Ended


Three Months EndedSeptember 30, 2009


September 30, 2008Attributable to


Attributable to





Attributable to


Attributable toOur Common


Noncontrolling





Our Common


NoncontrollingShareholder


Interests


Total


Shareholder


Interests


TotalNet income

$
195


$
19


$
214


$
(104
)

$



$
(104
)Other comprehensive income (loss):Currency translation adjustment


74



7



81



(73
)


(21
)


(94
)Change in fair value of effective portion of hedges, net


(15
)






(15
)


(16
)






(16
)Postretirement benefit plans:Change in pension and other benefits


3







3



2







2Other comprehensive income (loss) before income tax effect


62



7



69



(87
)


(21
)


(108
)Income tax provision (benefit) related to items of other
    comprehensive income (loss)


(2
)






(2
)


(6
)






(6
)Other comprehensive income (loss), net of tax


64



7



71



(81
)


(21
)


(102
)Comprehensive income

$
259


$
26


$
285


$
(185
)

$
(21
)

$
(206
)   Six Months Ended


Six Months EndedSeptember 30, 2009


September 30, 2008Attributable to


Attributable to





Attributable to


Attributable toOur Common


Noncontrolling





Our Common


NoncontrollingShareholder


Interests


Total


Shareholder


Interests


TotalNet income

$
338


$
37


$
375


$
(80
)

$
2


$
(78
)Other comprehensive income (loss):Currency translation adjustment


130



14



144



(63
)


(23
)


(86
)Change in fair value of effective portion of hedges, net


(4
)






(4
)


3







3Postretirement benefit plans:Change in pension and other benefits


6







6



2







2Other comprehensive income (loss) before income tax effect


132



14



146



(58
)


(23
)


(81
)Income tax provision related to items of other comprehensive
    income (loss)


6







6



2







2Other comprehensive income (loss), net of tax


126



14



140



(60
)


(23
)


(83
)Comprehensive income

$
464


$
51


$
515


$
(140
)

$
(21
)

$
(161
)    6




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)
  1.
    BUSINESS
    AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES    Description
    of Business and Basis of Presentation
    Form 10-K Form 8-K
    Acquisition
    of Novelis Common Stock
    Consolidation
    Policy
   7




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
    Reclassifications
    and Adjustment
    Forms 10-Q Forms 10-K
  Recently
    Adopted Accounting Standards
      Subsequent
    Events Subsequent Events
  Consolidation Noncontrolling Interests in
    Consolidated Financial Statements
 8




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  Intangibles  Goodwill and Other No. FAS 142-3, Determination of Useful Life of Intangible Assets
  Fair Value
    Measurements and Disclosures No. 107-1 28-1, Interim Disclosures about Fair Value of Financial
    Instruments; No. 157-4, Determining Fair Value When the Volume and Level of Activity
    for the Asset or Liability Have Significantly Decreased and
    Identifying Transactions That Are Not Orderly
  Investments Debt and Equity
    Securities No. 115-2 No. 124-2, Recognition of
    Other-than-Temporary-Impairments other-than-temporary
  Business
    Combinations Business Combinations; Accounting for
    Assets Acquired and Liabilities Assumed in a Business
    Combination That Arise from Contingencies
  Investments  Equity Method and Joint Ventures No. 08-06, Equity Method Investment Accounting Considerations)
 9




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  Recently
    Issued Accounting Standards
    Amendments to FASB Interpretation No. 46(R) Accounting for
    Transfers of Financial Assets
  Compensation  Retirement Benefits Employers Disclosures about Pensions and Other
    Postretirement Benefits
    2.
    RESTRUCTURING
    PROGRAMS      North





South





RestructuringEurope


America


Asia


America


Corporate


ReservesBalance as of March 31, 2009

$
61


$
16


$



$
2


$
1


$
80Provisions (recoveries), net


3



















3Cash payments


(33
)


(6
)






(2
)


(1
)


(42
)Impact of exchange rate changes


7











1







8Balance as of September 30, 2009

$
38


$
10


$



$
1


$



$
49  10




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  Europe
        North
    America
    South
    America
    3.
    INVENTORIES    September 30,


March 31,2009


2009Finished goods

$
226


$
215Work in process


375



296Raw materials


242



207Supplies


91



79934



797Allowances


(5
)


(4
)Inventories

$
929


$
793   4.
    CONSOLIDATION
    OF VARIABLE INTEREST ENTITIES   11




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##### Table of Contents



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

March 31,2009

2009Current assets

$
70


$
64Total assets

$
132


$
124Current liabilities

$
(40
)

$
(35
)Total liabilities

$
(142
)

$
(135
)Net carrying value

$
(10
)

$
(11
)   5.
    INVESTMENT
    IN AND ADVANCES TO NON-CONSOLIDATED AFFILIATES AND RELATED PARTY
    TRANSACTIONS    Three Months Ended


Six Months EndedSeptember 30,


September 30,2009


2008


2009


2008Net sales

$
128


$
167


$
241


$
324Costs, expenses and provisions for taxes on income


131



146



247



288Net income (loss)

$
(3
)

$
21


$
(6
)

$
36     Three Months Ended


Six Months EndedSeptember 30,


September 30,2009


2008


2009


2008Incremental depreciation and amortization expense

$
12


$
13


$
24


$
27Tax benefit


(3
)


(4
)


(7
)


(9
)Incremental depreciation and amortization expense, net

$
9


$
9


$
17


$
18    12




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##### Table of Contents



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


Six Months EndedSeptember 30,


September 30,2009


2008


2009


2008Purchases of tolling services and electricityAluminium Norf GmbH(A)

$
64


$
74


$
120


$
147Consorcio Candonga(B)






10



1



13Total purchases from related parties

$
64


$
84


$
121


$
160     (A)
    
    We purchase tolling services from Aluminium Norf GmbH.(B)
    
    We obtain electricity from Consorcio Candonga for our operations
    in South America.    September 30,


March 31,2009


2009Accounts receivable(A)

$
13


$
25Other long-term receivables(A)

$
24


$
23Accounts payable(B)

$
55


$
48     (A)
    
    The balances represent current and non-current portions of a
    loan due from Aluminium Norf GmbH.(B)
    
    We purchase tolling services from Aluminium Norf GmbH and
    electricity from Consorcio Candonga. 13




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
   6.
    DEBT    September 30, 2009


March 31, 2009Unamortized








UnamortizedInterest





Fair Value


Carrying





Fair Value


CarryingRates(A)


Principal


Adjustments(B)


Value


Principal


Adjustments(B)


ValueThird party debt:Short term borrowings


2.09
%

$
177


$



$
177


$
264


$



$
264Novelis Inc.11.5% Senior Notes, due February 2015


11.50
%


185



(4
)


181











7.25% Senior Notes, due February 2015


7.25
%


1,124



44



1,168



1,124



47



1,171Floating rate Term Loan Facility, due July 2014


2.25
%(C)


293







293



295







295Novelis CorporationFloating rate Term Loan Facility, due July 2014


2.27
%(C)


864



(50
)


814



867



(54
)


813Novelis Switzerland S.A.Capital lease obligation, due December 2019 (Swiss francs (CHF)
    50 million)


7.50
%


47



(3
)


44



45



(3
)


42Capital lease obligation, due August 2011 (CHF 2 million)


2.49
%


2







2



2







2Novelis Korea LimitedBank loan, due October 2010


3.00
%(C)


100







100



100







100Bank loan, due February 2010 (Korean won (KRW) 50 billion)


3.81
%


42







42



37







37Bank loan, due May 2009 (KRW 10 billion)


7.47
%














7







7OtherOther debt, due December 2011 through December 2012


1.00
%


1







1



1







1Total debt  third parties






2,835



(13
)


2,822



2,742



(10
)


2,732Less: Short term borrowings






(177
)






(177
)


(264
)






(264
)Current portion of long term debt






(58
)


9



(49
)


(59
)


8



(51
)Long-term debt, net of current portion  third
    parties:





$
2,600


$
(4
)

$
2,596


$
2,419


$
(2
)

$
2,417Related party debtNovelis Inc.Unsecured credit facility  related party, due January
    2015


13.00
%

$



$



$



$
91


$



$
91     (A)
    
    Interest rates are as of September 30, 2009 and exclude the
    effects of accretion/amortization of fair value adjustments as a
    result of the Arrangement and the debt exchange completed in the
    fourth quarter of fiscal 2009.(B)
    
    Debt existing at the time of the Arrangement was recorded at
    fair value. Additional floating rate Term Loan with a face value
    of $220 million issued in March 2009 was recorded at a fair
    value of $165 million. Additional 11.5% Senior Note
    with a face value of $185 million issued in August 2009 was
    recorded at fair value of $181 million (see
    11.5% Senior Notesbelow).(C)
    
    Excludes the effect of related interest rate swaps and the
    effect of accretion of fair value. 14




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
     As of September 30, 2009

