##### 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 1934 
|          
|           |  | For the quarterly period ended June 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                                                             |  | Not Applicable                             
|(State or other jurisdiction of
    incorporation or organization) |  | (I.R.S. employer
    identification number)
|                                                                  
|3399 Peachtree Road NE, Suite 1500                                 |  | 30326                                      
|Atlanta, Georgia                                                   |  | (Zip Code)                                 
|(Address of principal executive offices)                           |  |                                            

Telephone: (404) 814-4200


(Registrants telephone number, including area code)


þ o


o þ












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TABLE OF CONTENTS


|                                             |  |                                                                                           |  |          |    |  |  | 
|-------------------------------------------- |  | ----------------------------------------------------------------------------------------- |  | -------- | -- |  |  | 
|                                             |  |                                                                                           |  | Page No. |   
|                                             |  |                                                                                           |  |          |   
|PART I.                                      |  | FINANCIAL INFORMATION                                                                     |  |          |    | 
|Item 1.                                      |  | Financial Statements                                                                      |  |          | 2  | 
|Item 2.                                      |  | Managements Discussion and Analysis
    of Financial Condition and Results of Operations |  |          | 33 | 
|Item 3.                                      |  | Quantitative and Qualitative Disclosures
    About Market Risk                            |  |          | 48 | 
|Item 4.                                      |  | Controls and Procedures                                                                   |  |          | 51 | 
|                                            
|PART II.                                     |  | OTHER INFORMATION                                                                         |  |          |    | 
|Item 1.                                      |  | Legal Proceedings                                                                         |  |          | 53 | 
|Item 2.                                      |  | Unregistered Sales of Equity Securities and
    Use of Proceeds                           |  |          | 53 | 
|Item 3.                                      |  | Defaults Upon Senior Securities                                                           |  |          | 53 | 
|Item 4.                                      |  | Submission of Matters to a Vote of Security
    Holders                                   |  |          | 53 | 
|Item 5.                                      |  | Other Information                                                                         |  |          | 53 | 
|Item 6.                                      |  | Exhibits                                                                                  |  |          | 53 | 
|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



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##### Table of Contents






PART I. FINANCIAL INFORMATION







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

Novelis Inc.


CONSOLIDATED AND COMBINED STATEMENTS OF INCOME (unaudited)


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


|                                                                                                                                                     |                            |                |       |       |            |  |       |       |  |  |       |       |   |  |       |       |  
|---------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | -------------- | ----- | ----- | ---------- |  | ----- | ----- |  |  | ----- | ----- | - |  | ----- | ----- | -
|                                                                                                                                                     |                            | Second Quarter |       |       | Six Months | 
|                                                                                                                                                     |                            |                |       |       |            | 
|Periods ended June 30                                                                                                                                |                            | 2005           |       |       | 2004       |  |       | 2005  |  |  | 2004  |      
|                                                                                                                                                     |                            |                |       |       |            |  |       |       |  |  |       |      
|Sales and operating revenues                                                                                                                         |                            |                |       |       |            |  |       |       |  |  |       |       |   |  |       |      
|                                                                                                                                                     |  third parties            |                |       | 2,173 |            |  |       | 1,805 |  |  |       | 4,291 |   |  |       | 3,523 |  
|                                                                                                                                                     |  related parties (NOTE 7) |                |       |      |            |  |       | 124   |  |  |       |      |   |  |       | 216   |  
|                                                                                                                                                     |                            |                |       |       |            |  |       |       |  |  |       |      
|                                                                                                                                                     |                            |                | 2,173 |       |            |  | 1,929 |       |  |  | 4,291 |       |   |  | 3,739 |      
|                                                                                                                                                     |                            |                |       |       |            |  |       |       |  |  |       |      
|Costs and expenses                                                                                                                                   |                            |                |       |       |            |  |       |       |  |  |       |       |   |  |       |      
|Cost of sales and operating expenses, excluding depreciation and
    amortization noted below                                                        |                            |                |       |       |            |  |       |       |  |  |       |       |   |  |       |      
|                                                                                                                                                     |  third parties            |                |       | 1,968 |            |  |       | 1,578 |  |  |       | 3,852 |   |  |       | 3,083 |  
|                                                                                                                                                     |  related parties (NOTE 7) |                |       |      |            |  |       | 112   |  |  |       |      |   |  |       | 192   |  
|Depreciation and amortization                                                                                                                        |                            |                | 57    |       |            |  | 57    |       |  |  | 115   |       |   |  | 118   |      
|Selling, administrative and general expenses                                                                                                         |                            |                | 76    |       |            |  | 50    |       |  |  | 152   |       |   |  | 110   |      
|Research and development expenses                                                                                                                    |                            |                | 11    |       |            |  | 6     |       |  |  | 19    |       |   |  | 10    |      
|Research and development expenses  related parties
    (NOTE 7)                                                                                     |                            |                |      |       |            |  | 12    |       |  |  |      |       |   |  | 18    |      
|Interest                                                                                                                                             |                            |                |       |       |            |  |       |       |  |  |       |       |   |  |       |      
|                                                                                                                                                     |  third parties            |                |       | 50    |            |  |       | 10    |  |  |       | 94    |   |  |       | 21    |  
|                                                                                                                                                     |  related parties (NOTE 7) |                |       |      |            |  |       | 9     |  |  |       |      |   |  |       | 17    |  
|Other expenses (income)  net (NOTE 9)                                                                                                               |                            |                |       |       |            |  |       |       |  |  |       |       |   |  |       |      
|                                                                                                                                                     |  third parties            |                |       | 11    |            |  |       | 4     |  |  |       | (3    | ) |  |       | 8     |  
|                                                                                                                                                     |  related parties (NOTE 7) |                |       |      |            |  |       | 21    |  |  |       |      |   |  |       | (22   | )
|                                                                                                                                                     |                            |                |       |       |            |  |       |       |  |  |       |      
|                                                                                                                                                     |                            |                | 2,173 |       |            |  | 1,859 |       |  |  | 4,229 |       |   |  | 3,555 |      
|                                                                                                                                                     |                            |                |       |       |            |  |       |       |  |  |       |      
|Income before income taxes and other items                                                                                                           |                            |                |      |       |            |  | 70    |       |  |  | 62    |       |   |  | 184   |      
|Income taxes (NOTE 6)                                                                                                                                |                            |                | 15    |       |            |  | 23    |       |  |  | 44    |       |   |  | 66    |      
|                                                                                                                                                     |                            |                |       |       |            |  |       |       |  |  |       |      
|Income (loss) before other items                                                                                                                     |                            |                | (15   | )     |            |  | 47    |       |  |  | 18    |       |   |  | 118   |      
|Equity income                                                                                                                                        |                            |                | 2     |       |            |  | 1     |       |  |  | 4     |       |   |  | 3     |      
|Minority interests                                                                                                                                   |                            |                | (5    | )     |            |  | (3    | )     |  |  | (11   | )     |   |  | (7    | )    
|                                                                                                                                                     |                            |                |       |       |            |  |       |       |  |  |       |      
|Net income (loss)                                                                                                                                    |                            |                | (18   | )     |            |  | 45    |       |  |  | 11    |       |   |  | 114   |      
|                                                                                                                                                     |                            |                |       |       |            |  |       |       |  |  |       |      
|Earnings (loss) per share(NOTE 4)                                                                                                                    |                            |                |       |       |            |  |       |       |  |  |       |       |   |  |       |      
|Net income (loss) per share  basic                                                                                                                  |                            |                | (0.24 | )     |            |  | 0.61  |       |  |  | 0.15  |       |   |  | 1.54  |      
|Net income (loss) per share  diluted                                                                                                                |                            |                | (0.24 | )     |            |  | 0.61  |       |  |  | 0.15  |       |   |  | 1.53  |      
|                                                                                                                                                     |                            |                |       |       |            |  |       |       |  |  |       |      
|Dividends per common share                                                                                                                           |                            |                | 0.09  |       |            |  |      |       |  |  | 0.18  |       |   |  |      |      
|                                                                                                                                                     |                            |                |       |       |            |  |       |       |  |  |       |      
|Supplemental information(NOTE 1)                                                                                                                     |                            |                |       |       |            |  |       |       |  |  |       |       |   |  |       |      
|Net income (loss) attributable to consolidated results of
    Novelis from January 6 to June 30, 2005 
    increase (decrease) to Retained earnings |                            |                | (18   | )     |            |  |       |       |  |  | 41    |       |   |  |       |      
|Net loss attributable to combined results of Novelis from
    January 1 to January 5, 2005  decrease to
    Owners net investment                  |                            |                |      |       |            |  |       |       |  |  | (30   | )     |   |  |       |      
|                                                                                                                                                     |                            |                |       |       |            |  |       |       |  |  |       |      
|Net income (loss)                                                                                                                                    |                            |                | (18   | )     |            |  |       |       |  |  | 11    |       |   |  |       |      
|                                                                                                                                                     |                            |                |       |       |            |  |       |       |  |  |       |      



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Novelis Inc.


CONSOLIDATED AND COMBINED BALANCE SHEETS


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


|                                                                                      |                                                |             |       |        |              |  |       |        |  
|------------------------------------------------------------------------------------- | ---------------------------------------------- | ----------- | ----- | ------ | ------------ |  | ----- | ------ | -
|                                                                                      |                                                | June 30,    |       |        | December 31, | 
|As at                                                                                 |                                                | 2005        |       |        | 2004         | 
|                                                                                      |                                                |             |       |        |              | 
|                                                                                      |                                                | (unaudited) |       |        | (audited)    | 
|ASSETS                                                                               
|Current assets                                                                        |                                                |             |       |        |              |  |       |       
|Cash and cash equivalents                                                             |                                                |             | 129   |        |              |  | 31    |       
|Trade receivables (net of allowances of $32 in 2005 and $33 in
    2004)              |                                                |             |       |        |              |  |       |       
|                                                                                      |  third parties (NOTE 8)                       |             |       | 1,030  |              |  |       | 710    |  
|                                                                                      |  related parties (NOTES 7 and 8)              |             |       |       |              |  |       | 87     |  
|Other receivables                                                                     |                                                |             |       |        |              |  |       |       
|                                                                                      |  third parties                                |             |       | 249    |              |  |       | 118    |  
|                                                                                      |  related parties (NOTE 7)                     |             |       | 35     |              |  |       | 846    |  
|Inventories                                                                           |                                                |             |       |        |              |  |       |       
|                                                                                      | Aluminum                                       |             |       | 962    |              |  |       | 1,081  |  
|                                                                                      | Raw materials                                  |             |       | 18     |              |  |       | 20     |  
|                                                                                      | Other supplies                                 |             |       | 142    |              |  |       | 125    |  
|                                                                                      |                                                |             |       |        |              | 
|                                                                                      |                                                |             | 1,122 |        |              |  | 1,226 |       
|                                                                                      |                                                |             |       |        |              | 
|Total current assets                                                                  |                                                |             | 2,565 |        |              |  | 3,018 |       
|                                                                                      |                                                |             |       |        |              | 
|Deferred charges and other assets                                                     |                                                |             | 235   |        |              |  | 193   |       
|Long-term receivables from related parties (NOTE 7)                                   |                                                |             | 82    |        |              |  | 104   |       
|Property, plant and equipment                                                         |                                                |             |       |        |              |  |       |       
|                                                                                      | Cost (excluding Construction work in progress) |             |       | 5,282  |              |  |       | 5,506  |  
|                                                                                      | Construction work in progress                  |             |       | 117    |              |  |       | 112    |  
|                                                                                      | Accumulated depreciation                       |             |       | (3,218 | )            |  |       | (3,270 | )
|                                                                                      |                                                |             |       |        |              | 
|                                                                                      |                                                |             | 2,181 |        |              |  | 2,348 |       
|                                                                                      |                                                |             |       |        |              | 
|Intangible assets (net of accumulated amortization of $10 in
    2005 and $9 in 2004) |                                                |             | 30    |        |              |  | 35    |       
|Goodwill                                                                              |                                                |             | 248   |        |              |  | 256   |       
|                                                                                      |                                                |             |       |        |              | 
|Total assets                                                                          |                                                |             | 5,341 |        |              |  | 5,954 |       
|                                                                                      |                                                |             |       |        |              | 



