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In addition, we combined functional groups such as ABS (Alcoa Business System), Customer and Marketing Services, EHS, People, and Quality to accelerate the culture changes in order to achieve our Vision and emphasize the ABS philosophy that “people are the linchpin of ABS.” 

As you will see in the pages of this report, we are expanding across our markets, using the tenets of ABS, to help our customers grow their businesses. We expect the combination of our global business structure, our functional resources, and our R&D expertise to continue to spur profitable organic growth and share gains across the world. 

## Upstream – Restarts and Growth Projects 

To take advantage of the strong alu- minum market, we are restarting several smelters. When complete, these restarts will add 220,000 metric tons per year (mtpy) of production in 2005, leaving us with idle capacity of 361,000 mtpy. Restart progress has been made at: 1) the Aluminerie de Bécancour, Inc. (ABI) facility in Quebec, following the end of a strike there. This strike resulted in a significant cost to the Company, but was necessary to enable the long- term flexibility we need to operate efficiently; 2) the Wenatchee smelter in Washington, USA, after the successful resolution of an issue regarding health- care cost-sharing. The plant had been idle since 2001, and the resolution of this issue helped save 400 jobs; and 3) the Massena East and West smelters in New York, USA, where we are now running at full capacity. 

In addition to restarts, we began steps to expand our upstream operations that will benefit the Company for years, if not decades, to come. For example, we broke ground in Iceland on Alcoa Fjar aál , the Company’s first greenfield smelter in more than 20 years. This hydropowered smelter, which is sched- uled to come on line in 2007, will be among the most environmentally friendly in the world. 

In Norway, we have agreed to build a new anode plant in Mosjøen, together with Elkem ASA, that will supply the Alcoa Fjar aál smelter in Iceland and the Mosjøen smelter in Norway, which is 50% held by Alcoa and Elkem. 

Alcoa Aluminio in Brazil also broke ground on an expansion that will increase its share of the Alumar smelting operations in São Luis by 30%, or 63,000 mtpy, bringing Alcoa Aluminio’s share of smelting capacity there to 262,000 mtpy, and Alcoa’s share of overall output will grow from 54% to 60%. The expansion was facilitated by completion of a new, 20-year hydropower agreement. 

We signed a memorandum of understanding (MOU) under which Alcoa and the Government of the Republic of Trinidad and Tobago will build a state-of-the-art, environmentally friendly aluminum smelter and related facilities in Trinidad. The smelter will utilize power produced by Trinidad and Tobago’s vast natural gas fields, which will then be converted into low-cost electricity for the smelter. We are now working with the government to finalize the project plan. 

## Return on Capital 

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In Ghana, we have signed an MOU with the Government of the Republic of Ghana to develop an inte- grated aluminum industry that would include bauxite mining, alumina refin- ing, aluminum production, and rail transportation infrastructure upgrades. We have begun expedited feasibility studies that are expected to be complet- ed in 2006, at which time both parties will negotiate definitive agreements as well as total investment costs. The MOU calls for the initial restart of 120,000 mtpy at the jointly owned 200,000 mtpy Valco smelter in Tema, Ghana, which is currently idled. 

Our alumina refining system is also expanding significantly with an eye toward sustained, long-term growth. In all, we are working on expansions that total more than 4 million mtpy. In Jamaica, for example, following on the heels of a 250,000 mtpy expansion of the Jamalco alumina refinery in 

Clarendon, we announced plans to fur- ther expand by at least an additional 1.5 million mtpy. This new expansion would more than double the refinery’s total capacity to at least 2.8 million mtpy. In addition, Alcoa World Alumina and Chemicals (AWAC) ownership in the refinery will move from 50% to 70%. 

AWAC is also a lead partner in a project exploring the feasibility for devel- oping jointly with the Government of the Republic of Guinea a 1.5 million mtpy alumina refinery there. A detailed feasi- bility study for the refinery is expected to be completed by mid-2005, with final costs, investment decisions, and con- struction to begin shortly thereafter. 

A 600,000 mtpy efficiency upgrade of the Pinjarra, Australia, alumina refinery continues to be on-track for completion by the end of 2005. And Suralco, owned by AWAC, completed a 250,000 mtpy expansion to its Paranam alumina refinery in Suriname well ahead of schedule. This brings that facility’s total capacity to approximately 2.2 million mtpy. 

## Portfolio Realignment and Expanding our Footprint 

We continued to review and rebalance our portfolio to better focus on our core businesses, while also making progress on acquisitions that will enhance our competitive position. 

In 2005 and for a few years there- after, one of our chief challenges will be the successful and ongoing integration and investment in two fabricating facili- ties that we purchased this year in Samara and Belaya Kalitva in the Russian Federation. The addition of the two Russian fabricating facilities – which feature cast house, flat-rolled products, extrusions, tubes, and forgings capabili- ties – will allow the Company to serve both the growing Russian market and global customers in Europe, Asia, and the Americas, giving us substantial com- petitive and comparative advantages. 

We reached an agreement with Fujikura Ltd. that paves the way for Alcoa to obtain full ownership of the Alcoa Fujikura (AFL) Automotive business. In return, Fujikura will obtain complete ownership of the AFL Telecommunications business. AFL Automotive is a large part of Alcoa’s approximately $3 billion automotive franchise, and this transaction increases our position in this market. 