AmountWithin one year

$
582 years


1163 years


164 years


165 years


1,114Thereafter


1,338Total

$
2,658   11.5% Senior
    Notes
      
    all of our existing and future Canadian and U.S. restricted
    subsidiaries,
    certain of our existing foreign restricted subsidiaries and
    our other restricted subsidiaries that guarantee debt in the
    future under any credit facilities, provided that the borrower
    of such debt is our company or a Canadian or a
    U.S. subsidiary.    Senior
    Secured Credit Facilities
    Short-Term
    Borrowings and Lines of Credit
   15




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
      Interest
    Rate Swaps
        7.
    SHARE-BASED
    COMPENSATION    Three Months Ended


Six Months EndedSeptember 30,


September 30,2009


2008


2009


2008Novelis Long-Tem Incentive Plan 2009

$
1


$



$
1


$
Novelis Long-Tem Incentive Plan 2010


1







1



Total compensation expense

$
2


$



$
2


$
   Novelis
    Long-Term Incentive Plan
   16




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##### Table of Contents



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


Weighted Average


AggregateAverage


Remaining


IntrinsicNumber of


Exercise Price


Contractual Term


Value (USD2010 LTIP

SARs


(in Indian Rupees)


(In years)


in millions)SARs outstanding as of March 31, 2009














(B
)Granted


13,459,711
(A)


85.79Exercised














Forfeited/Cancelled






Expired






SARs outstanding as of September 30, 2009


13,459,711



85.79



6.74


$
12   Weighted


Weighted Average


AggregateAverage


Remaining


IntrinsicNumber of


Exercise Price


Contractual Term


Value (USD2009 LTIP

SARs


(in Indian Rupees)


(In years)


in millions)SARs outstanding as of March 31, 2009


20,606,906
(A)


60.05



6.22



(B
)Granted






Exercised






Forfeited/Cancelled


(9,041,795
)


Expired






SARs outstanding as of September 30, 2009


11,565,111



60.05



5.72


$
17     (A)
    
    Represents total SARs approved by the Board of Directors for
    grant. As noted above, due to the performance criterion based on
    a future earnings target, the amount deemed granted for
    accounting purposes is limited to the individual tranches
    subject to an established earnings target, which includes the
    current and prior fiscal years.(B)
    
    The aggregate intrinsic value is zero as the market value of a
    share of Hindalco stock was less than the SAR exercise price.   17




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##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
    2010 LTIP

2009 LTIPExpected volatility

49.9  56.4%

54.0  57.1%Weighted average volatility

53.0%

55.9%Dividend yield

1.05%

1.05%Risk-free interest rate

6.8  7.1%

6.61  6.93%Expected life

3.7  5.2 years

3.2  4.2 years       8.
    POSTRETIREMENT
    BENEFIT PLANS      Pension Benefit PlansThree Months Ended


Six Months EndedSeptember 30,


September 30,2009


2008


2009


2008Service cost

$
8


$
11


$
16


$
21Interest cost


14



15



28



30Expected return on assets


(10
)


(13
)


(20
)


(26
)Amortization  (gains) losses


3



(1
)


6



(1
)Curtailment/settlement losses














1Net periodic benefit cost

$
15


$
12


$
30


$
25   Other BenefitsThree Months Ended


Six Months EndedSeptember 30,


September 30,2009


2008


2009


2008Service cost

$
1


$
1


$
3


$
3Interest cost


3



2



6



5Amortization  (gains) losses






1







1Curtailment/settlement losses














(2
)Net periodic benefit cost

$
4


$
4


$
9


$
7  18




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
    Employer
    Contributions to Plans
    Three Months Ended


Six Months EndedSeptember 30,


September 30,2009


2008


2009


2008Funded pension plans

$
9


$
7


$
12


$
11Unfunded pension plans


4



4



8



8Savings and defined contribution pension plans


4



4



7



9Total contributions

$
17


$
15


$
27


$
28     9.
    CURRENCY
    (GAINS) LOSSES    Three Months Ended


Six Months EndedSeptember 30,


September 30,2009


2008


2009


2008Net (gain) loss on change in fair value of currency derivative
    instruments(A)

$
(29
)

$
(7
)

$
(51
)

$
(39
)Net (gain) loss on remeasurement of monetary assets and
    liabilities(B)


(3
)


36



(7
)


56$
(32
)

$
29


$
(58
)

$
17     (A)
    
    Included in (Gain) loss on change in fair value of derivative
    instruments, net.(B)
    
    Included in Other (income) expenses, net.    Six Months Ended


Year EndedSeptember 30, 2009


March 31,2009Cumulative currency translation adjustment  beginning
    of period

$
(78
)

$
85Effect of changes in exchange rates


138



(163
)Cumulative currency translation adjustment  end of
    period

$
60


$
(78
)  19




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  10.
    FINANCIAL
    INSTRUMENTS AND COMMODITY CONTRACTS    September 30, 2009Assets


Liabilities


Net Fair ValueCurrent


Noncurrent


Current


Noncurrent(A)


Assets/(Liabilities)Derivatives designated as hedging instruments:Currency exchange contracts

$



$



$
(1
)

$
(27
)

$
(28
)Interest rate swaps






1



(13
)






(12
)Electricity swap










(6
)


(15
)


(21
)Total derivatives designated as hedging instruments






1



(20
)


(42
)


(61
)Derivatives not designated as hedging instruments:Aluminum contracts


130



19



(84
)


(3
)


62Currency exchange contracts


40



27



(37
)


(7
)


23Energy contracts


1



1



(4
)






(2
)Total derivatives not designated as hedging instruments


171



47



(125
)


(10
)


83Total derivative fair value

$
171


$
48


$
(145
)

$
(52
)

$
22   March 31, 2009Assets


Liabilities


Net Fair ValueCurrent


Noncurrent


Current


Noncurrent(A)


Assets/(Liabilities)Derivatives designated as hedging instruments:Currency exchange contracts

$



$



$



$
(11
)

$
(11
)Interest rate swaps










(13
)






(13
)Electricity swap










(6
)


(12
)


(18
)Total derivatives designated as hedging instruments










(19
)


(23
)


(42
)Derivatives not designated as hedging instruments:Aluminum contracts


99



41



(532
)


(13
)


(405
)Currency exchange contracts


20



31



(77
)


(12
)


(38
)Energy contracts










(12
)






(12
)Total derivatives not designated as hedging instruments


119



72



(621
)


(25
)


(455
)Total derivative fair value

$
119


$
72


$
(640
)

$
(48
)

$
(497
)     (A)
    
    The noncurrent portions of derivative liabilities are included
    in Other long-term liabilities in the accompanying condensed
    consolidated balance sheets. 20




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
   Net
    Investment Hedges
      Cash Flow
    Hedges
         21




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
    Three
    Month Comparison:
  Amount of Gain or (Loss)Amount of Gain or (Loss)

Recognized in Income onAmount of Gain or (Loss)

Reclassified from Accumulated

Derivative (Ineffective PortionRecognized in OCI on Derivative

OCI into Income

and Amount Excluded from(Effective Portion)

(Effective Portion)

Effectiveness Testing)Three Months

Three Months

Three Months

Three Months

Three Months

Three MonthsEnded

Ended

Ended

Ended

Ended

EndedSeptember 30,

September 30,

September 30,

September 30,

September 30,

September 30,2009

2008

2009

2008

2009

2008Electricity swap

$
(14
)

$
(13
)

$
1


$
4


$



$
Interest rate swaps

$



$
1


$



$



$



$
   Six Month
    Comparison:
  Amount of Gain or (Loss)Amount of Gain or (Loss)

Recognized in Income onAmount of Gain or (Loss)

Reclassified from Accumulated

Derivative (Ineffective PortionRecognized in OCI on Derivative

OCI into Income

and Amount Excluded from(Effective Portion)

(Effective Portion)

Effectiveness Testing)Six Months

Six Months

Six Months

Six Months

Six Months

Six MonthsEnded

Ended

Ended

Ended

Ended

EndedSeptember 30,

September 30,

September 30,

September 30,

September 30,

September 30,2009

2008

2009

2008

2009

2008Electricity swap

$
(3
)

$



$
2


$
8


$
2


$
Interest rate swaps

$
1


$
11


$



$



$



$
   Derivative
    Instruments Not Designated as Hedges
         22




---



##### Table of Contents



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


Six Months EndedSeptember 30,


September 30,2009


2008


2009


2008Derivative Instruments Not Designated as HedgesAluminum contracts

$
49


$
(181
)

$
97


$
(159
)Currency exchange contracts


29



7



51



39Energy contracts






(16
)






(9
)Gain (loss) recognized


78



(190
)


148



(129
)Derivative Instruments Designated as Cash Flow HedgesInterest rate swaps














Electricity swap


2



5



4



9Gain (loss) on change in fair value of derivative instruments,
    net

$
80


$
(185
)

$
152


$
(120
)   11.
    FAIR
    VALUE MEASUREMENTS         23




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
     September 30, 2009Fair Value Measurements UsingLevel 1(A)