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|                                                                                                                                 |                            |             |       |       |              |  |       |       | 
|-------------------------------------------------------------------------------------------------------------------------------- | -------------------------- | ----------- | ----- | ----- | ------------ |  | ----- | ----- | 
|                                                                                                                                 |                            | June 30,    |       |       | December 31, | 
|As at                                                                                                                            |                            | 2005        |       |       | 2004         | 
|                                                                                                                                 |                            |             |       |       |              | 
|                                                                                                                                 |                            | (unaudited) |       |       | (audited)    | 
|LIABILITIES AND SHAREHOLDERS/ INVESTED EQUITY                                                                                  
|Current liabilities                                                                                                              |                            |             |       |       |              |  |       |      
|Payables and accrued liabilities                                                                                                 |                            |             |       |       |              |  |       |      
|                                                                                                                                 |  third parties            |             |       | 1,302 |              |  |       | 859   | 
|                                                                                                                                 |  related parties (NOTE 7) |             |       | 37    |              |  |       | 401   | 
|Short-term borrowings                                                                                                            |                            |             |       |       |              |  |       |      
|                                                                                                                                 |  third parties            |             |       | 23    |              |  |       | 229   | 
|                                                                                                                                 |  related parties (NOTE 7) |             |       |      |              |  |       | 312   | 
|Debt maturing within one year (NOTE 10)                                                                                          |                            |             |       |       |              |  |       |      
|                                                                                                                                 |  third parties            |             |       | 3     |              |  |       | 1     | 
|                                                                                                                                 |  related parties (NOTE 7) |             |       |      |              |  |       | 290   | 
|                                                                                                                                 |                            |             |       |       |              | 
|Total current liabilities                                                                                                        |                            |             | 1,365 |       |              |  | 2,092 |      
|                                                                                                                                 |                            |             |       |       |              | 
|Debt not maturing within one year (NOTE 10)                                                                                      |                            |             |       |       |              |  |       |      
|                                                                                                                                 |  third parties            |             |       | 2,757 |              |  |       | 139   | 
|                                                                                                                                 |  related parties (NOTE 7) |             |       |      |              |  |       | 2,307 | 
|Deferred credits and other liabilities                                                                                           |                            |             | 486   |       |              |  | 472   |      
|Deferred income taxes                                                                                                            |                            |             | 198   |       |              |  | 249   |      
|Minority interests                                                                                                               |                            |             | 144   |       |              |  | 140   |      
|Shareholders/ Invested equity                                                                                                   |                            |             |       |       |              |  |       |      
|Common shares, no par value  unlimited number of
    shares authorized; issued and outstanding:
    73,993,006 shares (NOTE 11) |                            |             |      |       |              |  |      |      
|Additional paid-in capital                                                                                                       |                            |             | 434   |       |              |  |      |      
|Retained earnings                                                                                                                |                            |             | 27    |       |              |  |      |      
|Accumulated other comprehensive income (loss)                                                                                    |                            |             | (70   | )     |              |  | 88    |      
|Owners net investment                                                                                                           |                            |             |      |       |              |  | 467   |      
|                                                                                                                                 |                            |             |       |       |              | 
|                                                                                                                                 |                            |             | 391   |       |              |  | 555   |      
|                                                                                                                                 |                            |             |       |       |              | 
|Commitments and contingencies (NOTE 13)                                                                                          |                            |             |       |       |              |  |       |      
|                                                                                                                                 |                            |             |       |       |              | 
|Total liabilities and shareholders/invested equity                                                                              |                            |             | 5,341 |       |              |  | 5,954 |      
|                                                                                                                                 |                            |             |       |       |              | 



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Novelis Inc.


CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(unaudited)


(In millions of US$)


|                                                                                    |                                                  |                                            |                   |        |      |     |      |      |      |      |  
|----------------------------------------------------------------------------------- | ------------------------------------------------ | ------------------------------------------ | ----------------- | ------ | ---- | --- | ---- | ---- | ---- | ---- | -
|Six Months Ended June 30                                                            |                                                  | 2005                                       |                   |        | 2004 |    
|                                                                                    |                                                  |                                            |                   |        |      |    
|OPERATING ACTIVITIES                                                                |                                                  |                                            |                   |        |      |     |      |     
|Net income                                                                          |                                                  |                                            | 11                |        |      |     | 114  |     
|Adjustments to determine cash from operating activities:                            |                                                  |                                            |                   |        |      |     |      |     
|                                                                                    | Depreciation and amortization                    |                                            |                   | 115    |      |     |      | 118  |     
|                                                                                    | Deferred income taxes                            |                                            |                   | (17    | )    |     |      | 15   |     
|                                                                                    | Equity income                                    |                                            |                   | (4     | )    |     |      | (3   | )   
|                                                                                    | Stock option compensation                        |                                            |                   | 1      |      |     |      | 1    |     
|                                                                                    | Change in operating working capital              |                                            |                   |        |      |     |      |      |     
|                                                                                    |                                                  | Change in receivables                      |                   |        |      |     |      |      |      |     
|                                                                                    |                                                  |                                            |  third parties   |        |      | 62  |      |      |      | (115 | )
|                                                                                    |                                                  |                                            |  related parties |        |      |    |      |      |      | (114 | )
|                                                                                    |                                                  | Change in inventories                      |                   |        | 12   |     |      |      | (135 | )   
|                                                                                    |                                                  | Change in payables and accrued liabilities |                   |        |      |     |      |      |      |     
|                                                                                    |                                                  |                                            |  third parties   |        |      | 131 |      |      |      | 141  |  
|                                                                                    |                                                  |                                            |  related parties |        |      | (8  | )    |      |      | 125  |  
|                                                                                    | Change in deferred charges and other assets      |                                            |                   | 9      |      |     |      | (22  | )   
|                                                                                    | Change in deferred credits and other liabilities |                                            |                   | (28    | )    |     |      | 2    |     
|                                                                                    | Other  net                                      |                                            |                   | 4      |      |     |      | (28  | )   
|                                                                                    |                                                  |                                            |                   |        |      |    
|Cash from operating activities                                                      |                                                  |                                            | 288               |        |      |     | 99   |     
|                                                                                    |                                                  |                                            |                   |        |      |    
|FINANCING ACTIVITIES                                                                |                                                  |                                            |                   |        |      |     |      |     
|Proceeds from issuance of new debt  third parties                                  |                                                  |                                            | 2,750             |        |      |     | 441  |     
|Debt repayments                                                                     |                                                  |                                            |                   |        |      |     |      |     
|                                                                                    |  third parties                                  |                                            |                   | (1,633 | )    |     |      | (28  | )   
|                                                                                    |  related parties                                |                                            |                   | (1,180 | )    |     |      |     |     
|Short-term borrowings (repayments)  net                                            |                                                  |                                            |                   |        |      |     |      |     
|                                                                                    |  third parties                                  |                                            |                   | (468   | )    |     |      | (129 | )   
|                                                                                    |  related parties                                |                                            |                   | (74    | )    |     |      | 8    |     
|Dividends  common shareholders                                                     |                                                  |                                            | (14               | )      |      |     |     |     
|Dividends  minority interests                                                      |                                                  |                                            | (7                | )      |      |     | (3   | )   
|Net receipts from (payments to) Alcan                                               |                                                  |                                            | 104               |        |      |     | (17  | )   
|                                                                                    |                                                  |                                            |                   |        |      |    
|Cash from (used for) financing activities                                           |                                                  |                                            | (522              | )      |      |     | 272  |     
|                                                                                    |                                                  |                                            |                   |        |      |    
|INVESTING ACTIVITIES                                                                |                                                  |                                            |                   |        |      |     |      |     
|Purchases of property, plant and equipment                                          |                                                  |                                            | (56               | )      |      |     | (59  | )   
|Proceeds from disposal of businesses, investments and other
    assets, net of cash |                                                  |                                            | 9                 |        |      |     |     |     
|Change in long-term and other receivables                                           |                                                  |                                            |                   |        |      |     |      |     
|                                                                                    |  third parties                                  |                                            |                   | 341    |      |     |      | (311 | )   
|                                                                                    |  related parties                                |                                            |                   | 42     |      |     |      |     |     
|                                                                                    |                                                  |                                            |                   |        |      |    
|Cash from (used for) investing activities                                           |                                                  |                                            | 336               |        |      |     | (370 | )   
|                                                                                    |                                                  |                                            |                   |        |      |    
|Increase in cash and cash equivalents                                               |                                                  |                                            | 102               |        |      |     | 1    |     
|Effect of exchange rate changes on cash balances held in foreign
    currencies     |                                                  |                                            | (4                | )      |      |     |     |     
|Cash and cash equivalents  beginning of period                                     |                                                  |                                            | 31                |        |      |     | 27   |     
|                                                                                    |                                                  |                                            |                   |        |      |    
|Cash and cash equivalents  end of period                                           |                                                  |                                            | 129               |        |      |     | 28   |     
|                                                                                    |                                                  |                                            |                   |        |      |    



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Novelis Inc.


CONSOLIDATED AND COMBINED STATEMENTS OF SHAREHOLDERS/
INVESTED EQUITY (unaudited)


(In millions of US$, except number of shares which is in
thousands)


|                                                             |  |               |        |  |            |  |   |          |  |               |          |     |         |        |     |   |            |  |      |       |  |  |      |      |  |  |      |  
|------------------------------------------------------------ |  | ------------- | ------ |  | ---------- |  | - | -------- |  | ------------- | -------- | --- | ------- | ------ | --- | - | ---------- |  | ---- | ----- |  |  | ---- | ---- |  |  | ---- | -
|                                                             |  |               |        |  |            |  |   |          |  | Accumulated   |          |     |         |        |    
|                                                             |  |               |        |  |            |  |   | Other    |  |               |          |     |        
|                                                             |  | Common Shares |        |  | Additional |  |   |          |  | Comprehensive |          |     | Owners |        |     |  
|                                                             |  |               |        |  | Paid-in    |  |   | Retained |  |               | Income   |     |         | Net    |     |   |           
|                                                             |  | Shares        |        |  | Amount     |  |   | Capital  |  |               | Earnings |     |         | (Loss) |     |   | Investment |  |      | Total | 
|                                                             |  |               |        |  |            |  |   |          |  |               |          |     |         |        |     |   |            |  |      |       | 
|Balance at December 31, 2004                                 |  |               |       |  |            |  |  |          |  |               |         |     |         |        |    |   |            |  | 88   |       |  |  | 467  |      |  |  | 555  |  
|Net income  six months ended June 30                        |  |               |       |  |            |  |  |          |  |               |         |     |         |        | 41  |   |            |  |     |       |  |  | (30  | )(b) |  |  | 11   |  
|Other comprehensive loss (NOTE 16)                           |  |               |       |  |            |  |  |          |  |               |         |     |         |        |    |   |            |  | (158 | )     |  |  |     |      |  |  | (158 | )
|Dividends                                                    |  |               |       |  |            |  |  |          |  |               |         |     |         |        | (14 | ) |            |  |     |       |  |  | (7   | )    |  |  | (21  | )
|Transfer from Alcan  net                                    |  |               |       |  |            |  |  |          |  |               |         |     |         |        |    |   |            |  |     |       |  |  | 4    |      |  |  | 4    |  
|Issuance of common stock in connection with the distribution |  |               | 73,989 |  |            |  |  |          |  |               | 434      | (a) |         |        |    |   |            |  |     |       |  |  | (434 | )    |  |  |     |  
|Issuance of common stock in connection with stock plans      |  |               | 4      |  |            |  |  |          |  |               |         |     |         |        |    |   |            |  |     |       |  |  |     |      |  |  |     |  
|                                                             |  |               |        |  |            |  |   |          |  |               |          |     |         |        |     |   |            |  |      |       | 
|Balance at June 30, 2005                                     |  |               | 73,993 |  |            |  |  |          |  |               | 434      |     |         |        | 27  |   |            |  | (70  | )     |  |  |     |      |  |  | 391  |  
|                                                             |  |               |        |  |            |  |   |          |  |               |          |     |         |        |     |   |            |  |      |       | 






|    |  |                                                                                                                                                                                               
|--- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) |  | Represents the amount of Owners net investment after
    transfers from Alcan  net and the net loss from
    January 1 to January 5, 2005 as well as other
    post-transaction adjustments.
|   
|(b) |  | Refer to note 1  Background and Basis of
    Presentation.                                                                                                                                   



