CEO Statement

The 43 countries where we haveoperations are at varied stages of the economic, environmental, andsocial development cycle. We do notbelieve that our contribution to their sustainable development is limited tojob creation and economic benefits.

Examples of our community engage-ment can be found throughout thisthird Sustainability Report, which isone of our key reporting tools. Thisyear, in response to feedbackreceived, we have published a sepa-rate executive summary to helpincrease readership. We have includ-ed again a Global ReportingInitiative (GRI) index to help readersmore easily compare our perform-ance to that of other organizations.

level sooner than we thought waspossible and now are working tomaintain these reductions as wecontinue to grow the company significantly.

25.61

0 20 40 60 80 100

2004 57.015.3

Strategic Environmental Targets

(percent reduction since 2000)

■ Process Water■ Landfilled Waste■ Direct Greenhouse

Gas Emissions

1Reduction from 1990.

Process water includes seawater used for process operations.

Alain J. P. BeldaChairman and Chief Executive Officer

Alcoa’s vision is to be the best company in the world. To achieve

this, we need to engage our stakeholders, set short- and long-

term goals, implement initiatives to reach those goals, and be the

best company in the communities in which we operate.

This belief has underpinned our efforts to work with these com-

munities to gain a better understanding of how Alcoa affects

their economies, societies, and environments. It has focused us

on integrating sustainability into our decision-making processes.

This is not without challenges, as there is not always agreement

between various stakeholders on the value of our involvement.

These stakeholders bring expectations and experience, and we

must continue to work with them to reach understanding and

final agreement.

We also include current and histori-cal data to evaluate the progresswe’ve made in our quest of being the best.

Some 2004 highlights include thefollowing:

● The Public Issues Committee ofour board reviews and approvessustainability policies, and thisyear we established a SustainabilityLead Team sponsored by Alcoa’stop management—the ExecutiveCouncil—to strengthen the connec-tions to the business. We also cre-ated a senior managerial positionfor sustainability to deploy oursustainability policies and manageresults.

● We continued to make goodprogress toward our 2020 environ-mental goals, with significantreductions in air emissions, wastessent to landfills, and water use. We achieved our 2010 goal ofreducing our greenhouse gas emissions by 25% below our 1990

● We achieved corporate certificationto ISO 14001 for our corporate-wide environment, health, andsafety management system, and wehave 205 separate locations certi-fied to ISO 14001 as well. We havechallenges ahead, but it is clearthat we have processes and systemsin place and employee commitmentthroughout the company that willenable us to make our 2020 visiona reality.

● For the first time, our lost workdayrate dropped below 0.1, represent-ing a more than 25% improvementfrom 2003. Our total recordableinjury rate improved for the eight-eenth consecutive year, and 81% ofour locations had zero lost work-days. One of my disappointmentsis that our goal of a fatality-freeworkplace has escaped us again, aswe experienced three fatalities in2004—two employees and onecontractor. We have made tremen-dous progress with our safety performance over the years,but our goal is achieving zero inci-dents and sustaining a fatality-freeworkplace.

● The combined 2004 giving ofAlcoa and Alcoa Foundationtotaled US$28.8 million.

● Financial performance continued toimprove. Full-year income fromcontinuing operations increased33% over 2003 on record annualrevenues. We continued to paydown debt, which has beenreduced by approximately US$2.0billion since 2002, while investingin growth projects.

● We again were named to both theDow Jones Sustainability Indexand Fortune Magazine’s “MostAdmired Companies” (first in met-als category, second overall insocial responsibility). In January

2005, we were also named one of the top three most sustainablecorporations in the world byCorporate Knights and InnovestStrategic Value Advisors.

In 2000, we put in place our 2020 Strategic Framework forSustainability together with targetsto support our vision of becomingthe best company in the world. Inlate 2004, we initiated a review ofthe framework to make it more com-prehensive in terms of sustainabilityprinciples. The completed work willhelp with our 2006 planning process-es and future reporting.

I welcome your comments on this2004 report and invite you to submitthem through our dedicated e-mailaddress (sustainability@alcoa.com),our online survey (www.alcoa.com/go/sustainabilitysurvey), or the sur-vey found at the end of this report.

Alain J. P. Belda

Chairman and Chief ExecutiveOfficer

Income from Continuing Operations(millions of US dollars)

2001

2002

2000 1,451

904

518

2003 1,055

0 500

2004

1,000 1,500

1,402

2002

2001

2003

1.7

2.0

0.16

0.18

Lost Workdays

2000

1.8

■ Lost Workdays■ U.S. Manufacturing Average

0.15

0.09

0.12

0 0.5 1.0 1.5 2.0

2004

1.6

2004 industry average not available. Lost workday rate represents the number of injuries and illnesses resulting in one or more days away from work with or without job transfer or restrictions per 100 full-time workers.

Table of Contents

Social Performance Indicators .............................................44Work Environment...............................45Health and Safety ................................47Human Rights.......................................52Supplier and Contractor

Requirements.....................................54Society......................................................55Product Responsibility .......................61

Economic Performance Indicators .............................................62Shareholder Value................................62Customers...............................................67Supplier Relationships........................68Public Commitment ............................69

Awards and Recognition ............70

Case Studies......................................70

GRI Content Index ..........................71

Appendix ..............................................79

Feedback Form ................................81

Sustainability and Alcoa ...............3Alcoa’s Sustainable Strategy ...............3Vision, Values, and Principles..........13

Profile.....................................................16Organizational Profile ........................16Report Scope .........................................16Report Profile ........................................17

Governance Structure and Management Systems..................19Structure and Governance ................19Overarching Policies and

Management Systems .....................25

Environmental Performance Indicators .............................................27Material Use ..........................................28Energy......................................................30Water........................................................33Biodiversity ............................................33Emissions, Effluents, and Waste......36Products and Services .........................42Environmental Compliance ..............42Capital Expenditures ..........................43

Reporting FrameworkAs yet, there are no Generally AcceptedAccounting Principles for reporting social andenvironmental performance. We continue touse the reporting framework emerging fromthe voluntary Global Reporting Initiative, aswell as criteria established by other organiza-tions, to guide the structure of this report.

Forward-looking StatementCertain statements in this report relate to future events and expectations and, as such, constitute for-ward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.Forward-looking statements also include those containing such words as “anticipates,” “believes,”“estimates,” “expects,” “hopes,” “targets,” “should,” “will,” “will likely result,” “forecast,” “out-look,” “projects” or similar expressions. Such forward-looking statements involve known andunknown risks, uncertainties and other factors that may cause actual results, performance or achieve-ments of Alcoa to be different from those expressed or implied in the forward-looking statements.Alcoa disclaims any intention or obligation, other than as required by law, to update or revise anyforward-looking statements. Some of the important factors that could cause actual results to differmaterially from those in the forward-looking statements include material adverse changes in econom-ic or aluminum industry conditions generally, including global supply and demand conditions andprices for primary aluminum, alumina and other products, or material adverse changes in the mar-kets served by Alcoa; the company’s inability to achieve the level of cost savings, productivityimprovements or earnings growth anticipated by management, whether due to significant increases inenergy, raw materials or employee benefits costs or other factors; political and economic risks associ-ated with foreign activities, including fluctuations in foreign currencies or changes in the laws or gov-ernmental regulations or policies in the countries in which Alcoa operates; significant legal proceed-ings or investigations or the disposition of current proceedings other than as anticipated by Alcoa’smanagement; changes in Alcoa’s relationships with, or a significant downturn in the business orfinancial conditions of, key customers or suppliers; and the other risk factors summarized in Alcoa’sForm 10-K for the year ended December 31, 2004 and other SEC reports.

Sustainability and Alcoa

Living Our Values

Dividends to Shareholders

1888 1939 1952 1967 1980 1988 1997 20202004

Alcoa Foundation

SurinameCommunityMedical Clinic

Environmental Policy

70-yearMining Plan

Brazil - 1st GreenfieldPlant with Sustainabilityin Mind

Greening AustraliaPartnership

Safety DataSystems

Portland, Australia,Smelter in the Park

EH&S Training

WEC GoldMedal

UN Global500 Award

Vision andValues

Alcoa Business System

Dow JonesSustainabilityIndex (4 years)

Community Framework

ACTION andBravo!

2020 Framework

1st and 2nd Cost Challenges

Human RightsPosition

Top 3 Most SustainableCorporations in the World

SustainabilityReporting

Fortune - Best Metals Co.(each yearthrough 2004)

Long-term Business Success

Environmental Excellence

Social Responsibility

Good Governance

Adapted from Shell 2003.

3

within communities where we have a presence. The timeline belowshows key dates on our sustainabili-ty journey.

We are now taking the next step onthis journey and building on thework of many of our sustainabilitychampions over the years to inte-grate sustainability into our organi-zation in a more systematic way.

During 2004, we created a seniormanagerial position for sustainabilityand also established the internalSustainability Team, which is spon-sored by Alcoa’s Executive Council.This team has developed a plan builtaround integrating sustainability intoour business by focusing on threestrategies:

● People—We involve stakeholdersin the development and delivery ofour sustainability strategies.

● Processes—We integrate sustain-ability fully into all of our process-es and systems.

● Products—We produce more sus-tainable products that contributeto people’s quality of life.

Specific programs and our progressin achieving sustainability can befound in the detail of this report, butthe following provides additionalinsight into these key sustainableissues and challenges for Alcoa:

● Climate change.

● Engagement with our stakeholders,both internal and external.

● Integration of sustainability intoour business.

● Measurement system.

● Energy strategy.

● Products.

● Biodiversity.

● Technology.

● Facility end-of-life activities.

ALCOA’S SUSTAINABLESTRATEGYAlcoa’s Vision, Values, Principles (see page 13), and control systemsprovide a solid foundation for inte-grating sustainability into our operations. Our sustainability strate-gy is designed to align our Valueswith society’s values to ensure long-term success for Alcoa and ourstakeholders.

Building from our Values, our sus-tainability goal is to achieve simulta-neously financial success, environ-mental excellence, and social respon-sibility through partnerships in orderto deliver net long-term benefits toour shareholders, employees, cus-tomers, suppliers, and the communi-ties in which we operate.

Sustainability is not new to Alcoa,although we may not have alwaysused the term. For many years, wehave been striving for excellencewith a focus on better understandingand managing the economic, social,and environmental effects we create

4

Climate ChangeIn 1998, we established a ClimateChange Strategy Team that hasdeveloped and promoted our posi-tion on climate change, includingour target of reducing greenhousegas (GHG) emissions by 25% below1990 levels by 2010. We achievedthat goal in 2003, and we are nowconsidering additional targets as westrive to maintain our GHG reduc-tions as the company grows signifi-cantly. Here are some examples ofour activities along the entire alu-minum lifecycle chain.

Key Partnerships We continue to actively partner withexternal stakeholders. We are a mem-ber of the Business Leadership teamfor the Pew Center on Global ClimateChange, the World Resources InstituteGreen Power Market DevelopmentGroup, and the World EconomicForum Registry (charter member). Weare also actively involved in the devel-opment of GHG accounting standards

in conjunction with the InternationalAluminium Institute, InternationalStandards Organization, and theIntergovernmental Panel on ClimateChange.

Technology DevelopmentWe continue to pursue the develop-ment of GHG-free inert-anode alu-minum smelting, although thereremain technical and cost targets toovercome. In addition, our introduc-tion of a process for using CO2 toneutralize bauxite residue will helpprepare the residue for long-termdisposal and reduce GHG emissions.

Power Generation We are committed to decreasing ourreliance on fossil fuels by increasing,where possible, our use of natural,renewable energy sources that helpus lower our carbon dioxide emis-sions. This includes upgrading ourolder hydroelectric facilities toincrease output up to 30% with noadditional water flow (see case studyon page five).

Smelting Our aluminum smelters continue toreduce perfluorocarbon (PFC) emis-

sions. We reduced these emissionsfrom 4.0 million metric tons of CO2

equivalents in 2003 to 3.5 million in2004. Furthermore, our U.S.smelters reduced PFC and anode car-bon emissions below our industry’s2010 “Climate Vision” target levelswith the U.S. government.

Secondary Smelting We have a worldwide commitmentto produce 50% of our fabricatedaluminum product volume fromlower energy and lower GHG-intense recycled metal by year 2020.Today, about 20% of our fabricatedproducts are derived from recycledaluminum.

Fabrication In 2002, we established the AlcoaEnergy Efficiency Network based onan excellent partnership with theU.S. Department of Energy. The net-work conducts energy efficiency sur-veys at operating locations, identify-ing areas of possible improvement.The locations then agree to address

Alcoa Business Sustainability Model

Economic Performance

Environmental Excellence

Governance

Social Responsibility

Values and Principles

■ Integrity■ Environment, Health, & Safety■ Customer■ Excellence■ People■ Profitability■ Accountability

ABS

People – linchpin the systemProducts – make to useProcesses – eliminate waste

Stakeholders

CommunitiesShareholdersCustomersSuppliersEmployees

Sustainability and Alcoa

5

Recycling Our beverage can recycling activitiessave an estimated 2 million tons ofCO2 each year compared to produc-ing this same metal from primarysources. See page 41 for a moredetailed discussion on our recyclingefforts and page six for a schematicof the aluminum life cycle.

Engagement with StakeholdersWe define our stakeholders as anygroup or individual affected by ouroperations or that has the capacityto influence our operations or futureprospects. While it is difficult toidentify all of our stakeholders, abrief listing of some with whom wehave consulted is included in theappendix on page 79. In addition,examples of stakeholder partnershipscan be found throughout this reportin the case studies.

A key part of our sustainabilitystrategy is to begin working moreclosely with our stakeholders earlierin the development stage and duringthe implementation of new projects,thereby tapping into their expertise,increasing our understanding of theirexpectations, and defining a strongerrelationship.

This engagement occurs at variouslevels:

● At the plant level with our employees.

● In the local communities where weoperate.

● At the national and internationallevel with governments and non-governmental organizations.

● Through our membership in indus-try groups.

● Through Alcoa Foundation or onspecific activities—either policy orproject focused.

certain projects and are free to disre-gard others. At the end of 2004, thelocations had agreed to developplans for capturing more thanUS$50 million in savings with poten-tial CO2 emission reductions of 1.3million tons. Nearly $20 million insustainable annual savings havealready been captured, most withless than a one-year payback forcapital expenditures of $21 million.

Product Life Aluminum used in transport applica-tions pays for itself quickly in termsof fuel savings and greenhouse gasemissions. It is estimated that by2020 or earlier, the aluminum usedin automobiles, trucks, railways, andbuses will provide the potential tosave enough fuel to offset all of thegreenhouse gases produced by all ofthe aluminum companies throughoutthe world1. The industry will be anet reducer of greenhouse gases on asociety-wide basis.

More Hydropower Generationwith Same Water Flow

A US$187 million upgrade using newturbine technology at Alcoa’s Tapocohydroelectric system in the UnitedStates will boost the generation capac-ity of individual turbines between 1% to36% with no increase in water flow andenvironmental impacts.

The 326 megawatt Tapoco systemconsists of four dams and four power-houses in eastern Tennessee andwestern North Carolina. The oldestdam was built in 1919; the last in1957. A new government licensesigned in early 2005 to operate the

facilities for 40 more years provided theimpetus for the modernization process.

In 2002, Tapoco completed the upgradeof one turbine at its Calderwood power-house to test and optimize new technolo-gy developed by engineering partnerVoith-Siemens Hydro. The upgradeimproved operation by as much as 36%with the same water flow. Upgrades to

the second and third turbines atCalderwood are planned for 2005 and2006, and the 10 turbines at the otherthree Tapoco powerhouses will be completed over the next 15 years.

By increasing generating capacity atTapoco without constructing new dams,Alcoa is bringing additional zero-emission, renewable energy to theregion and reducing dependence onelectricity generated by fossil fuels.Cost competitive hydroelectric powerwill also help Alcoa’s manufacturingoperations in Tennessee remain com-petitive and ensure the company cancontinue to remain a significant sourceof local employment there.

Turbine upgrade at Calderwood

1Bruggink, Paul R. and Martchek, Kenneth J.Worldwide Recycled Aluminum Supply andEnvironmental Impact Model. Light Metals2004. Edited by A.T. Tabereaux, TMS (TheMinerals, Metals & Materials Society), 2004

Aluminum Production and Life Cycle

BauxiteExtraction

AluminaRefining

PowerGeneration

PrimarySmelting

Processing:(rolling, extrusion, etc.)

ManufacturingIndustry

SecondarySmelting

ProductLife

Scrap Collection

6

Plant LevelUnderstanding what our employeesthink and involving them in planningfor the future are important atAlcoa. Most business units and loca-tions regularly collect employee feed-back through formal and informalsurveys, focus groups, and open dis-cussion sessions.

For example, all plants within AlcoaEngineered Products conduct yearlyemployee surveys to evaluate leader-ship skills, communications, diversi-ty, safety, and other key topics. Theyuse the feedback to identify gaps andprioritize action plans. A pilot groupof U.S. plants is using OptionFindertechnology—handheld units whichallow users to “vote” their answersto questions—to facilitate discussionwithin meetings. A corporate-widesurvey of communications methodshelps identify how we communicatecompany-wide.

With a focus on people, the AlcoaBusiness System provides excellentopportunities for employee engage-ment. Around the company, employ-ees are involved in identifying andsolving problems utilizing a dailymanagement process that identifiesproblems quickly as well as throughKaizen (rapid improvement) events,autonomous maintenance groups,and training.

At Kitts Green, United Kingdom,85% of the workforce has beentrained to problem solve using mod-ern manufacturing techniques. Atour Portovesme smelter in Italy,employees are engaged in total pro-ductive maintenance in five pilotareas to create the spirit of owner-ship of equipment among operators.Another good example comes fromour Pinjarra refinery in Australia,where the Oxalate Kiln AdvisoryGroup (OKAG) enabled employeesto raise concerns and gain informa-tion about state-of-the-art emissioncontrols being installed on theoxalate kiln.

CommunitiesWe have deployed a communityframework through which eachoperating location is expected toengage the local community by themost appropriate method for thatcommunity. This takes many differ-ent forms, such as community advi-sory groups and open houses. Formore information, please see thecommunity consultation section onpage 59.

In addition, many of our employeesengage the communities in whichthey work and live by serving onboards of directors or volunteeringtheir services. These wide-rangingorganizations include school boards,youth groups like the Girl and BoyScouts, and emergency responseorganizations.

Source: International Aluminium Institute.

Defining and MeasuringSustainable Performance in Iceland

In an effort to ensure Alcoa’s new Fjardaálsmelter and related hydroelectric project inIceland are designed, constructed, andoperated in a manner that strives to bal-ance environmental, social, and economicalaspects, Alcoa and Landsvirkjun—the oper-ator of the hydroelectric facility—have jointlyworked with a broad coalition of externalstakeholders to develop specific sustainabil-ity objectives, indicators, and metrics tomeasure the projects’ performance.

An advisory group comprised of 30+stakeholders from Alcoa, Landsvirkjun,and numerous governmental, educational,and non-governmental organizations is

the backbone of the Iceland SustainabilityInitiative. The group’s purpose is to lookforward—not backward—and develop indi-cators to measure the performance of thehydro facility and smelter against sustain-ability targets. Participants include projectsupporters and those opposed.

According to Tryggvi Felixson, managingdirector of Landvernd, the Icelandic environ-ment association that has publicly opposedboth projects and is a member of theIceland project’s advisory group, "The con-struction of an aluminium smelter and asso-ciated hydroproject in Eastern Iceland willregrettably have a profound effect on natu-ral ecosystems and involves substantialenvironmental risk. Nevertheless, Alcoa´s

initiative to develop performance indicatorsto measure the socioeconomic and envi-ronmental aspects constitutes an importantand useful contribution toward our under-standing of development processes andhow these can be improved over time."

The advisory group, which met twice in2004, identified almost 50 indicators andnearly 70 associated metrics. Existingbaseline data were gathered, and thegroup convened again in January 2005to confirm the indicators.

In 2005, Alcoa and Landsvirkjun willestablish specific targets and developmonitoring protocols. Both companiesare fully committed to publicly reportingand communicating monitoring results.

For more information on the project, visitwww.alcoa.com/iceland/en/home.asp. 7

InternationalIn 2004, Rick Kelson, Alcoa’s chieffinancial officer, chaired a meeting of12 non-governmental organizationsand 11 Alcoa employees to promotean exchange of ideas and to obtaininput on both mechanisms to engagestakeholders and Alcoa’s futurereporting process. The meeting cov-ered our operations and our sustain-ability program, including our 2020Framework and sustainabilityreporting. We also received feedbackon our sustainability report, some ofwhich has been incorporated in thisreport. We plan to hold further dis-cussions in 2005.

In addition, we worked with hostgovernments and national and inter-national non-governmental organiza-tions on specific projects throughoutthe year.

MembershipsThrough membership in numerousorganizations worldwide, we extendour leadership presence and reputa-tion while also reaping the benefits

of participating in groups with dif-fering interests and knowledge.

In selecting which organizations tojoin, we first evaluate if the groupshares our vision and values. Theorganization must also be alignedwith our business strategy and bringa diversity of thinking to our busi-ness priorities. We also prefer joiningorganizations that can help usstretch beyond our current knowl-edge.

Our memberships range from indus-try-based organizations—such as theInternational Aluminium Institute—to groups that focus on business, theenvironment, and community. Theseinclude the Conference Board, PewCenter on Global Climate Change,

World Business Council forSustainable Development, WorldResources Institute Green PowerMarket Development Group,European Foundation Centre, andCouncil on Foundations.

In many cases, our representatives tothese groups take a leadership rolethrough service on boards, executivecouncils, or various committees. Forexample, John Gardner, Alcoa’s envi-ronmental manager for mining inAustralia, is the current chair of thebiodiversity taskforce for theInternational Council on Mining &Metals.

Alcoa FoundationAlcoa Foundation serves as a keyconnection point with our stakehold-ers through grants to, and partner-ships with, non-governmental organ-izations as well as programs likeACTION and Bravo! that encourageemployee engagement within thecommunity.

Fjar∂aál smelter groundbreaking on July 8, 2004

Sustainability and Alcoa

8

Examples of 2004 grants from thefoundation include the following:

● World Resources Institute: AUS$200,000 grant will help mobi-lize business faculty, students, andleaders in Mexico and Brazil toput sustainability into practice intheir communities and to promoteopportunities for them to be con-nected with the broader LatinAmerica Business, Environment,Learning, and Leadership (BELL)networks.

● Conservation InternationalFoundation: This US$75,000 grantwill help further develop and pro-mote initial biodiversity assessmentand planning (IBAP) methodology,which is designed to minimize thenegative impacts of extractiveindustry projects and to maximizeconservation opportunities.

● Student Conservation Association:With the help of Alcoa Found-ation’s US$90,000 grant, SCA willtrain eight participants from

Canada through natural resourcemanagement internships. The par-ticipants will be emerging leaderswho are working with organiza-tions involved in conservation andsustainability initiatives.

● World Wildlife Fund: AUS$150,000 grant will supportgraduate-level studies and peer net-working for eight to 12 conserva-tion leaders from Mexico, CostaRica, and Honduras.

● Tsunami Relief: Immediately fol-lowing the earthquake andtsunamis that struck SoutheastAsia in late 2004, AlcoaFoundation provided monetaryassistance to the American RedCross International ResponseFund. This and additional grantsfrom Alcoa Foundation matched

the contributions of Alcoansaround the world. In addition,Alcoa of Australia donated fundsto Care Australia, World Vision,Australian Red Cross, and Oxfamto help the devastated countries.

Other examples of AlcoaFoundation’s work, as well asdetailed grant-giving data, can befound in the society section on page55.

Integration of Sustainability To take advantage of opportunitiesfor embracing sustainability, we needto further integrate this thinking intoour internal processes—our gover-nance practices, manufacturingdesign and processes, employee andbusiness systems, and businessopportunities.

Existing processes and systems, suchas the Alcoa Business System (ABS)and financial and non-financial man-agement systems, provide thatopportunity.

Community EngagementUnderscores EfficiencyUpgrade Approval

By combining a state-of-the-art envi-ronmental impact assessment with aninnovative community engagementprocess based on a sustainabilityframework, Alcoa’s Pinjarra refinery inAustralia received governmentapproval in just seven months toincrease annual production by about600,000 tons.

“The community sentiment about theupgrade initially was a little skepticalas many felt that Alcoa had not beentotally honest in the past and may con-tinue to be so in the future,” said WallyBarrett, proprietor of Pinjarra Bus

Service. “A lot of this had been broughtabout by adverse press stories, whichwere not proved to be true and in manycases were incorrect, but the truth wasnever made available.”

Pinjarra’s comprehensive consultationand engagement process built on therefinery’s existing Community Consulta-tive Network (CCN). Major componentsincluded a community workshop withmore than 40 stakeholders and theestablishment of the 12-member upgradestakeholder reference group (SRG) towork with the Alcoa project team on theinitiative’s environmental, social, andeconomic aspects.

“I believe Alcoa made the right decisionand went about this in a totally openmanner that instilled a lot more confi-

dence in a lot of people,” said Barrett, amember of the refinery’s CCN andupgrade SRG. “A good example ofaction by Alcoa was when the refinery’sbauxite residue SRG requested thenext bauxite residue storage area be ina certain area that was not really favor-able to Alcoa for many reasons, mostof which were financial. Alcoa saw thereasoning behind the request andagreed to the area suggested, eventhough it brought a much higher cost.”

This community engagement model,called a “best practice” by the chairmanof the Environmental ProtectionAuthority of Western Australia, is beingadapted for other Alcoa upgrade andexpansion projects throughoutAustralia.

9

In Iceland, we are developing indica-tors to measure the performance ofboth the smelter and the hydro facil-ity in partnership with Landsvirkjun(owner of the hydroelectric station)and with the support of an advisorygroup. We are conducting a sustain-ability impact study in Guinea andan environmental impact assessmentin Juruti, Brazil, for proposedrefineries, and we are also engagingour stakeholders at an early stage inTrinidad. The lessons learned duringthese processes will be shared acrossthe company.

MeasurementAlcoa has a strong history of usingmetrics as a means to drive changewithin the company. In 2000, weestablished our 2020 StrategicFramework for Sustainability that issupported by clear targets for meas-uring progress toward our vision for2020. These targets are supplement-ed by environment, health, and safe-ty (EHS) goals and complemented byour existing financial goals. Detailsof progress toward meeting thesegoals can be found in the respectivesections of this report.

As part of our systematic approachto integrating economic, social, andenvironmental aspects throughoutour businesses, we have initiated areview of the existing 2020 Frame-work to make it more comprehen-sive in terms of sustainability princi-ples. This will also help us focus ourfuture reporting and will be a majorproject for the Sustainability Teamduring 2005. Our goal is to com-plete this work for inclusion in our2006 business plans.

Strategic Framework ● Supporting the growth of customer

businesses.

● Standing among the industrialcompanies in the first quintile ofreturn on capital among Standard& Poor’s Industrials Index.

● Elimination of all injuries andwork-related illnesses and the elim-ination of waste.

● Integration of environment, health,and safety with manufacturing.

● Products designed for the environ-ment.

● Environment, Health, and Safetyas a core Value.

● An incident-free workplace (anincident is any unpredicted eventwith capacity to harm humanhealth, the environment, or physi-cal property).

● Increased transparency and closercollaboration in community-basedenvironmental, health, and safetyinitiatives.

Global EHS GoalsEnvironment● From base year 2000:

● 60% reduction S02 by 2010. ● 50% reduction volatile organic

compounds by 2008. ● 30% reduction nitrogen oxides

by 2007. ● 80% reduction mercury

emissions by 2008. ● 50% reduction landfilled waste

by 2007.

● 60% reduction in process wateruse, and discharge, by 2008.

● From base year 1990: ● 25% reduction in greenhouse

gas emissions by 2010. Assuming success with the inert anode technology, a 50% reduction by 2010.

● Implement effective environmentalmanagement systems, such as ISO14001, at all locations by 2005.

● Zero environmental non-compli-ance incidents.

● US$100 million annual environ-mental and energy cost savings by2006 through elimination of wastesand design for sustainability.

● Environmental targets and com-munity relationship objectivesincorporated into all Alcoa busi-nesses’ annual plans.

Health● Locations will control 50% or

more of their significant ergonomicrisks by year-end 2005.

● 25% reduction in the incident rateof new work-related hearing shiftsas compared to the hearing shiftrate that exists for annualizedyear-end 2003 data or attainmentof a 1% or lower incident rate ofnew work-related hearing shifts byyear-end 2005.

● 60%, or more, reduction in num-ber or magnitude of unacceptableemployee chemical agent expo-sures by year-end 2005 from base-line 1999.

● 40%, or more, reduction in thenumber or magnitude of the top10 noise sources at each locationby year-end 2005 from baseline1999.

Sustainability and Alcoa

10

● All locations will have in place aninfluenza vaccination program byyear-end 2004.

● All locations will adopt no-smoking strategies and offer asmoking cessation program byyear-end 2006.

● Employee assistance services andhealth promotion activities in placeat all locations.

● Industrial hygiene programs inplace and risks quantified at alllocations.

● Occupational medicine programsin place and required medical eval-uations completed annually.

● Community health initiatives at alllocations.

Safety● Zero fatalities, zero lost workday

injuries.

● Zero incidents.

● Deployment of risk managementand reduction programs to elimi-nate causes of injuries.

Energy StrategyAs one of the world’s large users ofelectricity, we must balance our needfor low-cost and reliable energy tomeet our financial goals with respon-sibility to both the environment andsociety.

Over the next 30 years, the worlddemand for energy is going to dou-ble. Most of this growth will comefrom developing countries like China

and India, where demand for elec-tricity will typically outstrip supplyand limit the amount of industrialgrowth that can occur.

Traditionally, Alcoa smelters havebeen located in deregulated energymarkets, such as the United States,where energy costs have escalated.Our challenge today is to locate newsmelters where we can help bringsources of power and/or jobs into acountry and at the same time benefitfrom lower-cost energy, which isessential to competitiveness. Thisstrategy helped shape our decision tobuild the new smelter in Iceland, toexplore doing the same in Trinidad,and to expand our smelter atAlumar in Brazil.

When we build a smelter, we plantthe seeds for other industries to alsoestablish roots in that area. We alsocontribute to the communitythrough employee volunteerism,grants, and other community-basedinitiatives.

In addition to finding low-costsources of energy, we are alsoexploring ways to reduce the amountof energy we consume and toincrease our use of renewable energy.These issues are covered in moredetail in the environment section ofthis report.