Level 2(B)

Level 3(C)

TotalAssets  Derivative instruments

$



$
219


$



$
219Liabilities  Derivative instruments

$



$
(166
)

$
(31
)

$
(197
)   March 31, 2009Fair Value Measurements UsingLevel 1(A)

Level 2(B)

Level 3(C)

TotalAssets  Derivative instruments

$



$
191


$



$
191Liabilities  Derivative instruments

$



$
(644
)

$
(44
)

$
(688
)           Level 3DerivativeInstruments(A)Balance as of March 31, 2009

$
(44
)Net realized/unrealized gains included in earnings(B)


15Net realized/unrealized gains included in Other comprehensive
    income(C)


(9
)Net purchases, issuances and settlements


7Net transfers in and/or (out) of Level 3


Balance as of September 30, 2009

$
(31
)     (A)
    
    Represents derivative assets net of derivative liabilities.(B)
    
    Included in (Gain) loss on change in fair value of derivative
    instruments, net.(C)
    
    Included in Change in fair value of effective portion of hedges,
    net. 24




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
   Financial
    Instruments Not Recorded at Fair Value
    September 30 ,2009

March 31, 2009Carrying

Fair

Carrying

FairValue

Value

Value

ValueAssetsLong-term receivables from related parties

$
24


$
22


$
23


$
21LiabilitiesLong-term debtNovelis Inc.11.50% Senior Notes, due February 2015


181



192







7.25% Senior Notes, due February 2015


1,168



981



1,171



454Floating rate Term Loan facility, due July 2014


293



228



295



200Unsecured credit facility  related party, due January
    2015










91



93Novelis CorporationFloating rate Term Loan facility, due July 2014


814



668



813



584Novelis Switzerland S.A.Capital lease obligation, due December 2019 (CHF 50 million)


44



39



42



36Capital lease obligation, due August 2011 (CHF 2 million)


2



1



2



2Novelis Korea LimitedBank loan, due October 2010


100



92



100



83Bank loan, due February 2010 (KRW 50 billion)


42



41



37



33Bank loan, due May 2009 (KRW 10 billion)










7



7OtherOther debt, due December 2011 through December 2012


1



1



1



1Financial commitmentsLetters of credit






153







134   12.
    OTHER
    (INCOME) EXPENSES, NET    Three Months Ended


Six Months EndedSeptember 30,


September 30,2009


2008


2009


2008Exchange (gains) losses, net

$
(3
)

$
36


$
(7
)

$
56(Gain) loss on reversal of accrued legal claim






(26
)






(26
)Gain on disposal of property, plant and equipment, net






(1
)


(1
)


(2
)Gain on tax litigation settlement in Brazil










(6
)


Other, net


(3
)


1



(5
)


5Other (income) expenses, net

$
(6
)

$
10


$
(19
)

$
33  25




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
   13.
    INCOME
    TAXES    Three Months Ended


Six Months EndedSeptember 30,


September 30,2009


2008


2009


2008Pre-tax income before equity in net loss of non-consolidated
    affiliates and noncontrolling interests

$
311


$
(274
)

$
594


$
(211
)Canadian statutory tax rate


30
%


31
%


30
%


31
%Provision at the Canadian statutory rate


93



(85
)


178



(65
)Increase (decrease) for taxes on income (loss) resulting from:Exchange translation items


8



(22
)


20



(13
)Exchange remeasurement of deferred income taxes


13



(41
)


36



(21
)Change in valuation allowances


2



15



3



18Expense (income) items not subject to tax


(5
)


10



(4
)


6Enacted statutory tax rate changes






2







2Tax rate differences on foreign earnings


2



(54
)


(9
)


(68
)Uncertain tax positions, net


(26
)






(25
)


1Other  net






7







7Provision

$
87


$
(168
)

$
199


$
(133
)Effective tax rate


28
%


61
%


34
%


63
%       14.
    COMMITMENTS
    AND CONTINGENCIES  Legal
    Proceedings
  Coca-Cola
    Lawsuit. Coca-Cola
 26




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  Coca-Cola Coca-Cola
  Environmental
    Matters
      clean-up
   27




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  Brazil
    Tax Matters
    35-45% 80-100% 60-120 monthly 30-35% 70-80% 120-180 monthly 25-30% 60-70%
  Guarantees
    of Indebtedness
          Maximum


LiabilityPotential


CarryingType of Entity

Future Payment


ValueWholly-owned subsidiaries

$
43


$
5Aluminium Norf GmbH

$
15


$
    28




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
   15.
    SEGMENT,
    MAJOR CUSTOMER AND MAJOR SUPPLIER INFORMATION  Segment
    Information
    Adjustment to Eliminate Proportional
    Consolidation.
      Selected
    Segment Financial Information
  Adjustment toEliminateNorth








South


Corporate


ProportionalTotal Assets

America


Europe


Asia


America


and Other


Consolidation


TotalSeptember 30, 2009

$
2,714


$
2,997


$
881


$
1,422


$
39


$
(308
)

$
7,745March 31, 2009

$
2,973


$
2,750


$
732


$
1,296


$
50


$
(234
)

$
7,567   Comparison
    of Three Month
    Data:
  Adjustment toEliminateSelected Operating Results

North








South


Corporate


ProportionalThree Months Ended September 30, 2009

America


Europe


Asia


America


and Other


Consolidation


TotalNet sales

$
822


$
735


$
382


$
252


$



$
(10
)

$
2,181Depreciation and amortization


39



46



12



15



1



(21
)


92Capital expenditures


7



11



2



5







(3
)


22   29




---



##### Table of Contents



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

North








South


Corporate


ProportionalThree Months Ended September 30, 2008

America


Europe


Asia


America


and Other


Consolidation


TotalNet sales

$
1,111


$
1,097


$
458


$
300


$



$
(7
)

$
2,959Depreciation and amortization


41



54



13



19







(20
)


107Capital expenditures


10



17



6



9



1



(6
)


37   Comparison
    of Six Month
    Data:
  Adjustment toEliminateSelected Operating Results

North








South


Corporate


ProportionalSix Months Ended September 30, 2009

America


Europe


Asia


America


and Other


Consolidation


TotalNet sales

$
1,589


$
1,400


$
708


$
456


$



$
(12
)

$
4,141Depreciation and amortization


80



94



23



33



2



(40
)


192Capital expenditures


13



22



5



12







(6
)


46   Adjustment toEliminateSelected Operating Results

North








South


Corporate


ProportionalSix Months Ended September 30, 2008

America


Europe


Asia


America


and Other


Consolidation


TotalNet sales

$
2,194


$
2,315


$
968


$
595


$



$
(10
)

$
6,062Depreciation and amortization


83



117



28



36



1



(42
)


223Capital expenditures


17



36



11



15



1



(10
)


70  30




---



##### Table of Contents



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


Six Months EndedSeptember 30,


September 30,2009


2008


2009


2008North America

$
75


$
2


$
132


$
44Europe


60



62



93



173Asia


48



(3
)


86



28South America


36



48



47



95Corporate and other(A)


(19
)


(20
)


(34
)


(33
)Depreciation and amortization


(92
)


(107
)


(192
)


(223
)Interest expense and amortization of debt issuance costs


(44
)


(46
)


(87
)


(91
)Interest income


3



5



6



10Unrealized gains (losses) on change in fair value of derivative
    instruments, net(B)


254



(221
)


553



(201
)Adjustment to eliminate proportional consolidation


(17
)


(18
)


(33
)


(36
)Restructuring recoveries (charges), net


(3
)






(6
)


1Other costs, net






26



9



22Income (loss) before income taxes


301



(272
)


574



(211
)Income tax provision (benefit)


87



(168
)


199



(133
)Net income (loss)


214



(104
)


375



(78
)Net income attributable to noncontrolling interests


19







37



2Net income (loss) attributable to our common shareholder

$
195


$
(104
)

$
338


$
(80
)     (A)
    
    Corporate and other includes functions that are managed directly
    from our corporate office, which focuses on strategy development
    and oversees governance, policy, legal compliance, human
    resources and finance matters. These expenses have not been
    allocated to the regions. It also includes realized gains
    (losses) on corporate derivative instruments.(B)
    
    Unrealized gains (losses) on change in fair value of derivative
    instruments, net represents the portion of gains (losses) that
    were not settled in cash during the period. Total realized and
    unrealized gains (losses) are shown in the table below and are
    included in the aggregate each period in (Gain) loss on change
    in fair value of derivative instruments, net on our condensed
    consolidated statements of operations. 31




---



##### Table of Contents



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


Six Months EndedSeptember 30,


September 30,2009


2008


2009


2008Realized gains (losses) included in segment income

$
(174
)

$
36


$
(402
)

$
81Realized gains (losses) on corporate derivative instruments










1



Unrealized gains (losses)


254



(221
)


553



(201
)Gains (losses) on change in fair value of derivative
    instruments, net

$
80


$
(185
)

$
152


$
(120
)   Information
    about Major Customers and Primary Supplier
    Three Months Ended