6



---



##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
(unaudited)


(in millions of US$, except where indicated)




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



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











| |                             
| | ----------------------------
| | Post-transaction adjustments





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



7



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




| |                      
| | ---------------------
| | Basis of presentation











8



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




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





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







9



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)






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





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





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







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





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



10



---



##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)






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





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





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





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





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





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



11



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)






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



| |                                         
| | ----------------------------------------
| | Conditional Asset Retirement Obligations

conditional asset
retirement obligation




| |                    
| | -------------------
| | Share-Based Payment





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



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



12



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)






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







|   |                   
|-- | ------------------
|4. | EARNINGS PER SHARE



|                                                   |                                               |                |       |       |            |  |      |       |  |  |      |       |  |  |      |       | 
|-------------------------------------------------- | --------------------------------------------- | -------------- | ----- | ----- | ---------- |  | ---- | ----- |  |  | ---- | ----- |  |  | ---- | ----- | 
|                                                   |                                               | Second Quarter |       |       | Six Months | 
|                                                   |                                               |                |       |       |            | 
|Periods ended June 30                              |                                               | 2005           |       |       | 2004       |  |      | 2005  |  |  | 2004 |      
|                                                   |                                               |                |       |       |            |  |      |       |  |  |      |      
|Numerator:                                         |                                               |                |       |       |            |  |      |       |  |  |      |       |  |  |      |      
|                                                   | Net income (loss)                             |                |       | (18   | )          |  |      | 45    |  |  |      | 11    |  |  |      | 114   | 
|                                                   |                                               |                |       |       |            |  |      |       |  |  |      |      
|Denominator (number of common shares in millions): |                                               |                |       |       |            |  |      |       |  |  |      |       |  |  |      |      
|                                                   | Weighted average number of outstanding shares |                |       | 73.99 |            |  |      | 73.99 |  |  |      | 73.99 |  |  |      | 73.99 | 
|                                                   | Effect of dilutive stock options(a)           |                |       |      |            |  |      | 0.44  |  |  |      | 0.21  |  |  |      | 0.44  | 
|                                                   |                                               |                |       |       |            |  |      |       |  |  |      |      
|                                                   | Adjusted number of outstanding shares         |                |       | 73.99 |            |  |      | 74.43 |  |  |      | 74.20 |  |  |      | 74.43 | 
|                                                   |                                               |                |       |       |            |  |      |       |  |  |      |      
|Earnings (loss) per share  basic                  |                                               |                | (0.24 | )     |            |  | 0.61 |       |  |  | 0.15 |       |  |  | 1.54 |      
|                                                   |                                               |                |       |       |            |  |      |       |  |  |      |      
|Earnings (loss) per share  diluted                |                                               |                | (0.24 | )     |            |  | 0.61 |       |  |  | 0.15 |       |  |  | 1.53 |      
|                                                   |                                               |                |       |       |            |  |      |       |  |  |      |      






|    |                                                                                                                                                                                                                                                            
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(a) | As the Company experienced a loss for the second quarter,
    dilutive shares have been excluded from the computation of
    diluted earnings per share for the second quarter of 2005 since
    the effect of including such shares would be antidilutive.





13



---



##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)






|   |                       
|-- | ----------------------
|5. | RESTRUCTURING PROGRAMS



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





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





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





| |                                    
| | -----------------------------------
| | Other 2004 restructuring activities







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



14



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)






|                                                                          |  |           |     |       |            |  |    |       |  |  |       |   |  |  |     |  
|------------------------------------------------------------------------- |  | --------- | --- | ----- | ---------- |  | -- | ----- |  |  | ----- | - |  |  | --- | -
|                                                                          |  |           |     | Asset |            |  |    |       | 
|                                                                          |  | Severance |     |       | Impairment |  |    |       |  | 
|                                                                          |  | Costs     |     |       | Provisions |  |    | Other |  |  | Total |  
|                                                                          |  |           |     |       |            |  |    |       |  |  |       |  
|Provision balance as at January 1, 2004                                   |  |           | 19  |       |            |  |   |       |  |  | 12    |   |  |  | 31  |  
|2004:                                                                     |  |           |     |       |            |  |    |       |  |  |       |   |  |  |     |  
|Charges (recoveries) recorded in the statement of income                  |  |           | 7   |       |            |  | 8  |       |  |  | (1    | ) |  |  | 14  |  
|Liabilities recorded in the allocation of the Pechiney purchase
    price |  |           | 17  |       |            |  |   |       |  |  | 2     |   |  |  | 19  |  
|Cash payments  net                                                       |  |           | (14 | )     |            |  |   |       |  |  | (5    | ) |  |  | (19 | )
|Non-cash charges (recoveries)                                             |  |           |    |       |            |  | (8 | )     |  |  | 6     |   |  |  | (2  | )
|                                                                          |  |           |     |       |            |  |    |       |  |  |       |  
|Provision balance as at December 31, 2004                                 |  |           | 29  |       |            |  |   |       |  |  | 14    |   |  |  | 43  |  
|Six Months Ended June 30, 2005:                                           |  |           |     |       |            |  |    |       |  |  |       |   |  |  |     |  
|Charges (recoveries) recorded in the statement of income                  |  |           | (3  | )     |            |  |   |       |  |  | 1     |   |  |  | (2  | )
|Cash payments  net                                                       |  |           | (15 | )     |            |  |   |       |  |  | (4    | ) |  |  | (19 | )
|                                                                          |  |           |     |       |            |  |    |       |  |  |       |  
|Provision balance as at June 30, 2005                                     |  |           | 11  |       |            |  |   |       |  |  | 11    |   |  |  | 22  |  
|                                                                          |  |           |     |       |            |  |    |       |  |  |       |  



|   |             
|-- | ------------
|6. | INCOME TAXES



|                      |  |         |    |  |            |  |    |      |  |  |      |   |  |  |    | 
|--------------------- |  | ------- | -- |  | ---------- |  | -- | ---- |  |  | ---- | - |  |  | -- | 
|                      |  | Second  |    |  |           
|                      |  | Quarter |    |  | Six Months | 
|                      |  |         |    |  |            | 
|Periods ended June 30 |  | 2005    |    |  | 2004       |  |    | 2005 |  |  | 2004 |  
|                      |  |         |    |  |            |  |    |      |  |  |      |  
|Current               |  |         | 11 |  |            |  | 27 |      |  |  | 61   |   |  |  | 51 | 
|Deferred              |  |         | 4  |  |            |  | (4 | )    |  |  | (17  | ) |  |  | 15 | 
|                      |  |         |    |  |            |  |    |      |  |  |      |  
|                      |  |         | 15 |  |            |  | 23 |      |  |  | 44   |   |  |  | 66 | 
|                      |  |         |    |  |            |  |    |      |  |  |      |  





|   |                           
|-- | --------------------------
|7. | RELATED PARTY TRANSACTIONS



15



---



##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|                                                                                       |  |         |    |  |            |  |     |      |  |  |      |  |  |  |     |  
|-------------------------------------------------------------------------------------- |  | ------- | -- |  | ---------- |  | --- | ---- |  |  | ---- |  |  |  | --- | -
|                                                                                       |  | Second  |    |  |           
|                                                                                       |  | Quarter |    |  | Six Months | 
|                                                                                       |  |         |    |  |            | 
|Periods ended June 30                                                                  |  | 2005    |    |  | 2004       |  |     | 2005 |  |  | 2004 | 
|                                                                                       |  |         |    |  |            |  |     |      |  |  |      | 
|Sales and operating revenues(A)                                                        |  |         |    |  |            |  |     |      |  |  |      |  |  |  |     |  
|Alcan                                                                                  |  |         |   |  |            |  | 124 |      |  |  |     |  |  |  | 216 |  
|                                                                                       |  |         |    |  |            |  |     |      |  |  |      | 
|Cost of sales and operating expenses(A)                                                |  |         |    |  |            |  |     |      |  |  |      |  |  |  |     |  
|Alcan                                                                                  |  |         |   |  |            |  | 112 |      |  |  |     |  |  |  | 192 |  
|                                                                                       |  |         |    |  |            |  |     |      |  |  |      | 
|Research and development expenses(B)                                                   |  |         |    |  |            |  |     |      |  |  |      |  |  |  |     |  
|Alcan                                                                                  |  |         |   |  |            |  | 12  |      |  |  |     |  |  |  | 18  |  
|                                                                                       |  |         |    |  |            |  |     |      |  |  |      | 
|Interest(C)                                                                            |  |         |    |  |            |  |     |      |  |  |      |  |  |  |     |  
|Alcan                                                                                  |  |         |   |  |            |  | 9   |      |  |  |     |  |  |  | 17  |  
|                                                                                       |  |         |    |  |            |  |     |      |  |  |      | 
|Other expenses (income)  net                                                          |  |         |    |  |            |  |     |      |  |  |      |  |  |  |     |  
|Service fee income(D)                                                                  |  |         |   |  |            |  | (18 | )    |  |  |     |  |  |  | (27 | )
|Service fee expense(E)                                                                 |  |         |   |  |            |  | 10  |      |  |  |     |  |  |  | 19  |  
|Interest income(F)                                                                     |  |         |   |  |            |  | (6  | )    |  |  |     |  |  |  | (11 | )
|Derivatives(G)                                                                         |  |         |   |  |            |  | 36  |      |  |  |     |  |  |  | (8  | )
|Other                                                                                  |  |         |   |  |            |  |    |      |  |  |     |  |  |  | 6   |  
|                                                                                       |  |         |    |  |            |  |     |      |  |  |      | 
|Total other expenses (income)  net arising from
    transactions with Alcan           |  |         |   |  |            |  | 22  |      |  |  |     |  |  |  | (21 | )
|                                                                                       |  |         |    |  |            |  |     |      |  |  |      | 
|Interest income from Aluminum Norf GmbH                                                |  |         |   |  |            |  | (1  | )    |  |  |     |  |  |  | (1  | )
|                                                                                       |  |         |    |  |            |  |     |      |  |  |      | 
|Total other expenses (income)  net arising from
    transactions with related parties |  |         |   |  |            |  | 21  |      |  |  |     |  |  |  | (22 | )
|                                                                                       |  |         |    |  |            |  |     |      |  |  |      | 
|Purchase of inventory/tolling services                                                 |  |         |    |  |            |  |     |      |  |  |      |  |  |  |     |  
|Aluminum Norf GmbH                                                                     |  |         | 51 |  |            |  | 48  |      |  |  | 102  |  |  |  | 96  |  
|Alcan(H)                                                                               |  |         |   |  |            |  | 490 |      |  |  |     |  |  |  | 983 |  
|                                                                                       |  |         |    |  |            |  |     |      |  |  |      | 






|    |                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) | The Company sells inventory to Alcan and certain investees
    accounted for under the equity method in the ordinary course of
    business. In 2004, Alcan was considered a related party to
    Novelis.