Products Aluminum is one of the world’s mostsustainable materials, with about70% of the metal ever produced stillin use. Most other materials likelyhave substantially lower values dueto their material properties, longerhistory of production, or lowerrecovery/recycle value. Aluminumalso offers a significant range of ben-efits—high strength, lighter weight,longer life, etc.—that helps our cus-

tomers’ products become more sus-tainable as well. That’s why we arefocused on better understanding thesustainability of our current prod-ucts and opportunities for improvingand generating new ones.

We are involved in developing prod-ucts and processes to increase boththe amount of aluminum usedthroughout the world and thatwhich can be recovered for recycling.For example, we worked withPittsburgh Brewing Company tointroduce the first national beer inan aluminum bottle. In Spain, webuilt a highly efficient recycling plantto handle aluminum products previ-ously unrecyclable due to environ-mental concerns caused by the burn-off of paints and lacquers.

BiodiversityWe recognize that biodiversity is crit-ical for sustainability, and we havedeveloped programs to address thisimportant issue. For example, ourcorporate mine rehabilitation stan-dard requires that baseline biodiver-sity surveys are conducted prior todeveloping mines, so that potentialimpacts on sensitive species or com-munities can be avoided and baselineinformation can be used in develop-ing rehabilitation strategies. Newmines and mining areas are imple-menting this standard. However, insome developing countries there is alack of expertise to do this, and weare seeking to build this capacitywithin local scientists.

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For our major mines located inWestern Australia, Poços de Caldas,Brazil, and Trombetas, Brazil, there isroutine follow-up monitoring afterbaseline surveys. In WesternAustralia, the intensive biodiversitymonitoring program covers a rangeof objectives, including the following:

● Re-establishment of native plantspecies in rehabilitated areas.

● Re-colonization of fauna in reha-bilitated areas.

● Long-term monitoring of undis-turbed and mined areas to followflora and fauna succession.

● Mapping and re-mapping the dis-tribution of Phytophthora diebackdisease in forests and rehabilitatedareas.

The Western Australia fauna moni-toring program covers a wide rangeof fauna groups, including mam-mals, birds, reptiles, frogs, and aselected range of invertebrates.

Our long-term success depends oncomprehensive and consistent pro-

grams to understand, protect, andpromote biodiversity, and we intendto do so. For more information, seethe biodiversity section on page 33.

Technology For Alcoa, staying at the leadingedge of technology has been an inte-gral part of business from the verystart. For more than a century, ourtechnology groups have been helpingus use science to create and maintaina competitive edge. In the process,we have developed and harnessedsome of the world’s best technologi-cal ideas and solutions.

Throughout the world, we workwith suppliers, customers, and otherstakeholders to continuouslyimprove our sites, materials, process-es, and products within sustainabili-ty principles.

At the heart of this effort is AlcoaTechnical Center (ATC), the world’s

largest light metals research lab locat-ed outside of Pittsburgh (USA). Ourscientists, engineers, technicians, andsupport personnel develop highlyinnovative process and product solu-tions; continuously enhance customeruse and application of Alcoa prod-ucts; and solve environmental prob-lems by developing sustainable man-ufacturing processes and products.

ATC is part of a closely linked net-work of Alcoa labs located aroundthe world. Our technology groupsroutinely collaborate not only amongthemselves but also with our busi-nesses on product- and process-relat-ed issues that address both currentneeds and long-term opportunities.

For example, our scientists are devel-oping and testing alternative lubri-cants for our fabricating locationsthat minimize volatile organic com-pound (VOC) emissions and reduceongoing costs (see case study below).They are also investigating new engi-neered designs and natural systemsto better manage stormwater runoff(see case study on page 37).

Sustainability and Alcoa

Alternative Lubricants Reduce VOC Emissions,Treatment Costs

In an effort to meet its environmentalgoal of a 50% reduction in volatileorganic compound (VOC) emissions by2008 and to comply with increasinglystricter air regulations, Alcoa is devel-oping and evaluating non-oil-basedlubricants and related processchanges for its metal forging androlling operations worldwide.

Alcoa’s Cleveland Works (USA) wasfacing either a 35% reduction in pro-duction or more than US$10 million incapital expenditures to reduce VOCemissions from its forging operations

to meet stricter requirements if permitnegotiations were not successful.

To overcome the challenge, the facilitybegan using water-based lubricants andimplemented process changes, such ashow the lubricants are applied. Thesechanges have resulted in a 10% reduc-tion in VOC emissions and the avoidanceof costly end-of-pipe treatment systemsthat would have increased both energyuse and carbon dioxide emissions. Inaddition, Cleveland Works is savingapproximately US$2 million annually inoperating and maintenance costs. Thetechnology and methodologies will betransferred to other Alcoa forging opera-tions in Hungary, Mexico, and the United States.

In collaboration with the U.S. Departmentof Agriculture and researchers at theUniversity of Illinois at Chicago, Alcoa isalso developing and testing the use ofbio-based lubricants—made from sustain-able agricultural products like soybeansrather than from petroleum-based feed-stocks—for metal rolling applications.Benefits besides being an alternativesource of lubricant material include VOC emission reductions of 50% or moreand the avoidance of costly air treatmentsystems.

In addition to testing the application of bio-based lubricants for aluminum rolling, theteam is developing a complete life-cycleanalysis to compare all inputs and outputsof both oil- and bio-based lubricants.

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Facility End-of-life ManagementAt times, we may need to close afacility due to asset repositioning,strategic direction, losses, or otherreasons. During this process, wemake every attempt to minimize theimpact on the community, ouremployees, and the greater region.

Our assistance to employees affectedby a facility’s closure varies from sit-uation to situation due to labor con-tracts, government partnerships,local laws and regulations, andmore. Our Values guide us in this. Ingeneral, we provide employees withseverance compensation as well asoutplacement assistance and retrain-ing opportunities.

For example, in April 2004 weannounced that we would be idlingour continuous caster operation inSan Antonio, Texas (USA), at year’send. In the intervening eight months,we used onsite workshops and anoutside firm to provide career transi-tion services—resume preparation,interviewing skills, job search tech-

niques, and networking skills—tothe plant’s 175 employees. We alsoworked to place employees withtransferable skills at other Alcoalocations. On the compensation side,we provided severance pay based onyears of service and will continue lifeand health insurance for one year (oruntil employment is found).

In Jamaica, our Jamalco operationsused its Life after RedundancyProgramme to assist the 61 employ-ees affected by the closure of theBreadnut Valley mining operations in1999. Employees received severancepay based on number of years servedand attended company-sponsoredseminars on psychological and men-tal adjustment to new life phases,entrepreneurial skills for starting a

business, financial planning, invest-ing, wealth creation, and resumewriting. In addition, Jamalco usesservices provided by a companystarted by former Breadnut Valleyemployees (see case study below).

One of the most visible aspects ofour process is how we prepare thefacility and land for reuse. When aplant is identified for closure, anAlcoa team evaluates the asset (realestate, buildings, infrastructure, utili-ties, easements, etc.) to determine thebest potential reuse of the facility.We then develop the plans and con-tracts required to achieve the out-come. In some cases, this work mayinclude environmental remediationand demolition. In other cases, thefacility can be reused with minimalmodifications. The ultimate goal isto place the asset back into produc-tive reuse so that the community cancontinue to have a solid tax andemployment base.

Employee-formed Company Lessens Impact of Mine Closure

When the Breadnut Valley miningoperations in Jamaica closed in 1999,a group of employees formed theRedundant Employees Company(RECO) to provide services to Alcoa’sJamalco operations and other busi-nesses in the local community.

RECO’s 32 permanent employees—half of which are former Jamalcoemployees—provide the workforce forJamalco’s land rehabilitation efforts aswell as maintenance services for

Jamalco’s deep well and sewage pumps,equipment in the machine shops, andcranes. RECO’s innovative approach hasallowed Jamalco to concentrate on itscore business of refining bauxite into alu-mina while reducing costs associatedwith maintenance.

“The transition from working for Jamalcoto working for RECO has not been a diffi-cult one, as RECO’s management main-tains the high ideals and principles taught

by Jamalco and its management team,”said Obediah Morgan. “Since workingwith RECO, my family and I have bene-fited tremendously by being able toassist with my children’s education,purchasing a motor vehicle, coveringfuneral expenses, and placing some ofthe money I received when leavingJamalco in investments.”

He adds, “RECO’s management hasnot shortchanged the community duringits tenure as employers in the BreadnutValley region. They have maintained theworking relationship within the commu-nity and have tried to bridge the gap leftby the relocation of mining activities.”

RECO employees planting calliandroin Jamalco’s rehabilitation program

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transportation hub and light andmedium industrial development, 63hectares (156 acres) are being pre-served as open space for the greatercommunity. The facility that pro-duced aluminum for more than 60years is now positioned to becomethe anchor in the continued develop-ment of the area.

The experience we have gained inthe redevelopment of former facili-ties is being used to ensure that ournew facilities can be more easilyredeveloped for different uses in thefuture. Issues such as design parame-ters, building materials, and methodsof construction have been evaluatedto ensure that the facilities can bemore readily reused or more easilyremoved when their useful lives asaluminum production facilities end.

VISION, VALUES, ANDPRINCIPLESAt Alcoa, our vision is to be the bestcompany in the world—in the eyesof our customers, shareholders, communities, and people. We expectand demand the best we have tooffer by always keeping Alcoa’sValues top of mind.

ValuesIntegrityAlcoa’s foundation is our integrity.We are open, honest, and trustwor-thy in dealing with customers, suppliers, coworkers, shareholders,and the communities where we havean impact.

Environment, Health, and SafetyWe work safely in a manner thatprotects and promotes the healthand well-being of the individual andthe environment.

CustomerWe support our customers’ successby creating exceptional valuethrough innovative product andservice solutions.

Sustainability and Alcoa

An example of our work in this areainvolves the Troutdale, Oregon(USA), facility, where we permanent-ly closed a smelter that was obtainedthrough the acquisition of ReynoldsMetals Company. The smelter wasan old design that could not be eco-nomically operated. We evaluatedthe facility and determined that itpresented a significant opportunityto the region as an industrial andtransportation hub. We also quicklydetermined that the structures builtfor aluminum production could notsupport this redevelopment vision.We embarked on a US$20 milliondecommissioning program to clearthe land and remove environmentalliabilities.

In 2004, we entered into a purchaseand sale agreement with the Port ofPortland to transfer Troutdale’s 283hectares (700 acres) to the port oncewe completed the decommissioningand environmental work. We antici-pate that the sale will close in 2006.In addition to the redevelopmentplans, which include a regional

Alcoa’s Opportunities,Challenges in China

Over the next few years, Alcoa is plan-ning to employ more than 5,000 peopleand make over US$1 billion in additionalinvestments in China, ranking it as one ofthe country’s 10 largest foreign investors.

Within its China operations, Alcoasteadfastly adheres to its Values andPrinciples while acknowledging thecountry’s unique regulatory environ-ment and socio-economic circum-stances. This has resulted in Alcoalocations like Shanghai and Tianjinbeing considered model plants recog-nized by local authorities for their envi-ronmental, health, and safety practicesand achievements. In addition, Alcoa

adheres to a 40-hour workweek, payspremium for hours worked over that limit,and contributes to all required pensionand housing funds. In a country wherewomen have limited representation in professional and managerial positions,Alcoa locations typically have women inmore than 25% of these positions, andthe percentage continues to increase.

There are challenges. China is about thecollective good rather than the individual.Since Alcoa employees in China typicallyearn more than non-employees, there is aneed to grow more business in the commu-nities to ensure fair employment for all.

There is also the challenge of bridgingthe gap between Alcoa’s vision and poli-cies and employee experience andknowledge, which are often not as devel-oped as those in established economies.

To meet these challenges, Alcoa gainsa thorough understanding of the localcommunity to assess variances fromAlcoa values, policies, and proceduresand to evaluate the effect any changeswill have on employees and the com-munity. Other actions have includedjoining the China Business Council forSustainable Development and workingwith the China Association forEmployment Promotion on a nation-wide program to enhance the skills andexpertise of China’s unemployed.

Tianjin location

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ExcellenceWe relentlessly pursue excellence ineverything we do, every day.

PeopleWe work in an inclusive environ-ment that embraces change, newideas, respect for the individual, andequal opportunity to succeed.

ProfitabilityWe earn sustainable financial resultsthat enable profitable growth andsuperior shareholder value.

AccountabilityWe are accountable—individuallyand in teams—for our behaviors,actions, and results.

We live our Values and measure oursuccess by the success of our cus-tomers, shareholders, communities,and people.

Principles Integrity● We live our Values everywhere, all

of the time.

● We demonstrate integrity in ourbehavior and actions.

● We keep our promises.

● We have the confidence andcourage to ask for help.

● We expect integrity from everyAlcoan and do not tolerate unethi-cal behavior.

● We avoid conflicts of interest butwill declare situations where theymay occur.

● We expect integrity from our customers, suppliers, and otherswho do business with us.

● We communicate openly with individuals and communities onissues that affect them.

Environment, Health and Safety● We value human life above all else

and manage risks accordingly.

● We relentlessly pursue and contin-ually improve EHS systems andprocesses to achieve an EHS inci-dent-free workplace.

● We do not compromise our EHSValue for profit or production.

● We comply with all laws and sethigher standards for ourselves andour suppliers where unacceptablerisks are identified.

● We support pollution preventionand sustainable development, byincorporating social responsibility,economic success and environmen-tal excellence into our decisionmaking process.

● We measure and assess our per-formance and are open and trans-parent in our communications.

● We supply and use safe and reli-able products and services.

● We use our EHS knowledge toenhance the safety and well-beingof our communities.

● We are all accountable for con-forming with and deploying ourEHS Value and Principles.

Customer● We deeply understand our cus-

tomers’ needs and consistentlymeet or exceed them through ABS.

● We build strong long-term cus-tomer relationships at all levels.

● We cross organizational and geo-graphic boundaries to seamlesslyserve customers.

● We are the leader in our chosenmarket segments.

● We develop innovative product,service, and information solutions.

● We develop and nurture clear Alcoaand product brand identities.

● We develop and maintain a strong commercial organizationalcapability.

Excellence● We continuously set goals beyond

the best.

● We demand, recognize, and rewardexcellence.

● We achieve system excellencethrough application of the rules ofour system and by rapidly imple-menting best practices.

● We eliminate waste by rapidlysolving problems at their source.

● We move practical and theoreticallimits through innovation.

● We have rapid change as a mind-set.

● We are committed to excellence byliving our Values.

● We empower our people through adiverse learning organization tocapture the best from everyone.

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People● We treat each other with dignity

and respect at all times.

● We seek to understand each other’sideas and suggestions.

● We value diversity and our individ-ual differences.

● We create and seize opportunitiesfor growth and development.

● We seek and accelerate change.

● We continuously re-design ourwork to eliminate waste andimprove the value of our work.

● We provide appreciative and con-structive feedback to each other toimprove our individual and teamperformance.

● We create the appropriate balancein our work and family lives.

● We create value in the communityin which we live and work,through our presence and leader-ship.

Profitability● We all understand how our job

contributes to profitability.

● We eliminate waste every day,reducing our costs and capitalrequirements.

● We earn our right to grow byachieving returns that exceed ourcost of capital.

● We aggressively pursue organicgrowth by creating exceptionalvalue for customers.

● We make strategic acquisitions andintegrate them excellently.

● We openly and effectively commu-nicate our financial results inter-nally and externally.

● We do not make money at theexpense of our Values.

Accountability● We first recognize our role and

responsibilities, then take owner-ship, and accept the consequencesof our actions.

● We act with a sense of ownershipin our workplace.

● We encourage an environment ofrisk taking within the context ofaccountability.

● We solve the problems in our areaof responsibility and drive continu-ous improvement of our work.

● We do what we say we will do.

● We communicate openly as posi-tive team members to increase theperformance of our teams.

● We recognize the impact that ourown actions have in all outcomes.

● We recognize individual and teamaccomplishments and successes.

Idled Plant Overcomes Energy,Labor Cost Challenges

After being idle since 2001 due to soar-ing electricity prices, Alcoa’s Wenatcheesmelter in Washington (USA) restartedoperations in December 2004. Theplant’s employees had been receivingregular wages and benefits during thedowntime, performing upkeep at theplant and volunteering in the communityon a full-time schedule.

“When I volunteered with estate salesat the YMCA, there was not a day thatwent by when I didn’t hear how much

they appreciated the help,” said JoKeyser, smelter employee who serves aspresident of the Wenatchee AluminumTrades Council. “One of the things thatstands out in my mind is how the commu-nity service projects have improved atti-tudes and boosted morale at the plant.”

The restart of operations came aboutonce the smelter was able to secure along-term competitive power agreement,tax relief, and a new labor agreement thataddressed spiraling healthcare costs. Theplant’s 400 employees resumed their full-time work in the smelter.

“I’m elated that the plant restarted, andthe skills I learned working as a volunteerduring our idled time have paid off at my

job at Alcoa,” said Jeff Foglestrom, amechanic at the smelter. “I’m excited tobe able to remain in this community andthat the future looks bright for the plant.”

Alcoa Intalco Works, a second Alcoasmelter in Washington negativelyaffected by rising costs, continued tomaintain a consistent workforce in 2004following a 57% reduction in employeesin 2003. A partnership between Alcoa,government agencies and the employ-ee union resulted in outplacement serv-ices, training, and support for the dis-placed employees.

Sustainability and Alcoa

ORGANIZATIONALPROFILE

Reporting OrganizationAlcoa Inc.

Products and ServicesIn addition to aluminum productsand components, Alcoa also marketsconsumer brands that includeReynolds Wrap® aluminum foil,Alcoa® wheels, and Baco® householdwraps. Among our other businessesare vinyl siding, closures, precisioncastings, and electrical distributionsystems for cars and trucks.

Countries with AlcoaOperationsAs of the end of 2004, Alcoa operat-ed in 43 countries. A complete cur-rent list is available on alcoa.com.

Nature of OwnershipFormed in 1888 under the laws ofthe Commonwealth of Pennsylvania,Alcoa Inc. is a publicly listed company on the New York StockExchange (NYSE ticker symbol:AA).

Markets ServedAlcoa serves customers in the aero-space, alumina, aluminum ingot, auto-motive, commercial transportation,homes and commercial buildings,industrial products and services, andpackaging and consumer markets.

REPORT SCOPE

Contact PersonAnita RoperDirector-Sustainability

If you would like to write to usabout this sustainability report,please send an e-mail to sustainabili-ty@alcoa.com. To provide anony-mous feedback, please complete ouronline survey at www.alcoa.com/go/sustainabilitysurvey.

Reporting PeriodJanuary 1 through December 31,2004. This is Alcoa’s third sustain-ability report in this format. Wherepossible, we have provided five yearsof data to show trends in our per-formance.

Boundaries of ReportData contained in this report are forAlcoa’s global operations unless oth-erwise noted as regional.

Alcoa Metrics SystemAlcoa’s metrics system is the sourceof much of the data in this report.

In 1988, we initiated a process tocollect and display current detailed

information on safety in a way thatwould be available to all employees.We have expanded the original datasystem to include incident manage-ment, and we now use the system forall environmental, health, and safetydata collection and analysis, incidentmanagement, and reporting.

At any time, we can use the systemto determine current safety statistics,including accidents or near missesthat occur anywhere in the world ona particular day. We can also viewdetailed reports on incidents, evalu-ate the corrective action plans or sta-tus of a corrective action, and evalu-ate our progress toward our goals in

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Profile

2003 474

2001

2002

2000 459

459

482

Number of Locations

2004 435

0 100 200 300 400 500

As of year end.

*Millions of US dollars.

Ten-year historical data can be found in the Annual Report. Data changes from 2003 reporting due to reclassification of discontinued operations.

Key Statistics (As of December 31)

Employees Sales* Debt* Equity* Assets*

2003 120,000 21,092 7,266 12,075 31,7112004 119,000 23,478 6,300 13,300 32,609

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environment, health, and safety. Thesystem is an excellent managementtool that has helped us facilitate ourrapid progress in these areas.

As part of our commitment to open-ness and transparency, we beganpublishing real-time safety data pub-licly on alcoa.com in 2003 to pro-vide timely insight into our perform-ance on this critical measure.

We continue to work on determiningwhat regional or global metrics arerequired to guide us toward theachievement of sustainability, partic-ularly in the more complex and diffi-cult-to-measure social aspects of ouroperations.

Basis for Reporting on JointVentures, Partially OwnedSubsidiaries, Etc.Data in this report are drawn fromthose operations where Alcoa hasmajority interest and/or managementcontrol.

REPORT PROFILEThis third sustainability report contin-ues our efforts to become more trans-parent about our operations.

In this report, we provide informationon our continued progress to integratethe environmental, social, and eco-nomic aspects of our operations. Ouruse of online reporting ensures awider distribution of this informationand provides us with the ability tosupport this report with additionalinformation in a timely manner.

To help ensure the information weprovide meets the needs of our read-ers, we encouraged our stakeholdersto provide feedback on our 2003report through direct discussions andthe distribution of the report and anonline survey via CSR Wire to morethan 5,000 organizations that areinterested in corporate social respon-sibility. As of December 31, 2004,110 people responded to the onlinesurvey.

As a result of this consultativeprocess, we have retained the basicstructure of the previous reports withperformance data supported by illus-trative case studies. We have also

The Challenge of MeasuringCommunity Engagement

Measuring Alcoa’s community engage-ment performance beyond funds grantedis challenging, but progress is beingmade.

In the United States, 125 locations aresubject to a quarterly metrics assess-ment that evaluates eight categories ofperformance on a four-step scale: com-munity assessment; events; effectivegovernment relations; effective mediarelations; effective contributions andemployee involvement; community con-sultation; participation on statewideteams; and value added.

Each plant receives guidance on how tomove from the starting point to full com-

pliance in each category. To assure thathigh performance is achieved and sus-tained, the quarterly results are shared andreviewed with the business unit presidents,group presidents, and other senior Alcoamanagement. A similar system is used inAustralia, and implementation has begunin European and Caribbean locations.

Employee engagement forms anotherdimension of Alcoa’s community involve-ment, and calculating this impact is diffi-cult. We report the funds awardedthrough our ACTION and Bravo! grantsas well as the number of hours, number

of employee volunteers (ACTION only)and average hours per volunteer. Wealso measure and report on our TakingAction activities through estimates ofNGO, community member, and employ-ee involvement, as well as stories ofevents and employee experiences.

These measures do not comprehen-sively capture the total amount of volun-teer time employees give to their com-munities, as these are personal contribu-tions made on discretionary time. Thereare voluntary standards to guide a com-pany on what it can report, and we havechosen to report on those volunteeractivities matched or supported by cor-porate funds. These programs offer themost transparent calculation of employ-ee engagement available at this time.

Employees of Alcoa’s Deschambaultsmelter in Canada and their familiesspruce up a primary school playgroundduring the 2004 Taking Action week

Profile

retained an index to help our readerscompare the information containedin the report with the GlobalReporting Initiative guidelines.

This year, following a request fromour stakeholders, we have prepared a separate executive summary toincrease the availability of the infor-mation to stakeholders—in particu-lar, our employees. Other changesbased on consultation include moreinformation on our overall sustain-ability strategy and some key challenges.

As in past reports, we have selecteddata that we believe contribute mean-ingful insight into Alcoa operationsworldwide. We also selected data onthe basis that systems for collectingand collating that data already existor that we can make a reasonableestimate.

This sustainability report is just onepart of Alcoa’s commitment to openand transparent reporting of its oper-

ations. The following publicationscan be found on our external web-site, alcoa.com.

● Alcoa Annual Report

● Regional Sustainability Reports● Australia● Brazil● Canada● Europe● Jamaica● Suriname

● Location Sustainability Reports● Alcoa Architectural Products

Merxheim (France)

● Environmental Improvement Plans● Portland (Australia)● Pt. Henry (Australia)● Anglesea (Australia)

Criteria/Definitions Please refer to the Alcoa 2004Annual Report for details on ourfinancial accounting policies.

Internal Report AssuranceAlcoa management is responsible forthe integrity of the data published inthis report. The company maintainsa system of internal controls, includ-ing accounting controls and a strongprogram of internal and externalauditing. The system of controls pro-vides for appropriate procedures thatare consistent with high standards ofaccounting and administration. Thisreport has been prepared within theframework of those standards.

Independent Report AssuranceAs part of our consultation withstakeholders on our sustainabilityreporting, we have discussed optionsaround independent verification ofthis report. Our finding is that nocommon view exists on a singlecredible source of verification thatwill satisfy every individual stake-holder group.

We remain committed to the princi-ple of a credible and meaningful ver-ification process and will continue toexplore this issue and report ondevelopments. We will also continueto seek input from our stakeholdersto ensure that our future sustainabil-ity reports are increasingly meaning-ful to them.

Information RequestsPlease visit alcoa.com for additionalinformation about Alcoa’s economic,environmental, and social perform-ance.

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19

STRUCTURE ANDGOVERNANCEWe adopted our CorporateGovernance Guidelines in January2003, and they were reviewed andupdated in January 2005. Theseguidelines closely follow the BusinessRoundtable Principles of CorporateGovernance, a comprehensive state-ment of responsible corporate gover-nance principles dated May 2002that we endorse. The New YorkStock Exchange (NYSE) listing stan-dards serve as an additional founda-tion for our guidelines.

The Business Roundtable Principlesand NYSE listing standards also pro-vide the foundation for our boardcommittee charters, which arereviewed and revised annually, asappropriate, by the Board ofDirectors. In November 2003, theboard modified our Business ConductPolicies to make them applicable todirectors as well as all employees andall entities and ventures controlled by Alcoa.

Board of Directors(As of February 2005)

Alain J. P. Belda, 61,chairman of the boardof Alcoa since January2001, and chief execu-tive officer since May1999. Elected president

and chief operating officer in January1997, vice chairman in 1995, andexecutive vice president in 1994.President of Alcoa Aluminio S.A.from 1979 to 1994. Director ofAlcoa since 1998.

Kathryn S. Fuller, 58,president and chiefexecutive officer of theWorld Wildlife FundU.S. (WWF), one ofthe world’s largest

nature conservation organizations,since 1989; various positions withthe organization since 1982, includ-ing executive vice president, generalcounsel, and director of WWF’s pub-lic policy and wildlife trade monitor-ing programs. Director of Alcoasince 2002.

Carlos Ghosn, 50,president and chiefexecutive officer,Nissan MotorCompany, Ltd., since2001; chief operating

officer 1999-2001. From 1996 to1999, he was executive vice presi-dent of Renault S.A., and from 1979to 1996, he served in various capaci-ties with Compagnie Générale desEtablissements Michelin. Director ofAlcoa since 2002.

Joseph T. Gorman,67, chairman andchief executive officerof MoxahelaEnterprises, LLC, aventure capital firm,

since 2001. He was chairman andchief executive officer of TRW Inc., aglobal company serving the automo-tive, space, and information systemsmarkets, 1988-2001. Director ofAlcoa since 1991.

Judith M. Gueron, 63,visiting scholar at theRussell SageFoundation, a founda-tion devoted toresearch in the social

sciences, and president emerita of

MDRC, a nonprofit research organi-zation that designs, manages, andstudies projects to increase the self-sufficiency of economically disadvan-taged groups, since September 2004.Dr. Gueron was president of MDRCfrom 1986 to August 2004. Directorof Alcoa since 1988.

Sir Ronald Hampel,72, former chairmanof United BusinessMedia, a U.K.-basedmedia company, from1999-2002; chairman

of Imperial Chemical Industries plc(ICI) 1995-1999, and a director1985-1999; deputy chairman andchief executive officer 1993-1995;chief operating officer 1991-1993.Director of Alcoa since 1995.

Klaus Kleinfeld, 47,deputy chairman ofthe Managing Boardand president andchief executive officerof Siemens AG, a

global electronics and industrial con-glomerate, since January 27, 2005.Mr. Kleinfeld served as deputy chair-man of the Managing Board andexecutive vice president of SiemensAG from 2004 to January 27, 2005.He served as president and chiefexecutive officer, SiemensCorporation, the U.S. arm ofSiemens AG, from 2002 to 2004. Hewas also a member of the ManagingBoard of Siemens AG fromDecember 2002 to December 2003.Mr. Kleinfeld served as chief operat-ing officer of Siemens Corporationfrom January to December 2001.Prior to his U.S. assignment, Mr.Kleinfeld was executive vice presi-

Governance Structure and Management Systems

dent and a member of the ExecutiveBoard of the Siemens AG MedicalEngineering group from January toDecember 2000. Director of Alcoasince 2003.

Henry B. Schacht, 70,managing director andsenior advisor ofWarburg Pincus LLC,a global private equityfirm, since 2004. Mr.

Schacht served as chairman (1996 to1998; October 2000 to February2003) and chief executive officer(1996 to 1997; October 2000 toJanuary 2002) of LucentTechnologies Inc. He also previouslyserved as senior advisor (1998 to1999 and 2003) to Lucent. Mr.Schacht was managing director ofWarburg Pincus LLC from February1999 until October 2000. Directorof Alcoa since 1994.

Franklin A. Thomas,70, consultant, TFFStudy Group, a non-profit institutionassisting developmentin South Africa, since

1996; chairman, September 11 Fundsince 2001; president and chief exec-utive officer of The Ford Foundation1979-1996. Director of Alcoa since1977.

Ernesto Zedillo, 53,director, Yale Centerfor the Study ofGlobalization, sinceSeptember 2002.Former president of

Mexico, elected in 1994 and serveduntil 2000; held various positions inthe Mexican federal governmentfrom late 1987 to his election.Director of Alcoa since 2002.

Board CommitteesAudit CommitteeReviews Alcoa’s auditing, financialreporting, and internal control functions and retains the independ-ent auditors, which at the board’sinitiative will be submitted to theshareholders for ratification begin-ning with the 2005 annual share-holders meeting. It also reviews thecompany’s environmental, financial,and information technology auditsand monitors compliance withAlcoa’s Business Conduct Policies.The members of the Audit Committeeare independent, as defined underNYSE listing standards. The inde-pendent auditors, the chief financialofficer, the vice president—audit, andthe general counsel each regularlymeet in private session with the com-mittee without any other members ofmanagement being present.

Joseph T. Gorman

Judith M. Gueron

Klaus Kleinfeld

Henry B. Schacht—Chair

Ernesto Zedillo

Compensation and BenefitsCommitteeDetermines compensation for Alcoaofficers, administers the stock optionplan, oversees investment manage-ment of the principal pension andsavings plans, approves any special

post-retirement arrangements forretiring Alcoa officers, and performsother functions specified by the com-pany’s compensation and benefitplans. The committee retains inde-pendent compensation consultants toassist it.