Six Months EndedSeptember 30,

September 30,2009

2008

2009

2008Rexam


16
%


17
%


18
%


16
%Anheuser-Busch


11
%


7
%


11
%


7
%     Three Months Ended

Six Months EndedSeptember 30,

September 30,2009

2008

2009

2008Purchases from Rio Tinto Alcan as a percentage of total


45
%


36
%


41
%


35
%   16.
    SUPPLEMENTAL
    INFORMATION    September 30,


March 31,2009


2009Currency translation adjustment

$
62


$
(62
)Fair value of effective portion of hedges


(21
)


(19
)Pension and other benefits


(63
)


(67
)Accumulated other comprehensive income (loss)

$
(22
)

$
(148
)     Six Months EndedSeptember 30,2009

2008Interest paid

$
78


$
82Income taxes paid

$
13


$
67  32




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
   17.
    SUPPLEMENTAL
    GUARANTOR INFORMATION  Rule 3-10(h)(1) Regulation S-X,
   33




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  NOVELIS
    INC.
  CONDENSED
    CONSOLIDATING STATEMENT OF OPERATIONS
 (In
    millions)
  Three Months Ended September 30, 2009Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedNet sales

$
218


$
1,743


$
606


$
(386
)

$
2,181Cost of goods sold (exclusive of depreciation and amortization
    shown below)


193



1,408



513



(386
)


1,728Selling, general and administrative expenses


9



59



15







83Depreciation and amortization


1



67



24







92Research and development expenses


6



2



1







9Interest expense and amortization of debt issuance costs


29



29



2



(16
)


44Interest income


(17
)


(2
)






16



(3
)(Gain) loss on change in fair value of derivative instruments,
    net


(1
)


(71
)


(8
)






(80
)Restructuring charges, net






1



2







3Equity in net (income) loss of non-consolidated affiliates


(158
)


10







158



10Other (income) expenses, net


(8
)


17



(15
)






(6
)54



1,520



534



(228
)


1,880Income (loss) before income taxes


164



223



72



(158
)


301Income tax provision (benefit)


(31
)


103



15







87Net income (loss)


195



120



57



(158
)


214Less: Net income (loss) attributable to noncontrolling interests










19







19Net income (loss) attributable to our common shareholder

$
195


$
120


$
38


$
(158
)

$
195   34




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  Three Months Ended September 30, 2008Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedNet sales

$
389


$
2,482


$
767


$
(679
)

$
2,959Cost of goods sold (exclusive of depreciation and amortization
    shown below)


384



2,364



722



(679
)


2,791Selling, general and administrative expenses


6



62



21







89Depreciation and amortization


6



77



24







107Research and development expenses


7



3











10Interest expense and amortization of debt issuance costs


29



37



7



(27
)


46Interest income


(22
)


(6
)


(4
)


27



(5
)(Gain) loss on change in fair value of derivative instruments,
    net


3



194



(12
)






185Restructuring charges, net


(1
)


1











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


81



(2
)






(81
)


(2
)Other (income) expenses, net


(1
)


(22
)


33







10492



2,708



791



(760
)


3,231Income (loss) before income taxes


(103
)


(226
)


(24
)


81



(272
)Income tax provision (benefit)


1



(164
)


(5
)






(168
)Net income (loss)


(104
)


(62
)


(19
)


81



(104
)Less: Net income (loss) attributable to noncontrolling interests


















Net income (loss) attributable to our common shareholder

$
(104
)

$
(62
)

$
(19
)

$
81


$
(104
)  35




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  NOVELIS
    INC.
  CONDENSED
    CONSOLIDATING STATEMENT OF OPERATIONS
 (In
    millions)
  Six Months Ended September 30, 2009Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedNet sales

$
386


$
3,277


$
1,157


$
(679
)

$
4,141Cost of goods sold (exclusive of depreciation and amortization
    shown below)


349



2,622



969



(679
)


3,261Selling, general and administrative expenses


19



115



27







161Depreciation and amortization


2



145



45







192Research and development expenses


11



5



1







17Interest expense and amortization of debt issuance costs


55



59



5



(32
)


87Interest income


(32
)


(5
)


(1
)


32



(6
)(Gain) loss on change in fair value of derivative instruments,
    net


(3
)


(132
)


(17
)






(152
)Restructuring charges, net






4



2







6Equity in net (income) loss of non-consolidated affiliates


(305
)


20







305



20Other (income) expenses, net


(15
)


24



(28
)






(19
)81



2,857



1,003



(374
)


3,567Income (loss) before income taxes


305



420



154



(305
)


574Income tax provision (benefit)


(33
)


204



28







199Net income (loss)


338



216



126



(305
)


375Net income (loss) attributable to noncontrolling interests










37







37Net income (loss) attributable to our common shareholder

$
338


$
216


$
89


$
(305
)

$
338   36




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  Six Months Ended September 30, 2008Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedNet sales

$
784


$
5,064


$
1,603


$
(1,389
)

$
6,062Cost of goods sold (exclusive of depreciation and amortization
    shown below)


771



4,741



1,499



(1,389
)


5,622Selling, general and administrative expenses


6



124



43







173Depreciation and amortization


12



166



45







223Research and development expenses


15



6



1







22Interest expense and amortization of debt issuance costs


57



71



15



(52
)


91Interest income


(43
)


(11
)


(8
)


52



(10
)(Gain) loss on change in fair value of derivative instruments,
    net


3



133



(16
)






120Restructuring charges, net


(1
)














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


50











(50
)


Other (income) expenses, net


(8
)


(7
)


48







33862



5,223



1,627



(1,439
)


6,273Income (loss) before income taxes


(78
)


(159
)


(24
)


50



(211
)Income tax provision (benefit)


2



(131
)


(4
)






(133
)Net income (loss)


(80
)


(28
)


(20
)


50



(78
)Net income (loss) attributable to noncontrolling interests










2







2Net income (loss) attributable to our common shareholder

$
(80
)

$
(28
)

$
(22
)

$
50


$
(80
)  37




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  NOVELIS
    INC.
  CONDENSED
    CONSOLIDATING BALANCE SHEET
 (In
    millions)
  As of September 30, 2009Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedASSETSCurrent assetsCash and cash equivalents

$
11


$
157


$
78


$



$
246Accounts receivable, net of allowances third parties


25



843



338







1,206 related parties


666



202



36



(891
)


13Inventories


45



608



276







929Prepaid expenses and other current assets


4



29



17







50Fair value of derivative instruments


4



168



15



(16
)


171Deferred income tax assets






30



7







37Total current assets


755



2,037



767



(907
)


2,652Property, plant and equipment, net


144



2,097



528







2,769Goodwill






600



11







611Intangible assets, net






778



8







786Investments in and advances to non-consolidated affiliates


1,993



763



1



(1,993
)


764Fair value of derivative instruments, net of current portion


1



24



25



(2
)


48Deferred income tax assets






4



1







5Other long-term assets


1,047



213



79



(1,220
)


119Total assets

$
3,940


$
6,516


$
1,420


$
(4,122
)

$
7,754LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt

$
3


$
4


$
42


$



$
49Short-term borrowings third parties


50



116



11







177 related parties


8



474



19



(501
)


Accounts payable third parties


56



479



346







881 related parties


59



275



109



(388
)


55Fair value of derivative instruments


9



113



39



(16
)


145Accrued expenses and other current liabilities


40



304



86



(2
)


428Deferred income tax liabilities






12











12Total current liabilities


225



1,777



652



(907
)


1,747Long-term debt, net of current portion third parties


1,640



855



101







2,596 related parties


122



994



104



(1,220
)


Deferred income tax liabilities






506



12







518Accrued postretirement benefits


30



370



128







528Other long-term liabilities


40



311



5



(2
)


354Total liabilities


2,057



4,813



1,002



(2,129
)


5,743Commitments and contingenciesShareholders equityCommon stock


















Additional paid-in capital


3,497















3,497Retained earnings/(accumulated deficit)/owners net
    investment


(1,592
)


1,730



392



(2,122
)


(1,592
)Accumulated other comprehensive income (loss)


(22
)


(27
)


(102
)


129



(22
)Total Novelis shareholders equity


1,883



1,703



290



(1,993
)


1,883Noncontrolling interests










128







128Total liabilities and shareholders equity

$
3,940


$
6,516


$
1,420


$
(4,122
)

$
7,754  38




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  NOVELIS
    INC.
  CONDENSED
    CONSOLIDATING BALANCE SHEET
 (In
    millions)
   As of March 31, 2009Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedASSETSCurrent assetsCash and cash equivalents

$
3


$
175


$
70


$



$
248Accounts receivable, net of allowances third parties


21



761



267







1,049 related parties


411



183



32



(601
)


25Inventories


31



523



239







793Prepaid expenses and other current assets


4



31



16







51Fair value of derivative instruments






145



7



(33
)


119Deferred income tax assets






192



24







216Total current assets


470



2,010



655



(634
)