|    |  |                                                                                                                                                                                                                                        
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(B) |  | These expenses are comprised of an allocation of research and
    development expenses incurred by Alcan on behalf of the Company.
    In 2004, Alcan was considered a related party to Novelis.                                       
|   
|(C) |  | As discussed further below and in note 10  Debt
    Not Maturing Within One Year, the Company had various short-term
    and long-term debt payable to Alcan where interest was charged
    on both a fixed and a floating rate basis.
|   
|(D) |  | Service fee income relates to revenues generated through sales
    of research and development and other corporate services to
    Alcan.                                                                                              
|   
|(E) |  | Service fee expense relates to the purchase of corporate
    services from Alcan.                                                                                                                                                      

16



---



##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|    |  |                                                                                                                                 
|--- |  | --------------------------------------------------------------------------------------------------------------------------------
|(F) |  | Interest income earned on outstanding advances and loans to
    Alcan.                                                          
|   
|(G) |  | Alcan was the counterparty to all of the Companys metal
    derivatives and most of the Companys currency derivatives.        
|   
|(H) |  | Alcan is the primary supplier of prime and sheet ingot to the
    Company. Refer to note 13  Commitments and
    Contingencies.



|                                     |  |          |    |  |              |  |       | 
|------------------------------------ |  | -------- | -- |  | ------------ |  | ----- | 
|                                     |  | June 30, |    |  | December 31, | 
|As at                                |  | 2005     |    |  | 2004         | 
|                                     |  |          |    |  |              | 
|Trade receivables(A)                 |  |          |    |  |              |  |       | 
|Alcan                                |  |          |   |  |              |  | 87    | 
|                                     |  |          |    |  |              | 
|Other receivables                    |  |          |    |  |              |  |       | 
|Alcan(B)                             |  |          |   |  |              |  | 801   | 
|Aluminium Norf GmbH(C)               |  |          | 35 |  |              |  | 45    | 
|                                     |  |          |    |  |              | 
|                                     |  |          | 35 |  |              |  | 846   | 
|                                     |  |          |    |  |              | 
|Long-term receivables                |  |          |    |  |              |  |       | 
|Alcan                                |  |          |   |  |              |  | 2     | 
|Aluminium Norf GmbH(C)               |  |          | 82 |  |              |  | 102   | 
|                                     |  |          |    |  |              | 
|                                     |  |          | 82 |  |              |  | 104   | 
|                                     |  |          |    |  |              | 
|Payables and accrued liabilities(A)  |  |          |    |  |              |  |       | 
|Alcan                                |  |          |   |  |              |  | 356   | 
|Aluminium Norf GmbH                  |  |          | 37 |  |              |  | 45    | 
|                                     |  |          |    |  |              | 
|                                     |  |          | 37 |  |              |  | 401   | 
|                                     |  |          |    |  |              | 
|Short-term borrowings(D)             |  |          |    |  |              |  |       | 
|Alcan                                |  |          |   |  |              |  | 312   | 
|                                     |  |          |    |  |              | 
|Debt maturing within one year(E)     |  |          |    |  |              |  |       | 
|Alcan                                |  |          |   |  |              |  | 290   | 
|                                     |  |          |    |  |              | 
|Debt not maturing within one year(E) |  |          |    |  |              |  |       | 
|Alcan                                |  |          |   |  |              |  | 2,307 | 
|                                     |  |          |    |  |              | 






|    |                                                                                                                                                                                   
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) | The Company purchases from and sells inventory to Alcan and
    purchases services from an investee accounted for under the
    equity method, in the ordinary course of business.



|    |  |                                                                                                                                                                                                                                
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(B) |  | The balance at December 31, 2004 included various
    short-term floating rate notes totaling
     266 million
    and $55 maturing within one year that were settled by Alcan in
    2005 as part of the spin-off of Novelis.
|   
|(C) |  | Current and non-current portions of a loan to an investee
    accounted for under the equity method.                                                                                                                           
|   
|(D) |  | The balance at December 31, 2004 comprised loans due to
    Alcan in various currencies including
     193 million
    and GBP 20 million that were repaid in 2005 as part of the
    spin-off of Novelis.                    

17



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|    |  |                                                                                                                                            
|--- |  | -------------------------------------------------------------------------------------------------------------------------------------------
|(E) |  | The Company had various loans payable to Alcan as at
    December 31, 2004 as described in note 10 
    Debt Not Maturing Within One Year.



|   |                                    
|-- | -----------------------------------
|8. | SALES AND FORFAITING OF RECEIVABLES







|   |                              
|-- | -----------------------------
|9. | OTHER EXPENSES (INCOME)  NET



|                                                                                                |  |         |     |   |            |  |    |      |  |  |      |   |  |  |     |  
|----------------------------------------------------------------------------------------------- |  | ------- | --- | - | ---------- |  | -- | ---- |  |  | ---- | - |  |  | --- | -
|                                                                                                |  | Second  |     |   |           
|                                                                                                |  | Quarter |     |   | Six Months | 
|                                                                                                |  |         |     |   |            | 
|Periods ended June 30                                                                           |  | 2005    |     |   | 2004       |  |    | 2005 |  |  | 2004 |  
|                                                                                                |  |         |     |   |            |  |    |      |  |  |      |  
|Restructuring costs (recoveries)  net                                                          |  |         | (1  | ) |            |  | 2  |      |  |  | (2   | ) |  |  | 2   |  
|Gain on disposals of fixed assets(1)                                                            |  |         | (10 | ) |            |  |   |      |  |  | (11  | ) |  |  | (6  | )
|Interest income                                                                                 |  |         | (2  | ) |            |  | (7 | )    |  |  | (4   | ) |  |  | (13 | )
|Realized (gains) losses on monetization of cross-currency
    interest rate swaps               |  |         | (45 | ) |            |  |   |      |  |  | (45  | ) |  |  |    |  
|Realized (gains) losses on derivatives(2)                                                       |  |         | (15 | ) |            |  |   |      |  |  | (15  | ) |  |  |    |  
|Exchange (gains) losses                                                                         |  |         | 13  |   |            |  | 2  |      |  |  | 2    |   |  |  | 3   |  
|Unrealized (gains) losses on change in market value of
    derivatives and reclassifications(3) |  |         | 61  |   |            |  | 27 |      |  |  | 47   |   |  |  | (15 | )
|Service fee expense  net                                                                       |  |         |    |   |            |  | 1  |      |  |  |     |   |  |  | 1   |  
|Bridge financing commitment fee                                                                 |  |         |    |   |            |  |   |      |  |  | 13   |   |  |  |    |  
|Other expenses (income)                                                                         |  |         | 10  |   |            |  |   |      |  |  | 12   |   |  |  | 14  |  
|                                                                                                |  |         |     |   |            |  |    |      |  |  |      |  
|                                                                                                |  |         | 11  |   |            |  | 25 |      |  |  | (3   | ) |  |  | (14 | )
|                                                                                                |  |         |     |   |            |  |    |      |  |  |      |  






|    |                                                                                                                                                                                                                                                                                                                           
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes a gain on the sale of land in Asia of ($11) for the
    second quarter of 2005.                                                                                                                                                                                                                                  
|   
|(2) | Includes metal, natural gas and energy.                                                                                                                                                                                                                                                                                   
|   
|(3) | Included within the $47 for the six months ended June 30,
    2005, is $45 pre-tax ($30 after-tax) unrealized losses on the
    change in market value of derivative contracts, primarily with
    Alcan, for the period from January 1 to 5, 2005, as
    described in note 1  Background and Basis of
    Presentation.

18



---



##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|    |                                  
|--- | ---------------------------------
|10. | DEBT NOT MATURING WITHIN ONE YEAR

|                                                              |  |          |       |   |              |  |       |  
|------------------------------------------------------------- |  | -------- | ----- | - | ------------ |  | ----- | -
|                                                              |  | June 30, |       |   | December 31, | 
|As at                                                         |  | 2005     |       |   | 2004         | 
|                                                              |  |          |       |   |              | 
|DUE TO RELATED PARTIES                                        |  |          |       |   |              |  |       |  
|Total debt due to related parties(A)                          |  |          |      |   |              |  | 2,597 |  
|Debt maturing within one year included in current liabilities |  |          |      |   |              |  | (290  | )
|                                                              |  |          |       |   |              | 
|Debt not maturing within one year due to related parties      |  |          |      |   |              |  | 2,307 |  
|                                                              |  |          |       |   |              | 
|DUE TO THIRD PARTIES                                          |  |          |       |   |              |  |       |  
|Novelis Inc.                                                  |  |          |       |   |              |  |       |  
|Floating rate Term Loan B, due 2012(B)(C)                     |  |          | 411   |   |              |  |      |  
|7.25% Senior notes, due 2015(D)                               |  |          | 1,400 |   |              |  |      |  
|Novelis Corporation                                           |  |          |       |   |              |  |       |  
|Floating rate Term Loan B, due 2012(B)(C)(F)                  |  |          | 714   |   |              |  |      |  
|Novelis Switzerland S.A.                                      |  |          |       |   |              |  |       |  
|Capital lease obligation, due 2020 (CHF 62 million)           |  |          | 48    |   |              |  |      |  
|Novelis Korea Limited(E)                                      |  |          |       |   |              |  |       |  
|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                                                         |  |          |       |   |              |  |       |  
|Bank loans, due 2005/2011(F)                                  |  |          | 2     |   |              |  | 3     |  
|Other debt, due 2005/2010                                     |  |          |      |   |              |  | 2     |  
|                                                              |  |          |       |   |              | 
|                                                              |  |          | 2,760 |   |              |  | 140   |  
|Debt maturing within one year included in current liabilities |  |          | (3    | ) |              |  | (1    | )
|                                                              |  |          |       |   |              | 
|Debt not maturing within one year due to third parties        |  |          | 2,757 |   |              |  | 139   |  
|                                                              |  |          |       |   |              | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(A) | All of the Companys related party debt of $2,597 as at
    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 comprised a major
    portion of the $1,375 bridge financing provided by Alcan to the
    Company as a result of the reorganization transactions described
    in note 1  Background and Basis of Presentation.
    The remaining balance of the Alcan Notes of $170 was obtained in
    January 2005. The Alcan Notes were duly refinanced with the
    proceeds of the $1.4 billion 10-year Senior Notes issued in
    February 2005 (refer to (D) below).



|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|--- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(B) |  | In connection with the reorganization transactions described in
    note 1  Background and Basis of Presentation,
    the Company entered into senior secured credit facilities
    providing for aggregate borrowings of up to $1.8 billion.
    These facilities consist of a $1.3 billion seven-year
    senior secured Term Loan B facility, bearing interest at
    LIBOR plus 1.75%, all of which was borrowed on January 10,
    2005, and a $500 five-year multi-currency revolving credit
    facility. The Term Loan B

19



---



##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|    |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|--- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |  | facility 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
    reorganization transactions, the Companys separation from
    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.                                                                                                                     
|   
|(C) |  | The Company has entered into interest rate swaps to fix the
    interest rate on $310 of the variable 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, Novelis sold $1.4 billion
    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 placement were used to repay the Alcan Notes.                                                                                                                                                                                                                                                                                                                                                    
|   
|(E) |  | 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 KRW 40 billion and
    KRW 25 billion that were swapped for fixed rates of
    4.80% and 4.45%, respectively. In 2005, interest on another loan
    for KRW 2 billion ranges from 3.00% to 4.43% (2004:
    3.00% to 5.50%). In February 2005, Novelis Korea entered into a
    $50 floating rate long-term loan which was subsequently swapped
    for a 5.30% fixed rate KRW 51 billion loan.
|   
|(F) |  | Interest rates are a function of the lenders prime
    commercial rates or LIBOR/ EURIBOR rates.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               







|    |              
|--- | -------------
|11. | COMMON SHARES





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



20



---



##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)








|    |                                                 
|--- | ------------------------------------------------
|12. | STOCK OPTIONS AND OTHER STOCK-BASED COMPENSATION



| |                            
| | ---------------------------
| | Executive Share Option Plan





|                           |  |      |       |  |      |  |       | 
|-------------------------- |  | ---- | ----- |  | ---- |  | ----- | 
|                           |  | 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  | 



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



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



21



---



##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)






| |                                          
| | -----------------------------------------
| | Total Shareholder Return Performance Plan





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





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



22



---



##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)






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





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





|    |                              
|--- | -----------------------------
|13. | COMMITMENTS AND CONTINGENCIES











PAS Site.