Carlos Ghosn

Joseph T. Gorman—Chair

Sir Ronald Hampel

Franklin A. Thomas

Executive CommitteeActs on behalf of the board whenspecific action must be takenbetween board meetings. Under theby-laws of the company, this com-mittee is comprised of three or moredirectors and has and exercises theauthority of the board in the man-agement of the business and affairsof the company, except as otherwiselimited by law.

Alain J. P. Belda—Chair

Joseph T. Gorman

Henry B. Schacht

Franklin A. Thomas

Governance and NominatingCommitteeRecommends nominees for electionto the board and has oversightresponsibility for corporate gover-nance, director education, orienta-tion and compensation. The commit-tee is responsible for designing andoverseeing the annual performanceevaluation process for the directors,committees, and the board.

Kathryn S. Fuller

Sir Ronald Hampel

Franklin A. Thomas—Chair

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Governance Structure and Management Systems

Public Issues CommitteeProvides advice and guidance onpublic issues, oversees corporate giving, makes recommendations tothe board regarding significantshareholder issues, and reviews com-pany reporting initiatives regardingsocial and environmental matters.

Kathryn S. Fuller

Carlos Ghosn

Judith M. Gueron—Chair

Henry B. Schacht

Ernesto Zedillo

Independence Standards forAlcoa DirectorsAlcoa believes that a strong inde-pendent board is critical to the suc-cess of our business and meeting ourValues. A majority of directors mustbe “independent” under the listingstandards of the NYSE and theboard’s own Director IndependenceStandards. Board independencedepends not only on directors’ indi-vidual relationships, but also on theboard’s overall attitude. Providingobjective, independent judgment is atthe core of the board’s oversightfunction, and the board’s composi-tion should reflect this principle. Theboard and its committees complywith NYSE and company independ-ence standards.

Officers(As of February 2005)

Robert T. AlexanderVice President—Alcoa and Chairman, Alcoa Fujikura Ltd.

Margaret A. AupkeAssistant Treasurer

Alain J.P. BeldaChairman and Chief Executive Officer

Ricardo E. BeldaExecutive Vice President—EuropeanRegion

Julie A. CaponiAssistant Controller

William F. ChristopherExecutive Vice President—Alcoa andGroup President, Alcoa Aerospace,Automotive and CommercialTransportation

Donna C. DabneySecretary

Denis A. DemblowskiAssistant General Counsel

Ronald D. DickelVice President—Tax

Janet F. DuderstadtAssistant Secretary

Franklin L. FederVice President—Alcoa and President, Alcoa Latin America

Brenda A. HartAssistant Secretary

Paul A. HayesAssistant Treasurer

Regina M. HitcheryVice President—Human Resources

Cynthia E. HollowayAssistant Treasurer

Rudolph P. HuberVice President—Alcoa Global BusinessServices and Chief Information Officer

Barbara S. JeremiahExecutive Vice President—CorporateDevelopment

Richard B. KelsonExecutive Vice President and ChiefFinancial Officer

Denise H. KlutheAssistant Controller

Mario Longhi FilhoVice President—Alcoa and GroupPresident, Global Extruded and EndProducts

Ruth J. MackVice President—Alcoa and GroupPresident, Packaging and ConsumerProducts

Charles D. McLane, Jr.Vice President and CorporateController

Thomas J. MeekAssistant General Counsel

Colleen P. MillerAssistant Secretary

Joseph C. MuscariExecutive Vice President—Alcoa andGroup President, Rigid Packaging,Foil, and Asia

Judith L. NocitoAssistant General Counsel

William J. O’Rourke, Jr.Vice President—Environment,Health & Safety and Audit

Dale C. PerdueAssistant General Counsel

William B. PlummerVice President and Treasurer

Russell W. Porter, Jr.Vice President and Deputy GeneralCounsel

Lawrence R. PurtellExecutive Vice President andGeneral Counsel; Chief ComplianceOfficer

Bernt ReitanExecutive Vice President—Alcoa andGroup President, Global PrimaryProducts

Ricardo B. M. SayaoAssistant Treasurer

Richard L. (Jake) Siewert, Jr.Vice President—GlobalCommunications and Public Strategy

Paul D. ThomasExecutive Vice President—People,ABS, and Culture

Kurt R. WaldoAssistant General Counsel

Robert G. WennemerVice President—Pension FundInvestments and Analysis

Helmut WieserVice President—Alcoa and GroupPresident, Mill ProductsEurope/North America

John M. WilsonVice President and Deputy GeneralCounsel

Russell C. WisorVice President—Government Affairs

Mohammad A. ZaidiVice President and Chief TechnicalOfficer

Executive CompensationWe believe our compensation proce-dures and practices are in line withcurrent corporate governance stan-dards and practices. The design ofour executive compensation isintended to encourage managementto maintain a long-term perspective,while at the same time consistentlydelivering positive annual results.Fundamental underpinnings of thedesign are: paying for performance;paying competitively compared toother similar multinational industrialcompanies in order to attract thenecessary talent; and, at the execu-tive levels, paying total compensa-tion that is highly leveraged towardthe attainment of financial and non-financial goals. To ensure alignmentwith shareholders, stock ownershiprequirements apply at the executivelevel.

In 2004, we started reducing the useof stock options and began using ablend of stock options and restrictedstock units. Units at the top manage-ment level are 100% contingentupon company performance as compared with that of an externalcomparator group. In addition, thereload feature of our previous optiongrants has been limited. For optiongrants made in 2004 and after, therewill be no reload feature. We havenever repriced stock options. The2004 Alcoa Stock Incentive Plan wassubmitted to, and approved by,shareholders in 2004.

The Compensation and BenefitsCommittee of the board has respon-sibility for all aspects of executiveofficers’ compensation, includingapproval of officer employment,retention, and severance agreements.

In September 2003, following amajority of votes cast by sharehold-ers in favor of a shareholder propos-al, the Board of Directors adopted apolicy to seek shareholder approvalfor any future severance agreementwith any senior executive officer ofthe company when any such agree-ment would result in payments tothe officer in excess of 2.99 times hisor her salary and bonus. Even priorto the board’s response to the share-holder vote, it had been Alcoa’slongstanding practice and policy thatany severance agreement with a sen-ior executive officer requiredapproval by the Compensation andBenefits Committee. It should also benoted that prior to adoption of thepolicy, no severance agreementapproved by the Compensation andBenefits Committee had resulted incash payments or negotiated benefitsthat exceeded the 2.99 policy limit.

Audit ProcessOur goal is the same through bothour internal and external auditprocesses: to maintain world-classtransparency and accountability inAlcoa operations.

Independent AuditorsOver the last several years, we havesignificantly reduced our ratio ofnon-audit to audit fees paid to ourindependent auditor. In 2004, auditand audit-related fees totaledUS$12.5 million, while fees relatedto tax services totaled US$2.4 mil-lion and non-audit-related fees wereUS$0. Over the last four years, total

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Governance Structure and Management Systems

non-audit-related fees were US$0,reflecting our desire to limit thescope of the independent auditor toaudit and tax work only.

In accordance with resolutionsadopted by the Audit Committee,the lead audit and review partners ofthe independent auditor will berotated at least every five years.

Internal AuditWe have long had an independent,global Internal Audit Department(IAD). The vice president—auditmeets privately with the AuditCommittee at least four times peryear.

The IAD is responsible for providingfinancial, information technology,environmental, and health and safetyaudits in all Alcoa locations acrossthe world. The group’s focus is to

assess risk across the company, applyaudit resources to address thoserisks, and develop recommendationsto close any gaps that are detected asa result of an audit. IAD is alsocharged with implementing theAlcoa Self Assessment Tool, a typeof self-audit that is required to beperformed at least once every 18months by every Alcoa location andadministrative process worldwide.

In 2004, the IAD worked extensivelywith the external auditor and thecontroller’s organization to help pre-pare for the company’s certificationprocess in connection with theSarbanes Oxley Sec. 404 require-ments.

Ethics and ComplianceProgramAlcoa’s Ethics and ComplianceProgram is designed to ensure thatall Alcoa employees understand andfully comply with the letter and spir-it of the laws and regulations thatgovern our businesses, as well as ourBusiness Conduct Policies and guide-lines.

The program is designed, implement-ed, and enforced so that it will beeffective in preventing and detectingconduct not conducive to ourValues. We have taken the followingsteps to implement this requirement:

● The program includes globallypublished workplace standardsand behavior expectations, com-prehensively explained in Alcoa’sGuide to Business Conduct. Theguide has been written at a tenth-grade comprehension level andtranslated into the native languageof each significant Alcoa location(20 languages at the end of 2004).All employees are required to par-ticipate in a training session attheir location that explains thebusiness conduct standards andtheir applicability to the employ-ee’s job responsibilities. This train-

Self Assessments Lead to Improved Controls,Performance

To increase the level of controls andhelp locations and administrativeprocesses achieve sustainable out-comes, Alcoa employs a self-assess-ment tool to uncover and close gapsquickly and identify best practices.

Implemented in 1998 and most recent-ly updated in 2004, the Alcoa Self-Assessment Tool (ASAT) is the samestandardized tool used by Alcoa’sInternal Audit Department for compre-hensive internal audits. By using this“open book” test, audited groups knowexactly what will be evaluated and can

check and adjust performance to meet or exceed Alcoa’s minimum controlexpectations. Each location and someprocesses must undergo a full audit atleast once every five years; the self-assessment is required at least onceevery 12 to18 months.

ASAT consists of four modules—financialand business processes, informationtechnology, health and safety, and envi-ronment. Within each module arerequirements, called objectives, that loca-tions must evaluate on a four-grade scale(poor, fair, good, and excellent). Forexample, a health and safety objective isidentifying how well a location keepspedestrians segregated from mobileequipment.

Today, nearly every location andprocess self-assesses within the com-pany. Continuous improvement hasbeen evident as audit grades, internalcontrols, and performance measuresare improving continually.

For example, Alcoa’s Western AustraliaMining Environmental Departmentdeploys the ASAT schedule over an 18-month testing cycle that involves allmembers of the department. This stringent application of ASAT auditinghas resulted in an overall strengtheningof environmental management prac-tices. During its last corporate audit,the department had 92% of testedareas receiving either an excellent orgood rating.

ing and the guide are part of theon-boarding process for all newemployees and contractors.

● To keep our ethics and complianceefforts effective, we edited ourGuide to Business Conduct to pro-duce two condensed versions toaddress the needs of focusedgroups of stakeholders. The Guideto Business Conduct in a Manufac-turing Environment, made avail-able to all Alcoa businesses, con-tains a subset of items discussed inthe corporate guide but with afocus on business conduct issuesmost likely to exist in a productionor manufacturing environment. We also published a guide for keycustomers and suppliers. As withthe manufacturing guide, this doc-ument is a subset of our mainguide but is intended for customersand suppliers who may benefitfrom knowing how Alcoa employ-ees and agents are expected to conduct themselves in a businessrelationship.

● In 2004, we deployed mandatory,job-specific, web-based ethics andcompliance training to 13,000employees worldwide. This repre-sents a 30% increase over the previous year. This training isrequired for corporate officers,business unit leaders, and employ-ees who negotiate with customersand suppliers, can contractuallycommit the company, or haveaccess to confidential information.

● We distributed quarterly ethics andcompliance communication materi-als, which dealt with businessethics and proper conduct, to allAlcoa locations to maintain andfurther develop overall employeeawareness of current ethics andcompliance topics.

● We accelerated the deployment ofthe annual Business Conduct andConflict of Interest Survey toAugust 2004 to meet the year-endrequirements of the Sarbanes-Oxley law. Coverage was expand-ed to more than 11,000 employ-ees, and we accounted for 100%of all surveys issued.

The Compliance Advisory Council—made up of the chief executive officer, chief financial officer, generalcounsel, director of global compli-ance, and director of ethics and compliance—continues to meet on aregular basis to review programeffectiveness, assess strategic direc-tion, and provide tactical support forthis process.

Ethics and Compliance Line Our global Ethics and ComplianceLine provides employees and otherconcerned parties an anonymouschannel for expressing concerns andraising issues about workplace activities and business practices.Employees are also encouraged touse the line to obtain an interpreta-tion of laws or regulations, seek clarification of Alcoa policies or procedures, or simply ask for adviceon proper actions.

The compliance line is available toAlcoa employees worldwide, withthe local toll-free compliance linesanswered in the caller’s native lan-guage. We also offer an ethics and

compliance e-mail address (anony-mous, if desired) and a postal mailaddress for submission of writteninquiries. Every concern or requestfor advice is addressed and respond-ed to without reprisal, and we havea target response date of 18 calendardays contingent upon the seriousnessand number of issues raised.

When an employee calls or sendswritten notice, the issue is reviewedimmediately. Those that are felt topose an immediate threat to the per-sonal safety of employees, Alcoaproperty, or the community are sentto pre-determined emergency con-tacts, who begin an immediate inves-tigation and institute correctiveaction when necessary. Non-emer-gency issues are sent to a regionalliaison for review and forwarding tothe appropriate location or businessunit for investigation.

Once an issue is resolved, a writtenreport on the investigation and anycorrective actions is submitted to theregional liaison, who then provides aresponse to the employee.

Shareholder Engagement Alcoa has a dedicated shareholderrelations group that engages withboth institutional and individualshareholders to hear their concernsthroughout the year. The group facil-itates discussion with managementabout the strategy and tactics of the

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Governance Structure and Management Systems

company along with emerging cor-porate governance issues and thecompany’s corporate governancepolicies.

Shareholder engagement occurs atquarterly analyst conference calls,the annual shareholders meeting,individual and group meetings withinstitutional shareholders on amonthly basis, global investor con-ferences (usually one per year), andvia phone, e-mail, and in-personcontact.

Shareholders also elect the membersof the Board of Directors, andAlcoa’s Governance and NominatingCommittee considers shareholderrecommendations for director nomi-nees.

Shareholders can communicate anyconcerns to Alcoa’s Board ofDirectors through:

● Regular mail (care of AlcoaCorporate Secretary, Alcoa Inc.,390 Park Avenue, New York, NY10022, USA).

● Ethics and Compliance Line (seewww.alcoa.com/global/en/about_alcoa/corp_gov/business_conduct.asp for phone numbers by country).

OVERARCHING POLICIESAND MANAGEMENTSYSTEMS

Alcoa Business SystemAlcoa’s overarching operating systemis known as the Alcoa BusinessSystem (ABS). It is characterized bythree overarching principles: make touse; eliminate waste; and peoplelinchpin the system.

In practice, this means:

● Defining precisely our customers’requirements.

● Pre-specifying the activities, thepathways, and the connectionsnecessary for meeting those cus-tomer requirements and refusing tovary from them.

● Safeguarding what we have pre-specified with built-in tests to iden-tify and solve problems that mightthreaten our predetermined out-comes.

● Enabling every Alcoan to recognizeand trace problems back to theirroot cause and eliminate them—not through the use of elite, discrete teams of problem solvers,but through the disciplined, immediate, relentless participationof the people occupying the affected pathway.

This system provides the most efficient way for eliminating wasteby enabling us to supply customers,on demand, with defect-free prod-ucts at the lowest cost and with thehighest degree of safety.

Bringing Sustainability toShareholder Relations

Sustainability is becoming an increas-ingly important means for shareholdersto evaluate and gain confidence in acompany’s current and long-termprospects. Recognizing this, Alcoa hasinitiated efforts to supply regular infor-mation on its sustainability efforts tothe investing community.

In early 2004, key Alcoa leaders metwith the company’s largest shareholderson an individual basis to discuss gover-nance and sustainability issues prior tothe annual shareholders meeting.

Twice a year, investors and analysts areinvited to an Alcoa facility for tours of,and discussions about, that location’sbusiness. In March 2004, 17 analystsspent three days touring Alcoa locationsin Australia. These included Huntly Mine,the largest bauxite mine in the world thatis also recognized for its ongoing rehabil-itation program and achievement ofrestoring 100% species richness to reha-bilitated areas. Other sites toured werethe Pinjarra refinery, Yenorra rolling mill,and Portland smelter.

In November 2004, 46 investors, analysts, and members of the mediaheaded to Alcoa’s operations inRockdale, Texas, for a one-day tour.This 14,160-hectare (35,000-acre) siteis home to lignite mining, power generation, and aluminum smeltingoperations. The location has been rec-ognized by government agencies for itsaccomplishments in land reclamation,the environment, and health and safety.

Through these and other efforts topresent Alcoa’s sustainability efforts toshareholders, the company is under-scoring Alcoa’s long-term viability andproviding information that will help ininvestment decisions.

Analysts receive an overview of theAlcoa Business System tools used inmolten metal optimization at Rockdale

External Principles andInitiativesAlcoa subscribes to or endorses thefollowing externally developed prin-ciples or initiatives:

● The Business RoundtablePrinciples of CorporateGovernance

● International Aluminium InstituteSustainability Principles

● International Council on Mining& Metals Principles

Programs and ProceduresSome examples of Alcoa’s programsand procedures pertaining to eco-nomic, environmental, and socialperformance are contained through-out this report via case studies.

Certification Status In March 2004, BSI, Inc., issued aglobal certificate to Alcoa to recog-nize that our corporate-wide EHSmanagement system met all therequirements of the ISO 14001Environmental Management SystemsStandard. All Alcoa locations andbusiness units can seek ISO certifica-tion under this global certificate,reducing the cost of ISO certificationby more than half. Locations thatselect other registrars can continuetheir location-specific registration ifthey choose.

It is our intent to eventually have all locations certified under the global certificate, but we will transi-tion to that position over severalyears. Currently, 205 of our loca-tions throughout the world are certified to ISO 14001, either individually or under our global certificate.

We also have four locations that arecertified to the Occupational Healthand Safety Management Systemstandard (OHSAS 18001). They arePoços de Caldas, São Luis, AFL doBrasil, and Tubarão Extrusions—all Aluminio/Latin America loca-tions. Three locations are SA8000(social accountability) certified: AFL do Brasil, Poços de Caldas, andSão Luis.

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Helping the CommunityThrough ABS

Alcoa is expanding the reach of theAlcoa Business System (ABS) throughan innovative project at a Pittsburgh(USA) women’s shelter.

The Women’s Center and Shelter ofGreater Pittsburgh provides support formore than 9,000 women victims ofdomestic violence and their childrenannually. Faced with funding cuts, rising expenses, and high staffturnover, the center needed a manage-ment system that allowed it to meetthe increasing needs of women andchildren with reduced resources, yet

was compatible with the center’s goal torespectfully serve victims of domesticviolence.

A US$25,000 Alcoa Foundation grant inearly 2004 is funding a pilot adaptation ofABS in the center’s legal advocacy area.The grant helps pay for services from aconsulting firm as well as staff time tolearn about and implement ABS.Members of the Alcoa OperationsManagement Consulting group and otherAlcoa employees also volunteer to assist.

The initial focus was on optimizing thecenter’s hotlines and data collection sys-tems. Through ABS, two hotlines wereconsolidated into one, immediately givingcallers direct access to a live advocate.

The ABS initiative also homed in onunwieldy administrative systems; withinsix weeks, report preparation wasreduced from two advocates spending14 hours each per month to one personspending 45 minutes.

“ABS shows respect for the peopledoing the work,” said Shirl Regan, thecenter’s executive director. “The philos-ophy ‘People aren’t the problem, it’s thesystem’ really resonates with usbecause that’s what we tell the womenwe serve: ‘You’re not to blame, it’s thesystem.’ This approach allowed us toestablish the professional safety necessary for our staff to expose ourproblems and focus on solutions.”

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Environmental Performance Indicators

Alcoa aspires to be the best companyin the world in all that we do. Thatincludes our stewardship of the envi-ronment through our processes, ourpeople, and our products.

We have established ambitious short-,mid-, and long-term goals to ensurethat all of our employees and stake-holders know our direction and targets and are helping us achieve ourgoals. We are making good progressand are proud to share our successand identify the areas where addition-al focus is needed.

As we stated in 2001 when our 2020vision was announced, the plan isdynamic, and it will grow. Achievingthe goal of zero waste disposed inlandfills by 2015 will contribute toour ultimate strategy of not generat-ing the wastes in the first place. Ourgoal of zero water discharge by 2015will grow into a goal of helpingassure that clean, safe water is avail-able to more people throughout theworld. By following our progress andcommenting on our direction andgoals, our stakeholders can help us

truly be a great company that standsas the best in the world.

In many places, we have been recog-nized for environmental stewardshipby regulatory agencies, governmentbodies, non-governmental organiza-tions, and citizens groups. Our land-mark agreement to help preserve thebiodiversity of a region that includesAlcoa’s large landholdings adjacentto the Great Smoky MountainsNational Park in the eastern UnitedStates is evidence of the benefits thatcan come from having stewardshipas a component of the companymanagement process.

In 2004, we announced that we willinvest 64 million euros (approxi-mately US$80 million at the time ofthe October 2004 announcement) intechnology and environmentalimprovements for three of oursmelters in northern Spain. Theseinvestments, some of which will be

completed by the end of 2006, willfocus on emission reductions.

Our support of Earthwatch Instituteexpanded in 2004. Fifteen Alcoa vol-unteers (sixteen were selected, buthealth issues kept one from partici-pating) traveled to research sitesaround the world to help scientistswith their field research. These expe-ditioners again shared their experi-ences through diaries posted onalcoa.com.

The decision by BSI, an internation-ally recognized registrar, to certifyAlcoa’s corporate environmentalmanagement system to the ISO14001 standard is a further demon-stration of the comprehensive natureof our environmental efforts. Mostcompanies are certified on a loca-tion-by-location basis, with focus onthe management processes that drivethe local behavior. Alcoa’s corporate-level global certificate from BSImakes it clear that environmentalmanagement and stewardship is sys-temic throughout the corporationand a fully integrated part of thecompany-wide management system.

Minimizing the Waste

Throughout the world, Alcoa facilitiesare working to meet the company’sgoal of reducing landfilled waste 50%by 2007 and 100% by 2015 from baseyear 2000.

The Alumar refinery and smelter in SãoLuis, Brazil, increased solid wasterecycling rates to 100% in 2001, gen-erated 17% less waste between 2001and 2004, and enabled the recoveryand recycling of stockpiled waste. Thiseffort reduced environmental risks andsaved more than US$650,000 by elimi-nating the need to construct newwaste disposal and storage areas.

In 1998, the facility produced 45,720 met-ric tons (50,400 tons) of solid waste, ofwhich 51% was recycled. After a multi-disciplinary team used the AlcoaBusiness System to address waste man-agement, all industrial wastes are nowrecycled or co-processed. The facility isalso recycling or co-processing stockpiledsolid wastes, pushing the annual recy-cling rate to 104% in 2004.

“The surrounding communities in Sobral,where my company is located, are awareof Alumar’s work in waste management,”said Luciano Tertius, general manager ofCimento Poty, which co-processesAlumar spent pot lining in its cementclinker furnaces. “If any company wantsto become as world class as Alumar

seems to be, they have to look foralternative means of disposing theirwastes.”

In Canada, Alcoa’s Deschambaultsmelter has integrated waste manage-ment into its production processessince starting operations in 1992.Innovative programs reduced landfilledwaste (excluding spent pot lining) 60%between 1995 and 2000 and an addi-tional 35% from 2000 to 2004.

In 2003, the smelter was recognized byRecyc-Québec’s recycling awarenessprogram for having already achievedthe 2008 goals of the 1998-2008Quebec Policy for Waste Management.

We do face challenges in meeting ourenvironmental goals. For example,process water reduction is proving tobe complex and difficult, and ourprogress on mercury reduction hasbeen slower than we anticipated. Weremain committed to achieving ourgoals and will marshal the resourcesnecessary to do so.

What follows is a brief overview ofour environmental performance in2004. More information, including awide array of position papers on keyenvironmental issues, can be foundin the environment section ofalcoa.com.

MATERIAL USE

Total Materials UseAlcoa is a fully integrated aluminumcompany, which means that we havethe capabilities to extract raw mate-rials, process them into aluminum

metal, convert the metal into end-useproducts or make them available toothers for further processing, andrecycle aluminum products at theend of their useful life.

We mine bauxite, lignite, coal, andother minerals. We convert the baux-ite to aluminum oxide and then toaluminum metal through processesthat use fuels, caustic soda, lime,petroleum coke, coal tar pitch, alu-minum fluoride, other chemicals,water, and energy. We also use fuelsand hydroelectric facilities to pro-duce electrical energy, which is amajor component of the electrolyticprocess required to produce alu-minum metal from aluminum oxide.

The basic process requires approxi-mately four tons of bauxite to pro-duce two tons of aluminum oxide,which, in combination with one-halfton of carbon, can produce one tonof aluminum metal. Once produced,the metal can be used for a widevariety of products. Because it doesnot rust, decay, or lose its quality, itcan be recycled repeatedly withoutloss of properties.

We also manufacture a wide varietyof products from plastics for thepackaging, construction, and trans-portation markets. We typically purchase the resins—polyethylene,high-density polyethylene, polyvinylchloride, and polypropylene—andconvert them to semi-finished andfinished products.

We are aware of the importance ofmaterials flow throughout theeconomies of the world, and we rec-ognize the need to make efficient useof all raw materials and naturalassets. We believe that there is eco-nomic as well as stewardship justifi-cation for minimizing material flows,and we continue our work to makeall of our processes as efficient aspossible.

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Major Material Outputs

Emissions and Wastes■ Oily Wastes■ Volatile Organic Compounds (VOCs)■ Wastewater

Emissions and Wastes ■ Hydrogen Chloride ■ NOx ■ Wastewater

Alumina 1.92 Tons

Aluminum Smelting

Primary Metal1 Ton

Bauxite Ore~4 Tons

Bauxite Refining

Emissions and Wastes ■ Spent Pot Lining ■ Fluorides ■ SO2

Emissions and Wastes ■ Bauxite Residue ■ Particulate Emissions ■ Mercury

Mining Effects■ Dust■ Noise■ Stormwater

Recycled Metal~0.25 Ton

Ingot Casting/Semi Fabrication

Rolled, Extruded,Cast, & Forged

Products~1.25 Tons

EnvironmentalPerformance Indicators

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Waste Materials UsedOur primary approach to wastemanagement is to reduce waste gen-eration where possible. If waste gen-eration is not preventable, weattempt to reuse the waste or makeit attractive to others for use.

We now provide several thousandtons of spent pot lining (a large vol-ume waste from our electrolyticprocess) to cement plants annually asan energy and mineralizer source,and we will expand this program by20,000 additional tons in 2005. Thiswill mean that almost half the spentpot lining that we produce each yearwill no longer be a waste but rathera raw material.

We use what is essentially a wasteproduct from the petroleum refiningindustry—petroleum coke—as a rawmaterial to form the anodes that areessential for our electrolytic process.

We also purchase coal tar pitch, a by-product of the steel industry, as thebinder for our anodes. We believethat these forms of “industrial ecolo-gy” are an important component of asustainable business economy.

Similarly, we are initiating a full-plant program to use CO2 to neu-tralize all of the bauxite residue pro-duced at one of our refineries inAustralia (see case study below).

We believe that recycled metal fromproducts like used beverage cans,junked automobiles, demolishedbuildings, and discarded consumerproducts is an important source forour basic material, and its impor-tance will continue to grow.

The amount of available scrap canbe limited since the amount of alu-minum available for recycling isdependent on the amount of materialput in the products at the time oftheir manufacture. For example, thealuminum in a building ready fordemolition was probably placedthere 50 years ago, when the alu-

minum industry was less than 10%of the current size. Even though allthe scrap is recovered and reused, itis a small portion of the total pro-duction of aluminum products forbuildings in today’s market. Theamount of aluminum scrap recycledtoday is similar in weight to theentire output of the primary alu-minum industry in 1970. Thesescrap availability issues will contin-ue to be a challenge for the indus-try since the demand for aluminumproducts continues to grow eachyear—faster than the “retirementrate” of existing products.

Our metal recovery rates havedropped in recent years due to thelack of availability of scrap and thevery high scrap price that results.China and other developingeconomies are purchasing largequantities of scrap that would havebeen available to Alcoa in the past.

One Process WasteNeutralizes Another

By using waste carbon dioxide (CO2)to neutralize the alkalinity in bauxiteresidue, Alcoa’s Kwinana aluminarefinery in Australia has lowered envi-ronmental risks, increased opportuni-ties to reuse a large-volume solidwaste, and reduced the level of ongo-ing management of bauxite residuestorage areas after closure.

In Australia, Alcoa produces aluminafrom low-grade bauxite deposits minedin the country’s Darling Range. Forevery ton of alumina produced,approximately two tons of bauxiteresidue results.

During the refining process, a causticsoda solution is added to bauxite to dis-solve the alumina, allowing it to separatefrom the undissolved solids. Although thesolids are washed to recover and recyclecaustic soda, the residue still has a pH ofaround 13.5.

The residue carbonation process, whichtook Alcoa over a decade to develop andpilot, mixes high concentration CO2 withthe bauxite residue prior to it beingdeposited onto drying beds. TheKwinana refinery currently uses highpurity and high concentration CO2 that

is a waste generated by a nearbyindustrial facility.

Residue carbonation’s benefits include:

● Shorter residue drying times, whichdefer construction of the next dryingarea by two to three years.

● Greenhouse gas benefit, since theCO2 consumed equals at least70,000 tons per year.

● Creation of a more benign waste thatoffers improved remediation, long-term management, and alternativeuse opportunities.

● Reduced risk of ground and surfacewater contamination.

Plans to install the technology at otherAlcoa locations are underway.

Used PlasticsWe make closures, food packagingmaterials and containers, electricalcomponents for automotive wireharnesses, building components (sid-ing, shutters, soffit, etc.), and otherproducts from a variety of plasticmaterials.

We use internal process controls tokeep plastic materials separated, sothat the residues from our manufac-turing processes can be collected and reused in the process. Thisapproach reduces the amount ofwaste that must be disposed of andalso reduces the amount of raw

material that must be purchased.Unfortunately, we have not yetfound ways to effectively use wasteplastics or recycled resins from usedproducts in our manufacturingprocesses, but we continue to searchfor opportunities along with othersin our industry.