2,501Property, plant and equipment, net


162



2,146



491







2,799Goodwill






570



12







582Intangible assets, net






787











787Investments in and advances to non-consolidated affiliates


1,647



719







(1,647
)


719Fair value of derivative instruments, net of current portion






46



28



(2
)


72Deferred income tax assets


1



3











4Other long-term assets


1,028



207



96



(1,228
)


103Total assets

$
3,308


$
6,488


$
1,282


$
(3,511
)

$
7,567LIABILITIES AND SHAREHOLDERS EQUITYCurrent liabilitiesCurrent portion of long-term debt

$
3


$
4


$
44


$



$
51Short-term borrowings third parties






231



33







264 related parties


7



330



22



(359
)


Accounts payable third parties


33



458



234







725 related parties


41



157



90



(240
)


48Fair value of derivative instruments


7



540



126



(33
)


640Accrued expenses and other current liabilities


34



395



90



(3
)


516Deferred income tax liabilities


















Total current liabilities


125



2,115



639



(635
)


2,244Long-term debt, net of current portion third parties


1,464



852



101







2,417 related parties


223



976



120



(1,228
)


91Deferred income tax liabilities






459



10







469Accrued postretirement benefits


27



346



122







495Other long-term liabilities


50



288



5



(1
)


342Total liabilities


1,889



5,036



997



(1,864
)


6,058Commitments and contingenciesShareholders equityCommon stock


















Additional paid-in capital


3,497















3,497Retained earnings/(accumulated deficit)/owners net
    investment


(1,930
)


1,533



325



(1,858
)


(1,930
)Accumulated other comprehensive income (loss)


(148
)


(81
)


(130
)


211



(148
)Total Novelis shareholders equity


1,419



1,452



195



(1,647
)


1,419Noncontrolling interests










90







90Total liabilities and shareholders equity

$
3,308


$
6,488


$
1,282


$
(3,511
)

$
7,567  39




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  NOVELIS
    INC.
  CONDENSED
    CONSOLIDATING STATEMENT OF CASH FLOWS
 (In
    millions)
  Six Months Ended September 30, 2009Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedOPERATING ACTIVITIESNet cash provided by (used in) operating activities

$
37


$
353


$
152


$
(78
)

$
464INVESTING ACTIVITIESCapital expenditures


(1
)


(34
)


(11
)






(46
)Proceeds from sales of property, plant and equipment










4







4Changes to investment in and advances to non-consolidated
    affiliates






2











2Proceeds from loans receivable, net  related parties






14











14Net proceeds from settlement of derivative instruments


(2
)


(332
)


(82
)






(416
)Net cash provided by (used in) investing activities


(3
)


(350
)


(89
)






(442
)FINANCING ACTIVITIESProceeds from issuance of debt  third party


177















177Proceeds from issuance of debt  related party


3















3Principal payments third parties


(1
)


(6
)


(9
)






(16
) related parties


(256
)


(41
)


(13
)


216



(94
)Short-term borrowings, net third parties


50



(121
)


(25
)






(96
) related parties


1



142



(5
)


(138
)


Dividends  noncontrolling interests










(13
)






(13
)Net cash provided by (used in) financing activities


(26
)


(26
)


(65
)


78



(39
)Net increase (decrease) in cash and cash equivalents


8



(23
)


(2
)






(17
)Effect of exchange rate changes on cash balances held in
    foreign currencies






5



10







15Cash and cash equivalents  beginning of period


3



175



70







248Cash and cash equivalents  end of period

$
11


$
157


$
78


$



$
246  40




---



##### Table of Contents



Novelis
    Inc.
  NOTES TO
    THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
    (unaudited)  (Continued)
  NOVELIS
    INC.
  CONDENSED
    CONSOLIDATING STATEMENT OF CASH FLOWS
 (In
    millions)
  Six Months Ended September 30, 2008Non-Parent


Guarantors


Guarantors


Eliminations


ConsolidatedOPERATING ACTIVITIESNet cash provided by (used in) operating activities

$
15


$
(272
)

$
(24
)

$
(109
)

$
(390
)INVESTING ACTIVITIESCapital expenditures


(3
)


(50
)


(17
)






(70
)Proceeds from sales of property, plant and equipment






1



1







2Changes to investment in and advances to non-consolidated
    affiliates






13











13Proceeds from loans receivable, net  related parties






13











13Net proceeds from settlement of derivative instruments






66



28







94Net cash provided by (used in) investing activities


(3
)


43



12







52FINANCING ACTIVITIESPrincipal payments third parties


(1
)


(5
)


(1
)






(7
) related parties






(89
)


(140
)


229



Short-term borrowings, net third parties






279



(16
)






263 related parties


6



(10
)


124



(120
)


Dividends  noncontrolling interests










(5
)






(5
)Net cash provided by (used in) financing activities


5



175



(38
)


109



251Net increase (decrease) in cash and cash equivalents


17



(54
)


(50
)






(87
)Effect of exchange rate changes on cash balances held in
    foreign currencies






(6
)


(14
)






(20
)Cash and cash equivalents  beginning of period


12



177



137







326Cash and cash equivalents  end of period

$
29


$
117


$
73


$



$
219  41




---



##### Table of Contents



Item 2.
    Managements
    Discussion and Analysis of Financial Condition and Results of
    Operations  FORWARD
    LOOKING STATEMENTS
  The following information should be read together with our
    unaudited condensed consolidated financial statements and
    accompanying notes included elsewhere in this quarterly report
    for a more complete understanding of our financial condition and
    results of operations. The following discussion contains
    forward-looking statements that reflect our plans, estimates and
    beliefs. Our actual results could differ materially from those
    discussed in these forward-looking statements. Factors that
    could cause or contribute to these differences include, but are
    not limited to, those discussed below, particularly in
    SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND
    MARKET DATA.
  OVERVIEW
    AND REFERENCES
        Form 10-K Form 10-K Form 8-K
    HIGHLIGHTS
    
    We reported pre-tax income of $301 million for the three
    months ended September 30, 2009, as compared to pre-tax
    loss of $272 million for the three months ended
    September 30, 2008. Current quarter results include
    $254 million of unrealized gains on derivatives as compared
    to $221 million of losses in the prior year. The
    $254 million of unrealized gains includes a
    $169 million reversal of previously recognized losses upon
    settlement of derivatives and $85 million of unrealized
    gains relating 42




---



##### Table of Contents



to mark to market adjustments on metal and currency derivatives.
    The results for the three months ended September 30, 2008
    also include a $26 million gain on the reversal of a legal
    claim.  
    We reported pre-tax income of $574 million for the six
    months ended September 30, 2009, as compared to pre-tax
    loss of $211 million for the six months ended
    September 30, 2008. Current results include
    $553 million of unrealized gains on derivatives as compared
    to $201 million of losses in the prior year. The
    $553 million of unrealized gains includes a
    $410 million reversal of previously recognized losses upon
    settlement of derivatives and $143 million of unrealized
    gains relating to mark to market adjustments on metal and
    currency derivatives. The results for the six months ended
    September 30, 2008 also include a $26 million gain on
    the reversal of a legal claim.
    Shipments of flat rolled products were 8% and 12% less than the
    comparable three and six month periods a year ago, which was
    before the global economic slowdown. However, flat rolled
    shipments for the second quarter of fiscal 2009 were up in all
    regions over the first quarter of fiscal 2010, with the most
    significant increases in South America and Europe. Shipments of
    flat rolled products were 14% higher than the low levels
    experienced in the fourth quarter of fiscal 2009.
    We continue to effectively manage inventory levels. Metal
    inventories as of September 30, 2009 totaled 325 kt, up 9%
    from an inventory level of 299 kt as of March 31, 2009.  BUSINESS
    AND INDUSTRY CLIMATE
   43




---



##### Table of Contents



Key
    Sales and Shipment Trends
  Three Months Ended


Year Ended


Three Months EndedJune 30,


September 30,


December 31,


March 31,


March 31,


June 30,


September 30,2008


2008


2008


2009


2009


2009


2009(In millions, except shipments which are in kt)Net sales

$
3,103


$
2,959


$
2,176


$
1,939


$
10,177


$
1,960


$
2,181Percentage increase (decrease) in net sales versus comparable
    previous year period


10
%


5
%


(20
)%


(32
)%


(10
)%


(37
)%


(26
)%Rolled product shipments:North America


286



293



242



246



1,067



254



258Europe


271



254



197



188



910



185



203Asia


133



122



106



86



447



130



139South America


87



87



87



85



346



81



93Total


777



756



632



605



2,770



650



693Beverage and food cans


417



416



363



361



1,557



395



407All other rolled products


360



340



269



244



1,213



255



286Total


777



756



632



605



2,770



650



693Percentage increase (decrease)
    in rolled products shipments versus
    comparable previous year period:North America