23



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




PAS Oswego Site Performing Company.


Oswego North Ponds.




Butler Tunnel Site.




24



---



##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)


Tri-Cities Site.


Quanta Resources Site.


Sealand Site.


Toyo Coal Tar Remediation.


Diamond Alkali Superfund Site-Lower Passaic River
Initiative.


Jarl Extrusions (Rochester, NY).


25



---



##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)


consent


Terre Haute TCE Issue.








| |   |                                                                                                                                                                                                                                   
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | the contributed businesses, liabilities or contracts;                                                                                                                                                                             
|
| |  | liabilities or obligations associated with the contributed
    businesses, as defined in the separation agreement between
    Novelis and Alcan, or otherwise assumed by the Company pursuant
    to the separation agreement; and
|
| |  | any breach by the Company of the separation agreement or any of
    the ancillary agreements entered into with Alcan in connection
    with the separation.                                                                       





|    |                                              
|--- | ---------------------------------------------
|14. | FINANCIAL INSTRUMENTS AND COMMODITY CONTRACTS



26



---



##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)






 




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





|    |                          
|--- | -------------------------
|15. | SUPPLEMENTARY INFORMATION

|                        |                            |         |  |    |            |  |  |      |   |  |      |    |  |  |  |    |  
|----------------------- | -------------------------- | ------- |  | -- | ---------- |  |  | ---- | - |  | ---- | -- |  |  |  | -- | -
|                        |                            | Second  |  |    |           
|                        |                            | Quarter |  |    | Six Months | 
|                        |                            |         |  |    |            | 
|Periods ended June 30   |                            | 2005    |  |    | 2004       |  |  | 2005 |   |  | 2004 |   
|                        |                            |         |  |    |            |  |  |      |   |  |      |   
|Statement of Income     |                            |         |  |    |            |  |  |      |   |  |      |    |  |  |  |   
|                        | Interest on long-term debt |         |  | 48 |            |  |  | 13   |   |  |      | 85 |  |  |  | 25 |  
|                        | Capitalized interest       |         |  |   |            |  |  | (1   | ) |  |      |   |  |  |  | (1 | )
|                        |                            |         |  |    |            |  |  |      |   |  |      |   
|Statement of Cash Flows |                            |         |  |    |            |  |  |      |   |  |      |    |  |  |  |   
|                        | Interest paid              |         |  | 23 |            |  |  | 20   |   |  |      | 43 |  |  |  | 38 |  
|                        | Income taxes paid          |         |  | 33 |            |  |  | 24   |   |  |      | 38 |  |  |  | 36 |  
|                        |                            |         |  |    |            |  |  |      |   |  |      |   

|                                                        |                     |          |  |     |              |  |  |     | 
|------------------------------------------------------- | ------------------- | -------- |  | --- | ------------ |  |  | --- | 
|                                                        |                     | June 30, |  |     | December 31, | 
|As at                                                   |                     | 2005     |  |     | 2004         | 
|                                                        |                     |          |  |     |              | 
|Balance Sheet                                           |                     |          |  |     |              |  |  |    
|Payables and accrued liabilities include the following: |                     |          |  |     |              |  |  |    
|                                                        | Trade payables      |          |  | 825 |              |  |  | 899 | 
|                                                        | Accrued liabilities |          |  | 514 |              |  |  | 361 | 



27



---



##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|    |                     
|--- | --------------------
|16. | COMPREHENSIVE INCOME



|                                   |                                                                                                                                                                              |         |      |     |            |  |    |      |   |  |      |      |   |  |     |     |  
|---------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------- | ---- | --- | ---------- |  | -- | ---- | - |  | ---- | ---- | - |  | --- | --- | -
|                                   |                                                                                                                                                                              | Second  |      |     |           
|                                   |                                                                                                                                                                              | Quarter |      |     | Six Months | 
|                                   |                                                                                                                                                                              |         |      |     |            | 
|Periods ended June 30              |                                                                                                                                                                              | 2005    |      |     | 2004       |  |    | 2005 |   |  | 2004 |     
|                                   |                                                                                                                                                                              |         |      |     |            |  |    |      |   |  |      |     
|Net income (loss)                  |                                                                                                                                                                              |         | (18  | )   |            |  | 45 |      |   |  | 11   |      |   |  | 114 |    
|                                   |                                                                                                                                                                              |         |      |     |            |  |    |      |   |  |      |     
|Other comprehensive income (loss): |                                                                                                                                                                              |         |      |     |            |  |    |      |   |  |      |      |   |  |     |    
|                                   | Net change in deferred translation adjustments                                                                                                                               |         |      | (75 | )          |  |    | (5   | ) |  |      | (144 | ) |  |     | (44 | )
|                                   | Net change in minimum pension liability, net of taxes of ($11)
    and ($8), respectively, for the second quarter and six months
    ended June 30, 2005 (2004: nil and nil) |         |      | (10 | )          |  |    |     |   |  |      | (14  | ) |  |     |    |  
|                                   |                                                                                                                                                                              |         |      |     |            |  |    |      |   |  |      |     
|Comprehensive income (loss)        |                                                                                                                                                                              |         | (103 | )   |            |  | 40 |      |   |  | (147 | )    |   |  | 70  |    
|                                   |                                                                                                                                                                              |         |      |     |            |  |    |      |   |  |      |     



|                                              |  |          |     |   |              |  |     |  
|--------------------------------------------- |  | -------- | --- | - | ------------ |  | --- | -
|                                              |  | June 30, |     |   | December 31, | 
|As at                                         |  | 2005     |     |   | 2004         | 
|                                              |  |          |     |   |              | 
|Deferred translation adjustments              |  |          | (24 | ) |              |  | 120 |  
|Minimum pension liability                     |  |          | (46 | ) |              |  | (32 | )
|                                              |  |          |     |   |              | 
|Accumulated other comprehensive income (loss) |  |          | (70 | ) |              |  | 88  |  
|                                              |  |          |     |   |              | 



|    |                         
|--- | ------------------------
|17. | POST-RETIREMENT BENEFITS







| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | a) In the U.S., for Novelis 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 Novelis and Novelis 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 Novelis. No
    new plan was established.                                                                                                                                                                                                                                                                                                                                
|
| | c) In Switzerland, Novelis became a participating employer
    in the Alcan Swiss Pension Plans and Novelis employees are
    participating in these plans for up to one year (or longer with
    Alcan approval) provided Novelis makes the required pension
    contributions.                                                                                                                                                                                                           

28



---



##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




Canada Pension Plan


Pension Plan for Officers






|                              |  |                  |    |   |            |                |     |        |         |  |      |            |  |  |      |   |  |      |  |   |      |  |  |      |  |  |  |   |  |  |  |   | 
|----------------------------- |  | ---------------- | -- | - | ---------- | -------------- | --- | ------ | ------- |  | ---- | ---------- |  |  | ---- | - |  | ---- |  | - | ---- |  |  | ---- |  |  |  | - |  |  |  | - | 
|                              |  | Pension Benefits |    |   |            | Other Benefits |    
|                              |  |                  |    |   |            |                |    
|                              |  | Second           |    |   |            |                |     | Second |         |  |     
|                              |  | Quarter          |    |   | Six Months |                |     |        | Quarter |  |      | Six Months | 
|                              |  |                  |    |   |            |                |     |        |         |  |      |            | 
|Periods ended June 30         |  | 2005             |    |   | 2004       |                |     | 2005   |         |  | 2004 |            |  |  | 2005 |   |  | 2004 |  |   | 2005 |  |  | 2004 | 
|                              |  |                  |    |   |            |                |     |        |         |  |      |            |  |  |      |   |  |      |  |   |      |  |  |      | 
|Service cost                  |  |                  | 8  |   |            |                | 5   |        |         |  | 16   |            |  |  | 10   |   |  |      |  | 1 |      |  |  | 1    |  |  |  | 2 |  |  |  | 1 | 
|Interest cost                 |  |                  | 7  |   |            |                | 7   |        |         |  | 15   |            |  |  | 14   |   |  |      |  | 3 |      |  |  | 1    |  |  |  | 6 |  |  |  | 3 | 
|Expected return on assets     |  |                  | (6 | ) |            |                | (6  | )      |         |  | (12  | )          |  |  | (12  | ) |  |      |  |  |      |  |  |     |  |  |  |  |  |  |  |  | 
|Amortization                  |  |                  |    |   |            |                |     |        |         |  |      |            |  |  |      |   |  |      |  |   |      |  |  |      |  |  |  |   |  |  |  |   | 
| actuarial losses            |  |                  | 2  |   |            |                | 1   |        |         |  | 4    |            |  |  | 2    |   |  |      |  |  |      |  |  |     |  |  |  |  |  |  |  |  | 
| prior service cost          |  |                  | 1  |   |            |                | 1   |        |         |  | 2    |            |  |  | 2    |   |  |      |  |  |      |  |  |     |  |  |  |  |  |  |  |  | 
|Curtailment/ settlement gains |  |                  |   |   |            |                | (19 | )      |         |  |     |            |  |  | (19  | ) |  |      |  |  |      |  |  |     |  |  |  |  |  |  |  |  | 
|                              |  |                  |    |   |            |                |     |        |         |  |      |            |  |  |      |   |  |      |  |   |      |  |  |      | 
|Net periodic benefit cost     |  |                  | 12 |   |            |                | (11 | )      |         |  | 25   |            |  |  | (3   | ) |  |      |  | 4 |      |  |  | 2    |  |  |  | 8 |  |  |  | 4 | 
|                              |  |                  |    |   |            |                |     |        |         |  |      |            |  |  |      |   |  |      |  |   |      |  |  |      | 





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



29



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)








|    |                                  
|--- | ---------------------------------
|18. | 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
|
| | 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.                                       





30



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)






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





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





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





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





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





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



31



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##### Table of Contents



Novelis Inc.