ENERGY

Indirect Energy UseAlthough Alcoa uses cogeneration,hydroelectric facilities, and large,stand-alone electricity generatingplants to produce a significant por-tion of the electric power that werequire, we also purchase electricity

from hundreds of suppliers. Weattempt to integrate our facilitiesinto the distribution network wherepossible, and we can manage someof our plants in such a way that they

30

PVC-free Initiative ReducesPollution, Avoids Costs

Through an initiative with RigidPackaging Division customers to elimi-nate or reduce the use of PVC-coatedsheet used to make aluminum canends, Alcoa’s Tennessee Operations(USA) was able to meet new air pollu-tion requirements without modificationsto its aluminum reclamation delaquer-ing furnaces.

The PVC-free initiative allowed Alcoa toavoid pollution equipment operating costsand greatly reduce hydrogen chloride(HCl) emissions. In addition, 400 tons ofsolid or potentially hazardous waste wasavoided. And, a portion of the savingswas used to reduce nitrogen oxides(NOx) emissions by 50% through theinstallation of low-NOx burners in otherparts of the plant.

To encourage the market switch fromPVC coating to an Alcoa-developed,alternative coating, Alcoa worked withindividual customers to solve any per-formance issues they encountered.

As more of the cans returning toTennessee Operations for recyclingbecame PVC-free, the plant beganexperiencing a decline in the amount ofHCl emissions from its delaquering fur-naces. In early 2004, the furnaces werein compliance with the stricter govern-ment HCl emission standards.

In 2004, Tennessee Operations earnedthe Tennessee Chamber of Commerce& Industry Air Quality Award for itsPVC-free pollution prevention initiative.

Aluminum Metal Recovered by Alcoafrom Purchased Scrap

(thousands of metric tons)

2001

2002

2000 712

7371

768

2003 696

0 200

2004

400 600 800

625

1Estimated.

Includes dross processed by others to recycle metal back to Alcoa. Alcoa plants in North America also generated an additional 110,795 metric tons of scrap, which was sold to the secondary aluminum industry for subsequent recycling into die-cast alloy applica-tions. While we don't consume the scrap, we sell it to other consumers who do use it as opposed to landfilling it.

1Purchased electricity where the source of the power is not fully known.

Includes all purchased and self-generated electricity plus all fuel used. The increase in coal use resulted from higher utilization rates at Alcoa’s three solid-fuel-fired power plants. Please see endnote on page 43 for an explanation on data changes from 2003 reporting.

Total Energy Used (percent)

Oil Gas Coal Hydro Grid1

2000 8.4 17.8 34.4 36.6 2.72001 8.3 17.3 35.1 35.6 3.7

2002 8.9 17.8 32.5 37.8 2.9

2003 8.7 17.1 35.1 36.3 2.8

2004 9.2 17.5 35.8 34.6 3.0

EnvironmentalPerformance Indicators

31

can reduce electricity consumptionquickly in times of emergency andallow a local distribution network indifficulty to be stabilized. Several ofour large co-generation facilities alsosell electric power to such networks,and some of the facilities that weplan to expand in the next threeyears will be designed to also supplyeven more electric power in this way.

Renewable Energy As we search for stable and long-term energy supplies, we are com-mitted to decreasing our reliance onfossil fuels by increasing, where pos-sible, our use of natural, renewableenergy sources that help us lowerour carbon dioxide emissions andaddress global climate change.

Hydroelectric power has proved tobe an excellent power source for ourelectrolytic processes, and we contin-ue to seek additional hydro-basedpower. We own and operate sevenlarge dams in the eastern part of theUnited States and one in Suriname.We are also partners in two otherhydroelectric facilities in the UnitedStates and Canada.

In Brazil, as part of the Braziliangovernment’s long-term growthstrategy, we are involved as a minor-ity partner in the Machadinhohydroelectric project, which is now

complete. We also have an interest inthat country’s Barra Grande project,which is 95% complete. This projectwas scheduled to begin operation in2005 but was delayed pending thesatisfactory resolution of a contro-versy about the destruction of someunique forestlands that includedAraucaria trees. This impact was notproperly identified during the envi-ronmental impact assessment processconducted by the government butfound during a subsequent assess-ment conducted by BAESA, of whichAlcoa has a 42.2% ownership.

Agreement was reached in January2005, and a total of 1,140 familiesare being compensated by BAESA.This figure includes families qualifiedfor compensation under the originalterms, plus an additional 200 fami-lies under the recent agreement. Theadditional investment to support thisnew commitment is 21 millionBrazilian reais (US$7.8 million.). Theagreement provides for relocation ofthe families, donation of the woodfrom the reservoir area for construc-tion of houses in the community,financial support for crops, andacquisition of 200 hectares (494acres) of land for the community.

On the environment side, the gov-ernment approved BAESA’s proposalfor an offset program, where thepartnership will donate land to thegovernment and plant approximately20 new Araucaria trees for each oneremoved to prepare for the reservoirflooding. Details about the settle-ment’s other environmental aspectscan be found on the Brazilian coun-try page on alcoa.com.

2003 56.3

Purchased Electricity(billions of kilowatt hours)

2001

2002

2000 55.4

56.2

56.4

0 20

2004

40 60

54.9

10 30 50

The increases in purchased electricity reflect the increases in production at the Alcoa smelters where power is purchased from outside providers. Please see endnote on page 43 for an explanation on data changes from 2003 reporting.

We remain committed to renewable energy as demonstrated by the high percentage of hydro-based self-generated and purchased electricity.

Electricity Sourcing—Purchased and Self-generated (percent)

Hydro Oil Gas Coal Nuclear Local Other Grid Renewables

2000 45.8 4.0 1.7 40.2 4.5 3.8 0.02001 43.9 4.0 1.8 40.5 4.7 5.1 0.0

2002 45.7 4.3 1.9 39.6 4.6 4.0 0.0

2003 45.3 4.3 1.8 40.1 4.4 4.0 0.0

2004 43.4 4.5 1.9 41.1 4.7 4.3 0.1

We continue to source a high percentage of natural gas for our fossil fuel consumption.

Non-electric Fuel Sourcing (percent)

Oil Gas Coal

2000 24.4 73.2 2.42001 24.5 73.2 2.3

2002 25.2 72.5 2.3

2003 25.4 72.4 2.1

2004 26.3 71.6 2.1

Harvesting Wood, Building Jobs

With the cooperation of Alcoa’sSuriname Aluminum Company(Suralco), an entrepreneurial ventureto harvest hardwood trees from VanBlommestein Lake has the potential tocreate 150 full-time jobs and help meethardwood demand without encroach-ing on virgin Surinamese forest.

Van Blommestein Lake was formedwhen the Afobaka hydro facility wasbuilt in the early 1960s to supply powerto Suralco’s Paranam smelter. Most ofthe soft-wood trees are long gone, butthe hardwood trees are still standing inthe lake. Reclaiming this previouslylost timber offers substantial volumes

of high quality products with minimal envi-ronmental impact.

Since the operation of the hydro facility isthe responsibility of Suralco, the Surinamegovernment turned to the company foradvice. Working with Brokopondo WatraWood International—the company formed tomanage the harvesting operation—Suralcoidentified a suitable location for a harvestingconcession and provided access for a pilotproject that employed 34 people full timeand included a small sawmill. Suralco alsoassisted the operation with environmental,health, and safety audits. Brazilian divers,

who have experience in underwater treecutting from a similar operation inTucurui, Brazil, trained local employees.

“Suralco has been very open and con-structive with both general and practicalsupport, including allowing us to useroads, gates, and other infrastructure,”said Orlando Lee On, director ofBrokopondo Watra Wood International.

The pilot project was successfully com-pleted in October 2004, and commercialoperations began two months later.Brokopondo Watra Wood Internationalestimates that it can harvest 80 cubicmeters (105 cubic yards) of hardwoodper hectare, with 160,000 hectares (618square miles) of the lake available forpotential harvesting.

We are also a partner in three addi-tional government concessions ofhydroelectric projects in Brazil. Thefollowing list includes our ownershippercentage and the expected comple-tion dates pending contractual andenvironmental approvals:

● Serra do Facão, 39.5%, 2008

● Pai-Quere, 35%, 2008

● Estreito, 19.08%, 2009

In addition, we have expressed inter-est in participating in additionalprojects that the government ofBrazil is making available to privateinvestors. We believe that these proj-ects can be developed in a sustain-able way in accordance with theBrazilian laws, which were found tobe acceptable by the WorldCommission on Large Dams.

We are committed to be the principalcustomer for a new hydroelectricdam in Iceland. Our assessment ofthe Iceland project is that it will

require no relocation of people, willnot affect any commercial fisheries,will not adversely impact agriculture,will not affect water supplies, andwill have no effects on biodiversity.It will have very limited effect on thewildlife and commercial livestockactivities in the region.

We will also pursue hydroelectricprojects in China and other regionsof the world where the projects canbe developed with appropriate con-sideration of social, environmental,and financial issues and can be com-pleted in accordance with all locallaws and the guidelines of interna-tional institutions, such as the World Bank.

We are committed to increasing ouruse of renewable energy beyondhydroelectric power, and we areexploring other energy options, suchas wind energy. Our PortlandAluminium plant in Australia willprovide the distribution networkinterlink for a wind farm develop-ment, saving the developers signifi-cant additional investment thatwould have been required if ourplant had not been nearby. We arealso interested in developing windresources where the projects are eco-nomically attractive.

In 2003, we began participating inthe World Resource Institute’s Green Power Market DevelopmentGroup—the largest purchaser ofrenewable energy in the UnitedStates. In 2004, we expanded ourinvolvement from four to seven ofour administrative centers andincreased our purchase of greenpower by 50%.

32

Wood harvested from VanBlommestein Lake

EnvironmentalPerformance Indicators

33

WATERWe recognize that access to clean, safewater will be an issue of growingimportance throughout the world. Wehave determined that water-use reduc-tion is a critical component of sustain-ability for our company and many

others. We therefore are committed tomanaging the water resources avail-able to us with care and an apprecia-tion for the other potential users ofthis precious resource.

We have achieved a 17% reductionin water use since 2000 through

water conservation efforts at morethan half of our plants. We expect toachieve even more significant reduc-tions in several large plants throughwater recycling projects and processmodifications.

BIODIVERSITY

Alcoa’s Position onConservation of BiodiversityConsistent with Alcoa’s environmen-tal policy and our published positionon sustainable development, weactively endorse the concept of con-servation of biodiversity by operatingworldwide in a manner that mini-mizes effects on natural habitats andbiological resources. We attempt topreserve biodiversity on the landsthat we own.

For example, we have operatedhydroelectric projects on the LittleTennessee River in the United Statesfor more than 80 years. During thattime, the 9,915-hectare (24,500-acre)watershed has been under our man-agement control. During the processto relicense the four hydroelectricdams in the system in 2004, theNature Conservancy noted that thiswatershed area adjacent to the GreatSmoky Mountains National Park wasone of the last remaining areas in theeastern United States with the naturallevel of biodiversity intact. Thisachievement was due to limited devel-opment in the protected land (seecase study on page 34).

We own other large tracts of landthroughout the world (see chart onpage 34). We also have large mining

leases in Suriname, Western Australia,and Jamaica. In all cases, we managethese land areas with the aim of pre-serving the biodiversity and maintain-ing sustainable ecosystems. In addi-tion, we avoid the use of sensitiveareas, such as mangroves and otherwetlands, and are careful to addressissues like soil quality, groundwaterprotection, stream flow, and waterquality in all of the areas where weoperate, mine, or plan to mine.

Total Process Water Use by Region (millions of cubic meters)

Please see endnote on page 43 for an explanation on data changes from 2003 reporting.

Asia Pacific Europe North America South America Total

2000 19.5 21.1 69.5 6.5 116.6 2001 16.4 21.8 65.5 6.0 109.72002 21.7 21.9 61.7 6.0 111.32003 17.7 20.3 61.1 4.7 103.82004 18.7 19.6 55.9 4.4 98.6

Total Process Water Use(millions of cubic meters)

2001

2002

2000 116.6

109.7

111.3

2003 103.8

0 40

2004

80 120

98.6

20 60 100

Please see endnote on page 43 for an explanation on data changes from 2003 reporting.

Relicensing Effort PreservesPristine Land

With the October 2004 signing of his-toric U.S. land-swap legislation, Alcoa’sfour hydroelectric dams in Tennesseeand North Carolina received a 40-yearlicensing renewal, and more than 4,050hectares (10,000 acres) of land adja-cent to the Great Smoky MountainsNational Park will be preserved.

The land swap legislation—developed inconsultation with more than 20 govern-mental and non-governmental groups—transfers 40 hectares (100 acres) offlooded land within the park in exchangefor 75 hectares (186 acres) of biologicallysensitive land that Alcoa currently owns.

Alcoa will also grant a permanent ease-ment on 2,425 hectares (6,000 acres) ofland to the Tennessee Nature Conservancy,which will have the option to buy the land.In addition, Alcoa will grant a 40-year tem-porary easement on 1,620 more hectares(4,000 acres) to the conservancy.

“This is a textbook example of how amajor American company can work withcommunities and conservation organiza-tions to help Americans keep a high stan-dard of living as well as to conserve theenvironment,” said U.S. Senator LamarAlexander while introducing the legislationon the U.S. Senate floor. “Once approved,I expect it to become a model for many

other companies, communities, andconservation groups.”

Adds Don Barger, southeast regionaldirector for the National ParksConservation Association, “Alcoa hasbeen an excellent steward of this landfor decades. Once we started negotiat-ing the details of the settlement, every-one in the room—especially Alcoa’srepresentatives—were very concernedabout real, long-term protection for theland. To me, that’s responsible corpo-rate behavior.”

The four dams provide power to Alcoa’sTennessee plants, and the companyemploys 2,000 people in the area withan economic impact of US$377 million.

nected by haul roads or conveyors.We work successfully to prevent theisolation of wildlife and the disrup-tion of stream flows. We also main-tain vegetation cover and the qualityand quantity of groundwater.

Large water storage or residue dis-posal lakes that are used at ourrefineries are attractive to migratingbirds.

We control production operationsthat may affect biodiversity throughair emissions of materials like fluo-ride in order to protect vegetationand grazing animals in a smelter’svicinity. We have sampling, monitor-ing, and emission control programsin place at all major sources of theseemissions to ensure that the impactson the environment are acceptable.

Alcoa facilities use water fromstreams, lakes, and catchments aswell as groundwater. This water usecan affect biodiversity, as can the dis-charge of wastewater from ourprocesses. These situations are moni-tored and managed to preserve biodi-versity.

Our use of hydroelectric facilities togenerate power can also have effectson biodiversity. These effects can bepositive when the reservoirs andwater releases are properly managed.We have recently completed detailedstudies of the effects of hydroelectricprojects in the southeastern part ofthe United States and are committedto managing and operating all hydrofacilities to minimize impacts on bio-diversity.

In the past, products such as detach-able aluminum pull tabs on beveragecans and certain types of plastic packaging materials, when improper-ly discarded, could affect wildlife

34

Impacts on BiodiversityAlcoa operations can affect biodiver-sity in several ways.

Our mining activities, although usu-ally limited to relatively small pitswhere bauxite exists, can affect aregion because the pits must be con-

Major Alcoa Land Tracts

Location Hectares

AustraliaWestern Australia 26,084Victoria 1,185BrazilMinas Gerais 600Maranhão 5,300Pará 600

CaribbeanEastern and Central Suriname 4,550

Jamaica 3,154

United StatesCentral Texas 11,500

South Central Texas 1,400

Southern Indiana 3,440

Tennessee/Western North Carolina 9,600

Central North Carolina 15,355

Central South Carolina 2,000

Northern Maryland 871

Northern New York 780

Southern US (Georgia and Kentucky) 2,120

One hectare equals approximately 2.5 acres.

EnvironmentalPerformance Indicators

35

and certain marine species. However,the redesign of these products hassignificantly reduced or eliminatedconcerns about such impacts.

Mining Reclamation ProcessIn 2004, we updated our bauxitemine rehabilitation standard, thedocument that describes the require-ments for mine operation and mineclosure for all Alcoa mines. Thisupdate reflects efforts to clarify thestandard, increase alignment withAlcoa’s management systems andpriorities, and strengthen communi-cation and consultation with stake-holders.

Where relatively extensive opera-tions, such as bauxite mining, arecarried out in natural habitats, reha-

bilitation of the disturbed landshould, in most circumstances, favorthe return of the pre-existing vegeta-tion and fauna communities. Suchrehabilitation should aim to re-estab-lish the broadest practicable geneticbase using local genetic material andprovenances wherever possible. Forexample, if the local stakeholdersrequest that road access be main-tained or that rehabilitation pro-grams be designed to increase wateryield to local reservoirs, efforts willbe made to accommodate thoserequests. In Jamaica, the reclaimedlands are designed to enhance theopportunities for farmers to use theland for crops and livestock (see casestudy below).

Because biodiversity preservation is amajor focus of the rehabilitationprocess, it is always a major compo-

nent of any future land-use decisionand rehabilitation plan. To deter-mine the biodiversity of our rehabili-tated land, we routinely monitor thenumber of trees per hectare, thegrowth rate, the understory densityand diversity, seed production rate,litter density, and other parametersto determine the health of the vege-tation. We also conduct periodicbird, mammal, and insect counts forimportant species, such as spiders(predators), ants (seed dispersalagents), and springtails and mites(active in leaf breakdown and nutri-ent recycling). In addition, we con-duct extensive studies on surfacewater volumes and quality and ongroundwater levels and quality.

Goat Rearing on Rehabilitated Land ProvidesAlternative Income

Jamalco (Alcoa’s Jamaican opera-tions), the Jamaica Bauxite Institute,and the Inter-American Institute forCooperation on Agriculture are collab-orating on a five-year, US$3.3 milliongoat development project on land thatJamalco has rehabilitated after miningat Mocho in Clarendon.

The project’s aim is to promote agricul-ture as an avenue for sustainabledevelopment and build the skillsrequired for creating alternative incomefor residents in Mocho since Jamalco

concluded its mining operations in thearea in November 2003.

Goats are an important source of meatin Jamaica, and local demand outstripssupply. Jamaica currently imports about4,500 tons of goat meat—worth aboutUS$4 million—every year.

Under the goat project, farmers arelearning about advanced animal hus-bandry practices and herd rotation. In aneffort to ensure continuity, the knowledgegained is also being transferred to thewider community through the highschools, where students are being intro-duced to modern animal husbandry atan early age.

Started in 2001, the Mocho goat projectconsisted of 11 farmers, 154 goats, and15 hectares (37 acres) of rehabilitatedland in 2004. Plans call for an additional34 farmers by the end of 2005, when theproject will be transferred to the commu-nity to be operated as a cooperative tohelp residents maintain its viability.

“The project has benefited the familiesthrough a steady stream of incomefrom selling fresh goat meat and milk,which many people now want,” saidfarmer Isabella Scott. “We can alsomake cheese and use the leather forcrafts and drums and tambourines.”

36

EMISSIONS, EFFLUENTS,AND WASTEThe Alcoa Business System recognizesthat all wastes are costs. We arefocused on waste reduction as a wayto improve our processes, reducecosts, and reduce our environmentaleffects.

Over the last 20 years, Alcoa loca-tions have made significant progress.Our fluoride emissions continue tobe reduced each year. Our emissionsof sulfur dioxide, volatile organiccompounds (VOCs), and oxides ofnitrogen continue to fall as plannedunder our 2020 strategy. We havereduced the volume of waste sent tolandfills by more than half since2000 and will continue to work tomake further gains in this area. Ouruse of water has not been reduced asrapidly as we had planned, and addi-tional efforts to address this criticalresource will be necessary.

For a detailed discussion on ourefforts to reduce greenhouse gasemissions, please see the climatechange section on page four of thisreport.

7,318

2001

2002

2003 1,221824

7,002

■ Area Disturbed (annual)■ Area Rehabilitated (annual) Open Mine Area (cumulative)

2000 9951,172

7,626

974834

1,310

2,0000 10,0006,0004,000 8,000

8617,177

Mining Land Disturbed/Land Rehabilitated

(hectares)

0 1,200 2,000

2004 1,0711,026

400 1,600800

6,960

Area disturbed means annual land used in each reported year for mining or for mining infrastructure (roads, shops, crushing equipment, conveyors). Area rehabilitated means annual land returned to nature or to productive use (such as farming) after mining in each reported year. Open mine area is the cumulative area of land that has not been rehabilitated (including active mines and land used for mining infrastructure). One hectare equals approximately 2.5 acres.

South American numbers for 2003 exclude rehabilitation at the Paranam area, where current mining operations are run by BHPBilliton. South American data reported for other years have remained unchanged and include the Paranam area.

Jamaican data include areas from the Breadnut Valley and Harmon Valley mines. Harmon Valley mine is a joint venture that is not operated by Jamalco.

The increase in bauxite production in Alcoa mines has resulted in the increase in the amount of land disturbed on an annual basis. We expect the area rehabilitated to equal the area disturbed when averaged over time.

Open Mine Area (hectares)

Cumulative figures. One hectare equals approximately 2.5 acres.

Asia Pacific Europe/Africa North America South America Total

2000 2,870 1,084 1,179 2,493 7,6262001 2,489 1,192 1,031 2,465 7,1772002 2,404 1,359 1,077 2,478 7,3182003 2,549 1,564 955 1,935 7,0022004 2,643 1,661 803 1,853 6,960

Area Disturbed for Mining (hectares)

Annual figures. One hectare equals approximately 2.5 acres.

Asia Pacific Europe/Africa North America South America Total

2000 598 109 205 83 9952001 548 108 152 53 8612002 527 178 185 85 9742003 641 248 243 89 1,2212004 585 97 283 106 1,071

Area Rehabilitated (hectares)

Annual figures. One hectare equals approximately 2.5 acres. The high levels of rehabilitation in Asia Pacific in 2000 and 2001 resulted from the closure and full rehabilitation of all the infrastructure associated with the Jarradale mine in Western Australia—Alcoa’s first bauxite mine in that region. The land has now been returned to the government, fully rehabilitated.

Asia Pacific Europe/Africa North America South America Total

2000 704 0 410 58 1,1722001 929 0 301 80 1,3102002 612 11 138 73 8342003 431 43 236 113 8242004 490 90 286 160 1,026

EnvironmentalPerformance Indicators

37

Ozone-depleting SubstancesWe have eliminated ozone-depletingsubstances from process operations.In newly acquired facilities, elimina-tion of these substances is a high pri-ority. We do continue to use halongas as a fire suppressant in 70 sensi-tive locations throughout the world,and these systems will continue to bephased out. There was one 62-kilo-gram (140-pound) release from ahalon system at an Alcoa location in2002 and a 14.7-kilogram (32.4-pound) release in 2004.

We are currently replacing somehalon systems with FM 2000, whichis not an ozone-depleting substancebut does have a high global-warmingpotential. We continue to search forother substitutes that will addressthat concern as well.

Reducing Stormwater Volume,Contamination ThroughNatural Systems

Through two innovative techniques thatuse nature to reduce and treat stormwa-ter runoff, Alcoa’s Mt. Holly smeltingfacility in South Carolina (USA) has thepotential to realize a 50% reduction instormwater discharge volume and signif-icant decreases in the residual runoff’scontaminants—at a cost that is about60% less to construct and up to 90%less to operate than conventional end-of-pipe treatment systems.

In response to Alcoa’s 2020 frameworkfor sustainability, Mt. Holly and scien-tists from Alcoa Technical Centerdesigned and installed pilot engineered

natural systems to reduce the costs, energy consumption, and environmentaleffects of wastewater discharges in theface of increasingly stringent discharge limitations. The pilot systems include vegetated soil profiles and constructedtreatment wetlands.

One pilot vegetated filter strip and soil pro-file, consisting of buffalo grass planted direct-ly on high clay content soils, was constructedbetween two potline buildings. The facilityalso constructed another strip that replacedthe top 30 centimeters (one foot) of clay withmore loamy topsoil. Both are being evaluat-ed to determine the reduction of runoff vol-ume and contaminant transport from the

building site, with a significant reductionin runoff already being experienced.During Hurricane Charley in August2004, for example, stormwater runofffrom the vegetated areas was 95% lessthan the runoff from non-vegetated areas.

The constructed treatment wetland con-sists of two separate areas—one cellbiologically stabilizes metal contami-nants, and the other cell adsorbs fluo-ride. Preliminary results show residualrunoff with a 90% reduction in alu-minum, a more than 95% decrease inzinc, and a 50% reduction in fluoride.

The pilot findings are being applied toAlcoa’s new smelter in Iceland, whichwill be a zero process-water dischargeplant and will have significantly reducedstormwater runoff.

Direct Greenhouse Gas Emissions1 (million metric tons of CO2 equivalents—CO2, e)

1Direct GHG emissions are the emissions from the facilities where Alcoa has at least a 50% ownership and/or management control.

Please see endnote on page 43 for an explanation on data changes from 2003 reporting.

Direct CO2 PFCs SF6 Total

1990 31.3 17.0 2.2 50.52000 32.7 7.4 1.1 41.22001 32.5 4.2 0.7 37.42002 32.3 4.6 0.0 36.92003 33.6 4.0 0.0 37.62004 34.1 3.5 0.0 37.6

Indirect Greenhouse Gas Emissions Associated with Purchased Electricity(million metric tons of CO2 )

Indirect CO2 data were affected by using updated local emissions factors for purchased electricity in accordance with the WRI/WBCSD GHG Protocol. With regards to purchased electricity, as better data become available, indirect emissions totals are refreshed. The percent of energy use allocated to grid, compared to the 2003 report, dropped significantly due to the result of better data becoming available.

Indirect CO2

1990 19.22000 20.7

2001 21.9

2002 19.7

2003 22.0

2004 22.1

Vegetated filter strip

SO2 Emissions by Region (thousands of metric tons)

1Alcoa operates two large coal-fired power plants in the United States. The increase in SO2 in North America in 2003 and 2004 resulted from increased utilization of power plants owned by Alcoa. Please see endnote on page 43 for an explanation on data changes from 2003 reporting.

Asia Pacific Europe North America1 South America Total

2000 50.7 18.7 226.2 13.4 309.22001 44.5 19.6 210.2 12.2 286.52002 50.2 21.0 192.6 12.9 276.72003 48.1 15.5 211.9 13.6 289.12004 50.5 13.4 213.2 14.3 291.4

2003 289.1

SO2 Emissions(thousands of metric tons)

2001

2002

2000 309.2

286.5

276.7

0 100

2004

200 300 400

291.4

Please see endnote on page 43 for an explanation on data changes from 2003 reporting.

38

Switch to Biodiesel FuelsEnvironmental Improvements

Heavy industry requires heavy equip-ment, and two U.S. Alcoa locationshave switched their mobile equipmentfleets to a soy-based biodiesel fuel toreduce emissions and improve thework environment.

Recognizing that eliminating dieselequipment wasn’t feasible because ofthe limited capacity of alternative tech-nology, Alcoa Davenport Works in Iowabegan evaluating the use of B20, a20% blend of soy-based biodiesel andlow-sulfur diesel, in 2001. This blendcan be used in new and older dieselengines with no engine modificationsand no noticeable impact on the

engine’s output power. The biodiesel alsoprovides better lubrication, and the sol-vent characteristics of the soy oil result inlonger engine life, a cleaner fuel system,and reduced engine noise.

Results of the evaluation indicated that theambient concentration of diesel exhaustparticulate in high traffic areas decreasedby 80%, and tailpipe emissions werereduced by 44%. Other emissions andtheir respective reductions were: unburnedhydrocarbons (37%), sulfur dioxide (20%),carbon dioxide (10%), and carbon monox-ide (20%). In addition, the objectionableodor of diesel exhaust changed to the odor

of French fries. Davenport switchedfrom diesel to biodiesel for all poweredequipment in 2002.

Davenport’s experience with B20 cas-caded to Alcoa Tennessee Operations,which began evaluating the fuel andworking with engine manufacturers toensure equipment reliability, perform-ance, and warranties would not benegatively impacted. Full conversionof the entire Tennessee fleet began inNovember 2004.

In addition to emission reductions andworkplace improvements, the use ofbiodiesel reduces dependence on oiland provides agricultural-based employ-ment since the fuel is manufacturedfrom soybeans—a renewable source.

Please see endnote on page 43 for an explanation on data changes from 2003 reporting.

NOx Emissions by Region (thousands of metric tons)

Asia Pacific Europe North America South America Total

2000 9.8 2.0 51.7 2.2 65.72001 9.3 2.1 44.4 2.2 58.02002 8.9 2.2 38.8 2.2 52.12003 8.9 2.3 40.2 2.2 53.62004 9.5 2.5 37.1 2.2 51.3

NOx Emissions(thousands of metric tons)

2001

2002

2000 65.7

58.0

52.1

2003 53.6

0 20

2004

40 60 80

51.3

Please see endnote on page 43 for an explanation on data changes from 2003 reporting.

Refueling with B20 soy-based biodiesel

EnvironmentalPerformance Indicators

39

2002

2003

2001

13.2

VOC Emissions(thousands of metric tons)

2000 18.7

15.8

15.7

0 5

2004

10 15 20

11.6

Please see endnote on page 43 for an explanation on data changes from 2003 reporting.

VOC Emissions by Region (thousands of metric tons)

Please see endnote on page 43 for an explanation on data changes from 2003 reporting.

Asia Pacific Europe North America South America Total

2000 1.6 2.0 14.8 0.3 18.72001 1.4 1.9 12.1 0.4 15.82002 1.5 1.8 12.1 0.3 15.72003 1.3 1.9 9.8 0.2 13.22004 1.5 1.7 8.2 0.2 11.6

The mercury emissions from Alcoa refineries are a function of the volume of bauxite processed. The changes in emissions in 2004 reflect the increased production at our Suralco refinery in Suriname. Please see endnote on page 43 for an explanation on data changes from 2003 reporting.

Mercury Emissions by Region (thousands of kilograms)

Asia Pacific Europe North America South America Total

2000 1.01 0.38 2.59 0.37 4.352001 1.06 0.44 1.39 0.46 3.352002 1.00 0.26 1.46 0.45 3.182003 1.02 0.45 1.54 0.48 3.502004 1.02 0.46 2.22 0.46 4.16

3.35

2002

2003

2001

3.50

Mercury Emissions(thousands of kilograms)

2000 4.35

3.18

0 1

2004

2 3 5

4.16

4

The mercury emissions from Alcoa refineries are a function of the volume of bauxite processed. The changes in emissions in 2004 reflect the increased production at our Suralco refinery in Suriname. Please see endnote on page 43 for an explanation on data changes from 2003 reporting.