3
%


5
%


(10
)%


(11
)%


(3
)%


(11
)%


(12
)%Europe


(5
)%


(8
)%


(19
)%


(30
)%


(15
)%


(32
)%


(20
)%Asia


13
%


5
%


(21
)%


(30
)%


(9
)%


(2
)%


14
%South America


16
%


13
%


5
%


(2
)%


7
%


(7
)%


7
%Total


3
%


1
%


(13
)%


(20
)%


(7
)%


(16
)%


(8
)%Beverage and food cans


11
%


9
%


(6
)%


(7
)%


2
%


(5
)%


(2
)%All other rolled products


(5
)%


(7
)%


(22
)%


(33
)%


(17
)%


(29
)%


(16
)%Total


3
%


1
%


(13
)%


(20
)%


(7
)%


(16
)%


(8
)%         Business
    Model and Key Concepts
   44




---



##### Table of Contents



Three Months Ended





Six Months EndedSeptember 30,


Percent


September 30,


Percent2009


2008


Change


2009


2008


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

$
1,616


$
3,075



(47
)%

$
1,365


$
2,935



(53
)%Average cash price during the period

$
1,805


$
2,792



(35
)%

$
1,623


$
2,865



(43
)%Closing cash price as of end of period

$
1,850


$
2,395



(23
)%

$
1,850


$
2,395



(23
)%     
    Our products have a price structure based upon the LME price.
    Increases or decreases in the LME price have a direct impact on
    net sales, cost of goods sold and working capital.
    We pay cash to brokers to settle derivative contracts in advance
    of billing and collecting cash from our customers, which
    negatively impacts our liquidity position. The lag between
    derivative settlement and customer collection typically ranges
    from 30 to 60 days, which temporarily reduces our liquidity
    in periods following declines in LME. During the six months
    ended September 30, 2009, we had net outflows of
    $416 million for payments related to the settlement of
    derivatives.    Metal
    Price Ceilings
   45




---



##### Table of Contents




    We maximize the amount of our internally supplied metal inputs
    from our smelting, refining and mining operations in Brazil and
    rely on output from our recycling operations which utilize used
    beverage cans (UBCs). Both of these sources of aluminum supply
    have historically provided an offsetting benefit to the metal
    price ceiling contracts. We refer to these two sources as
    internal hedges.
    We entered into derivative instruments to hedge projected
    aluminum volume requirements above our assumed internal hedge
    position, mitigating our exposure to further increases in LME
    prices. As a result of these instruments, we will continue to
    incur cash losses related to these contracts even if LME prices
    remain below the ceiling price. As of September 30, 2009
    the fair value of the liability associated with these derivative
    instruments was $14 million.    Metal
    Price Lag
     46




---



##### Table of Contents



Foreign
    Exchange Impact
    Exchange Rate as of


Average Exchange RateSeptember 30,


March 31,


Three Months Ended


Six Months Ended2009


2009


September 30, 2009


September 30, 2009U.S. dollar per Euro


1.462



1.328



1.438



1.328Brazilian real per U.S. dollar


1.781



2.301



1.841



1.932South Korean won per U.S. dollar


1,189



1,377



1,224



1,261Canadian dollar per U.S. dollar


1.073



1.258



1.084



1.115   Exchange Rate as of


Average Exchange RateSeptember 30,


March 31,


Three Months Ended


Six Months Ended,2008


2008


September 30, 2008


September 30, 2008U.S. dollar per Euro


1.408



1.581



1.478



1.520Brazilian real per U.S. dollar


1.923



1.744



1.708



1.673South Korean won per U.S. dollar


1,206



992



1,102



1,065Canadian dollar per U.S. dollar


1.060



1.028



1.050



1.028     RESULTS
    OF OPERATIONS FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2009
    COMPARED TO THE THREE MONTHS ENDED SEPTEMBER 30, 2008
       47




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##### Table of Contents



Segment
    Review
        Selected Operating Results

North








SouthThree Months Ended September 30, 2009

America


Europe


Asia


America


Eliminations


TotalNet sales

$
822


$
735


$
382


$
252


$
(10
)

$
2,181Shipments (kt)Rolled products


258



203



139



93







693Ingot products


8



15



1



7







31Total shipments


266



218



140



100







724   Selected Operating Results

North








SouthThree Months Ended September 30, 2008

America


Europe


Asia


America


Eliminations


TotalNet sales

$
1,111


$
1,097


$
458


$
300


$
(7
)

$
2,959Shipments (kt)Rolled products


293



254



122



87







756Ingot products


14



27



4



5







50Total shipments


307



281



126



92







806     North








SouthChanges in Segment Income

America


Europe


Asia


AmericaSegment income  three months ended September 30,
    2008

$
2


$
62


$
(3
)

$
48Volume:Rolled products


(18
)


(51
)


6



1Other










(1
)


Conversion premium and product mix


19



22



7



18Conversion costs(A)


22



24



15



3Metal price lag


43



(27
)


(18
)


4Foreign exchange


10



26



33



(5
)Other changes(B)


(3
)


4



9



(33
)Segment income  three months ended September 30,
    2009

$
75


$
60


$
48


$
36  48




---



##### Table of Contents



(A)
    
    Conversion costs include expenses incurred in production such
    as direct and indirect labor, energy, freight, scrap usage,
    alloys and hardeners, coatings, alumina and melt loss.
    Fluctuations in this component reflect cost efficiencies during
    the period as well as cost inflation (deflation).(B)
    
    Other changes include selling, general &
    administrative costs and research and development for all
    segments and certain other items which impact one or more
    regions, including such items as the impact of purchase
    accounting and metal price ceiling contracts. Significant
    fluctuations in these items are discussed below.  North
    America
        Europe
       49




---



##### Table of Contents



Asia
        South
    America
       50




---



##### Table of Contents



Reconciliation
    of segment results to Net income
    Three Months EndedSeptember 30,2009


2008North America

$
75


$
2Europe


60



62Asia


48



(3
)South America


36



48Corporate and other


(19
)


(20
)Depreciation and amortization


(92
)


(107
)Interest expense and amortization of debt issuance costs


(44
)


(46
)Interest income


3



5Unrealized gains (losses) on change in fair value of derivative
    instruments, net


254



(221
)Adjustment to eliminate proportional consolidation


(17
)


(18
)Restructuring recoveries (charges), net


(3
)


Other costs, net






26Income (loss) before income taxes


301



(272
)Income tax provision (benefit)


87



(168
)Net income (loss)


214



(104
)Net income attributable to noncontrolling interests


19



Net income (loss) attributable to our common shareholder

$
195


$
(104
)            51




---



##### Table of Contents




    Our functional currency in Canada and Brazil is the
    U.S. dollar and the company holds significant
    U.S. dollar denominated debt in these locations. As the
    value of the local currencies strengthens and weakens against
    the U.S. dollar, unrealized gains or losses are created in
    those locations for tax purposes, while the underlying gains or
    losses are not recorded in our income statement.    
    We have significant net deferred tax liabilities in Brazil that
    are remeasured to account for currency fluctuations as the taxes
    are payable in local currency.
    Our income is taxed at various statutory tax rates in varying
    jurisdictions. Applying the corresponding amounts of income and
    loss to the various tax rates results in differences when
    compared to our Canadian statutory tax rate.        RESULTS
    OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2009
    COMPARED TO THE SIX MONTHS ENDED SEPTEMBER 30, 2008
   52




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##### Table of Contents



Segment
    Review
    Selected Operating Results

North








SouthSix Months Ended September 30, 2009

America


Europe


Asia


America


Eliminations


TotalNet sales

$
1,589


$
1,400


$
708


$
456


$
(12
)

$
4,141Shipments (kt)Rolled products


512



388



269



174







1,343Ingot products


15



42



1



14







72Total shipments


527



430



270



188







1,415   Selected Operating Results

North








SouthSix Months Ended September 30, 2008

America


Europe


Asia


America


Eliminations


TotalNet sales

$
2,194


$
2,315


$
968


$
595


$
(10
)

$
6,062Shipments (kt)Rolled products


579



525



255



174







1,533Ingot products


23



55



11



11







100Total shipments


602



580



266



185







1,633     North








SouthChanges in Segment Income

America


Europe


Asia


AmericaSegment income  six months ended September 30,
    2008

$
44


$
173


$
28


$
95Volume:Rolled products


(43
)


(132
)


4



(3
)Other






(1
)


(1
)


2Conversion premium and product mix


27



68



21



24Conversion costs(A)


43



30



26



7Metal price lag


52



(72
)


(42
)


(6
)Foreign exchange


12



35



42



(9
)Other changes(B)


(3
)


(8
)


8



(63
)Segment income  six months ended September 30,
    2009

$
132


$
93


$
86


$
47     (A)
    
    Conversion costs include expenses incurred in production such as
    direct and indirect labor, energy, freight, scrap usage, alloys
    and hardeners, coatings, alumina and melt loss. Fluctuations in
    this component reflect cost efficiencies during the period as
    well as cost inflation (deflation). 53




---



##### Table of Contents



(B)
    