NOTES TO THE CONSOLIDATED AND


COMBINED FINANCIAL STATEMENTS
(unaudited)  (Continued)


(in millions of US$, except where indicated)




|                                                |  |                |     |   |            |  |     |      |  |  |      |   |  |  |     |  
|----------------------------------------------- |  | -------------- | --- | - | ---------- |  | --- | ---- |  |  | ---- | - |  |  | --- | -
|                                                |  | Second Quarter |     |   | Six Months | 
|                                                |  |                |     |   |            | 
|Periods ended June 30                           |  | 2005           |     |   | 2004       |  |     | 2005 |  |  | 2004 |  
|                                                |  |                |     |   |            |  |     |      |  |  |      |  
|Sales and operating revenues  intersegment     |  |                |     |   |            |  |     |      |  |  |      |   |  |  |     |  
|Novelis North America                           |  |                |    |   |            |  | 4   |      |  |  | 1    |   |  |  | 5   |  
|Novelis Europe                                  |  |                | 9   |   |            |  | 8   |      |  |  | 28   |   |  |  | 13  |  
|Novelis Asia                                    |  |                | 2   |   |            |  | 2   |      |  |  | 5    |   |  |  | 4   |  
|Novelis South America                           |  |                | 14  |   |            |  | 19  |      |  |  | 30   |   |  |  | 27  |  
|Adjustments for equity-accounted joint ventures |  |                |    |   |            |  |    |      |  |  |     |   |  |  |    |  
|Eliminations                                    |  |                | (25 | ) |            |  | (33 | )    |  |  | (64  | ) |  |  | (49 | )
|                                                |  |                |     |   |            |  |     |      |  |  |      |  
|                                                |  |                |    |   |            |  |    |      |  |  |     |   |  |  |    |  
|                                                |  |                |     |   |            |  |     |      |  |  |      |  

|                                                |  |                |       |   |            |  |       |      |  |  |       |   |  |  |       |  
|----------------------------------------------- |  | -------------- | ----- | - | ---------- |  | ----- | ---- |  |  | ----- | - |  |  | ----- | -
|                                                |  | Second Quarter |       |   | Six Months | 
|                                                |  |                |       |   |            | 
|Periods ended June 30                           |  | 2005           |       |   | 2004       |  |       | 2005 |  |  | 2004  |  
|                                                |  |                |       |   |            |  |       |      |  |  |       |  
|Sales and operating revenues                    |  |                |       |   |            |  |       |      |  |  |       |   |  |  |       |  
|Novelis North America                           |  |                | 840   |   |            |  | 749   |      |  |  | 1,667 |   |  |  | 1,419 |  
|Novelis Europe                                  |  |                | 833   |   |            |  | 767   |      |  |  | 1,640 |   |  |  | 1,523 |  
|Novelis Asia                                    |  |                | 360   |   |            |  | 298   |      |  |  | 698   |   |  |  | 566   |  
|Novelis South America                           |  |                | 144   |   |            |  | 117   |      |  |  | 293   |   |  |  | 235   |  
|Adjustments for equity-accounted joint ventures |  |                | (4    | ) |            |  | (2    | )    |  |  | (7    | ) |  |  | (4    | )
|                                                |  |                |       |   |            |  |       |      |  |  |       |  
|                                                |  |                | 2,173 |   |            |  | 1,929 |      |  |  | 4,291 |   |  |  | 3,739 |  
|                                                |  |                |       |   |            |  |       |      |  |  |       |  

|                                                                                     |  |         |     |   |            |  |     |      |  |  |      |   |  |  |      |  
|------------------------------------------------------------------------------------ |  | ------- | --- | - | ---------- |  | --- | ---- |  |  | ---- | - |  |  | ---- | -
|                                                                                     |  | Second  |     |   |           
|                                                                                     |  | Quarter |     |   | Six Months | 
|                                                                                     |  |         |     |   |            | 
|Periods ended June 30                                                                |  | 2005    |     |   | 2004       |  |     | 2005 |  |  | 2004 |  
|                                                                                     |  |         |     |   |            |  |     |      |  |  |      |  
|Regional Income                                                                      |  |         |     |   |            |  |     |      |  |  |      |   |  |  |      |  
|Novelis North America                                                                |  |         | 34  |   |            |  | 72  |      |  |  | 91   |   |  |  | 141  |  
|Novelis Europe                                                                       |  |         | 58  |   |            |  | 56  |      |  |  | 115  |   |  |  | 98   |  
|Novelis Asia                                                                         |  |         | 29  |   |            |  | 23  |      |  |  | 59   |   |  |  | 43   |  
|Novelis South America                                                                |  |         | 19  |   |            |  | 44  |      |  |  | 57   |   |  |  | 72   |  
|                                                                                     |  |         |     |   |            |  |     |      |  |  |      |  
|Total Regional Income                                                                |  |         | 140 |   |            |  | 195 |      |  |  | 322  |   |  |  | 354  |  
|Corporate costs                                                                      |  |         | 34  |   |            |  | (10 | )    |  |  | 7    |   |  |  | (20  | )
|Impairment, restructuring and rationalization costs                                  |  |         | 10  |   |            |  | (2  | )    |  |  | 11   |   |  |  | 5    |  
|Adjustments for equity-accounted joint ventures                                      |  |         | (11 | ) |            |  | (10 | )    |  |  | (22  | ) |  |  | (21  | )
|Adjustments for change in fair market value and
    reclassifications of derivatives |  |         | (66 | ) |            |  | (27 | )    |  |  | (47  | ) |  |  | 22   |  
|Depreciation and amortization                                                        |  |         | (57 | ) |            |  | (57 | )    |  |  | (115 | ) |  |  | (118 | )
|Interest                                                                             |  |         | (50 | ) |            |  | (19 | )    |  |  | (94  | ) |  |  | (38  | )
|                                                                                     |  |         |     |   |            |  |     |      |  |  |      |  
|Income before income taxes and other items                                           |  |         |    |   |            |  | 70  |      |  |  | 62   |   |  |  | 184  |  
|                                                                                     |  |         |     |   |            |  |     |      |  |  |      |  



|    |                  
|--- | -----------------
|19. | SUBSEQUENT EVENTS



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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
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    |       |   | Six Months Ended |  
|                                  |  | Ended June 30   |       |   | June 30          |  
|                                  |  |                 |       |   |                  |  
|                                  |  | 2005            |       |   | 2004             |   |       | 2005 |  |   | 2004  | 
|                                  |  |                 |       |   |                  |   |       |      |  |   |       | 
|                                  |  | ($ in millions) |      
|Sales and operating revenues      |  | $               | 2,173 |   |                  | $ | 1,929 |      |  | $ | 4,291 |  |  | $ | 3,739 | 
|Total Regional Income(i)          |  |                 | 140   |   |                  |   | 195   |      |  |   | 322   |  |  |   | 354   | 
|Net income (loss)                 |  |                 | (18   | ) |                  |   | 45    |      |  |   | 11    |  |  |   | 114   | 
|Rolled products shipments(ii)(kt) |  |                 | 731   |   |                  |   | 709   |      |  |   | 1,443 |  |  |   | 1,392 | 
|Total assets                      |  |                 | 5,341 |   |                  |   | 6,920 |      |  |   | 5,341 |  |  |   | 6,920 | 
|Free cash flow(iii)               |  |                 | 135   |   |                  |   | (79   | )    |  |   | 211   |  |  |   | 37    | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(i) | Regional Income comprises earnings before interest, taxes,
    depreciation and amortization excluding certain items, such as
    corporate office costs and asset and goodwill impairments,
    restructuring, rationalization and the change in fair market
    value of our derivatives, which are not under the control of the
    regional groups. These items are managed by the Companys
    corporate 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 performance of our operating segments.







|      |                                                                                                                                                                                                                                                                                                                  
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(ii)  | Includes conversion of customer-owned metal (tolling).                                                                                                                                                                                                                                                           
|     
|(iii) | Free cash flow (which is a non-U.S. GAAP measure) consists
    of cash from operating activities less capital expenditures and
    dividends. Dividends include those paid by our less than
    wholly-owned subsidiaries to their minority shareholders and
    dividends to the common shareholders of Novelis.

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| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 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. The Companys method of calculating free cash flow
    may not be consistent with that of other companies.

HIGHLIGHTS


Net income (loss).


Shipments.


Regional Income.


Financing Activity.


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




Net income (loss)






| |   |                                                                                                                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Gain on the monetization of cross-currency interest rate swaps
    of inter-company debt amounting to $37 million in 2005;                                                                          
|
| |  | Gain on the sale of land in our Asia region of $11 million
    in 2005;                                                                                                                             
|
| |  | Unrealized losses on the change in market value of derivatives
    of $43 million in the second quarter of 2005, compared to
    unrealized losses in the second quarter of 2004 of
    $18 million;
|
| |  | Foreign currency balance sheet translation losses of
    $25 million in the second quarter of 2005, mainly in South
    America, compared to a gain of $6 million in the second
    quarter of 2004;

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| |   |                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Gain in the second quarter 2004 of $13 million on a change
    in the pension plan for our South American operations; and                                           
|
| |  | As a stand-alone company, our interest expense increased by
    $20 million in the second quarter of 2005 compared to the
    2004 carve-out allocations from Alcan.



Sales and operating revenues
and shipments




Costs and expenses










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Income taxes




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
    region; 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.                            

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Reconciliation




|                                           |                                                                   |                 |     |     |      |  |     |     |  
|------------------------------------------ | ----------------------------------------------------------------- | --------------- | --- | --- | ---- |  | --- | --- | -
|                                           |                                                                   | Second Quarter  |    
|                                           |                                                                   |                 |    
|                                           |                                                                   | 2005            |     |     | 2004 | 
|                                           |                                                                   |                 |     |     |      | 
|                                           |                                                                   | ($ in millions) |    
|Regional Income                            |                                                                   |                 |     |     |      |  |     |    
|                                           | Novelis North America                                             |                 |     | 34  |      |  |     | 72  |  
|                                           | Novelis Europe                                                    |                 |     | 58  |      |  |     | 56  |  
|                                           | Novelis Asia                                                      |                 |     | 29  |      |  |     | 23  |  
|                                           | Novelis South America                                             |                 |     | 19  |      |  |     | 44  |  
|                                           |                                                                   |                 |     |     |      | 
|Total Regional Income                      |                                                                   |                 | 140 |     |      |  | 195 |    
|                                           | Corporate office(*)                                               |                 |     | 34  |      |  |     | (10 | )
|Other Adjustments                          |                                                                   |                 |     |     |      |  |     |    
|                                           | Equity-accounted joint ventures                                   |                 |     | (11 | )    |  |     | (10 | )
|                                           | Change in market value of and reclassification of
    derivatives |                 |     | (66 | )    |  |     | (27 | )
|                                           | Restructuring, rationalization and impairment                     |                 |     | 10  |      |  |     | (2  | )
|                                           | Depreciation and amortization                                     |                 |     | (57 | )    |  |     | (57 | )
|                                           | Interest                                                          |                 |     | (50 | )    |  |     | (19 | )
|                                           |                                                                   |                 |     |     |      | 
|Income before income taxes and other items |                                                                   |                 |    |     |      |  | 70  |    
|                                           |                                                                   |                 |     |     |      | 






|  |                                                                                                                                                         
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Corporate office includes the $45 million gain realized on
    the monetization of cross-currency interest rate swaps in the
    second quarter of 2005.



|                              |  |                 |       |  |         |  |       |          |  |  |       |   
|----------------------------- |  | --------------- | ----- |  | ------- |  | ----- | -------- |  |  | ----- | --
|                              |  | Second          |       |  | Second  |  |       |         
|                              |  | Quarter         |       |  | Quarter |  |       |         
|North America                 |  | 2005            |       |  | 2004    |  |       | % Change | 
|                              |  |                 |       |  |         |  |       |          | 
|                              |  | ($ in millions) |      
|Sales and operating revenues  |  |                 | 840   |  |         |  | 749   |          |  |  | 12.1  | % 
|Regional Income               |  |                 | 34    |  |         |  | 72    |          |  |  | (52.8 | )%
|Rolled product shipments (kt) |  |                 | 284   |  |         |  | 289   |          |  |  | (1.7  | )%
|Regional Income per tonne     |  |                 | 120   |  |         |  | 249   |          |  |  | (51.8 | )%
|Depreciation                  |  |                 | 18    |  |         |  | 17    |          |  |  | 5.9   | % 
|Capital expenditures          |  |                 | 9     |  |         |  | 6     |          |  |  | 50.0  | % 
|Total assets                  |  |                 | 1,415 |  |         |  | 2,879 |          |  |  | (50.9 | )%





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



|                              |  |                 |       |  |         |  |       |          |  |  |       |   
|----------------------------- |  | --------------- | ----- |  | ------- |  | ----- | -------- |  |  | ----- | --
|                              |  | Second          |       |  | Second  |  |       |         
|                              |  | Quarter         |       |  | Quarter |  |       |         
|Europe                        |  | 2005            |       |  | 2004    |  |       | % Change | 
|                              |  |                 |       |  |         |  |       |          | 
|                              |  | ($ in millions) |      
|Sales and operating revenues  |  |                 | 833   |  |         |  | 767   |          |  |  | 8.6   | % 
|Regional Income               |  |                 | 58    |  |         |  | 56    |          |  |  | 3.6   | % 
|Rolled product shipments (kt) |  |                 | 264   |  |         |  | 256   |          |  |  | 3.1   | % 
|Regional Income per tonne     |  |                 | 220   |  |         |  | 219   |          |  |  | 0.5   | % 
|Depreciation                  |  |                 | 25    |  |         |  | 24    |          |  |  | 4.2   | % 
|Capital expenditures          |  |                 | 12    |  |         |  | 22    |          |  |  | (45.5 | )%
|Total assets                  |  |                 | 2,193 |  |         |  | 2,372 |          |  |  | (7.5  | )%