2002

2003

2001

0.84

Fluoride Emissions(kilograms per metric ton of aluminum produced)

2000 0.95

0.92

0.89

0 0.2

2004

0.4 0.6 0.8 1.0

0.83

Total Wastes Generated(millions of metric tons)

2001

2002

2000 1.76

1.91

1.82

2003 1.64

0 0.5

2004

2.5

1.49

1.0 1.5 2.0

Please see endnote on page 43 for an explanation on data changes from 2003 reporting.

1.22

2002

2003

2001

1.31

Bauxite Residue(tons per ton of alumina produced)

2000 1.25

1.28

0 0.5

2004

1.0 2.0

1.27

1.5

Spent Pot Lining (kilograms per metric ton of aluminum produced)

2001

2002

2000 20.67

21.85

23.09

2003 20.801

0 15105

2004

20 25

21.60

1Estimate

Alcoa’s cell life continues to increase, resulting in fewer cell failures and fewer cells that need the lining removed and replaced. This pollution prevention effort reduces operating costs and will result in less spent pot lining for disposal. However, since the proportion of Pechiney-design cells has increased through the acquisition of a number of plants that use this technology, the actual weight of SPL continued to increase even as the number of cell failures decreased. (Pechiney cells use more insulation than Alcoa-designed cells.) This trend has reversed since the proportion of heavily insulated cells in the Alcoa system has not increased since 2000. Alcoa’s efforts to extend cell life have been very successful and are expected to continue to result in significant improvements in cell life and reductions in the amount of SPL that will be generated. For example, Alcoa locations experienced 1,548 cell lining failures in 2002. In 2003, the number of failures was reduced to 1,463. In 2004, they dropped to 1,078.

Spent Pot Lining Recycled/Reused(percent)

2003 27

2004 25

0 20 40 60 80 100

Total Wastes Landfilled(thousands of metric tons)

2001

2002

2000 857.5

540.6

527.4

2003 474.4

0 750500250

2004

1,000

368.8

Does not include bauxite residue. Please see endnote on page 43 for an explanation on data changes from 2003 reporting.

40

Dynamic System ReducesRiver Fluoride Levels

Using an innovative technique calleddynamic rainwater management,Alcoa’s Deschambault smelter inCanada is synchronizing the release ofexcess stored storm and melt water—which contains fluoride—with the natu-ral flow of Belle-Iles River to protectaquatic life. This is the first use of sucha system in Canada and was designedand piloted in cooperation with theQuebec Ministry of the Environment.

“This project is a good example of howinformation sharing, cooperation, andparticipation lead to good business andbetter environmental management,”

said Gerard Croteau, industrial ecologyadviser for the Ministry.

Deschambault uses treated rainwaterand snowmelt water in plant processes,and often the amount collected exceedsplant needs. During periods of heavyrain, it was impossible to manage waterdischarge in sync with the natural rhythmof the river. When the river was runninglow, discharges could cause spikes in fluoride concentration and possibly jeop-ardize aquatic life. To get discharge con-centrations within set limits, the smelterrented expensive treatment equipment.

With the new rainwater managementsystem, Deschambault strives to main-tain the river’s fluoride concentrationsbelow 0.2 parts-per-million over a four-day average. Computerized analysis ofthe fluoride in the river, the flow of theriver, and the fluoride in the rainwaterstorage basin allows the smelter toautomatically adjust the discharge flowso that the river’s fluoride concentra-tion remains under the water qualitycriteria needed for the long-term pro-tection of aquatic life in this small river.

The new system also eliminated theneed for rental equipment that couldcost US$100,000 per year and helpsDeschambault document that it ismeeting all water quality objectives setfor the plant by the Ministry.

Does not include bauxite residue. The high landfilled waste in Asia Pacific in 2003 and 2004 resulted from several large construction projects at two Alcoa refineries in Australia that produced demolition debris (mainly concrete) that was landfilled. Please see endnote on page 43 for an explanation on data changes from 2003 reporting.

Total Wastes Landfilled by Region (thousands of metric tons)

Asia Pacific Europe North America South America Total

2000 39.2 128.3 665.3 24.7 857.52001 46.8 82.7 385.4 25.7 540.62002 24.2 83.1 394.3 25.8 527.42003 31.1 75.3 349.4 18.6 474.42004 44.1 59.5 245.2 20.0 368.8

Belle-Iles River

EnvironmentalPerformance Indicators

41

Discharges to WaterAlcoa discharges wastewater frommany plants throughout the world.We continue to improve the qualityof our wastewater and are striving toreduce the volume of our discharges.Our long-term goal is to reach zerodischarge of wastewater by 2015. Insome refineries, like those in WesternAustralia and Jamaica, we haveachieved this goal.

Recycling Aluminum is one of the few materialsused in consumer products that canbe economically recycled withoutlocal, regional, or national subsidies.For example, recycling rates for alu-minum beverage cans exceed 80% inmany countries, including Brazil,Switzerland, Japan, and Sweden. Inthe United States, the aluminum canrecycling rate has been as high as66%, but now stands near 50%. Ofthe 100 billion aluminum cans soldeach year in the United States,approximately 50 billion are collectedand remelted to make new cans.Similarly, aluminum in automobiles,buildings, and electrical systems arerecycled at rates near 90%.

Since aluminum can be recycled withless energy than any other metal, it’s a

“manufactured resource.” Once thealuminum is separated from theoxide in the bauxite, it can be usedover and over again by us and byfuture generations. The current“standing inventory” of this manu-factured resource is about 500 mil-lions tons of aluminum in use andavailable for future recycling. Thisrepresents about 70% of all the alu-minum that has ever been produced.The International AluminiumInstitute estimated that more than 12million tons of this standing invento-ry is recycled every year.

We currently operate one of thelargest used beverage can recyclingfacilities in the world at our plantnear Knoxville, Tennessee (USA). Allof the recycled metal from the cans isreturned directly to the can sheetmanufactured at the adjacent rollingmill and is converted again to bever-age cans. We operate similar butsmaller facilities in other countries.

Caustic Soda Waste Becomes Useful

To reduce costs and make progresstoward waste reduction goals, Alcoafacilities are exploring alternative usesand processes for caustic soda—anexpensive raw material used to cleanaluminum extrusion dies that is also asignificant hazardous waste.

Alcoa’s Tubarão extrusion plant inBrazil previously shipped its annual1,000 cubic meters (1,308 cubic yards)of spent soda to another Alcoa facilityfor treatment. In cooperation with alocal coal mining company, Tubarãoexplored using the waste to neutralizeacid mine drainage water. Laboratory

and field tests showed that one cubicmeter (1.3 cubic yards) of caustic sodawas capable of neutralizing 1,300 cubicmeters (1,700 cubic yards) of drainage.The soda also precipitated several dis-solved metals.

Following government approval of theprocess, the mine began introducingcaustic soda into its stabilization lake.Once the acid mine drainage reaches aneutral pH of 6 to 7, the water is safelyreleased to the river. Because the miningcompany pays the shipping costs for the

caustic soda, Tubarão savesUS$50,000 in annual transportationcosts.

In Spain, Alcoa’s Noblejas extrusionplant reduced the amount of causticsoda waste it produces by 50%between 2001 and 2004 by retainingsome aluminum in the dies and clean-ing them when required to maintainquality instead of routinely after everyuse. In addition to reduced causticsoda use, other advantages from thisprocess change include reducedergonomic risks because employeesare handling the dies less, lower con-sumption of both water and electricity,and reduced employee exposure tocaustic soda.

Total Wastes Sold or Recycled(thousands of metric tons)

2001

2002

2000 888

1,029

1,064

2003 1,259

0 1,000500

2004

1,500

1,097

Please see endnote on page 43 for an explanation on data changes from 2003 reporting.

PRODUCTS AND SERVICES

Significant EnvironmentalImpacts of Principal Productsand ServicesAlcoa’s products are used in themanufacture of transportation, con-struction, packaging, and consumergoods. The aluminum and plasticmaterial we manufacture can befound in almost every market as wellas in typical homes, automobiles,trucks, trains, and businesses.

Packaging materials that use alu-minum provide improved food pro-tection, reduce spoilage and waste,eliminate the need for refrigerationin some cases (aseptic packaging formilk and other products), and pro-vide convenient and attractive pack-ages to the customer. Aluminum bev-erage cans are the most recycledpackage in the world. Many of themore complex packages that consistof multiple layers of aluminum andother materials are more difficult torecycle, but Alcoa has entered into a

partnership with Tetra-Pak in Brazilto operate a large laminated materi-al recovery and recycling system toraise the recycling rate for thesetypes of packages.

Aluminum used in transportationapplications pays for itself in gaso-line savings and reduces greenhousegas emissions to the atmosphere.The aluminum content of the aver-age car produced in the worldincreases each year, and aluminumwill soon be the second most-usedmaterial after steel. (Aluminum willovertake iron within two years, asthe use of that heavy material isreduced and aluminum usageincreases.) Studies have shown thatbecause of the unique properties ofaluminum, including lightness, stiff-ness, and formability, aluminum-intensive cars can be safer, moreresponsive, and more fuel efficientthan cars without significantamounts of aluminum.

In homes and buildings, aluminumoffers the opportunity for productsthat are longer lived, easier to main-tain, and easily recycled. Recentstudies in both the United Statesand Europe have shown that thealuminum used in construction

applications is recycled with veryhigh efficiency when the building isdemolished—approaching 95% ofthe metal in the structures.

ENVIRONMENTALCOMPLIANCEIn 1999, Alcoa established a compre-hensive environmental complianceprocess and formed the CorporateEnvironmental Compliance Group toassure that all environmental compli-ance issues received the appropriatelevel of oversight. The group assistslocations in defining complianceissues and assures aggressive correc-tive actions are in place and complet-ed for any identified environmentalcompliance issue.

In early 2001, Alcoa adopted a goal of achieving 100% compliancewith all environmental laws andregulations by the end of 2004. The Corporate EnvironmentalCompliance Group provided stew-ardship to Alcoa’s business unitsand locations in that effort throughthe development and implementa-tion of compliance-focused manage-ment systems to better assure sus-tainable compliance.

We require all Alcoa locations tooperate in compliance with all appli-cable environmental laws and regu-lations. Excellent progress has beenmade, with more than 60% of Alcoalocations achieving the goal in 2004.The percentage increases to 71% ifyou include those locations that onlyreported one incident1 in 2004. The

42

1990 1995 2000 2001 2002 2003

Aluminum Can Recycling Rate (percent)

Western EuropeUnited KingdomUnited StatesAustraliaBrazil

Aluminum industry estimates; 2004 data, 2003 Australian data, and 1990 Brazilian data not available. 2003 Western Europe number takes into account uncertainties of some figures. Australian data from Aluminum Can Group.

0

20

40

60

80

100

1Incident data reported in this year’s report can vary, to some degree, from data reported in prior years. Alcoa’s reporting protocols allow locations to back report incidents that may have been missed or to delete incidents that have been incorrectly reported for prior years. This can result in the number of incidents and the environmental incident rate to increase or decrease for prior years.

2Spills over 2,000 liters are classified as major incidents in the Alcoa Environmental Incident Management System. The requirements to report major environmental incidents began in 2002, the first year the data were available.

3The environmental incident rate is the total number of reported incidents divided by the number of reporting Alcoa locations. It should be noted that the total number of incidents reported in 2004 was actually 7% lower from that reported in 2003. The increase in the rate for 2004 was negatively impacted by an 8% reduction in reporting locations from 2003 to 2004 as a result of divestitures and/or plant closures in 2004.

Alcoa requires any spill of oils or other liquids in excess of 20 liters to be reported internally as an incident—whether or not they are contained within our facilities, and whether or not they are required to be reported to external agencies. The environmental incident rate includes all categories of incidents reported into the Alcoa Environmental Incident Management System.

Environmental Incident Rate

Spills Over Spills Over Environmental Incident Rate 20 Liters1 2,000 Liters1, 2 per Location per Year2, 3

2000 1,038 Not available 9.32001 1,146 Not available 8.1

2002 1,219 97 8.1

2003 969 51 7.9

2004 969 25 8.0

43

EnvironmentalPerformance Indicators

process will continue until 100%compliance is the norm, and it will beextended to include full compliancewith all internally developed stan-dards and requirements. The ultimategoal is to have zero environmentalincidents (including spills, releases,complaints from neighbors, and mal-functions, even if allowed by locallaws) by 2015 or earlier.

CAPITAL EXPENDITURES Capital Expenditures ProcessWe dedicate a significant portion ofour capital expenditures to addressenvironmental, health, and safetyissues at operating locations. We usea number of processes, includingtechnology teams, the EHS Requestfor Authorization (RfA) ReviewTeam, and technology managementreview boards, to ensure that tech-nology improvements are sharedwidely throughout Alcoa and thatlearnings from technology improve-ments are quickly implemented else-where.

For example, the EHS RfA ReviewTeam meets monthly to discuss allprojects with environmental, health,and safety implications and mustapprove the projects before they canbe funded. This team evaluates theneeds, the proposed solutions, andthe long-term implications of theprojects and the technologies/prac-tices proposed. Large-scale projects,such as new projects/plants and sig-nificantly expanded plants, also musthave early involvement teams estab-lished to address sustainability issues,stakeholder interactions, environmen-tal impact assessment studies, andcommunications.

Endnote

Alcoa’s Environmental Metrics System isa dynamic reporting tool that allowslocations to update their data as morecomplete and accurate informationbecomes available. Modifications to dataprior to 2004 reflect an improvement indata quality as locations revise their datameasurement techniques and guidelinesfor reporting, thus eliminating the needfor estimates.

Environmental Capital Expenditures(millions of US dollars)

2001

2002

2000 96

80

115

96

80

2003 37

0 8040 6020

2004

100 120

70

Capital expenditures for environmental purposes in the period 2000-2002 reflect the upgrading of environmental standards at facilities of newly acquired companies—Reynolds (2000), Cordant (2001), Ivex (2002), and Fairchild (2002). Concurrently, significant expenditures also occurred as a result of bringing aluminum smelters to new regulatory standards in the United States. Spending in 2003 is reflective of the success in previous years to upgrade acquired locations to Alcoa standards, as well as a greater emphasis on non-capital solutions to environmental issues through the use of the Alcoa Business System, which engages people at the operating level to develop and implement solutions.

1An incident is any unpredicted event withcapacity to harm human health, the environ-ment, or physical property. Some incidents canlead to an imposition of fines and penalties byvarious EHS regulatory bodies.

At Alcoa, we are as conscious aboutthe effect of events and issues occur-ring outside the workplace as we areof those happening inside. Increas-ingly, these social factors can affectour success as a growing global busi-ness. They frequently connect to thehealth of our workforce, our safetyperformance, the skills developmentof our employees, and our ability tolead through our Values and com-munity engagement.

We have talked in previous reportsabout the ongoing need to fine-tunethese social dimensions of sustain-ability and the challenges of measur-ing and reporting them. It’s impor-tant to note that we have made sig-nificant improvements in this area.

Our people are the foundation ofour success throughout the world.Our multiple businesses require awide range of skills, and this createscomplexity in talent developmentthat is partially addressed through anew online learning system we intro-duced in 2004. We are also develop-ing processes and tools to captureour global people metrics. A chal-

job through ergonomics and hearingconservation initiatives, but we arealso increasingly expanding our def-inition of health to include lifeissues that occur outside of work.Changes of activity, like smokingcessation or stress reduction, andearly diagnosis and monitoring ofmedical conditions can often miti-gate problems that impair employeehealth, attendance, and performanceon the job. For these reasons, wepay for preventative screenings inthe United States and have rein-forced our healthy workforce initia-tives. This supports the view thatwhat frequently happens off the jobcan influence the health and well-being of our workforce and thecosts and availability of the health-care services that we provide.

Significant numbers of employeescontinue to be involved in theircommunities outside of workthrough our three employee engage-ment programs. This connection tothe community is a fundamentalexpression of Alcoa’s Values inaction and builds essential social

lenge for 2005 is to work closelywith our business units to focus ongrowth, attract and retain diversetalent, maintain an engaged work-force, and develop the leaders fortoday and our future—both in thecommunity and at work.

In 2004, we dramatically improvedour lost workday rate from analready strong basis. Between 2003and 2004, this rate improved nearly29%. For the first time, we hit mile-stones that we thought unimaginablejust a few years ago. Yet there aredeficiencies as well. We experiencedthree fatalities, an unacceptablerecord given our Values and ourcommitment to workplace safety. We are evaluating our defined proce-dures that could help prevent thesetragedies, and we continue to seektheir root causes.

In the health area, we are focusingnot only on what happens on the

44

Social Performance Indicators

New High School FillsEducational Void in Brazil

With the May 2004 opening of theCentro de Ensino Médio ProfessorMário Marins Meireles High School inSão Luis, Brazil, 845 students nowhave the opportunity to continue theirstudies close to home and at no cost.

Previously, many of these studentseither traveled long distances to attendhigh school or dropped out of schooldue to their inability to pay the trans-portation costs. Without a high schooldegree, many could not enter the localworkforce.

The new US$650,000 school was paidfor by the Alcoa-managed Alumar refin-

ery and smelter in São Luis in conjunctionwith the state government, which isresponsible for the school’s ongoing oper-ation. The construction project employed91 people from the surrounding communi-ty (90% of the project’s workforce), andthe local contractor was required to followAlcoa’s environment, health, and safetystandards.

“I believe that this school will developwork that is as beautiful as the school’sphysical space,” said Priscila Lima, astudent at the school. “It was God’s giftthat Alumar and the state governmentprovided us this great opportunity.”

Alumar also established partnershipswith several local non-governmentalorganizations, including the PublicLibrary Friends Society, to developadditional educational activities withthe school.

Demand for the school is rising, withstudents from other communitiesrequesting the opportunity to attend.School enrollment for 2005 is expectedto reach 1,200, a 42% increase overthe first year’s roster.

45

Social Performance Indicators

established metrics to constantlystrive to create an inclusive environ-ment wherever we operate. Theactive leadership of Alcoa Women’sNetwork has now establishedregional programs, and the emer-gence of the Alcoa African HeritageNetwork shows that Alcoa hasembraced the affinity group model.

Gender Balance In 1999, Alcoa established a five-year rate-of-change goal for improv-ing gender balance within the com-pany’s leadership. We achieved theexecutive level goal. While progresswas made at the senior manager andmanager levels, it did fall short ofour aspiration. We are committed toincreasing the role of women leadersat Alcoa, and we anticipate the workof the Alcoa Women’s Network willhelp us reach the new five-year goalsand metrics that we are establishingwithin each of the Alcoa global busi-ness and resource units to ensurethat this focus is a priority.

capital. This is an area of communi-ty investment that we will continueto nurture wherever Alcoa’s growthtakes us. Employee engagement pro-grams like ACTION and Bravo! helpdemonstrate the leadership roles thatAlcoa employees take around theworld and in our communities.

We continue to invest in our commu-nities through Alcoa Foundation andcommunity-funded grants by Alcoa.Through the foundation’s four areasof excellence—safe and healthy chil-dren and families, conservation andsustainability, global education andworkplace skills, and business andcommunity partnerships—we seekprojects with impact, focus, partner-ship potential, and long-term signifi-cance despite the size of the grant orthe nonprofit organization fulfillingthe work.

In the area of conservation and sus-tainability, we are developing a foun-dation-funded fellowship programthat will support promising leadersin academia and practitioners inapplied research. The initiative willsupport fellows around the worldwho are pursuing interdisciplinarywork on practices, policy, andapplied solutions to enhance sustain-ability. The program will includeevents that bring together leadersfrom across sectors and regions ofthe world. It will foster the develop-ment of networks that will extendthe sharing of knowledge and bestpractices and link Alcoa Foundationwith the next generation of leadersin sustainability and their importantcontributions to society.

WORK ENVIRONMENT

DiversityDiversity and inclusiveness withinour organizational culture are cen-tral to our aspiration of being a val-ues-based and value-creating enter-prise. Our Alcoa Business Systembegins with a fundamental respectfor the contributions of eachemployee, regards individual differ-ences as strengths, and nurturesopportunities to achieve professionaland personal success. We seek toensure that each employee is valuedand that the work climate promotesinclusiveness. All qualified individu-als seeking job opportunities with uswill receive consideration foremployment without regard to race,color, religion, sex, physical impair-ment, sexual orientation, or nationalorigin.

In early 2004, we saw the establish-ment of the Alcoa African HeritageNetwork (AAHN), which is our sec-ond affinity group. The first—AlcoaWomen’s Network—began in 2003and continues to provide the catalystto develop women leaders through-out the company. The mission ofAAHN is to improve Alcoa’s recruit-ment, development, and inclusion ofleaders of African heritage. Thegroup is focusing on networking,career development, retention, andmentoring.

One of the challenges that we face isdetermining the appropriate modelsof diversity within the cultural com-plexity of our global family and thencollecting data to reflect our progresstoward those models. As we haverealigned our businesses globallywithin their market sectors, eachnewly formed business group has

Represents year-over-year measurement.

Alcoa Women in Leadership Positions (percent)

Manager Senior ExecutivesManagers

1999 Actual 9 7 22004 Target 17 12 7.5

2004 Actual 13 10 8

Multicultural Workforce OpensWindows of Opportunity

At Alcoa’s Yennora rolling mill inAustralia, 343 employees representingmore than 40 nationalities work throughlanguage barriers, political differences,and cultural diversity on a daily basis toremain a unified workforce focused ona common goal.

“Being part of such a diverse workforceopens the windows of opportunity forme to understand other cultures andenhances my abilities and experiencesin finding a way to handle different atti-tudes and personalities,” said BenjieLualhati, roll shop coordinator. “It alsoprovides ample expertise to be shared

among the workforce, which in turn con-tinuously improves work processes andethics and leads to changes in people’sattitudes toward others by making themmore tolerant.”

To overcome the inherent challenges insuch a diverse workforce, Yennora spendssignificant time on direct communications.Because the level of written English is bet-ter than oral, most formal messages are inwritten form. All employees also must com-plete an English test as part of the recruit-

ing process and are asked to speak thatlanguage at work as needed.

The facility has developed innovativeways of recognizing employees, includingan open house that featured a multicul-tural theme with a food tasting, flag dis-plays, and ethnic dancing and singing. Inaddition, every employee appointment,not just those for management, receivesan organizational announcement.

“The challenge to get people to open up and express their true feelings andbeliefs is overcome in part by associat-ing with each other at ethnic functionsthat show people their values areimportant to the community and verymuch appreciated,” said Lualhati.

TalentAs we focus on global businessorganizations, organic growth, andmarket sector alignment, the chang-ing complexion of our global work-force offers greater opportunities tostrengthen our talent.

Our global presence allows us toattract a wider talent pool and createinnovative development assignments.A 2004 global reorganization thatconnects our businesses more closelywith their customers affords theopportunity to specifically tie our tal-ent strategy to business growth andcustomer relationships. This creates aclear path for employee development.

Evaluating our core capabilities andour effectiveness in processes that canbe leveraged has been a priority focusand will continue to be in 2005. Thechanging complexion of our globalworkforce offers us opportunities tobetter understand our communitiesand ensure our alignment with thepeople who will eventually join andremain a part of our workforce.

Employee DevelopmentIn 2004, we began a global rolloutof Learning Express, a new learningmanagement system that puts thepower of learning directly into anemployee’s own hands. Through thisself-service online system, anemployee can search Alcoa’s globallearning catalog, select and enroll incourses (web-based, instructor-led,etc.), develop an individual learningplan, ensure monitoring of certifica-tions, assess performance gaps, andmaintain comprehensive records of

existing and acquired skills. At theend of 2004, the system was avail-able to employees in Brazil,Hungary, United Kingdom, andUnited States. We plan comprehen-sive deployment across all remainingregions in 2005.

After a 2002 analysis of our peopledata revealed a potential gap in lead-ership numbers due to retirementsand attrition, we launched a newdesign for leadership development in2003 that is rapidly facilitatingbroad-based global leadership skills.These programs provide distincttraining that is built upon AlcoaValues, supported through demon-stration of skills over nine months,and augmented with executive lead-ership mentors. Additionally, thetraining curriculum incorporates skilldevelopment in areas that ensure ourcommitment to global business mod-els and cultural diversity. More than200 managers and executives havealready completed these customizedlearning programs.

46

Yennora employee Jener Belista

Social Performance Indicators

47

Labor Costs(billions of US dollars)

2003 6.1

2001

2002

2000 5.2

5.7

5.5

0 2 4

2004

6 8

6.2

Includes salaries plus employee expenses for external training, transfer and relocation, expatriate costs, workers' compensation, travel, recognition and rewards, medical expenses, meals, recruitment, transportation, education, work clothes, retiree medical, and other employee-related expenses. Excludes contract and temporary labor and computer- and communications-related expenses.

2000 figure includes six months of labor costs of mid-year acquisition of Reynolds Metals. 2003 figure includes US$345 million in labor costs for Fairchild acquisition. Increase in labor costs per employee due to rising U.S. health care costs and the effects of currency translation. Health care costs from 2003 to 2004 remained flat.

In 2004, we experienced a couplesignificant industrial relations issuesthat had a major effect on our earn-ings. By year’s end, the issues hadbeen resolved.

ABI At our ABI smelter in Quebec,Canada, a strike started in July afterextended negotiations. Within thefirst 10 days of the strike, two out ofthree potlines were completely shutdown. However, ABI had 100salaried employees running the pro-duction of this one potline. Whilethis was not our desirable state ofproduction, there was communityand media support for Alcoa. Therehave been some very positive out-comes from this, including addressingoutstanding issues regarding pensionsand staffing models. In addition, oneof our U.S. locations had additionalcapacity restarted to help supplysome of our customer commitments.

Five Day Notices at U.S. Plants Four of our largest U.S. facilitiesreceived grievance notices from theUnited Steelworkers of America regard-ing the contracting out of services. Theinitial notice was filed with ourTennessee Operations within 12 hoursof the ABI strike, and the three remain-ing notices arrived within weeks. Weactively engaged all locations throughextensive communication with ouremployees, customers, and communi-ties, and we executed contingencyplans for continuous production.

Following the notices, four days ofnegotiations occurred at the Tennesseelocation that ultimately led to furtherdiscussion at the international and corporate levels. The parties met inPittsburgh in October and were able tobring resolution to the grievances.

The Alcoa management team is nowfocused on the company’s 2005reopener, which pertains to a laboragreement that covers about 9,000U.S. production and maintenanceworkers in 15 operating locations.

HEALTH AND SAFETY

Health SummaryAlcoa’s ideal state for health andsafety is zero work-related illnessesand injuries and improved healthand well-being for all employees. To that end, we establish and trackkey metrics that move us incremen-tally toward these goals.

In the area of occupational health,100% of our reporting locations(excluding new acquisitions) identifiedand described their workplace healthhazards (qualitative assessment) by theend of 2003. Quantitative assessment,the second aspect of our comprehen-sive health hazard assessment process,reached 93% in 2004 versus a target

Employee RelationsWhatever the position—from chiefexecutive office to supervisors tooperators on the floor—our belief isthat we are employees of Alcoa firstand, for some of our workforce,members of trade and labor associa-tions as well.

2003 120,000

Number of Employees

2001

2002

2000 142,000

129,000

127,000

0 50,000 100,000

2004

150,000

119,000

Alcoa does not aggregate global data differentiating part-time from full-time employees. As of February 2005, the company has 131,000 employees due to the acquisition of two Russian fabricating facilities from RUSAL.

1Includes Caribbean, Central America, and Latin America.2Includes Middle East and Africa.

Employees by Region

North America South America1 Europe2 Asia Pacific

2000 96,600 11,500 27,400 6,5002001 86,800 8,400 27,700 6,100

2002 83,900 7,800 28,300 7,000

2003 77,700 6,900 27,700 7,700

2004 76,400 6,600 28,500 7,500

48

of 95%. This second step quantifiesthe hazards identified and is adynamic measure of the continuousstate of unknown risks within Alcoalocations. Acquisitions and othernew locations within Alcoa rapidlycomplete these assessments so thatappropriate hazard reduction planscan be developed and initiated.

With respect to chemical overexpo-sures, our approach has been to trackreduction in the number of hazardsthat exceed Alcoa standards fromfixed reference points (baselineyears). This “cycle” approach con-trols for new overexposures identifiedthrough the continuous hazardassessment process and for newacquisitions. For the 2001 year-endcycle (1999 baseline year) and 2003year-end cycle (2002 baseline year),we reached 28% and 33% reduc-tions, respectively, for a total reduc-tion of 61%. This was against a2003 year-end cumulative target of40%. An additional 15% reductionwas achieved during 2004 (from startof 2004 baseline), bringing the total

reduction to 76% against a 2005year-end cumulative target of 60%.

Using the same cycle approach fornoise overexposures, we achieved a12% reduction by year-end 2001(1999 baseline year) and a 14%reduction by year-end 2003 (2002baseline year) in the magnitude ofthe top 10 noise hazards at eachlocation that exceeded Alcoa stan-dards. This progress was against a2003 year-end cumulative target of40%. During 2004, an additional12% reduction was reached from thestart of 2004 baseline, bringing thetotal reduction to 38%. While wehave not quite yet achieved the 40%reduction goal that had been set for

the end of 2003, the additionalprogress in calendar year 2004 rep-resents another 46% improvementover our progress through 2003, andwe are expecting to achieve the 40%goal in 2005.

Our hearing conservation effortshave been strengthened through thedeployment of state-of-the-art test-ing/training technologies, and wecontinue to analyze our hearing lossexperience in order to reduce andultimately eliminate work-related,noise-induced hearing losses. Ourquantitative target focuses on reduc-ing the number of new work-relatedhearing shifts between 2003 (the ref-erence point) and 2005.

The identification and managementof ergonomic risks continue to behigh priorities. Having exceeded our2003 goal of eliminating at least halfof the top 10 ergonomic risks at allAlcoa locations (58% achieved vs.50% target), we set a more ambi-tious 2005 goal. Every location hasnow been challenged to control atleast half of all significant ergonomic

Capturing ErgonomicImprovements ThroughTechnology, Tools, Training

Elimination of ergonomic injuries is anessential component of Alcoa’s globalstrategy for achieving zero work-related injuries, and the current goal isfor locations to control 50% or more oftheir significant ergonomic risks byyear-end 2005.

At Alcoa’s San Ciprián smelter and refin-ery in Spain, an ongoing program thatranges from simple toolbox meetings toadvanced motion capturing technologyreduced ergonomic incidents by 99%between 1992 and 2004 and resulted inno lost workdays due to ergonomicinjuries in 2002, 2003, and 2004.