    Other changes include selling, general &
    administrative costs and research and development for all
    segments and certain other items which impact one or more
    regions, including such items as the impact of purchase
    accounting and metal price ceiling contracts. Significant
    fluctuations in these items are discussed below.  North
    America
      Europe
      Asia
      South
    America
   54




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##### Table of Contents



Reconciliation
    of segment results to Net income
    Six Months EndedSeptember 30,2009


2008North America

$
132


$
44Europe


93



173Asia


86



28South America


47



95Corporate and other


(34
)


(33
)Depreciation and amortization


(192
)


(223
)Interest expense and amortization of debt issuance costs


(87
)


(91
)Interest income


6



10Unrealized gains (losses) on change in fair value of derivative
    instruments, net


553



(201
)Adjustment to eliminate proportional consolidation


(33
)


(36
)Restructuring recoveries (charges), net


(6
)


1Other costs, net


9



22Income (loss) before income taxes


574



(211
)Income tax provision (benefit)


199



(133
)Net income (loss)


375



(78
)Net income attributable to noncontrolling interests


37



2Net income (loss) attributable to our common shareholder

$
338


$
(80
)          55




---



##### Table of Contents



LIQUIDITY
    AND CAPITAL RESOURCES
           56




---



##### Table of Contents



Available
    Liquidity
    September 30,


March 31,2009


2009Cash and cash equivalents

$
246


$
248Overdrafts


(11
)


(11
)Gross availability under the ABL facility


400



233Borrowing availability limitation due to fixed charge coverage
    ratio


(80
)


(80
)Total estimated liquidity

$
555


$
390       Operating
    Activities
   57




---



##### Table of Contents



Six Months EndedSeptember 30,2009


2008


ChangeNet cash provided by (used in) operating activities

$
464


$
(390
)

$
854Net cash provided by (used in) investing activities


(442
)


52



(494
)Less: Proceeds from sales of assets


(4
)


(2
)


(2
)Free cash flow

$
18


$
(340
)

$
358Ending cash and cash equivalents

$
246


$
219


$
27       Investing
    Activities
    Six Months EndedSeptember 30,2009


2008


ChangeCapital expenditures

$
(46
)

$
(70
)

$
24Proceeds from sales of assets


4



2



2Changes to investment in and advances to non-consolidated
    affiliates


2



13



(11
)Proceeds from related parties loans receivable, net


14



13



1Net proceeds (outflow) from settlement of derivative instruments


(416
)


94



(510
)Net cash provided by (used in) investing activities

$
(442
)

$
52


$
(494
)      58




---



##### Table of Contents



Financing
    Activities
    Six Months EndedSeptember 30,2009


2008


ChangeProceeds from issuance of debt, third parties

$
177


$



$
177Proceeds from issuance of debt, related parties


3







3Principal payments, third parties


(16
)


(7
)


(9
)Principal payments, related parties


(94
)






(94
)Short-term borrowings, net


(96
)


263



(359
)Dividends, noncontrolling interest


(13
)


(5
)


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

$
(39
)

$
251


$
(290
)             OFF-BALANCE
    SHEET ARRANGEMENTS
    
    any obligation under certain derivative instruments;
    any obligation under certain guarantees or contracts; 59




---



##### Table of Contents




    a retained or contingent interest in assets transferred to an
    unconsolidated entity or similar entity or similar arrangement
    that serves as credit, liquidity or market risk support to that
    entity for such assets; and
    any obligation under a material variable interest held by the
    registrant in an unconsolidated entity that provides financing,
    liquidity, market risk or credit risk support to the registrant,
    or engages in leasing, hedging or research and development
    services with the registrant.    Derivative
    Instruments
    September 30, 2009Assets


Liabilities


Net Fair ValueCurrent


Noncurrent


Current


Noncurrent(A)


Assets/(Liabilities)Derivatives designated as hedging instruments:Currency exchange contracts

$



$



$
(1
)

$
(27
)

$
(28
)Interest rate swaps






1



(13
)






(12
)Electricity swap










(6
)


(15
)


(21
)Total derivatives designated as hedging instruments






1



(20
)


(42
)


(61
)Derivatives not designated as hedging instruments:Aluminum contracts


130



19



(84
)


(3
)


62Currency exchange contracts


40



27



(37
)


(7
)


23Energy contracts


1



1



(4
)






(2
)Total derivatives not designated as hedging instruments


171



47



(125
)


(10
)


83Total derivative fair value

$
171


$
48


$
(145
)

$
(52
)

$
22   60




---



##### Table of Contents



March 31, 2009Assets


Liabilities


Net Fair ValueCurrent


Noncurrent


Current


Noncurrent(A)


Assets/(Liabilities)Derivatives designated as hedging instruments:Currency exchange contracts

$



$



$



$
(11
)

$
(11
)Interest rate swaps










(13
)






(13
)Electricity swap










(6
)


(12
)


(18
)Total derivatives designated as hedging instruments










(19
)


(23
)


(42
)Derivatives not designated as hedging instruments:Aluminum contracts


99



41



(532
)


(13
)


(405
)Currency exchange contracts


20



31



(77
)


(12
)


(38
)Energy contracts










(12
)






(12
)Total derivatives not designated as hedging instruments


119



72



(621
)


(25
)


(455
)Total derivative fair value

$
119


$
72


$
(640
)

$
(48
)

$
(497
)     (A)
    
    The noncurrent portions of derivative liabilities are included
    in Other long-term liabilities in the accompanying condensed
    consolidated balance sheets.  Net
    Investment Hedges
      Cash Flow
    Hedges
     61




---



##### Table of Contents



Three
    Month
    Comparison:
   Amount of Gain or (Loss)Amount of Gain or (Loss)

Recognized in Income onAmount of Gain or (Loss)

Reclassified from Accumulated

Derivative (Ineffective PortionRecognized in OCI on Derivative

OCI into Income

and Amount Excluded from(Effective Portion)

(Effective Portion)

Effectiveness Testing)Three Months

Three Months

Three Months

Three Months

Three Months

Three MonthsEnded

Ended

Ended

Ended

Ended

EndedSeptember 30,

September 30,

September 30,

September 30,

September 30,

September 30,2009

2008

2009

2008

2009

2008Electricity swap

$
(14
)

$
(13
)

$
1


$
4


$



$
Interest rate swaps

$



$
1


$



$



$



$
   Six
    Month
    Comparison:
  Amount of Gain or (Loss)Amount of Gain or (Loss)

Recognized in Income onAmount of Gain or (Loss)

Reclassified from Accumulated

Derivative (Ineffective PortionRecognized in OCI on Derivative

OCI into Income

and Amount Excluded from(Effective Portion)

(Effective Portion)

Effectiveness Testing)Six Months

Six Months

Six Months

Six Months

Six Months

Six MonthsEnded

Ended

Ended

Ended

Ended

EndedSeptember 30,

September 30,

September 30,

September 30,

September 30,

September 30,2009

2008

2009

2008

2009

2008Electricity swap

$
(3
)

$



$
2


$
8


$
2


$
Interest rate swaps

$
1


$
11


$



$



$



$
   Derivative
    Instruments Not Designated as Hedges
     62




---



##### Table of Contents



Three Months EndedSeptember 30,


Six Months Ended September 30,2009


2008


2009


2008Derivative Instruments Not Designated as HedgesAluminum contracts

$
49


$
(181
)

$
97


$
(159
)Currency exchange contracts


29



7



51



39Energy contracts






(16
)






(9
)Gain (loss) recognized


78



(190
)


148



(129
)Derivative Instruments Designated as Cash Flow HedgesInterest rate swaps














Electricity swap


2



5



4



9Gain (loss) on change in fair value of derivative instruments,
    net

$
80


$
(185
)

$
152


$
(120
)   Guarantees
    of Indebtedness
    
    certain of our wholly-owned and majority-owned
    subsidiaries; and
    Aluminium Norf GmbH, which is a fifty percent (50%) owned joint
    venture that does not meet the requirements for consolidation.     63




---



##### Table of Contents



Maximum

LiabilityPotential Future

CarryingType of Entity

Payment

ValueWholly-owned subsidiaries

$
43


$
5Aluminium Norf GmbH

$
15


$
     Other
    CONTRACTUAL
    OBLIGATIONS
  Form 10-K
  DIVIDENDS
    CRITICAL
    ACCOUNTING POLICIES AND ESTIMATES
  Form 10-K
  RECENT
    ACCOUNTING STANDARDS
  Recently
    Adopted Accounting Standards
     64




---



##### Table of Contents



Subsequent
    Events Subsequent Events
  Consolidation Noncontrolling Interests in
    Consolidated Financial Statements
  Intangibles  Goodwill and Other No. FAS 142-3, Determination of Useful Life of Intangible Assets
  Fair Value
    Measurements and Disclosures No. 107-1 28-1, Interim Disclosures about Fair Value of Financial
    Instruments; No. 157-4, Determining Fair Value When the Volume and Level of Activity
    for the Asset or Liability Have Significantly Decreased and
    Identifying Transactions That Are Not Orderly
  Investments Debt and Equity
    Securities No. 115-2 No. 124-2, Recognition of Other-than-Temporary-Impairments
  Business
    Combinations Business Combinations; Accounting for
    Assets Acquired and Liabilities Assumed in a Business
    Combination That Arise from Contingencies
 65