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



|                              |  |                 |     |  |         |  |     |          |  |  |      |  
|----------------------------- |  | --------------- | --- |  | ------- |  | --- | -------- |  |  | ---- | -
|                              |  | Second          |     |  | Second  |  |     |         
|                              |  | Quarter         |     |  | Quarter |  |     |         
|Asia                          |  | 2005            |     |  | 2004    |  |     | % Change | 
|                              |  |                 |     |  |         |  |     |          | 
|                              |  | ($ in millions) |    
|Sales and operating revenues  |  |                 | 360 |  |         |  | 298 |          |  |  | 20.8 | %
|Regional Income               |  |                 | 29  |  |         |  | 23  |          |  |  | 26.1 | %
|Rolled product shipments (kt) |  |                 | 123 |  |         |  | 115 |          |  |  | 7.0  | %
|Regional Income per tonne     |  |                 | 236 |  |         |  | 200 |          |  |  | 18.0 | %
|Depreciation                  |  |                 | 11  |  |         |  | 11  |          |  |  |     | %
|Capital expenditures          |  |                 | 7   |  |         |  | 4   |          |  |  | 75.0 | %
|Total assets                  |  |                 | 986 |  |         |  | 948 |          |  |  | 4.0  | %



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



|                              |  |                 |     |  |         |  |     |          |  |  |       |   
|----------------------------- |  | --------------- | --- |  | ------- |  | --- | -------- |  |  | ----- | --
|                              |  | Second          |     |  | Second  |  |     |         
|                              |  | Quarter         |     |  | Quarter |  |     |         
|South America                 |  | 2005            |     |  | 2004    |  |     | % Change | 
|                              |  |                 |     |  |         |  |     |          | 
|                              |  | ($ in millions) |    
|Sales and operating revenues  |  |                 | 144 |  |         |  | 117 |          |  |  | 23.1  | % 
|Regional Income               |  |                 | 19  |  |         |  | 44  |          |  |  | (56.8 | )%
|Rolled product shipments (kt) |  |                 | 60  |  |         |  | 49  |          |  |  | 22.4  | % 
|Regional Income per tonne     |  |                 | 317 |  |         |  | 898 |          |  |  | (64.7 | )%
|Depreciation                  |  |                 | 11  |  |         |  | 12  |          |  |  | (8.3  | )%
|Capital expenditures          |  |                 | 5   |  |         |  | 4   |          |  |  | 25.0  | % 
|Total assets                  |  |                 | 761 |  |         |  | 808 |          |  |  | (5.8  | )%





39



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RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30,
2005 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 2004






| |           
| | ----------
| | Net income





| |   |                                                                                                                                                                                       
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Gain on the monetization of cross-currency interest swaps of
    inter-company debt amounting to $37 million in 2005;                                                                 
|
| |  | Gain on the sale of land in Asia of $11 million in 2005;                                                                                                                              
|
| |  | Unrealized losses on the change in market value of derivatives
    of $37 million in the first half of 2005, compared to
    unrealized gains in the first half of 2004 of $8 million;
|
| |  | Foreign currency balance sheet translation losses of
    $21 million in the first half of 2005. The first half of
    2004 recorded a gain of $5 million;                             
|
| |  | Start-up costs amounting to $19 million in 2005;                                                                                                                                      
|
| |  | Gain in the first half of 2004 of $13 million on a change
    in our South American pension plan; and                                                                                 
|
| |  | As a stand-alone company, our interest expense increased by
    $37 million in the first half of 2005 compared to the 2004
    carve-out allocations from Alcan.                      





| |                                           
| | ------------------------------------------
| | Sales and operating revenues and shipments





| |                   
| | ------------------
| | Costs and expenses







40



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##### Table of Contents









| |             
| | ------------
| | Income taxes



OPERATING SEGMENT REVIEW




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



|                                           |                                                                     |                 |     |      |      |  |     |      |  
|------------------------------------------ | ------------------------------------------------------------------- | --------------- | --- | ---- | ---- |  | --- | ---- | -
|                                           |                                                                     | Six Months      |    
|                                           |                                                                     |                 |    
|                                           |                                                                     | 2005            |     |      | 2004 | 
|                                           |                                                                     |                 |     |      |      | 
|                                           |                                                                     | ($ in millions) |    
|Regional Income                            |                                                                     |                 |     |      |      |  |     |     
|                                           | Novelis North America                                               |                 |     | 91   |      |  |     | 141  |  
|                                           | Novelis Europe                                                      |                 |     | 115  |      |  |     | 98   |  
|                                           | Novelis Asia                                                        |                 |     | 59   |      |  |     | 43   |  
|                                           | Novelis South America                                               |                 |     | 57   |      |  |     | 72   |  
|                                           |                                                                     |                 |     |      |      | 
|Total Regional Income                      |                                                                     |                 | 322 |      |      |  | 354 |     
|                                           | Corporate office *                                                  |                 |     | 7    |      |  |     | (20  | )
|Other Items                                |                                                                     |                 |     |      |      |  |     |     
|                                           | Equity-accounted joint ventures                                     |                 |     | (22  | )    |  |     | (21  | )
|                                           | Change in fair market value and reclassification of
    derivatives |                 |     | (47  | )    |  |     | 22   |  
|                                           | Restructuring, rationalization and impairment                       |                 |     | 11   |      |  |     | 5    |  
|                                           | Depreciation and amortization                                       |                 |     | (115 | )    |  |     | (118 | )
|                                           | Interest                                                            |                 |     | (94  | )    |  |     | (38  | )
|                                           |                                                                     |                 |     |      |      | 
|Income before income taxes and other items |                                                                     |                 | 62  |      |      |  | 184 |     
|                                           |                                                                     |                 |     |      |      | 






|  |                                                                                                                                                           
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------
|* | Corporate office includes the $45 million gain realized on
    the monetization of cross-currency interest rate swaps in the
    first six months of 2005.

41



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



|                              |  |                 |       |  |            |  |       |          |  |  |       |   
|----------------------------- |  | --------------- | ----- |  | ---------- |  | ----- | -------- |  |  | ----- | --
|                              |  | Six Months      |       |  | Six Months |  |       |         
|North America                 |  | 2005            |       |  | 2004       |  |       | % Change | 
|                              |  |                 |       |  |            |  |       |          | 
|                              |  | ($ in millions) |      
|Sales and operating revenues  |  |                 | 1,667 |  |            |  | 1,419 |          |  |  | 17.5  | % 
|Regional Income               |  |                 | 91    |  |            |  | 141   |          |  |  | (35.5 | )%
|Rolled product shipments (kt) |  |                 | 567   |  |            |  | 563   |          |  |  | 0.7   | % 
|Regional Income per tonne     |  |                 | 160   |  |            |  | 250   |          |  |  | (36.0 | )%
|Depreciation                  |  |                 | 36    |  |            |  | 34    |          |  |  | 5.9   | % 
|Capital expenditures          |  |                 | 17    |  |            |  | 17    |          |  |  |      |   
|Total assets                  |  |                 | 1,415 |  |            |  | 2,879 |          |  |  | (50.9 | )%









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



|                              |  |                 |       |  |            |  |       |          |  |  |       |   
|----------------------------- |  | --------------- | ----- |  | ---------- |  | ----- | -------- |  |  | ----- | --
|                              |  | Six Months      |       |  | Six Months |  |       |         
|Europe                        |  | 2005            |       |  | 2004       |  |       | % Change | 
|                              |  |                 |       |  |            |  |       |          | 
|                              |  | ($ in millions) |      
|Sales and operating revenues  |  |                 | 1,640 |  |            |  | 1,523 |          |  |  | 7.7   | % 
|Regional Income               |  |                 | 115   |  |            |  | 98    |          |  |  | 17.3  | % 
|Rolled product shipments (kt) |  |                 | 516   |  |            |  | 505   |          |  |  | 2.2   | % 
|Regional Income per tonne     |  |                 | 223   |  |            |  | 194   |          |  |  | 14.9  | % 
|Depreciation                  |  |                 | 51    |  |            |  | 52    |          |  |  | (1.9  | )%
|Capital expenditures          |  |                 | 20    |  |            |  | 32    |          |  |  | (37.5 | )%
|Total assets                  |  |                 | 2,193 |  |            |  | 2,372 |          |  |  | (7.5  | )%





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



|                              |  |                 |     |  |            |  |     |          |  |  |      |  
|----------------------------- |  | --------------- | --- |  | ---------- |  | --- | -------- |  |  | ---- | -
|                              |  | Six Months      |     |  | Six Months |  |     |         
|Asia                          |  | 2005            |     |  | 2004       |  |     | % Change | 
|                              |  |                 |     |  |            |  |     |          | 
|                              |  | ($ in millions) |    
|Sales and operating revenues  |  |                 | 698 |  |            |  | 566 |          |  |  | 23.3 | %
|Regional Income               |  |                 | 59  |  |            |  | 43  |          |  |  | 37.2 | %
|Rolled product shipments (kt) |  |                 | 237 |  |            |  | 223 |          |  |  | 6.3  | %
|Regional Income per tonne     |  |                 | 249 |  |            |  | 193 |          |  |  | 29.0 | %
|Depreciation                  |  |                 | 23  |  |            |  | 23  |          |  |  |     |  
|Capital expenditures          |  |                 | 10  |  |            |  | 8   |          |  |  | 25.0 | %
|Total assets                  |  |                 | 986 |  |            |  | 948 |          |  |  | 4.0  | %







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



|                              |  |                 |     |  |            |  |     |          |  |  |       |   
|----------------------------- |  | --------------- | --- |  | ---------- |  | --- | -------- |  |  | ----- | --
|                              |  | Six Months      |     |  | Six Months |  |     |         
|South America                 |  | 2005            |     |  | 2004       |  |     | % Change | 
|                              |  |                 |     |  |            |  |     |          | 
|                              |  | ($ in millions) |    
|Sales and operating revenues  |  |                 | 293 |  |            |  | 235 |          |  |  | 24.7  | % 
|Regional Income               |  |                 | 57  |  |            |  | 72  |          |  |  | (20.8 | )%
|Rolled product shipments (kt) |  |                 | 123 |  |            |  | 101 |          |  |  | 21.8  | % 
|Regional Income per tonne     |  |                 | 463 |  |            |  | 713 |          |  |  | (35.1 | )%
|Depreciation                  |  |                 | 22  |  |            |  | 24  |          |  |  | (8.3  | )%
|Capital expenditures          |  |                 | 7   |  |            |  | 7   |          |  |  |      |   
|Total assets                  |  |                 | 761 |  |            |  | 808 |          |  |  | (5.8  | )%



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LIQUIDITY AND CAPITAL RESOURCES