The facility initiated improvements in theearly 1990s and formalized a written pro-gram in 1999. Significant improvementswere seen, but ergonomic-related injuriescontinued.

Stepping up its efforts, San Ciprián creat-ed an ergonomics laboratory, identifiedits top 10 ergonomic risks, hired a full-time ergonomist, and acquired aUS$70,000 ergonomics movement cap-tor. The latter captures an employee’smovements while he or she is conducting

specific work tasks and then performsa biomechanical analysis. The result-ing data are used to develop workprocess changes. The captor is alsoused to select the best tool for a particular process and can identifyphysical disabilities that may producemusculoskeletal disorders.

“The ergonomic improvements to myjob are important because they facili-tate and improve the work methods,”said Carlos Méndez Trasancos,mechanical maintainer in the carbonplant. “Load handling was one of thebig contributors to ergonomic injuries,but some new tools have made ourwork easier. Through new tools andtraining, we can perform our jobs withthe lowest risk.”

Ergonomics movement captor

Social Performance Indicators

49

risks. A rigorously developedergonomic risk-assessment tool hasbeen created to assist locations inidentifying these risks. During 2004,22% of all significant ergonomicrisks were controlled.

Compared to year-end 2003, a number of additional plant locations

have improved their ergonomic self-assessment scores to good orbetter, bringing the total number ofestablished locations having achieved this rigorous assessmentlevel to 86%.

The availability of occupationalmedicine services at all Alcoa

locations, regardless of size, remainsa cornerstone of our strategy forachieving our ideal state. Throughthe end of 2004, 97% of our loca-tions globally had such programs inplace, and our rate for completingrequired medical evaluations was94% versus a target of 100%.

2004-20052004 baseline

2002-20032002 baseline

1999-20011999 baseline

28

33

15

Cumulative Chemical Number Reduction

(percent)

0 20 40 60 80 100

Indicates reduction in the number of chemical hazards exceeding Alcoa standards by reporting locations.

2004-20052004 baseline

2002-20032002 baseline

1999-20011999 baseline

12

22

10

Cumulative Chemical Magnitude Reduction

(percent)

0 20 40 60 80 100

Indicates reduction in the magnitude of chemical hazards exceeding Alcoa standards by reporting locations.

2004-20052004 baseline

2002-20032002 baseline

1999-20011999 baseline

12

14

12

Cumulative Noise Magnitude Reduction

(percent)

0 20 40 60 80 100

Indicates reduction in the magnitude of the top 10 noise sources by reporting locations.

Locations with a Good or BetterAlcoa Self Assessment Tool Scorein Ergonomics

2002 61

2003 78

0 20 40

2004

8060

86

100

The Alcoa Self Assessment Tool is a type of self-audit that is required to be performed at least once every 18 months by every Alcoa location or administrative process worldwide.

Year 2000 and, to a lesser extent, 2001 information on ergo-relatedness is incomplete due to inconsistent capturing of information in Alcoa’s Incident Management System.

Ergonomic Incidents

Total Number of Percent of TRR Total Lost Number of Percent of LWDRecordable Ergo-related Incidents Workday (LWD) Ergo-related Incidents

(TRR) Incidents TRR Incidents Ergo-related Incidents LWD Incidents Ergo-related

2000 5,081 1,460 29% 367 125 34%2001 4,904 1,560 32% 417 149 36%

2002 2,931 933 32% 212 77 36%

2003 2,497 701 28% 223 60 27%

2004 2,150 590 27% 116 31 27%

Industrial Hygiene Assessments— Quantitative

(percent of assessments completed by reporting locations)

2001

2002

2000 61

75

75

2003 88

0 20 40

2004

8060

93

100

Quantitative refers to workplace health hazards adequately measured.

Industrial Hygiene Assessments— Qualitative

(percent of assessments completed by reporting locations)

2001

2002

2000 85

95

99

2003 100

0 20 40

2004

8060

100

100

Qualitative refers to workplace health hazards identified and described.

50

Healthy Workforce InitiativesThe objective of Alcoa’s healthy work-force initiatives—one of our six majorstrategic health and safety thrusts—isto assure that risks both on and off thejob are understood, and that thisknowledge is used to optimize thehealth and well-being of all employees.

Our initial round of targets began in2001 and focused on establishingemployee assistance program (EAP)services and location-specific healthpromotion activities. Through 2004,93% of established global locationshad EAP services in place and 93%had health promotion activities inplace against targets of 100%. Wealso revised our EAP standard in2004 to establish a minimum set ofexpectations for employee assistance,family support, and counseling to allof our employees worldwide and toassure the availability of resources.

Building on our foundation in EAPand health promotion, all locationswere required to make available annu-

al influenza vaccines to employeeswho desired to receive one beginningin 2004. Despite the vaccine shortagein the United States, 90% of globalreporting locations were able to satis-fy this goal, in part through appropri-ate collaboration and coordinationwith local public health authorities tosteer vaccine to priority individuals.

Smoking cessation was a new objec-tive in 2004, with all locations

required to identify resources forsmoking cessation assistance andadopt no-smoking strategies, includ-ing a declaration that their locationwould be smoke-free no later thanthe end of 2006. By year-end 2004,91% of global reporting locationshad achieved this goal.

Planned initiatives in 2005 willadvance the efforts already under-way, and we will continue ourassessments of local and regionalhealth issues so that appropriatefuture interventions can be tailoredaccordingly. These initiatives rely onthe most efficient combination ofcommunity and company resources.Local workforce, community expec-tations, and cultural relevance dic-tate the specific type and nature ofthe initiatives at any given Alcoalocation. Specific programming isfurther guided by internal efforts tounderstand the root causes ofadverse health that may be amenableto intervention.

Management of Chronic Illnessin the Workplace StandardAlcoa maintains a worldwide healthstandard that enables and supportsemployees living with chronic dis-eases, including life-threatening andtransmittable diseases like HIV/AIDS,to continue to pursue active careers.The employees must be physicallycapable of working, able to performtheir assigned duties in an acceptablemanner, and not presenting a direct

threat to the health and safety ofthemselves or others at work.

Reasonable accommodations to thephysical needs of such personnel aremade on a case-by-case basis and, ata minimum, will meet all applicablelegal requirements. The standardalso addresses issues of reasonableaccommodation, coworker educationand counseling, and confidentiality.

2003 96

Occupational Medicine Programs Established

(percent of reporting locations complying)

2001

2002

2000 69

91

88

0 20 40

2004

8060

97

100

The number of reporting locations reflected in the dataincreased between 2001 and 2002 due to acquisitions.

2003 93

Occupational Medical Evaluations(percent of annual required evaluations completed by reporting locations)

2001

2002

2000 98

94

89

0 20 40

2004

8060

94

100

The number of reporting locations reflected in the dataincreased between 2001 and 2002 due to acquisitions.

Healthy Workforce Initiatives (percent of locations implementing program)

Employee Assistance Health Promotion Influenza Smoking Cessation/Program Activities Vaccines No Smoking Policy

2002 73 75 - -

2003 88 89 - -

2004 93 93 90 91

Social Performance Indicators

51

Health and Safety Capital Expenditures(millions of US dollars)

2001

2002

2000 79

102

112

2003 50

0 20 40

2004

8060 120

63

100

Capital expenditures for health and safety in the period 2000-2002 relate to the upgrading of standards at newly acquired companies—Reynolds (2000), Cordant (2001), Ivex (2002), and Fairchild (2002). Spending in 2003 is reflective of the business condition, success in previous years to upgrade acquired locations to Alcoa standards, as well as a greater emphasis on non-capital solutions to health and safety issues through the use of the Alcoa Business System, which engages people at the operating level to develop and implement solutions.

Helping Employees Get Healthier

Initiated in April 2004 with the distribu-tion of an apple for every employee, ahealthy workforce campaign at Alcoalocations in The Netherlands aims toimprove employee well-being at workand also instill a healthy lifestyle out-side the plant walls.

With an initial internal focus onergonomics for shop floor employees,the campaign includes specific trainingon neck and back issues and the useof tools to prevent ergonomic injuries tothose parts of the body.

The healthy lifestyle component of thecampaign—which features a kangaroomascot named Fred Fit as its brand—uses newsletters, posters, and education-

al sessions to create awareness ontopics ranging from smoking cessationand summer health tips to healthy foodand exercise.

This proactive approach to helpemployees achieve positive, long-termhealth effects is already resulting innoticeable positive outcomes.Employees are using the back andneck information in their work, a groupstopped smoking through laser thera-py, and other employees have comeup with ideas to promote sports andexercise. Although it’s too early to sta-tistically measure the campaign’seffects, the locations are seeing adecrease in absenteeism.

Health and Safety Management SystemOver the years, a comprehensive frame-work for continuous improvementefforts has evolved into what is todayknown as the Alcoa Health and SafetyManagement System. This system isused to proactively manage health andsafety at all Alcoa locations.

Each location has various task, depart-ment, ad hoc, and other committees todevelop and implement health andsafety programs based on the location’sstrategic health and safety plan. Theseleadership groups include a cross-section of personnel from the facility.

Our health and safety management sys-tems include recording and notificationof occupational accidents and diseases.Our internal standards meet, and inmany cases exceed country legislativerequirements. Our practices are consis-tent with the ILO Code of Practice onRecording and Notification of Occupa-tional Accidents and Diseases. Any differences are of a minor nature.

Over the next two years, the AlcoaHealth and Safety Management Systemwill be integrated into the Alcoa EHS

Management System to conform withISO 14001 and OHASA 18001. Thisinitiative will further strengthen ourEHS management initiatives in suchkey areas as roles/responsibilities andaction plans focused on root causeswith aggressive closure timelines.

Safety SummaryIt was another year of continuedimprovement for Alcoa’s global safe-ty performance. For the first time inour history, our global lost workdayrate dropped into single digits per10,000 employees. We ended theyear with just under nine lost work-day injuries per 10,000 people in ourworkforce. We continue to makeprogress toward our goal of zeroinjuries, with 81% of our locationscompleting the year with zero lostworkdays.

Regrettably, we experienced threefatal injuries—two employees andone contractor. We have conductedthorough investigations and evaluat-ed all of the contributing factors.While no clear common causes havesurfaced, we continue to look at allaspects of our complex industrialsystems to identify and eliminateprobable-and highly improbable—causes of fatalities. We have alsodeployed a global communicationprocess to assure that all areinformed of incidents with signifi-cant fatality risk.

9.0

2002

2001

2003 1.69

7.2

Total Recordable Injuries

20002.89

2.55

2.22

8.1

■ Total Recordable■ U.S. Manufacturing

Average

0 2 4 6 8 1

2004 1.67

6.8

2004 industry average not available. Total recordable rate represents the number of injuries and illnesses resulting in days away from work, job transfer or restriction, medical treatment, or other recordables per 100 full-time workers.

2002

2003

2001

1

3 1

Total Fatalities

2000 3 6

1

1

■ Employee■ Contractor

0

2004

2 4 6 8 10

2 1

Training Speaks the Languageof Safety

Along with the U.S. OccupationalSafety and Health Administration(OSHA) and three nonprofit organiza-tions, Alcoa’s packaging facility inAvenel, New Jersey, sponsored andhelped conduct much-needed safetytraining for an underserved segment ofthe working population.

The 10-hour safety training sessionheld in October 2004 targetedHispanic workers, a growing segmentof the U.S. labor force. According tothe U.S. Department of Labor, theseworkers accounted for 14% of all U.S.fatalities in 2003.

Three nonprofit organizations—The Windof the Spirit, American Friends, and LittleSchool and More—advertised the freesafety training event within Avenel’sHispanic community. Topics during thesession, which was conducted inSpanish, included employee rights, elec-trical safety, fall protection, fatality pre-vention, hand power tools, and more. Inaddition to sponsoring the training andproviding 10 employee volunteers, Alcoadonated hard hats, safety glasses, andhearing protection for each of the 64trainees. Alcoa had also sponsored andparticipated in three four-hour sessionsearlier in the year.

“By sponsoring these events andassisting with the training, Alcoa reallywent a long way in helping with our ini-tiative to address this serious issue,”said Patricia Clark, OSHA regionaladministrator for New York, NewJersey, Puerto Rico, and the VirginIslands. “Alcoa is serving as a wonder-ful role model and setting an industryexample of a company that hasembraced the issue of making sureworkers are trained in the languagethey are most comfortable with. Thecompany is going beyond training itsemployees to also train others thatmay not get training through their ownemployers. What we really need areother companies to do the same thing.”

52

HUMAN RIGHTS Alcoa is a global enterprise that doesbusiness in many markets. In order todo so successfully, we rely on allemployees living our Values and supporting Principles. Specifically, ourpeople Value provides support for thefundamental human rights embeddedin our business model and is explicitlyrequired by our statement of humanrights. This statement provides clearlanguage to assist our leaders tounderstand their responsibilities andidentify actions they can take to sup-port human rights across multicultur-al boundaries.

One of the challenges any corpora-tion faces is understanding thediverse cultural and legal environ-ments where it operates and seekingcommon ground to formulate aglobal human rights policy thatembodies the diverse nature of eachregion’s requirements and norms.

We continued to recognize andunderstand human error and its rolein injuries and fatalities. We areusing this information to optimizeour systems, and we have lookedboth internally at our incident expe-rience and externally to other organ-izations and experts to advance ourlearning in this area.

2002

2001

2003

1.7

2.0

0.16

0.18

Lost Workdays

2000

1.8

■ Lost Workdays■ U.S. Manufacturing Average

0.15

0.09

0.12

0 0.5 1.0 1.5 2.0

2004

1.6

2004 industry average not available. Lost workday rate represents the number of injuries and illnesses resulting in one or more days away from work with or without job transfer or restrictions per 100 full-time workers.

Social Performance Indicators

53

We evaluate major human rightsdoctrines, such as the UniversalDeclaration of Human Rights, inlight of our culture and operatingenvironment. While we see no needto adopt any specific doctrine, wereview various ones for commonprinciples and ideas that may beconsidered in the formation of ourposition on human rights.

To help ensure our human rightsstatement is understood and adheredto, Alcoa business leaders around theworld are expected to provide timelyadvice and guidance to employees onethics and compliance concerns. OurValues provide the common frame-work for this advice. They are thepillars of Alcoa’s culture and serve asour universal language—transcendingculture and geography. Our Valuesembody the highest standards of cor-porate behavior in all aspects of busi-ness and in all regions of the world.

We have a global Ethics andCompliance Line (see page 24) toenable employees to express concernsor request advice in their native lan-

guage and anonymously, if theychoose. Every concern and request isaddressed and responded to withoutreprisal. Like the year before, we didnot receive any calls related to humanrights issues in 2004.

Human Rights StatementChildren and Young Workers As a fundamental principle, we donot employ children or support theuse of child labor. We do encouragethe creation of educational, training,or apprenticeship programs tied toformal education for young people.

Freedom of Engagement We believe that people should workbecause they want or need to, notbecause they are forced to do so. Weprohibit the use of prison labor,

forcibly indentured labor, bondedlabor, slavery, or servitude.

Equality of OpportunityWe recognize, respect, and embracethe cultural differences found in theworldwide marketplace. Our work-place is a meritocracy where our goalis to attract, develop, promote, andretain the best people from all cul-tures and segments of the population,based on ability. We have zero toler-ance for discrimination or harassmentof any kind.

CompensationWe ensure that compensation meetsor exceeds the legal minimums andis competitive with industry stan-dards as specified in our global poli-cy. Our compensation philosophy isclearly communicated to employeesand is in full compliance with allapplicable laws.

Freedom of AssociationWe recognize and respect the free-dom of individual Alcoans to join, orrefrain from joining, legally author-ized associations or organizations.

Making the Learning,Communication Connection

For the indigenous peoples living inremote villages in the vast, pristinerainforest that covers most ofSuriname, access to computers madeavailable in part through AlcoaFoundation grants provides an oppor-tunity to connect with a broader world.

Approximately 5% of Suriname’s popu-lation lives in villages scatteredthroughout the country’s undevelopedinterior. Some of these villages havetheir own schools, and students fromsurrounding areas make daily trips—often in boats—to these educationalcenters.

Early on, Alcoa’s Suriname AluminumCompany (Suralco) formed a relationshipwith the Education and CommunicationNetwork (Educon), a non-profitSurinamese foundation that promotesthe integration of computers in everydaylife to increase learning opportunities andencourage communication between dif-ferent sectors of Surinamese society.

Working together, the two organizationsinstalled 52 computers in areas outsidethe capital city of Paramaribo. Moengo,where Suralco has a bauxite miningoperation, received 24 computers.Powaka, an Amerindian village close to

the company’s Paranam alumina refin-ery, received 12 laptops. The projectwas particularly challenging since noreliable electricity or telephone connec-tions were available. Satellite connec-tion and solar panels were installed tosecure reliable service.

Through these computer systems,local village teachers keep in contactwith each other and organize confer-ence calls with colleagues and fellowstudents in the Paramaribo schools.

Future plans include installing comput-ers in the schools of Brokpondo, whereSuralco operates a hydro facility, andat Langatabitjie, which is close toSuralco’s gold and bauxite concession.

Relationships with Indigenous PeopleWithin the framework of our Values,we respect the cultures, customs, andvalues of the people in communitieswhere we operate and take intoaccount their needs, concerns, andaspirations.

SUPPLIER ANDCONTRACTORREQUIREMENTSWe have a comprehensive Ethics andCompliance Program that requiresadherence to our policies and guide-lines, which include environmentaland social responsibilities. Availablein 20 languages, the materials are pro-vided to all employees and long-termcontractors throughout the world.

In 2004, these materials were con-densed to provide a focused Guide toBusiness Conduct (Supplier Guide)that specifically addresses supplier-oriented sections of our business con-duct policies. Our businesses receivedthe Supplier Guide for distribution to

their major suppliers to ensure theirawareness of our requirements forbusiness conduct. The materials arealso available to all current andpotential suppliers via alcoa.com.

We also participated in the develop-ment of the Institute for SupplyManagement’s Principles andStandards of Social Responsibility,which were released in 2004. Theprinciples and standards cover sevenareas of social responsibility—com-munity, diversity, environment, ethics,financial responsibility, human rights,and safety. An internal Alcoa teamdefined our position statements foreach of these areas, and the state-ments were reviewed with our globalprocurement leadership. Finalapproval is expected from companyleadership in early 2005.

54

Once the statements are approved,the following activities are plannedfor the remainder of 2005:

● Conduct a series of internal procure-ment forums to communicate thepositions and obtain feedback fromour procurement professionals.

● Identify areas where we may havegaps related to our positions anddevelop action plans to respond.

● Respond to any gaps and continueto align with our overall sustain-ability framework.

In regard to human rights, all Alcoasupplier decisions are driven byAlcoa’s Business Conduct Policies.We will not knowingly use supplierswho participate in the followingactivities: supplying unsafe productsor services; breaking laws or regula-tions; using child labor or forcedlabor; or using physical punishmentto discipline employees, even if it ispermitted by local law.

Turning Teens into Tomorrow’sBusinesswomen

According to the Committee of 200(C200) and Simmons University, 97% ofU.S. teen girls expect to work through-out their lives, but fewer than 10%anticipate having careers in business. Agrant partnership between AlcoaFoundation, C200, and Girl Scouts ofthe USA chapters in New York,Pittsburgh, and Chicago seeks to boostthis number by introducing more girls tothe possibilities of careers in businessthrough a novel business planning com-petition and scholarship program calledFrom Badge to Business.

In each of the three cities, members of theAlcoa Women’s Network (AWN) have con-nected with the Girl Scouts as career daypanelists and judges in the ScholarshipPlus business plan competition. They havealso presented scholarship awards andgrant checks.

During Alcoa’s 2004 Worldwide Week ofCommunity Service, AWN memberssought to actively reach Girl Scoutsthrough an innovative career-awarenessvideoconference. During the conference,26 Girl Scouts learned about differentcareers and businesses at Alcoa and how

10 AWN women in six cities preparedfor their careers and tackle importantissues like work life balance, measur-ing success, handling adversity, andinternational assignments.

The reactions from the girls were over-whelmingly positive. What did they likebest? “That adults answered the ambiguities about business based ontheir personal experiences,” said oneyoung woman. “I got to see and learnabout the diversity of women workingfor Alcoa,” said another.

AWN will continue to reach out toyoung women to encourage them toconsider careers in the varied and val-ued-added world of business.

AWN videoconference

Social Performance Indicators

55

Alcoa Community Giving (US dollars)

2000

2001 Total U.S. Mexico Canada Africa Asia Australia Caribbean Central & Europe GlobalS. America

Alcoa Foundation 21,284,784 15,029,312 948,750 209,200 196,892 99,500 100,000 167,000 1,306,781 1,897,350 1,330,000Other Related Foundations 658,951 189,250 8,000 461,701Alcoa 18,088,028 11,090,743 3,240,453 9,799 699,904 64,508 2,229,606 753,015Excess FMV of 12,600,000 12,600,000Donated Property

Total Combined Giving 52,631,763 38,909,305 948,750 3,457,653 196,892 109,299 799,904 231,508 3,998,088 2,650,365 1,330,000

Total U.S. Mexico Canada Africa Asia Australia Caribbean Central & Europe GlobalS. America

Alcoa Foundation 20,103,977 15,385,392 456,528 204,500 25,000 148,284 1,250,290 1,508,683 1,125,300Other Related Foundations 1,348,333 868,002 45,500 434,831Alcoa 3,286,315 1,493,338 83,825 197,390 694,808 56,489 498,014 262,451Excess FMV of Donated Property

Total Combined Giving 24,738,625 17,746,732 456,528 333,825 0 222,390 694,808 204,773 2,183,135 1,771,134 1,125,300

In our work to identify sources inlow-cost countries, we have imple-mented a robust supplier qualifica-tion and identification process. Thereare three levels of qualification thatare accomplished through thisprocess: first level; detailed level sur-vey; and onsite inspection. In eachstage of the process, issues related tohuman rights are addressed. Thisculminates in the final stage whenAlcoa’s sourcing team conducts thor-ough onsite audit inspections tomake sure that the chosen low-costcountry supplier ethically and pro-fessionally measures up to our busi-

ness ethics and environment, health,and safety standards.

SOCIETYFor the past five years, we haveexpanded our definition of commu-nity investment to ensure that werepresent more than money in thelocations where we operate. Thisstrategy keeps financial assistance atits core, but also encourages employ-ee engagement in the communitythrough volunteer activity, the shar-ing of knowledge and expertise, andthe donation of products or equip-

ment to nonprofits or non-govern-mental organizations.

Grant making—focused on AlcoaFoundation’s four areas of excellence-continues to be a central element ofour global and local leadership pres-ence in social investing. Our grantdecisions are based on the insights of29 business unit lead teams and morethan 200 local coordinators whomake grant recommendations for theirlocations and who develop communi-ty investment strategies based on theirassessment of local conditions andopportunities to make a difference.

Alcoa Community GivingThe combined giving of Alcoa andAlcoa Foundation totaled US$28.8million in 2004. Alcoa Foundationmade more than US$17 million ingrants in 33 countries where Alcoaoperates, with Alcoa and Alcoa-related foundations awarding anoth-

er US$11.8 million in a wide rangeof grants to partner non-governmen-tal organizations around the world.

Since 2001, we have supplementedAlcoa Foundation’s capacity tomaintain appropriate leadership lev-els of investment through corporatecontributions in our communities aswe expand to new markets, commu-

nities, and countries. Encouragingincreases in our asset base, due tomeasured improvements in the stockmarket and the performance of ourinvestment portfolio, enabled AlcoaFoundation to increase its 2004 pay-out by more than $2 million over the2003 levels.

2002 Total U.S. Mexico Canada Africa Asia Australia Caribbean Central & Europe GlobalS. America

Alcoa Foundation 17,211,415 11,464,815 840,800 229,285 196,394 20,000 135,000 167,085 1,088,834 1,879,201 1,190,001Other Related Foundations 536,022 44,783 6,000 485,239Alcoa 11,355,071 6,273,962 723 178,829 44,239 1,156,334 102,057 2,679,971 918,957Excess FMV of 5,650,000 5,650,000 0Donated Property

Total Combined Giving 34,752,508 23,433,560 841,523 414,114 196,394 64,239 1,291,334 269,142 4,254,044 2,798,158 1,190,001

2003 Total U.S. Mexico Canada Africa Asia Australia Caribbean Central & Europe GlobalS. America

Alcoa Foundation 14,970,191 8,808,555 620,387 205,500 234,500 75,000 236,500 105,000 1,241,430 1,233,140 2,210,179Other Related Foundations 517,000 517,000Alcoa 11,069,967 7,481,969 122,755 485,078 72,284 2,096,064 (4,729) 393,934 422,612Excess FMV of 265,405 170,453 94,952Donated Property

Total Combined Giving 26,822,563 16,460,977 743,142 690,578 234,500 147,284 2,332,564 100,271 2,247,316 1,655,752 2,210,179

2004 Total U.S. Mexico Canada Africa Asia Australia Caribbean Central & Europe GlobalS. America

Alcoa Foundation 17,000,536 9,209,113 584,350 339,565 277,329 287,500 448,800 334,109 862,740 2,250,500 2,406,530Other Related Foundations 533,707 10,000 523,707Alcoa 10,691,586 5,990,165 95,385 522,870 26,949 2,803,182 138,533 521,842 592,660Excess FMV of 556,770 503,537 53,233Donated Property

Total Combined Giving 28,782,599 15,712,815 679,735 862,435 277,329 314,449 3,305,215 472,642 1,908,289 2,843,160 2,406,530

Global grants can be awarded in any country for purposes that benefit multiple countries, including the United States.

Alcoa Community Giving (US dollars) continued

56

Building CommunitiesThrough Education

Children at the Nueva CreaciónElementary School in Acuña, Mexico,received a lesson in community invest-ment when more than 400 people vol-unteered to help prepare the propertywhere a new school will be constructedbeginning in February 2005.

The students had been learning intemporary trailers, which often swel-tered under the Mexican sun. A nearby

Alcoa plant held an ACTION project tohelp with the project, and 180 Alcoaassociates—many of whom were parentsof the students—participated.

During the project, volunteers helpedclean and beautify the site, planting treesas part of Alcoa’s Ten Million Trees initia-tive. Alcoa’s medical personnel also helda health fair for the students, conductingphysical examinations and providing les-sons on dental hygiene. Every studentreceived a toothbrush, toothpaste, andschool supplies. The school received aUS$3,000 grant through Alcoa’s ACTIONprogram.

The Alcoa employees are continuing tohelp the school since it is in its initialstages and has many needs. A toy col-lection occurred in late 2004, andemployees plan to make presentationson environment, health, and safety top-ics in 2005.

ACTION GrantsGroups of five or more Alcoaemployees in any facility around theworld can design a day of service ata local nonprofit organization andhave their effort matched by either aUS$1,500 or US$3,000 Alcoa grantto that local agency.

Since its inception as a pilot in four loca-tions in 2000, ACTION has grown toinclude employee-designed projects in185 locations. While an ACTION proj-ect traditionally required 10 or moreemployees to quality for a US$3,000grant, we added a second track of mini-ACTION grants (US$1,500) in 2004 to

accommodate smaller locations orprojects that involve a minimum of fiveand up to nine employees.

The following tables chart the growthof this team-oriented approach toemployee engagement—activity furtherfostered by our second WorldwideWeek of Community Service.

ACTION Grants

2002 Total U.S. Mexico Canada Africa Asia Australia Caribbean Central & EuropeS. America

Number of Grants 234 105 17 18 3 36 3 24 28U.S. Dollar Value $702,000 $315,000 $51,000 $54,000 $9,000 $108,000 $9,000 $72,000 $84,000Number of Hours 19,669 7,218 816 1,423 173 5,615 120 2,422 1,882Number of Employee Volunteers 4,106 1,496 200 245 51 1,392 30 331 361Average Number of Hours per Project 84 69 48 79 58 156 40 101 67

2003 Total U.S. Mexico Canada Africa Asia Australia Caribbean Central & EuropeS. America

Number of Grants 341 166 25 18 1 44 33 54U.S. Dollar Value $1,023,000 $498,000 $75,000 $54,000 $3,000 $132,000 $99,000 $162,000Number of Hours 25,257 11,158 3,367 1,299 40 2,522 3,223 3,648Number of Employee Volunteers 4,461 2,031 485 195 10 598 492 650Average Number of Hours per Project 74 67 135 72 40 57 98 68

2001 Total U.S. Mexico Canada Africa Asia Australia Caribbean Central & EuropeS. America

Number of Grants 110 67 10 3 8 3 12 7U.S. Dollar Value $330,000 $201,000 $30,000 $9,000 $24,000 $9,000 $36,000 $21,000Number of Hours 9,340 5,048 524 328 488 120 1,552 1,280Number of Employee Volunteers 2,332 1,259 131 82 122 30 388 320Average Number of Hours per Project 85 75 52 109 61 40 129 183

2004 Total U.S. Mexico Canada Africa Asia Australia Caribbean Central & EuropeS. America

Number of Grants 363 194 23 13 2 35 23 73U.S. Dollar Value $1,053,000 $559,500 $66,000 $37,500 $6,000 $105,000 $81,000 $198,000Number of Hours 23,805 10,468 2,840 881 107 1,760 2,472 5,277Number of Employee Volunteers 5,391 2,470 695 195 23 447 660 901Average Number of Hours per Project 66 54 123 68 54 50 107 72

Represents projects paid during each respective year.

Social Performance Indicators

57

2002

Bravo! Grants

2003 Total U.S. Mexico Canada Africa Asia Australia Caribbean Central & EuropeS. America

Number of Grants 1,795 369 92 140 358 613 223U.S. Dollar Value $488,750 $92,250 $23,000 $35,000 $89,500 $153,250 $55,750Number of Hours 169,136 45,339 5,196 19,634 45,774 30,692 22,501Average Number of Hours per Volunteer 94 123 56 140 128 50 101

2004 Total U.S. Mexico Canada Africa Asia Australia Caribbean Central & EuropeS. America

Number of Grants 3,985 500 128 188 592 1 2,130 446U.S. Dollar Value $996,250 $125,000 $32,000 $47,000 $148,000 $250 $532,500 $111,500Number of Hours 299,629 67,270 7,512 21,057 74,899 50 106,500 22,341Average Number of Hours per Volunteer 75 135 59 112 127 50 50 50

Total U.S. Mexico Canada Africa Asia Australia Caribbean Central & EuropeS. America

Number of Grants 437 143 19 161 2 55 57U.S. Dollar Value $109,250 $35,750 $4,750 $40,250 $500 $13,750 $14,250Number of Hours 35,758 8,644 966 20,275 100 2,750 3,023Average Number of Hours per Volunteer 82 60 51 126 50 50 53

Represents projects paid during each respective year.