---



##### Table of Contents



Investments  Equity Method and Joint Ventures No. 08-06, Equity Method Investment Accounting Considerations)
  Recently
    Issued Accounting Standards
    Amendments to FASB Interpretation No. 46(R) Accounting for
    Transfers of Financial Assets
  Compensation  Retirement Benefits Employers Disclosures about Pensions and Other
    Postretirement Benefits
    SPECIAL
    NOTE REGARDING FORWARD-LOOKING STATEMENTS AND MARKET
    DATA
  Form 10-Q
 66




---



##### Table of Contents




    the level of our indebtedness and our ability to generate cash;
    changes in the prices and availability of aluminum (or premiums
    associated with such prices) or other materials and raw
    materials we use;
    the effect of metal price ceilings in certain of our sales
    contracts;
    the capacity and effectiveness of our metal hedging activities,
    including our internal used beverage cans (UBCs) and smelter
    hedges;
    relationships with, and financial and operating conditions of,
    our customers, suppliers and other stakeholders;
    fluctuations in the supply of, and prices for, energy in the
    areas in which we maintain production facilities;
    our ability to access financing for future capital requirements;
    continuing obligations and other relationships resulting from
    our spin-off from Rio Tinto Alcan;
    changes in the relative values of various currencies and the
    effectiveness of our currency hedging activities;
    factors affecting our operations, such as litigation,
    environmental remediation and
    clean-up
    costs, labor relations and negotiations, breakdown of equipment
    and other events;
    the impact of restructuring efforts in the future;
    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 including further
    deterioration in the global economy, particularly sectors in
    which our customers operate;
    our ability to improve and maintain effective internal control
    over financial reporting and disclosure controls and procedures
    in the future;
    changes in the fair value of derivative instruments;
    cyclical demand and pricing within the principal markets for our
    products as well as seasonality in certain of our
    customers industries; 67




---



##### Table of Contents




    changes in government regulations, particularly those affecting
    taxes, environmental, health or safety compliance;
    changes in interest rates that have the effect of increasing the
    amounts we pay under our principal credit agreement and other
    financing agreements; and
    the effect of taxes and changes in tax rates.  Form 10-Q, Form 10-Q Form 10-K
  Item 3.
    Quantitative
    and Qualitative Disclosures About Market Risk        Commodity
    Price Risks
    Aluminum
       68




---



##### Table of Contents



Sensitivities
    Energy
           69




---



##### Table of Contents



Sensitivities
    Change in


Change inPrice


Fair ValueElectricity


(10
)%

$
(2
)Natural Gas


(10
)%


(2
)Heating Oil


(10
)%


   Foreign
    Currency Exchange Risks
    non-U.S. dollar
     70




---



##### Table of Contents



Sensitivities
    Change in


Change inExchange Rate


Fair ValueCurrency measured against the U.S. dollarBrazilian real


(10
)%

$
(35
)Euro


10
%


(29
)Korean won


10
%


(7
)Canadian dollar


(10
)%


(2
)British pound


10
%


(1
)Swiss franc


10
%


(1
)       Interest
    Rate Risks
        Sensitivities
    Change in


Change inRate


Fair ValueInterest Rate ContractsNorth America


(10
)%

$
(1
)Asia


(10
)%


   Item 4.
    Controls
    and Procedures  Evaluation
    of Disclosure Controls and Procedures
   71




---



##### Table of Contents



Form 10-Q Rule 13a-15(e)
  Changes
    in Internal Control Over Financial Reporting
  Rule 13a-15(f)
  Material
    Weakness Existing as of September 30, 2009 and Remediation
    Plan
  Form 10-K/A Forms 10-Q Forms 10-K
       72




---



##### Table of Contents



73




---



##### Table of Contents



PART II.
    OTHER INFORMATION  Item 1.
    Legal
    Proceedings  Coca-Cola
    Lawsuit. Coca-Cola Coca-Cola Coca-Cola
  Item 1A.
    Risk
    Factors  Our goodwill and other intangible assets could become
    further impaired, which may require us to take significant
    non-cash charges against earnings.
        The covenants in our Credit Agreements and the indenture
    governing our Senior Notes impose significant operating
    restrictions on us.
    
    incur additional debt and provide additional guarantees;
    pay dividends beyond certain amounts and make other restricted
    payments;
    create or permit certain liens;
    make certain asset sales;
    use the proceeds from the sales of assets and subsidiary stock; 74




---



##### Table of Contents




    create or permit restrictions on the ability of our restricted
    subsidiaries to pay dividends or make other distributions to us;
    engage in certain transactions with affiliates;
    enter into sale and leaseback transactions;
    designate subsidiaries as unrestricted subsidiaries; and
    consolidate, merge or transfer all or substantially all of our
    assets or the assets of our restricted subsidiaries.      Item 6.
    Exhibits  ExhibitNo.

Description2
.1

Arrangement Agreement by and among Hindalco Industries Limited,
    AV Aluminum Inc. and Novelis Inc., dated as of February 10, 2007
    (incorporated by reference to Exhibit 2.1 to our Current Report
    on Form 8-K filed on February 13, 2007) (File No. 001-32312))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

Amended and Restated Bylaws, adopted as of July 24, 2008
    (incorporated by reference to Exhibit 3.2 to the Form 8-K filed
    by Novelis Inc. on July 25, 2008 (File No. 001-32312))4
.1

Indenture, relating to the 11
    1/2% Senior
    Notes due 2015, dated as of August 11, 2009, between Novelis
    Inc., the guarantors named on the signature pages thereto and
    The Bank of New York Mellon Trust Company, N.A., as trustee
    (incorporated by reference to Exhibit 4.1 to our Current Report
    on Form 8-K filed on August 17, 2009).4
.2

Form of 11
    1/2% Senior
    Notes due 2015 (included in Exhibit 4.1).10
.1

Registration Rights Agreement, dated as of August 11, 2009,
    among Novelis Inc., the guarantors named on the signature pages
    thereto and Credit Suisse Securities (USA) LLC, as
    representative of the initial purchasers (incorporated by
    reference to Exhibit 10.1 to our Current Report on Form 8-K
    filed on August 17, 2009).10
.2

Employment Agreement between Novelis Inc. and Antonio Tadeu
    Coelho Nardocci (incorporated by reference to Exhibit 10.1 to
    our Current Report on Form 8-K/A filed on September 9, 2009).31
.1

Section 302 Certification of Principal Executive Officer31
.2

Section 302 Certification of Principal Financial Officer32
.1

Section 906 Certification of Principal Executive Officer32
.2

Section 906 Certification of Principal Financial Officer     *
    
    Indicates a management contract or compensatory plan or
    arrangement. 75




---



##### Table of Contents



SIGNATURES
      By:
    /s/  Steven
    Fisher       By
    /s/  Robert
    P. Nelson       76




---



##### Table of Contents



EXHIBIT INDEX
  ExhibitNo.

Description2
.1

Arrangement Agreement by and among Hindalco Industries Limited,
    AV Aluminum Inc. and Novelis Inc., dated as of February 10, 2007
    (incorporated by reference to Exhibit 2.1 to our Current Report
    on Form 8-K filed on February 13, 2007) (File No. 001-32312))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

Amended and Restated Bylaws, adopted as of July 24, 2008
    (incorporated by reference to Exhibit 3.2 to the Form 8-K filed
    by Novelis Inc. on July 25, 2008 (File No. 001-32312))4
.1

Indenture, relating to the 11
    1/2% Senior
    Notes due 2015, dated as of August 11, 2009, between Novelis
    Inc., the guarantors named on the signature pages thereto and
    The Bank of New York Mellon Trust Company, N.A., as trustee
    (incorporated by reference to Exhibit 4.1 to our Current Report
    on Form 8-K filed on August 17, 2009).4
.2

Form of 11
    1/2% Senior
    Notes due 2015 (included in Exhibit 4.1).10
.1

Registration Rights Agreement, dated as of August 11, 2009,
    among Novelis Inc., the guarantors named on the signature pages
    thereto and Credit Suisse Securities (USA) LLC, as
    representative of the initial purchasers (incorporated by
    reference to Exhibit 10.1 to our Current Report on Form 8-K
    filed on August 17, 2009).10
.2

Employment Agreement between Novelis Inc. and Antonio Tadeu
    Coelho Nardocci (incorporated by reference to Exhibit 10.1 to
    our Current Report on Form 8-K/A filed on September 9, 2009).31
.1

Section 302 Certification of Principal Executive Officer31
.2

Section 302 Certification of Principal Financial Officer32
.1

Section 906 Certification of Principal Executive Officer32
.2

Section 906 Certification of Principal Financial Officer     *
    
    Indicates a management contract or compensatory plan or
    arrangement. 77