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



|                               |  |                 |     |   |            |  |     |  
|------------------------------ |  | --------------- | --- | - | ---------- |  | --- | -
|                               |  | Six Months      |     |   | Six Months | 
|Cash Flow                      |  | 2005            |     |   | 2004       | 
|                               |  |                 |     |   |            | 
|                               |  | ($ in millions) |    
|Cash from operating activities |  |                 | 288 |   |            |  | 99  |  
|Dividends                      |  |                 | (21 | ) |            |  | (3  | )
|Capital expenditures           |  |                 | (56 | ) |            |  | (59 | )
|                               |  |                 |     |   |            | 
|Free cash flow                 |  |                 | 211 |   |            |  | 37  |  
|                               |  |                 |     |   |            | 







| |                      
| | ---------------------
| | Investment Activities



|                                      |  |                 |     |   |            |  |     |          |  |  |      |   
|------------------------------------- |  | --------------- | --- | - | ---------- |  | --- | -------- |  |  | ---- | --
|                                      |  | Six Months      |     |   | Six Months |  |     |         
|Capital Expenditures and Depreciation |  | 2005            |     |   | 2004       |  |     | % Change | 
|                                      |  |                 |     |   |            |  |     |          | 
|                                      |  | ($ in millions) |    
|Capital expenditures                  |  |                 | 56  |   |            |  | 59  |          |  |  | (5.1 | )%
|Depreciation and amortization expense |  |                 | 115 |   |            |  | 118 |          |  |  | (2.5 | )%
|Capital reinvestment rate(i)          |  |                 | 49  | % |            |  | 50  | %        |  |  |      |   






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

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















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CONTRACTUAL OBLIGATIONS






ACCOUNTING POLICES






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





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





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



ACCOUNTING STANDARDS






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





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







SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND
MARKET DATA






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| |   |                                                                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | our separation from Alcan;                                                                                                                                                  
|
| |  | the level of our indebtedness and our ability to generate cash
    following the separation;                                                                                
|
| |  | relationships with, and financial and operating conditions of,
    our customers and suppliers;                                                                             
|
| |  | changes in the prices and availability of raw materials we use;                                                                                                             
|
| |  | changes to and volatility of metal prices;                                                                                                                                  
|
| |  | 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;               
|
| |  | our ability to cause our registration statement on Form S-4
    to go effective in a timely manner to avoid special interest
    charges on our 7.25% senior notes due 2015;
|
| |  | changes in general economic conditions;                                                                                                                                     
|
| |  | cyclical demand and pricing within the principal markets for our
    products as well as seasonality in certain of our
    customers industries;                           
|
| |  | change in government regulations, particularly those affecting
    environmental, health or safety compliance;                                                              
|
| |  | efforts to improve our disclosure controls and procedures are
    not successful or that we will not be able to maintain adequate
    controls in the future; and           
|
| |  | change in market value of derivatives.                                                                                                                                      






Item 3.     Quantitative and
Qualitative Disclosures about Market Risk(in millions of US$, except foreign currency denominations
and LME prices)




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Interest Rates






 






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Foreign Currency Derivatives




|                                             |                       |                                          |     |         |      |  |     |        |  |      |      |        |         |        |   |        |        |  |    |        |  |  |     |  |  |  |    |   | 
|-------------------------------------------- | --------------------- | ---------------------------------------- | --- | ------- | ---- |  | --- | ------ |  | ---- | ---- | ------ | ------- | ------ | - | ------ | ------ |  | -- | ------ |  |  | --- |  |  |  | -- | - | 
|                                             |                       |                                          |     |         |      |  |     |        |  | 2009 |      |        | Total   |        |   |       
|                                             |                       |                                          |     |         |      |  |     |        |  | and  |      |        | Nominal |        |   | Fair   |       
|                                             |                       | 2005                                     |     |         | 2006 |  |     | 2007   |  |      | 2008 |        |         | Beyond |   |        | Amount |  |    | Value  | 
|                                             |                       |                                          |     |         |      |  |     |        |  |      |      |        |         |        |   |        |        |  |    |        | 
|                                             |                       | (In US$ millions, except contract rates) |    
|FORWARD CONTRACTS                            |                       |                                          |     |         |      |  |     |        |  |      |      |        |         |        |   |        |        |  |    |        |  |  |     |  |  |  |    |  
|To purchase USD against the foreign currency
|CHF Nominal Amount                           |                       |                                          | 12  |         |      |  | 11  |        |  |      | 2    |        |         |        | 2 |        |        |  | 1  |        |  |  | 28  |  |  |  | (1 | )
|                                             | Average contract rate |                                          |     | 1.2785  |      |  |     | 1.3479 |  |      |      | 1.2873 |         |        |   | 1.2613 |        |  |    | 1.2381 |  |  |     |  |  |  |    |   | 
|To sell USD against the foreign currency    
|CAD Nominal Amount                           |                       |                                          | 2   |         |      |  |    |        |  |      |     |        |         |        |  |        |        |  |   |        |  |  | 2   |  |  |  |   |  
|                                             | Average contract rate |                                          |     | 1.2560  |      |  |     |       |  |      |      |       |         |        |   |       |        |  |    |       |  |  |     |  |  |  |    |   | 
|CHF Nominal Amount                           |                       |                                          | 16  |         |      |  |    |        |  |      |     |        |         |        |  |        |        |  |   |        |  |  | 16  |  |  |  |   |  
|                                             | Average contract rate |                                          |     | 1.2751  |      |  |     |       |  |      |      |       |         |        |   |       |        |  |    |       |  |  |     |  |  |  |    |   | 
|KRW Nominal Amount                           |                       |                                          | 57  |         |      |  |    |        |  |      |     |        |         |        |  |        |        |  |   |        |  |  | 57  |  |  |  | (1 | )
|                                             | Average contract rate |                                          |     | 1,012.0 |      |  |     |       |  |      |      |       |         |        |   |       |        |  |    |       |  |  |     |  |  |  |    |   | 
|To purchase EUR against the foreign currency
|GBP Nominal Amount                           |                       |                                          | 53  |         |      |  | 3   |        |  |      | 2    |        |         |        |  |        |        |  | 33 |        |  |  | 91  |  |  |  | (1 | )
|                                             | Average contract rate |                                          |     | 0.6760  |      |  |     | 0.7160 |  |      |      | 0.7361 |         |        |   |       |        |  |    | 0.7387 |  |  |     |  |  |  |    |   | 
|CAD Nominal Amount                           |                       |                                          | 2   |         |      |  |    |        |  |      |     |        |         |        |  |        |        |  |   |        |  |  | 2   |  |  |  |   |  
|                                             | Average contract rate |                                          |     | 1.5218  |      |  |     |       |  |      |      |       |         |        |   |       |        |  |    |       |  |  |     |  |  |  |    |   | 
|USD Nominal Amount                           |                       |                                          | 12  |         |      |  |    |        |  |      |     |        |         |        |  |        |        |  |   |        |  |  | 12  |  |  |  |   |  
|                                             | Average contract rate |                                          |     | 1.2248  |      |  |     |       |  |      |      |       |         |        |   |       |        |  |    |       |  |  |     |  |  |  |    |   | 
|To sell EUR against the foreign currency    
|GBP Nominal Amount                           |                       |                                          | 66  |         |      |  | 16  |        |  |      |     |        |         |        |  |        |        |  |   |        |  |  | 82  |  |  |  | 2  |  
|                                             | Average contract rate |                                          |     | 0.6844  |      |  |     | 0.7073 |  |      |      |       |         |        |   |       |        |  |    |       |  |  |     |  |  |  |    |   | 
|CHF Nominal Amount                           |                       |                                          | 14  |         |      |  | 8   |        |  |      | 4    |        |         |        | 4 |        |        |  | 3  |        |  |  | 33  |  |  |  | (1 | )
|                                             | Average contract rate |                                          |     | 1.5204  |      |  |     | 1.4973 |  |      |      | 1.4610 |         |        |   | 1.4430 |        |  |    | 1.4266 |  |  |     |  |  |  |    |   | 
|USD Nominal Amount                           |                       |                                          | 202 |         |      |  | 128 |        |  |      | 76   |        |         |        |  |        |        |  | 5  |        |  |  | 411 |  |  |  | 9  |  
|                                             | Average contract rate |                                          |     | 1.2501  |      |  |     | 1.2515 |  |      |      | 1.2699 |         |        |   |       |        |  |    | 1.1254 |  |  |     |  |  |  |    |   | 
|To sell GBP against the foreign currency    
|CHF Nominal Amount                           |                       |                                          | 7   |         |      |  |    |        |  |      |     |        |         |        |  |        |        |  |   |        |  |  | 7   |  |  |  |   |  
|                                             | Average contract rate |                                          |     | 2.1580  |      |  |     |       |  |      |      |       |         |        |   |       |        |  |    |       |  |  |     |  |  |  |    |   | 
|USD Nominal Amount                           |                       |                                          | 32  |         |      |  |    |        |  |      |     |        |         |        |  |        |        |  |   |        |  |  | 32  |  |  |  | 1  |  
|                                             | Average contract rate |                                          |     | 1.8368  |      |  |     |       |  |      |      |       |         |        |   |       |        |  |    |       |  |  |     |  |  |  |    |   | 
|To purchase GBP against the foreign currency
|CHF Nominal Amount                           |                       |                                          | 7   |         |      |  |    |        |  |      |     |        |         |        |  |        |        |  |   |        |  |  | 7   |  |  |  |   |  
|                                             | Average contract rate |                                          |     | 2.2324  |      |  |     |       |  |      |      |       |         |        |   |       |        |  |    |       |  |  |     |  |  |  |    |   | 
|USD Nominal Amount                           |                       |                                          | 45  |         |      |  | 2   |        |  |      | 2    |        |         |        | 1 |        |        |  |   |        |  |  | 50  |  |  |  | (1 | )
|                                             | Average contract rate |                                          |     | 1.8229  |      |  |     | 1.7850 |  |      |      | 1.7949 |         |        |   | 1.7922 |        |  |    |       |  |  |     |  |  |  |    |   | 



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Derivative Commodity Contracts









Item 4.     Controls and
Procedures


Evaluation of disclosure controls and procedures








Changes in internal control over financial reporting




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##### Table of Contents






PART II. OTHER INFORMATION





Item 1.     Legal
Proceedings.







Item 2.     Unregistered
Sales of Equity Securities and Use of Proceeds.







Item 3.     Defaults Upon
Senior Securities.







Item 4.     Submission of
Matters to a Vote of Security Holders.







Item 5.     Other
Information.







Item 6.     Exhibits.


|            |    |             |  |                                                                                                                                                                                                                                                   
|----------- | -- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit No. |    | Description
|            |    |            
|            | 10 | .1          |  | Deferred Share Agreement, dated as of July 1, 2002, between
    Alcan Corporation and Martha Finn Brooks (incorporated by
    reference to Exhibit 10.1 to the Form 8-K filed by
    Novelis Inc. on August 1, 2005) (File No. 001-32312)         
|            | 10 | .2          |  | Amendment to Deferred Share Agreement, dated as of July 27,
    2005, between Novelis Inc. and Martha Finn Brooks (incorporated
    by reference to Exhibit 10.2 to the Form 8-K filed by
    Novelis Inc. on August 1, 2005) (File No. 001-32312)
|            | 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                                                                                     

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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              
| | Controller                    
| | (Principal Accounting Officer)



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EXHIBIT INDEX


|        |    |             |  |                                                                                                                                                                                                                                                   
|------- | -- | ----------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |    |            
|Number  |    | Description
|        |    |            
|        | 10 | .1          |  | Deferred Share Agreement, dated as of July 1, 2002, between
    Alcan Corporation and Martha Finn Brooks (incorporated by
    reference to Exhibit 10.1 to the Form 8-K filed by
    Novelis Inc. on August 1, 2005) (File No. 001-32312)         
|        | 10 | .2          |  | Amendment to Deferred Share Agreement, dated as of July 27,
    2005, between Novelis Inc. and Martha Finn Brooks (incorporated
    by reference to Exhibit 10.2 to the Form 8-K filed by
    Novelis Inc. on August 1, 2005) (File No. 001-32312)
|        | 31 | .1          |  | Certification of the Chief Executive Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                        
|        | 31 | .2          |  | Certification of the Chief Financial Officer pursuant to
    Section 302 of the Sarbanes-Oxley Act of 2002                                                                                                                                        
|        | 32 | .1          |  | Certification 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                                                                                     

55