Bravo! GrantsIndividual Alcoa employees whomake a significant commitment oftime to a nonprofit or non-governmental organization can seetheir efforts maximized through asupportive grant for their organiza-tion. When an employee volunteersat least 50 hours a year at a qualify-

ing charitable organization, Alcoaawards the organization US$250.Applications for community serviceperformed in 2004 were acceptedthrough January 31, 2005.

In an effort to align with Alcoa’s e-business approach and to ensure themost efficient way to adhere to U.S.government requirements for anti-

terrorism vetting of grant recipients,we instituted online applications forACTION and Bravo! in 2004. Welook for further improvements in2005 to increase the number ofBravo! applicants as more Alcoaemployees have access to onlinecapabilities at work and learn aboutthe value of the program.

58

Drive for EmployeeCommunity Involvement

While commuting to work can be a realchore for some, Joel Câmara—anemployee at Alcoa’s Poços de Caldassmelter in Brazil—considers his com-mute a fulfilling experience.

Every morning at sunrise before headingto work, Câmara and his wife drive tothe homes of up to six children with disabilities to take them to theAssociação de Pais e Amigos dosExcepcionais (Association of Parentsand Friends of the Disabled), a non-governmental organization that provides

assistance to children and adults with dis-abilities.

The association provides psychologicaland other medical services, as well aseducation and job-skills training to nearly

600 clients to enable them to partici-pate fully in the world of work or main-stream schools.

“When I give my time to these chil-dren, I receive so much more inreturn,” said Câmara. “Organizationssuch as APAE really depend oneveryone getting involved, and I feelprivileged to be a part of these chil-dren’s lives. It’s also a good feeling toshare my experience with other Alcoaemployees and to encourage them toget involved in the community.”

Câmara’s volunteer work has earnedthe association a US$250 grant fromAlcoa through the Bravo! program.

Joel Câmara, his wife Sonja, andstudent Juliana

Social Performance Indicators

59

Community ConsultationImplementation of the AlcoaCommunity Framework—a tool andprocess used to facilitate and meas-ure ongoing relationship-buildingand communications between Alcoaand its community stakeholders—progressed steadily in 2004.

Engagement with individuals andgroups grew significantly as locationsin the United States and Australiacontinued implementation, and theEuropean region began a formal roll-out in the fourth quarter.

In the United States, the seven-per-son North American Public StrategyGroup worked with 125 locations toconduct individual communityassessments to better understandeach location’s role in the communi-ty and how best to work with stake-holders to address the mutual needsof both Alcoa and our neighbors.Once an assessment is completed, thelocation develops a roadmap on howit will deal with issues and stake-holders. Tactics include building rela-tionships with local officials andmedia, leveraging employee engage-

ment in the community, and con-tributing to the long-term economicsustainability of the facility.

Examples of how these U.S. effortsstrengthened our ties with stake-holders in 2004 include the estab-lishment of 25 formal communityadvisory boards to provide a forumfor ongoing interaction between theplants and area residents. These for-mal boards held more than 60 meet-ings during the year. In addition,more than 250 government officialsvisited Alcoa locations in 2004 tolearn more about the economic andsocial effect Alcoa has had in thesecommunities.

Taking Action—Alcoa’s Worldwide Week ofCommunity ServiceUnder the theme of global educationand workforce development, morethan 170 Alcoa locations developedWeek of Service activities that high-lighted the work of Alcoa employeesin our communities.

We celebrated this second worldwideservice event from October 2-10,2004, with activities ranging from vol-unteer recognition ceremonies in theplants to community-based serviceprojects at schools, environmentaltrails, youth centers, and other educa-tional facilities. Participation increasedin 2004, with more countries involvedand more activities occurring. Manyplants invited local civic and commu-nity officials to participate first-handin our community work.

Taking Action

Locations Countries Events

2003 150+ 20 235+2004 170+ 27 300+

Challenge HighlightsCommunity Engagement

Alcoa Automotive, Aerospace, andCommercial Transportation (AACT)issued a 2004 challenge to its 50 loca-tions worldwide—not only perform acommunity assessment using theAlcoa Community Framework, butestablish a standard for the future bysharing insights and best practices forcommunity engagement.

Working with Alcoa Foundation, thebusiness unit’s grant-making lead teamset aside US$50,000 of its grant allo-cation budget for re-allocation to three

exemplary AACT locations that exhibitedinnovative approaches to communityengagement.

Eight finalist locations presented theresults of their community assessmentsand coordinated strategies: Cleveland,Ohio (USA); Beloit, Wisconsin (USA);Auburn, Indiana (USA); Wichita Falls,Texas (USA); Tucson, Arizona (USA),Torrance, California (USA); AFL Mexico;and AFL Romania. The plan presenta-tions were judged by Bill Christopher,group president of AACT, and representa-tives from Alcoa Foundation and theNorth American Public Strategy Group.

The judges found the plans to be thor-ough and creative. They connected an

assessment of community issues withgrant making, employee engagementopportunities, and possibilities forcommunity consultation.

The event brought together locationsfrom several regions of the world toshare insights and best practices thatset the standard for others to emulate.The presentations were so compellingthat AACT and Alcoa Foundationawarded allocations to four locationsrather than the three that had beenenvisioned. The winning locationswere: AFL Mexico, Auburn, Beloit, andTucson.

Community Assessment 98Events 61Government Relations 31Media Relations 32Effective Contributions &Employee Engagement 34Community Consultation 20Participation onStatewide Teams 53Value Added 25

U.S. Community Consultation(percent of reporting U.S. locations fully compliant with Alcoa Community Framework programs in 2004, by category)

In Australia, all locations have estab-lished community consultative net-works consisting of Alcoa and com-munity representatives to worktogether on important issues, includ-ing sustainability, environmentaleffects, local employment, and Alcoasponsorship and partnership pro-grams. Locations have also devel-oped other programs for communityengagement. For example, ourVictorian operations establishedAlcoa in the Community committeesmade up of a diverse range ofemployees from management tounion delegates. The committeesproactively pursue community part-nerships, approve sponsorshiprequests, act as ambassadors for thecompany, and promote volunteeringin the workforce. We plan to roll outthis engagement model at otherAustralian sites in 2005.

We also work with Victorian com-munities to develop environmentalimprovement plans for each loca-tion. Community members partici-pate in developing the plan, sign offon the plan, monitor our progress inachieving targets, and annuallyreview the plan. In addition, weengage with the local communitywhen we propose to expand orupgrade our facilities. For theWagerup refinery expansion inWestern Australia, we are workingwith five community working groups

that include neighbors, local busi-nesses, government representatives,and Alcoa employees as part of thecommunity consultation and envi-ronmental assessment process. Thecase study on the Pinjarra refineryupgrade on page eight providesanother example of this form ofengagement.

In 2004, Alcoa World AluminaAustralia earned the Alcoa GlobalLeadership Award for Best CommunityEngagement. This award is given to theAlcoa business unit whose communityengagement achieves the most effectiveand sustainable linkage of the goals ofboth the Alcoa Community Frameworkand Alcoa Foundation.

Global EHS Community Programs

Number of Locations Number of Number ofHolding Community Programs Programs Community Participants

2001 65 231 430,998

2002 109 501 369,6081

2003 105 575 436,844

2004 195 726 558,684

1Due to Alcoa's revised standards for community programs, locations are now reporting better data related to the number of individuals directly affected instead of those indirectly affected by means of newsletter circulation or event sponsorship.

Community Health InitiativesThe safety and health of the peoplewho live in Alcoa communitiesremain of vital concern to us. Wereinforce our Values and demon-strate our commitment to our neigh-bors when we focus on health in thecommunity and share informationthat can lead to injury and diseaseprevention, healthier lifestyles, andbetter life prospects for communityresidents.

In 2003, we instituted new trackingand reporting methods to capturedata on the number of Alcoa locations that have engaged theircommunities through health-related initiatives. By the end of 2004, three-fourths of global reporting locationshad established at least one health orsafety community initiative. Theseinitiatives have engaged 550,000individuals worldwide since 2000,with 301,000 engaged in 2004 alone.

60

Bribery and CorruptionAlcoa has a corporate-wide policyand zero tolerance for bribes. Ourcorporate approach is one of strictcompliance with the letter and spiritof all laws focused on anti-briberyand corruption, such as the provi-sions of the Foreign CorruptPractices Act (FCPA).

Alcoa’s policy in this regard clearlystates that all directors, officers, andemployees shall comply with all lawsand regulations that are applicable tothe company’s activities. These provi-sions of our business conduct policiesare further reinforced and specificallyaddressed through training and inour Guide to Business Conduct,which has been translated into 20languages and deployed globally toall employees and contractors.

Social Performance Indicators

61

Political ContributionsPursuant to Alcoa’s global businessconduct policies, the use of companyfunds, property, services, and thingsof value for or in aid of (or in oppo-sition to) any political parties or can-didates for public office is prohibit-ed. Similarly, the policies dictate thatno such corporate asset may be used,without the prior written approvalof Alcoa’s Chairman of the Boardand the general counsel, for or in aidof (or in opposition to) any commit-tee whose principal purpose is toinfluence the outcome of a referen-dum or other vote of the electorateon a public issue.

Employees may volunteer their owntime to assist a candidate or cam-paign committee. However, companyfacilities, employee work-time, sup-port services, office supplies, elec-tronic mail access, etc., may not,under any circumstances, be utilizedin such an effort. Nor does the com-pany allow the formation of politicalaction committees (PACs).

Similarly, corporate funds cannot beused to purchase tickets or otherwisepay for the admission fee (or otherexpenses) to fundraising activities ofany candidate, potential candidate,political committee, or political party.

PRODUCTRESPONSIBILITY

Customer Environmental,Health, and Safety ActivitiesIn response to increasing requestsfrom customers and suppliers, Alcoaconducted several benchmarking ses-sions in North America duringwhich we openly shared ourapproach to environment, health,and safety. Topics included integra-

tion of EHS into manufacturingprocesses, fatality prevention, occu-pational health initiatives, environ-mental programs, internal audit pro-grams, and metrics systems.

Product Information andLabelingFor years, Alcoa has developed andprovided to downstream customersmaterial safety data sheets (MSDS)and product labels for both commer-cial and hazardous waste products.These documents discuss relevantenvironmental, health, and safetyrisks and what precautions to takeand procedures to follow when usingour products.

This program has been in place formany years to not only address ourEHS values but to also meet legalrequirements that exist in manyregions of the world. We audit ourlocations to ensure they are follow-ing this practice, and many of theseMSDS and product labels have beentranslated into languages needed forparticular countries. We recently putin place a mandatory product stew-ardship and integrity standard thatreinforces the development and dis-tribution of MSDS and productlabels.

For a complete listing of our materi-al safety data sheets, visit alcoa.com.

Online Privacy Statement(Worldwide)Alcoa is committed to safeguardingprivacy online. From time to time,Alcoa may make changes to this pri-vacy statement to reflect changes in

its business or to serve users better.Alcoa will use reasonable efforts topublish any such changes in the pri-vacy statement.

Alcoa protects privacy on alcoa.comthrough four basic principles:

● Users will always be advised whenAlcoa is collecting informationabout them or their online prefer-ences and expectations and it willbe made clear how that informa-tion is to be used.

● Users will be able to choosewhether or not they want to pro-vide that information.

● Any information collected aboutusers will be secure and not sharedwith any third parties unless usersgive prior permission for thatinformation to be shared.

● Users will have access to any personal information Alcoa col-lects and keeps about them, andthey will be able to securelychange or delete that informationat any time.

Because Alcoa offers a wide range ofonline business opportunities for itscustomers, the amount of informa-tion the company needs to collect inorder to serve them in a particularbusiness transaction will sometimesvary from case to case. Regardless ofthe amount of information collected,the four principles listed above willapply. Wherever Alcoa collects per-sonal information, users will find alink to this privacy statement. Ifusers choose not to provide someinformation, for example to enableconfirmation of credit status, it maynot be possible for them to proceedwith their chosen business activitywith Alcoa.

Economic Performance Indicators

62

Disciplined financial management isessential to ensure long-term successfor both Alcoa and the societies weaffect.

Our financial management is exem-plified by our stringent financial con-trols, our commitment to a conserva-tive capital structure, our dedicationto financial return goals, and ourfocus on value creation throughprofitable top-line growth, highlyselective capital spending, and costreduction activities. As an exampleof the strength of our financialprocesses, we are able to consolidatethe financial performance of morethan 350 operating locations in 43countries and report quarterly earn-ings before any other Dow JonesIndustrial Average member company.

Our aim to create sustainable financialresults that enable profitable growthand superior shareholder value isdefined by three financial goals:

● Joining the first quintile ofStandard & Poor’s (S&P)Industrials in return-on-capital(ROC) performance and, in pur-suit of that goal, providing returnsgreater than the cost of capital.

● Consistently eliminating waste. We launched our third consecutivecost challenge aimed at eliminatingUS$1.2 billion in costs on a run-rate basis by 2006.

● Maintaining a strong balancesheet, defined by a debt-to-capitalratio in the range of 25% to 35%.

Within this context, 2004 was anoth-er strong year for Alcoa. We generat-ed the highest annual sales in thecompany’s history, increased incomefrom continuing operations by 33%to US$1.4 billion, and reduced debt-to-capital to 30.0% through, amongother factors, strong cash from oper-ations of approximately US$2.2 bil-

lion. We achieved these resultsdespite a weaker US dollar and costpressures caused by increases in sev-eral key raw material inputs, includ-ing energy, caustic, and resin.

Following is a brief summary of oureconomic performance in 2004. Formore detailed information, pleaserefer to the 2004 Alcoa AnnualReport.

SHAREHOLDER VALUE Our strong financial results havepositioned us to achieve our primaryfinancial goal—creating significantvalue for our shareholders. We deliv-ered a total shareholder return1 of249% over the last 10 years com-pared to the S&P 500 Index of212% and the Dow Jones IndustrialsIndex of 243% over the same period.

Online Sourcing ReducesCosts, Increases SupplierVisibility

Through the use of online sourcing topurchase goods and services, Alcoahas reduced procurement costs, lever-aged its global purchasing power, andcreated a means for suppliers tobroaden their visibility within Alcoa.

In 2004, approximately 6.4% of Alcoa'stotal purchases were made via onlinebidding. Since the program’s inception

in 2001, the company has sourced morethan $3.9 billion in goods and servicesonline with an average savings of 13.3%per purchase compared to historicalcosts.

More than 860 Alcoa buyers worldwidehave been trained to use the tool, wherebidders compete online for business bysubmitting offers with immediate feed-back on their position in the event.Suppliers have indicated the tool hasmade the sourcing process more trans-parent and allowed some vendors previ-ously not considered to routinely competefor Alcoa business.

“In the past, Alcoa’s purchasing activitywas very decentralized, with every loca-

tion having its own way of going aboutprocurement for the products wemake,” said Ben Ruela, national salesaccount manager for Hyster, a full-lineproducer of material handling equip-ment. “With online bidding, it’s a muchcleaner process, and we have a cen-tral group within Alcoa to assist us.We’ve also become visible to all loca-tions and have gotten into placeswhere we weren't before.”

1Represents the total return a given investmentin a stock would have delivered over a givenperiod with the assumption that all dividendsare reinvested in that stock, as measured byBloomberg.

0

100

200

300

400

500

600

Dec 94 Dec 95 Dec 96 Dec 97 Dec 98 Dec 99 Dec 00 Dec 01 Dec 02 Dec 03 Dec 04

Source: Bloomberg

Alcoa Share Price Performance

■ Alcoa■ S&P 500 Index■ Dow Jones Industrials

2000 2001 2002 2003 2004

Return on Capital

Top Quintile S&P IndustrialsAlcoa

Indicators are based on Bloomberg return on capital methodology. S&P Industrials data not available for 4Q 2004.

0

10

20

30

Economic Performance Indicators

63

1S&P Industrials data not available for 4Q2004.

Alcoa has been listed on the NewYork Stock Exchange1 (ticker symbol: AA) since 1951 and had anestimated 295,000 common share-holders that owned, on average, 870million common shares in 2004.

We have delivered our returns toshareholders through a combinationof capital growth and quarterly dividends, which have been paiduninterrupted since 1939. The Board of Directors determines

whether dividends will be paid and, if so, the amounts, taking intoaccount various factors that includeoperational performance and capital requirements. Our dividendshave grown at a compounded annual rate of 14% for the last 10 years.

Return on CapitalWe remain committed to the goal ofachieving first quintile return on cap-ital (ROC). As measured byBloomberg, our ROC for the fullyear of 2004 was 8.4%, up from7.0% in 2003. The 2004 entry pointof the first quintile of the S&PIndustrials1 was 18.5%.

1Alcoa currently has secondary listings onexchanges in Australia, Belgium, Germany,Switzerland, and the United Kingdom. Ourpreferred shares are listed on the AmericanStock Exchange.

1Includes dividends to both common and preferred shareholders.

Distributions to Shareholders

Dividends1 Dividends Paid(millions of US dollars) per Common Share

(US dollars)

2000 418 0.502001 518 0.602002 509 0.60

2003 516 0.60

2004 524 0.60

64

Positioning for GrowthA strong balance sheet—measured in terms of the relationship betweendebt and total capitalization—is crucial to enabling profitable growththrough both the general economicand aluminum cycles. Our targetdebt-to-total capitalization isbetween 25% and 35%.

In 2004, we made significantprogress in strengthening our bal-ance sheet. We moved our debt-to-total capitalization from 35.1% in2003 to 30.0% in 2004. This is thelowest ratio we have achieved since1999. Improved operating results,working capital efficiency, cash fromoperations, capital discipline, andbusiness portfolio managementdrove this performance.

Our strong balance sheet hasallowed us to retain an investmentgrade rating with major agencies,such as S&P and Moody’s, for morethan 27 years. At of the end of2004, our long-term debt was rated“A-” by S&P and “A2” by Moody’s.In January 2005, S&P revised itsdebt outlook for Alcoa to negativefrom stable, citing higher capitalexpenditures in 2005 and futureyears. There was no change to either Alcoa’s long-term or short-term ratings.

2001

2002

2003 3,03921,092

■ Working Capital1

■ Revenue Working Capital

% of Revenue

2000 3,90622,010

3,10119,934

21,933

100 4020 30

3,151

Working Capital

(millions of US dollars)

0 10,000 25,000

2004 3,48023,478

5,000 15,000 20,0001Defined as Receivables from customers, less allowances + Inventories – Accounts payable, trade.Data changes from 2003 reporting due to reclassifi-cation of discontinued operations.

LME 1 (US dollars per metric ton)

0 1,000 2,000

Cash fromOperations

(millions of US dollars)

2003

2004

2001

2002

2000

1,844

0 1,000 2,000 3,000

2,199

1Average three-month aluminum price on the London Metal Exchange.

Data changes from 2003 reporting due to reclassifi-cation of discontinued operations.

2,851

2,411

2,434

2001

2002

2000 38.6

35.8

43.1

Debt as a Percent of Invested Capital

2003 35.1

2004 30.0

0 10 20 30 40 50

Defined as (Short-term borrowings + commercial paper + Long-term debt, due within one year + Long-term debt, less amount due within one year) / (Short-term borrowings + commercial paper + Long-term debt, due within one year + Long-term debt, less amount due within one year + Minority interests + Total shareholders’ equity).

2002

2003

2001

352

2000 388

418

329

Cash Interest Paid(millions of US dollars)

2004 318

0 100 200 300 500400

2001

2002

20031,184

■ Capital Expenditures■ Depreciation1

Capital Expenditures % of Depreciation

2000 1,102990

1,104

983

0 15050 100

1,177

Capital Expenditures

(millions of US dollars)

1,273

870

0 1,000 1,500

20041,212

500

1,143

1Provision for depreciation, depletion, and amortization.

Data changes from 2003 reporting due to reclassifi-cation of discontinued operations.

Economic Performance Indicators

65

Enhancing Portfolio Value Economic value is the engine thatdrives our company and the benefitsto shareholders, employees, cus-tomers, suppliers, and communities.To increase this value, we continual-ly review our business portfolio andshape it for future growth. In 2004,we completed the execution of ourportfolio rebalancing initiativeannounced in January 2003, and wecontinued to pursue profitablegrowth in both our upstream anddownstream businesses. The January2003 portfolio initiative strength-ened our balance sheet through thesale of certain non-core businesses.The proceeds of these sales wereused to pay down debt and positionthe company for long-term profitablegrowth.

Aluminum Smelting GrowthInitiativeIn 2004, we broke ground on ourpreviously announced greenfieldsmelter in East Iceland. This 322,000metric-tons-per-year (mtpy) alu-minum smelter is the company’s firstgreenfield smelter in 20 years. Uponcompletion, it will be one of themost efficient, environmentally-friendly, and safest smelters in theworld.

We have begun preliminary work for an environmental impact assess-ment for a potential state-of-the-art,low-emission smelter with a capacityof 341,000 mtpy in southwestTrinidad. If the study results are positive, the project will be presentedto the Alcoa Board of Directors andthe Government of Trinidad andTobago for an investment decision.

In April 2004, Alcoa and theAluminum Corporation of China

Limited (Chalco) received approvalfrom the China National Develop-ment and Reform Commission toproceed with formation of their proposed 50/50 joint venture at thePingguo aluminum facility in theGuangxi Zhang Autonomous Regionin South China. This facility is oneof the most efficient alumina andaluminum production facilities inChina, with current alumina refiningcapacity at 850,000 mtpy and alu-minum smelter capacity of 135,000mtpy. China is one of the fastestgrowing aluminum markets, and theparties continue to work diligentlyon the terms of their joint ventureand to obtain the necessary govern-ment approvals.

Brownfield expansions are often aviable option to grow our smeltingportfolio. In 2004, we announcedthat our 100% equity-owned sub-sidiary, Alcoa Aluminio S.A., willexpand its share of the smeltingoperations in São Luis by 30%, or63,000 mtpy. This brings AlcoaAluminio’s share of smelting capacityin that facility to 262,000 mtpy.Construction is currently underway,and production is expected to beginin the third quarter of 2005.

We also sold our 10% stake in theAlscon smelter in Ikot Abasi,Nigeria, to that country’s federalgovernment. We assumed the stakeas part of our acquisition ofReynolds Metals. The Alscon smelterwas 70% owned by the federal gov-ernment and 20% by Ferrostaal AG.Only a portion of the facility has

ever been operated, and it has beenidle since mid-1999.

Alumina Refining Growth InitiativeThroughout the year, we continued to pursue growth initiatives in refin-ing. Alcoa World Alumina andChemicals (AWAC)—a global alliance between Alumina Limited(40%) and Alcoa (60%)—and thegovernment of the Republic ofGuinea signed a protocol for devel-oping jointly a 1.5 million mtpy alu-mina refinery in Guinea, West Africa.

AWAC received the Western Australiangovernment’s environmental approvalfor its previously announced Pinjarraalumina refinery efficiency upgrade(see case study on page eight). Workon the project, which will increase pro-duction at the facility by 600,000mtpy, began in March 2004 and isexpected to be completed by the end of 2005.

In December 2004, Alcoa announcedan agreement in principle to expandthe Jamalco alumina refinery inClarendon by more than 1.5 millionmtpy. The expansion will more thandouble the refinery’s total capacity toat least 2.8 million mtpy.

In Suriname, Suralco substantiallycompleted a 250,000 mtpy expansionto the Paranam alumina refineryahead of schedule in early 2005. Thefacility’s total capacity is nowapproximately 2.2 million mtpy.Suralco owns 55% of the Paranamfacility.

We have also recently expedited engi-neering efforts and work towardsecuring permits for a 2 million mtpyexpansion of the Alumar aluminarefinery in São Luis, of which AWACwill have a 54% share, and for a

66

bauxite reserve in Juruti, Brazil,where AWAC has certain explorationrights and mineral leases.

Downstream BusinessesIn early 2005, we completed theacquisition of two fabricating facili-ties in Samara and Belaya Kalitva inthe Russian Federation fromRUSAL. As part of Alcoa, the twofabricating facilities will serve notonly the domestic Russian marketbut will also focus on global cus-tomers in Europe, Asia, and theAmericas.

In January 2005, we completed thesale of our 50% equity interest inIntegris Metals, Inc., a metals servicecenter company engaged in process-ing and distributing metals.

In December 2004, we signed a let-ter of intent with Fujikura Ltd. ofJapan in which Alcoa will obtaincomplete ownership of the AFLautomotive business based inDetroit, Michigan (USA), andFujikura will obtain complete own-ership of the AFL telecommunica-tions business, based in Nashville,Tennessee (USA). AFL Automotive isa large part of Alcoa’s automotivebusiness, and this transactionincreases our position in this strate-gic market, helping us serve ourautomotive customers globally.Alcoa and Fujikura hold a51%/49% respective ownership ofboth through the Alcoa FujikuraLimited joint venture until the trans-action is completed.

In packaging, Alcoa Aluminio S.A.sold its Brazilian flexible packagingbusiness unit, known as Itaipava.Earlier in 2004, we successfully com-pleted the sale of our aluminum foil

facilities at Russellville, Arkansas(USA), and St. Louis, Missouri (USA).

AWAC completed the sale of itsAlcoa specialty chemicals business in2004. We also sold our automotivefastener business, packaging equip-ment business, and extrusion facili-ties in Europe and Brazil during2004.

Energy Generation Growth InitiativeEnergy represents approximately13% of our cost structure. In 2004,energy costs for our operationsworldwide increased 13%. To helpoffset these costs, we continuallystrive to improve energy efficiency inall Alcoa operating facilitiesthroughout the world and seek low-cost, sustainable sources of power.

Energy conservation efforts are beingmade in the liquor yield and calcinerefficiency of alumina refineries. Insmelting, the focus has been on theoptimization of new cell design andthe operation of existing cells com-bined with the upgrading of carbonbaking furnaces. The energy efficiencyof remelt furnaces is also improving.All operational changes are made infull compliance with applicable envi-ronmental laws and regulations.

In 2004, we signed a 20-year agree-ment with Eletronorte—a Brazilianregional energy producer and sell-er—to buy up to 500 megawatts ofhydro-powered electricity annually.This power will supply our share ofproduction at the Alumar aluminum

smelter in São Luis. Our share of theMachadinho (in operation) andBarra Grande (under construction)hydropower facilities will supply thefull energy needs of our Poços deCaldas smelter. We continue to pur-sue competitive and environmentallysound energy projects in Brazil toincrease our energy self-sufficiencyand make further upstream expan-sion possible.

Additional information about ourenergy initiatives can be found in theenvironment section beginning onpage 27.

Cost Savings InitiativesThe long-term sustainability of ourcompany is invariably tied to attain-ing a competitive cost position ineach of the markets we serve. Since1998, we have embarked upon aseries of cost challenges based on theprinciples of the Alcoa BusinessSystem. These principles call for theelimination of waste on a sustainablebasis.

After successfully completing oursecond cost savings program inJanuary 2004, we set a new goal toseek an additional US$1.2 billion inreductions during the 2004 to 2006period. Although higher input costsdampened our cost-savings achieve-ment in 2004, this third program isaimed at bringing total savings tomore than US$3.3 billion since1998. These cost savings are sustain-able in nature, excluding compo-nents such as energy and currency.

We will continue to widen the appli-cation of the Alcoa Business Systemthroughout the company in a contin-uous effort to drive down costs andbuild closer ties to customers.

1Average three-month aluminum price on the London Metal Exchange.

Data changes from 2003 reporting due to reclassification of discontinued operations.

Sales

Sales Third Party Aluminum Shipments LME1 (billions of US dollars) (metric tons) (US dollars per metric ton)

2000 22.0 5,398 1,5672001 21.9 4,992 1,453

2002 19.9 5,236 1,366

2003 21.1 5,047 1,429

2004 23.5 5,093 1,778

2004 Revenue by Market

Packaging & Consumer 26% Commercial Transportation 6%

Building & Construction 11%

Aerospace 9%

Aluminum & Alumina 25%

Industrial Products & Other 12%

Automotive 11%

Economic Performance Indicators

67

CUSTOMERSIn 2004, Alcoa generated revenues ofUS$23.5 billion in 43 countries. Thisrepresents a compounded annualsales growth of 9.3% over the last10 years and 8.1% over the mostrecent five years.

While acquisition was our primarymeans for growth in previous years,we created a Customer and Market-ing Services resource unit and relatedtools to help our businesses captureprofitable organic growth. This effortinvolves expanding business with ourexisting customers and adding new

ones—particularly in fast-growingglobal markets.

One new tool is the Alcoa GrowthProcess, which is a multi-phased, disciplined approach to market strat-egy development that helps link us

with our customers. Using thisapproach, we continued to bringtogether Alcoa businesses serving the same customer to identify andoffer integrated solutions that tran-scend the value of any one business.

Revenues by Market (percent)

Data changes from 2003 reporting due to reclassification of discontinued operations.

Packaging & Aluminum & Industrial Automotive Building & Aerospace CommercialConsumer Alumina Products Construction Transportation

& Other

2000 21 26 19 11 12 6 5

2001 22 25 16 12 12 9 4

2002 25 25 13 14 12 7 4

2003 25 25 12 13 10 10 5

2004 26 25 12 11 11 9 6

Revenues by Segment (billions of US dollars)

Data changes from 2003 reporting due to reclassification of discontinued operations.

Alumina & Primary Flat-rolled Engineered Packaging & Other TotalChemicals Metals Products Products Consumer

2000 2.1 3.7 5.4 5.5 2.0 3.3 22.02001 2.0 3.4 5.0 5.9 2.6 3.0 21.9

2002 1.8 3.2 4.6 5.1 2.8 2.4 19.9

2003 2.0 3.2 4.8 5.6 3.1 2.4 21.1

2004 2.0 3.8 5.9 6.3 3.2 2.3 23.5

Revenues by Region (percent)

Data changes from 2003 reporting due to reclassification of discontinued operations.

United States Europe Other Americas Pacific

2000 66 18 7 92001 64 21 7 8

2002 63 21 8 8

2003 61 23 6 10

2004 61 22 6 11

68

Countries with Significant AlcoaParticipation in the LocalEconomyAlcoa has operations in 43 countries(as of December 31, 2004) with vary-ing significance within the context ofthe overall scale of economic activity inthese economies. In three countries inparticular—Suriname1, Jamaica2 (seecase study below), and Guinea3—weparticipate in joint ventures whoseoperations represent a sizeable compo-nent of the national GDP of thesecountries. We recognize our role andthe responsibilities of good corporatecitizenship in every one of the countriesin which we operate.

