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During the course of 2004, we completed the portfolio restructuring efforts announced in January 2003, including the sale of Packaging Equipment, Huck Automotive Fasteners, Specialty Chemicals, the Russellville (AR) and St. Louis (MO) foil locations, and Itaipava. In addition, we completed the sale of Integris Metals to Ryerson Tull and transferred our interest in the Juruti bauxite reserves that had been acquired through the Reynolds acquisi- tion to AWAC. 

In China, we received approval to form our joint venture with the Aluminum Corporation of China, Ltd., (Chalco) at Pingguo and continue to move this project, as well as our Bohai rolling mill initiative, through various government approvals and negotiations. Both of these projects will enhance our position in the fastest-growing markets in the aluminum industry. 

Within other businesses of the Company we also continued to expand our footprint, opening facilities in new geographies in order to serve customers effectively and efficiently, including operations in Romania (extrusions), Honduras (wire harnesses), and Egypt (closures). 

## Living our Values 

At Alcoa we live our Values every day. They are the guide to how we operate our business. Our Values require us to think and act not only on the present challenges, but also with the legacy in mind that we leave for those that will come after us… as well as the commit- ments made by those that came before us. We think of it in terms of a relay race, where each one of us adds value today and long term for all shareowners, Alcoans, and the communities in which we operate. 

Environment, Health and Safety – Our lost workday rate of 0.09 (injuries per 200,000 work hours) for 2004 was the best in our history. During the year, we had 258 million hours worked with 116 incidents, and more than four out of five Alcoa locations did not have a single lost workday. Despite that significant progress, we suffered three fatalities: two Alcoans and a contractor working on our site. We continue to investigate these incidents to root cause, as well as other incidents with significant fatality risk, to eliminate or control them in our 

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workplace. We can do better, and we owe it to ourselves and our families to move more rapidly toward creating a zero-incident workplace. In 2005, we will place further focus on this vital area. 

This year we maintained Alcoa’s leadership position on climate change by meeting and holding the goal of reducing greenhouse gas emissions by 25% from 1990 levels. We helped devel- op a global sustainability model with the International Aluminium Institute. Under the most likely scenario in that model, the industry will become “green- house gas neutral” by 2017 – the first and perhaps only industry that will be able to make that claim. A presentation on the model received “Best Paper” honors at The Minerals, Metals & Materials Society (TMS) conference in Washington, D.C. 

SOX and Internal Audit – Regulatory requirements associated with Sarbanes- Oxley (SOX) represented one of the most significant challenges faced in 2004. Responding to these, we devel- oped and implemented a comprehensive set of controls through the use of self- assessment documentation and testing. In addition, we conducted over 140 Finance and IT SOX reviews, as well as 300 scheduled process/location audits. As of year-end, Alcoa was able to clearly demonstrate an effective internal control system. To ensure compliance through- out the organization, we spent nearly $10 million this year auditing and testing our controls. The result is an even stronger control environment, with less rework and waste. 

Alcoa Foundation, Community Framework, and Sustainability – Alcoa Foundation increased its 2004 payout by 14%, with grants totaling $17 million in 34 countries, up from nearly $15 million in 2003. Alcoa’s employee engagement activities reached new heights in 2004. Our programs, designed to encourage and reward active participation in com- munities, saw a 39% increase in 2004, 

resulting in more than $2 million being contributed on behalf of Alcoans. 

We also made great strides in increasing the understanding of both external and internal audiences of our sustainability activities across the globe, including the online publication of five regional reports to augment our corpo- rate report on our social, economic, and environmental impacts. Our overall sustainability efforts have been recog- nized as among the best in the world by Innovest and Corporate Knights at a ceremony held at the World Economic Forum in Davos, Switzerland. 

## Delivering Both Short- and Long-Term 

As we look into 2005, market conditions remain strong. Both the alumina and primary aluminum markets continue to be in a deficit where demand exceeds supply, and key downstream markets are recovering. 

While we will continue to experi- ence cost and currency pressures, we are applying rigor toward sustained cost- savings programs to help offset external market conditions. Your Company is actively pursuing growth opportunities – both in operations and through helping our customers succeed in the market- place. And our focus is on delivering both short-term and long-term results. 

I am confident that Alcoa will achieve its goals. I can express this confi- dence knowing how Alcoans deliver when we focus on the task at hand, using the tools at our disposal, and with total commitment. Our personal and professional pride drives our talented people across the globe as we strive to become the best company in the world. 

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February 18, 2005 