SUPPLIER RELATIONSHIPSWe spent US$20.1 billion in operat-ing costs (cost of goods sold; selling,general administrative, and otherexpenses; and research and develop-ment expenses) in 2004, with no onesupplier representing more than10% of the dollar value of totalgoods and services we purchased.

To help lower our cost structure, webegan an initiative to source prod-

ucts and services from countries andsuppliers that meet our quality levelsbut at lower total costs. We believethis initiative is critical to keep ourfacilities viable and operating inthose communities. The jobs we gen-erate, taxes we pay, and communityinvestments we make remain becauseof our cost competitiveness.

In 2004, we initiated a supplierdiversity program, which will contin-ue to be developed and deployedduring 2005. The program’s goal isto encourage diverse companies todevelop relationships with Alcoa,creating wealth within the minoritycommunity and throughout Alcoa’svalue chain. We have classified oursuppliers by diversity status, devel-oped a supplier diversity scorecard,and implemented a system toresearch opportunities for new rela-tionships with diverse suppliers. Wehave also become an active memberof the National Minority SupplierDevelopment Council in the UnitedStates.

Alcoa and Alcoa Foundationin Jamaica

Alcoa’s presence in a country or com-munity provides positive benefitsthrough employment opportunities, taxpayments, the purchase of local goodsand services, and infrastructureimprovements like roads, health care,and electricity.

In 2004, Alcoa’s Jamalco1 operations inJamaica accounted for 2% of the coun-try’s gross domestic product. Jamalcoemployed 540 full-time equivalentemployees, paid out US$19.6 million insalary and benefits, and spent US$47.4million on local contractor services andsupplies. Additionally, Jamalco paidUS$12 million in taxes. The company’s

assets include a refinery in Halse Hall anda port at Rocky Point, Clarendon.

Alcoa’s involvement in Jamaica went fur-ther in 2004. Alcoa Foundation investedapproximately US$375,000 in programsto improve the quality of life in Jamaica,bringing its five-year investment in thenation to nearly US$1 million. The fund-ing has been used for quality health carein hospitals, vocational training for resi-dents, and scholarship funds to localeducational institutions.

Additionally, several grants addresseddisaster preparedness before HurricaneIvan hit and rehabilitation effort in its

aftermath. Before the storm,US$25,000 was granted to theJamaican Red Cross to establish andstock emergency shelters. After thehurricane, the foundation awardedUS$80,000 to Food for the Poor Inc. to teach fisherman in two Jamaicancommunities a more sustainable andenvironmentally friendly technique tofish. This effort is part of a larger effortto restore the economic activity of twocommunities near Jamalco, where thelivelihood of many fishermen was dev-astated by the storm.

Rocky Point port

1Alcoa has a refinery and two bauxite mines inSuriname that are owned 45% by BHP Billitonand 55% by Suriname Aluminum CompanyL.L.C. (part of the AWAC group of companiesand therefore owned 60% by Alcoa and 40% byAlumina Ltd.). The Suriname AluminumCompany L.L.C. also owns a hydro-electric dam.

2Alcoa has a refinery and bauxite mine inJamaica, which are owned 50% by ClarendonAlumina Production, Ltd. (a wholly ownedsubsidiary of the Government of Jamaica) and50% by Alcoa Minerals of Jamaica L.L.C.(part of the AWAC group of companies).

3Alcoa World Alumina LLC owns a 45% inter-est in Halco (Mining), Inc. Halco owns 51%and the Guinean government owns 49% ofCompagnie des Bauxites de Guinée (CBG),which has the exclusive rights to develop andmine bauxite in a 25,900-square-kilometer(10,000-square-mile) area in northwesternGuinea. Alcoa has a bauxite purchase contractwith CBG that will provide Alcoa with bauxitethrough 2011.

1Jamalco is a 50/50 joint venture between Alcoa Mineralsof Jamaica L.L.C. and Clarendon Alumina Production,Ltd., a wholly owned subsidiary of the Government ofJamaica. Jamalco is part of the Alcoa World Aluminaand Chemicals (AWAC) group of companies, which isowned 60% by Alcoa and 40% by Alumina Limited.

2002

2003

2001

24.4

2000 33.3

31.7

31.5

Effective Tax Rate(percent)

2004 25.3

0 10 20 30 40

Data changes from 2003 reporting due to reclassifi-cation of discontinued operations.

2002

2003

2001

303

0

2004

100 200 300 400 600500

294

2000 419

548

583

Cash Paid for Income Taxes(millions of US dollars)

Data changes from 2003 reporting due to reclassifi-cation of discontinued operations.

69

PUBLIC COMMITMENTIn addition to our extensive commu-nity engagement (see page 55), we make tax payments to govern-ments in all the countries in whichwe operate. In 2004, cash paid forincome taxes totaled US$294 mil-lion. This excludes the numerousother taxes, such as royalties, sales taxes, excise duties, levies, andlocal taxes, that we paid in thosecountries.

Partnership with SupplierSecures Contract

Facing a contract renewal with a majorcustomer for shrink sleeve labels andpressure to decrease costs, AlcoaFlexible Packaging (AFP) and supplierBonset America Corporation teamedtogether to create a high-value propos-al that secured the five-year contract.

AFP and Bonset originally had workedwith the customer—one of the largest

for both companies—to develop and sup-ply the shrink sleeve label technologyused on many of the customer’s prod-ucts. Bonset provided PETG shrink filmto AFP, which then converted the film intoprinted shrink sleeve labels.

“We have always acted in a way that pro-tects the market we’re in,” said PaulWingate, sales manager for Bonset. “Wewant to partner with film converters whoare committed to the technical side sothat products like shrink sleeve labelsgain wide acceptance because they areproblem-free. We have always had agood working relationship with Alcoa, and

we knew the company understood howto use our film and also had an excel-lent technical presence in the field.”

In addition to working on trimmingcosts, AFP and Bonset stressed thetechnical expertise both companiesbrought, the proven track record ofsupplying time-sensitive industries likethe dairy market, and their historicallyexcellent customer service.

Economic Performance Indicators

Awards and Recognition Case Studies

Alcoa earned and granted numerousawards and recognition in 2004.Below are a few examples of corpo-rate-wide awards and the grantingorganization. A complete listing canbe found on alcoa.com underCommitment to Sustainability.

In addition, Alcoa was named one ofthe top three most sustainable corpo-rations in the world by CorporateKnights and Innovest Strategic ValueAdvisors in early 2005.

Dow Jones Sustainability Index (fourth consecutive year)

Most Admired CompaniesFortune Magazine (first in metals category, second over-all in social responsibility)

Best Managed CompaniesForbes Magazine (first in materials category)

Industry Genius: Inventions andPeople Protecting the Climateand Fragile Ozone Layer (Alcoa chapter included in this book)

Top Ten Organization withWorld-class Safety and HealthProgramIndustrial Safety and Hygiene News

2004 World’s Best Metals andMining Company in Europe andthe United StatesGlobal Finance Magazine

Agile 100 AwardCIO Magazine

70

The following case studies, which can be found throughout the 2004Sustainability Report, illustrate how Alcoa is acting upon its commitment tosustainable development throughout the world

More Hydropower Generation with Same Water Flow ...........................................5Defining and Measuring Sustainable Performance in Iceland ................................7Community Engagement Underscores Efficiency Upgrade Approval ..................8Alternative Lubricants Reduce VOC Emissions, Treatment Costs.....................11Employee-formed Company Lessens Impact of Mine Closure............................12Alcoa’s Opportunities, Challenges in China ..............................................................13Idled Plant Overcomes Energy, Labor Cost Challenges .........................................15The Challenge of Measuring Community Engagement..........................................17Self Assessments Lead to Improved Controls, Performance.................................23Bringing Sustainability to Shareholder Relations .....................................................25Helping the Community Through ABS .......................................................................26Minimizing the Waste ........................................................................................................27 One Process Waste Neutralizes Another .....................................................................29PVC-free Initiative Reduces Pollution, Avoids Costs ..............................................30Harvesting Wood, Building Jobs....................................................................................32Relicensing Effort Preserves Pristine Land..................................................................34Goat Rearing on Rehabilitated Land Provides Alternative Income...................35Reducing Stormwater Volume, Contamination Through

Natural Systems..............................................................................................................37Switch to Biodiesel Fuels Environmental Improvements .......................................38Dynamic System Reduces River Fluoride Levels ......................................................40Caustic Soda Waste Becomes Useful.............................................................................41New High School Fills Educational Void in Brazil..................................................44Multicultural Workforce Opens Windows of Opportunity..................................46Capturing Ergonomic Improvements Through Technology,

Tools, Training................................................................................................................48Helping Employees Get Healthier .................................................................................51Training Speaks the Language of Safety......................................................................52Making the Learning, Communication Connection................................................53Turning Teens into Tomorrow’s Businesswomen .....................................................54Building Communities Through Education................................................................56Drive for Employee Community Involvement...........................................................58Challenge Highlights Community Engagement ........................................................59Online Sourcing Reduces Costs, Increases Supplier Visibility..............................62Alcoa and Alcoa Foundation in Jamaica ....................................................................68Partnership with Supplier Secures Contract...............................................................69

GRI Content Index

71

This index was developed to helpinterested readers compare the infor-mation in Alcoa’s SustainabilityReport and Annual Report and onour website with the Global ReportingInitiative guidelines. We also drawupon criteria from other organizationsto frame our sustainability reporting.

In the last column of the chart, wehave indicated on what pages the

required information can be found inthe Sustainability Report and theAnnual Report as well as the URLsfor relevant information onalcoa.com. “Partially reported” indi-cates that we have provided a por-tion of the information required. Ina number of instances, we’re work-ing toward better data collection tomore fully report this information.

“Not disclosed” means that thisinformation is either not collected ona global basis or kept confidential forcompetitive or other reasons. “Notapplicable” means that it does notapply to our operations or 2004reporting.

We have used the abbreviations SR forSustainability Report, AR for AnnualReport, and Web for alcoa.com.

GRI SECTION DESCRIPTION LOCATION

Vision and Strategy

1.1 Statement of the organization’s vision and strategy SR page 3regarding its contribution to sustainable development.

1.2 Statement from the CEO describing key elements of the report. SR Preface

Profile

2.1 Name of reporting organization. SR page 16

2.2 Major products and/or services. SR page 16

2.3 Operational structure of the organization. Web www.alcoa.com/global/en/about_alcoa/listing.asp

2.4 Description of major divisions, operating companies, SR page 16subsidiaries, and joint ventures.

Webwww.alcoa.com/global/en/about_alcoa/listing.asp

2.5 Countries in which the organization’s operations are located. SR page 16

Webwww.alcoa.com/global/en/about_alcoa/globalmap.asp

2.6 Nature of ownership SR page 16

2.7 Nature of markets served. SR page 16

2.8 Scale of the reporting organization. SR page 16 (Key Statistics)

SR page 65 (Enhancing Portfolio Value)

AR inside front cover

2.9 List of stakeholders. Partially Reported

Too numerous to provide a comprehensive list.

SR page 5 (Engagement with Stakeholders)

SR page 79 (Appendix)

2.10 Contact person. SR page 16

2.11 Reporting period. SR page 16

2.12 Date of most recent previous report. SR page 16

2.13 Boundaries of report. SR page 16

2.14 Significant changes since previous report. SR page 65

2.15 Basis for reporting on joint ventures, partially owned SR page 17subsidiaries, etc.

72

GRI SECTION DESCRIPTION LOCATION

2.16 Explanation of the nature and effect of any re-statements Provided as footnotes to individual SR chartsof information provided in earlier reports. where data changed.

2.17 Decisions not to apply GRI principles or protocols in the SR page 71preparation of the report.

2.18 Criteria/definitions used in any accounting for economic, SR page 18environmental, and social costs and benefits.

AR page 45

2.19 Significant changes from previous years in the measurement methods. Not Applicable

2.20 Policies and internal practices to enhance and provide SR page 18assurance about the accuracy, completeness, and reliability that can be placed on the sustainability report.

2.21 Policy and current practice with regard to providing SR page 18independent assurance for the full report.

2.22 Means by which report users can obtain additional information and reports. SR page 18

Governance Structure and Management Systems

3.1 Governance structure. SR page 19

3.2 Percentage of the board of directors that are independent, SR page 19non-executive.

3.3 Process for determining the expertise board members Webneed to guide the strategic direction of the organization. http://www.alcoa.com/global/en/about_alcoa/

corp_gov/nominating.asp

3.4 Board-level processes for overseeing the organization’s Webidentification and management of economic, environmental, http://www.alcoa.com/global/en/about_alcoa/and social risks and opportunities. corp_gov/public_issues.asp

3.5 Linkage between executive compensation and achievement SR page 22of the organization’s financial and non-financial goals.

3.6 Organizational structure and key individuals responsible SR page 22 (Audit Process)for oversight, implementation, and audit of economic, environmental, social, and related policies. SR page 19 (Structure and Governance)

SR page 21 (Public Issues Committee)

SR page 21 (Officers)

3.7 Mission and value statements, internally developed codes of SR page 13conductor principles, and policies related to economic, environ-mental, and social performance and the status of implementation.

3.8 Mechanisms for shareholders to provide recommendations SR page 24or direction to the board of directors.

3.9 Basis for identification and selection of major stakeholders. SR page 5 (Engagement with Stakeholders)

SR page 79 (Appendix—Stakeholders)

3.10 Approaches to stakeholder consultation. SR page 5 (Engagement with Stakeholders)

SR page 16 (Report Scope)

SR page 17 (Report Profile)

SR page 59 (Community Consultation)

Case Studies Throughout Report

3.11 Type of information generated by stakeholder consultations. Partially Reported

Due to the volume of our consultation at the local, national, and international levels, there are too many individual engagements

to report. Many examples are contained in this report.

GRI Content Index

73

GRI SECTION DESCRIPTION LOCATION

3.11 (continued) SR page 5 (Engagement with Stakeholders)

SR page 16 (Report Scope)

SR page 17 (Report Profile)

SR page 59 (Community Consultation)

Case Studies Throughout Report

Webwww.alcoa.com/iceland/en/info_page/landsvirkjun.asp

Webwww.alcoa.com/australia/en/info_page/PURE_Communityhome.asp

3.12 Use of information resulting from stakeholder Partially Reportedengagements.

Due to the volume of our consultation at the local, national, and international levels, there are too many individual engagements

to report. Many examples are contained in this report.

SR page 5 (Engagement with Stakeholders)

SR page 16 (Report Scope)

SR page 17 (Report Profile)

SR page 59 (Community Consultation)

Case Studies Throughout Report

Webwww.alcoa.com/iceland/en/info_page/landsvirkjun.asp

Webwww.alcoa.com/australia/en/info_page/PURE_Communityhome.asp

3.13 Explanation of whether and how the precautionary Not Disclosedapproach or principle is addressed by the organization. Through our extensive management systems, we advocate a

risk-based approach to our operations. At this stage, however, we do not formally address the precautionary principle in our Sustainability Report.

3.14 Externally developed, voluntary economic, environmental, SR page 26and social charters, sets of principles, or other initiatives to which the organization subscribes or which it endorses.

3.15 Principal memberships in industry and business associations, SR page 7and/or national/international advocacy organizations.

3.16 Policies and/or systems for managing upstream and SR page 10 (Products)downstream impacts.

SR page 11 (Technology)

SR page 41 (Recycling)

SR page 42 (Significant Environmental Impacts)

SR page 68 (Supplier Relationships)

Webwww.alcoa.com/global/en/about_alcoa/sell_terms.asp

3.17 Reporting organization’s approach to managing indirect Partially Reportedeconomic, environmental, and social impacts resulting from its activities. Unclear as to what would constitute full reporting under GRI.

74

GRI SECTION DESCRIPTION LOCATION

3.17 (continued) SR page 12 (Facility End-of-life Management)

SR page 68 (Countries with Significant Alcoa Participation in the Local Economy)

3.18 Major decisions during the reporting period regarding the SR page 65location of, or changes in, operations.

3.19 Programs and procedures pertaining to economic, SR page 26environmental, and social performance.

3.20 Status of certification pertaining to economic, environmental, SR page 26 (Certification Status)and social management systems.

SR page 16 (Alcoa Metrics System)

AR page 39

GRI Content Index

4.1 Table identifying the location of each element of the GRI report content. SR page 71

Performance Indicators—Economic

EC1 Net sales. SR page 67

EC2 Geographic breakdown of markets. Partially Reported

We provide revenues by market, segment, and region. Revenues by product and/or country are considered commercially sensitive.

SR page 67 (Revenues by Market)

SR page 67 (Revenues by Segment)

SR page 67 (Revenues by Region)

EC3 Cost of all goods, materials, and services purchased. Partially Reported

This information is considered commercially sensitive.

SR page 68

EC4 Percentage of contracts that were paid in accordance Not Disclosedwith agreed terms, excluding agreed penalty arrangements. Processes for collecting the data on a global level do not exist currently.

EC5 Total payroll and benefits. Partially Reported

We report total labor costs externally.

SR page 47

EC6 Distributions to providers of capital. SR page 63 (Distributions to Shareholders)

SR page 64 (Cash Interest Paid)

EC7 Increase/decrease in retained earnings. AR page 44

EC8 Total sum of taxes of all types broken down by country. Partially Reported

Total cash paid for income taxes and effective tax rate have been provided. Through our membership in the International Council on

Mining and Metals, we support the extractive industry’s transparency initiative regarding disclosure of payment

of taxes and royalties. We will work with host governments that participate in this process.

SR page 69 (Cash Paid for Income Taxes)

SR page 69 (Effective Tax Rate)

GRI Content Index

75

GRI SECTION DESCRIPTION LOCATION

EC9 Subsidies received broken down by country or region. Not Disclosed

While in some instances these data are commercially sensitive, more reporting of subsidies is

occurring. Alcoa will keep this issue under review.

EC10 Donations to community, civil society, and other groups broken SR page 55down in terms of cash and in-kind donations per type of group.

Performance Indicators—Environmental

EN1 Total materials use other than water. Partially Reported

Due to the broad range of materials used across our various businesses, we do not collect these data at the global level.

SR page 28

EN2 Percentage of materials used that are wastes from sources SR page 29external to the reporting organization.

EN3 Direct energy use segmented by primary source. SR page 30

EN4 Indirect energy use. SR page 30

EN5 Total water use. SR page 33

EN6 Location and size of land owned, leased, or managed SR page 34in biodiversity-rich habitats.

EN7 Description of the major impacts on biodiversity associated with SR page 34activities and/or products and services in terrestrial,freshwater, and marine environments.

EN8 Greenhouse gas emissions. SR page 37

EN9 Use and emissions of ozone-depleting substances. SR page 37

EN10 NOx, SOx and other significant air emissions by type. SR page 38

EN11 Total amount of waste by type and destination. Partially Reported

We report total waste, waste to landfill, and wastesold or recycled. We do not have data collection systems in place to report by other destinations on a global level.

SR page 39 (Total Wastes Generated)

SR page 40 (Total Wastes Landfilled)

SR page 41 (Total Wastes Sold or Recycled)

EN12 Significant discharges to water by type. Partially Reported

While we track water usage, we do not track water discharges as a metric.

SR page 41

EN13 Significant spills of chemicals, oils, and fuels in terms of total SR page 43number and total volume.

EN14 Significant environmental impacts of principal products and services. SR page 42

EN15 Percentage of the weight of products sold that is reclaimable SR page 29at the end of the products’ useful life and percentage thatis actually reclaimed.

EN16 Incidents of and fines for non-compliance. Partially Reported

Alcoa’s goal is 100% compliance with all environmental laws and regulations by the end of 2004. We report performance against

this goal as a percentage of total Alcoa locations.

SR page 43

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GRI SECTION DESCRIPTION LOCATION

EN17 Initiatives to use renewable energy sources and to increase SR page 31energy efficiency.

EN23 Total amount of land owned, leased, or managed for production SR page 35activities or extractive use.

EN35 Total environmental expenditures by type. Partially Reported

Alcoa reports total global expenditures.

SR page 43

Performance Indicators—Social

LA1 Breakdown of workforce. Partially Reported

Processes for collecting the data on a global level do not exist currently.

SR page 47 (Employees by Region)

SR page 45 (Gender Balance)

LA2 Net employment creation and average turnover segmented Not Disclosedby region/country.

Processes for collecting the data on a global level do not exist currently.

LA3 Percentage of employees represented by independent Not Disclosedtrade union organizations or other bona fide employee representatives. Processes for collecting the data on a

global level do not exist currently.

LA4 Policy and procedures involving information, consultation, Not Disclosedand negotiation with employees over changes in the reporting organization’s operations. Development of policy is planned.

LA5 Practices on recording and notification of occupational SR page 51accidents and diseases, and how they relate to the ILO Code of Practice on Recording and Notification of Occupational Accidents and Diseases.

LA6 Description of formal joint health and safety committees Partially Reportedcomprising management and worker representatives and proportion of workforce covered by any such committees. All locations have health and safety committees that participate

in deployment of the location’s proactive safety efforts. These committees include broad representation.

SR page 51

LA7 Standard injury, lost day, and absentee rates and number Partially Reportedof work-related fatalities (including subcontracted workers).

Processes for collecting absentee data on a global level do not exist currently.

SR page 51

LA8 Description of policies or programs (for the workplace SR page 50and beyond) on HIV/AIDS.

LA9 Average hours of training per year per employee by Not Disclosedcategory of employee.

The initial 2004 deployment of a new learning management system will help with future collection of the data. There is a wide array of training available to Alcoa

employees. That training includes health and safety, Alcoa Business System, diversity, and leadership training.

77

GRI Content Index

GRI SECTION DESCRIPTION LOCATION

LA10 Description of equal opportunity policies or programs, Partially Reportedas well as monitoring systems to ensure compliance and results of monitoring. Alcoa has clearly articulated commitment to equal opportunity.

The Ethics and Compliance Line is available to help monitor in this area. In 2005, we will address strengthening

of our monitoring activities.

SR page 53

LA11 Composition of senior management and corporate SR page 19 (Board of Directors)governance bodies.

SR page 20 (Board Committees)

SR page 21 (Officers)

HR1 Description of policies, guidelines, corporate structure, Partially Reportedand procedures to deal with all aspects of human rights relevant to operations. Our human rights statement and Ethics and Compliance Line

are detailed in the report.

SR page 52

HR2 Evidence of consideration of human rights impacts as Partially Reportedpart of investment and procurement decisions.

All Alcoa activities are covered by our human rights statement.

SR page 52 (Human Rights)

SR page 54 (Supplier and Contractor Requirements)

HR3 Description of policies and procedures to evaluate and Partially Reported address human rights performance with the supply chain and contractors. We investigate identified human rights issues in the supply chain,

but we do not currently have a formal auditing process for this issue.

SR page 54 (Supplier and Contractor Requirements)

HR4 Description of global policy and procedures/programs Partially Reportedpreventing all forms of discrimination in operations.

Alcoa has a clearly articulated commitment against discrimination. The Ethics and Compliance Line is available to help monitor in this

area. In 2005, we will address strengthening our monitoring activities.

SR page 53

HR5 Description of freedom of association policy and extent Partially Reportedto which this policy is universally applied independent of local laws, as well as description of procedures/ Freedom of association is part of Alcoa’s globalprograms to address this issue. human rights statement.

SR page 53

HR6 Description of policy excluding child labor as defined by Partially ReportedILO Convention 138 and extent to which this policy is visibly stated and applied, as well as description of Alcoa has a clearly articulated commitment on children and procedures/programs to address this issue. young workers. The Ethics and Compliance Line is available

to help monitor in this area. In 2005, we will address strengthening our monitoring activities.

SR page 53

HR7 Description of policy to prevent forced and compulsory Partially Reportedlabor and extent to which this policy is visibly stated and applied, as well as description of procedures/programs Alcoa has a clearly articulated commitment on freedomto address this issue. of engagement. The Ethics and Compliance Line is

available to help monitor this area. In 2005, we will address strengthening our monitoring activities.

SR page 53

78

GRI SECTION DESCRIPTION LOCATION

HR12 Description of policies, guidelines, and procedures to SR page 54 (Relationships with Indigenous People)address the needs of indigenous people.

SR page 53 (Equality of Opportunity)

SR page 45 (Diversity)

SR page 53 (Case Study: Making the Learning, Communication Connection)

SO1 Description of policy to manage impacts on communities SR page 12 (Facility End-of-life Management)in areas affected by activities, as well as description of procedures/programs to address this issue. SR page 35 (Mining Reclamation Process)

SR page 12 (Case Study: Employee-formed Company Lessens Impact of Mine Closure

SR page 35 (Case Study: Goat Rearing on Rehabilitated Land Provides Alternative Income)

SO2 Description of the policy, procedures/management Partially Reportedsystems, and compliance mechanisms for organizations and employees addressing bribery and corruption. Alcoa has a clearly articulated commitment against

bribery and corruption. The Ethics and Compliance Line is available to help monitor in this area. In 2005,

we will address strengthening our monitoring activities.

SR page 60 (Bribery and Corruption)

SR page 13 (Vision, Values, and Principles)

SR page 23 (Ethics and Compliance Program)

SO3 Description of policy, procedures/management systems, SR page 61and compliance mechanisms for managing political lobbying and contributions.

SO4 Awards received relevant to social, ethical, and SR page 70environmental performance.

Webwww.alcoa.com/global/en/about_alcoa/

commitment_to_sustain/awards_recognition.asp

PR1 Description of policy for preserving customer health and Partially Reportedsafety during use of products and services, and extent to which this policy is visibly stated and applied, as well Formal policy does not exist. Product responsibility is as description of procedures/programs to address part of our ongoing relationship with our customers.this issue.

SR page 61

Webwww.alcoa.com/global/en/environment/msds_search.asp

PR2 Description of policy, procedures/management systems, SR page 61and compliance mechanisms related to product information and labeling. Web

www.alcoa.com/global/en/environment/msds_search.asp

PR3 Description of policy, procedures/management systems, Partially Reportedand compliance mechanisms for consumer privacy.

Alcoa is committed to maintaining consumer privacy.

SR page 61

Some GRI descriptions are edited for length. Reprinted with permission of the Global Reporting Initiative. For the complete SustainabilityReporting Guidelines, please visit www.globalreporting.org.

79

Appendix

STAKEHOLDERSBelow is a partial listing of stake-holders we have consulted or part-nered with on sustainability issues. Itshould be noted that inclusion onthis list does in no way indicate thatthese organizations support Alcoa’sactivities. Over the course of the year,we have met with them, both formal-ly and informally, to solicit theirviews on our business initiatives.

InternationalBenedictine Sisters

Coalition for EnvironmentallyResponsible Economies (CERES)

Conference Board

Conservation International

Council on Foundations

Earthwatch Institute

European Foundation Centre

Human Rights Watch

Independent Sector

Interfaith Center on CorporateResponsibility (and its constituents)

International Aluminium Institute

International Audit ProtocolConsortium

International Chamber of Commerce

International Council on Mining andMetals

International Organization forStandardization

Missionary Oblates of MaryImmaculate (OMI)

Pew Center on Global ClimateChange

Student Conservation Association

World Business Council forSustainable Development

World Council of Churches

World Resources Institute

World Wildlife Fund

EuropeAmerican Chamber of Commerce tothe European Union

European Aluminium Association

European Association of Metals

NationalAustraliaAustralia Aluminium Council

Australian Business Arts Foundation

Equal Opportunity for Women inthe Workplace Agency

Greening Australia

BrazilBrazilian Aluminum Council (ABAL)

Business for Recycling (CEMPRE)

CanadaAluminum Association of Canada

Environment Canada

Jour de la Terre Québec

Quebec Ministry of Environment

Quebec Department of Public Health

Réseau des Ressourceries du Québec

GuineaGuinea Ecologee

IcelandINCALandvernd

United StatesAmerican Friends Service Committee

Aluminum Association

Business Roundtable

Environmental Defense

National Business Group on Health and Human Resource PolicyAssociation

The Conservation Fund

Community ConsultativeGroupsAustraliaCommunity Consultative Networks

● Pinjarra

● Kwinana

● Wagerup

Community Advisory Boards

● Point Henry

● Anglesea

Community Advisory Network

● Portland

Stakeholder Reference Groups

● Pinjarra for the efficiency upgradeand bauxite residue

● Kwinana for bauxite residue

Working Groups

● Wagerup Working Group

● Wagerup Unit Three ● Emissions & health● Residue & water● Noise & transport● Land management● Socio & economic impacts

● Wagerup Tripartite Group

80

CanadaCommunity Advisory Boards

● Baie-Comeau

● Bécancour

● Deschambault

Working Groups

● Baie-Comeau PAHs Committee

● Becancour Industrial Park—Responsible ManagementCommittee

● Deschambault Quebec FarmerUnion Committee

IcelandAlcoa Fjardabyggd CommunityConsultative Group

JamaicaJamalco Community Council

United StatesCommunity Advisory Boards

● Carson, California

● Branford, Connecticut

● Winsted, Connecticut

● Eastman, Georgia

● Warrick, Indiana

● Louisville, Kentucky

● Frederick, Maryland

● Whitehall, Michigan

● Belmont, New Hampshire

● Massena, New York

● Badin, North Carolina

● Alcoa Technical Center,Pennsylvania

● Grove City, Pennsylvania

● Lancaster, Pennsylvania

● Philadelphia, Pennsylvania

● Gaffney, South Carolina

● Goose Creek, South Carolina

● Spartanburg, South Carolina

● Alcoa, Tennessee

● Morristown, Tennessee

● Point Comfort, Texas

● Rockdale, Texas

● Richmond, Virginia

● Ferndale, Washington

● Wenatchee, Washington

Thank you for reading Alcoa's 2004 Sustainability Report. We believe that it is an important way to provide information to a broad spectrum of stakeholders. The report is intended to provide a clear view ofwhat we do. If we can do this job better for you, we would like to hear your suggestions for improvements. Please help us by rating our report on a scale of 1 (poor) to 10 (excellent).

1. How would you rate the report’s structure in terms of finding information? ■■ 1 ■■ 2 ■■ 3 ■■ 4 ■■ 5 ■■ 6 ■■ 7 ■■ 8 ■■ 9 ■■ 10

2. How useful is the report to assess where Alcoa has made progress and where the company has morework to do in the areas of:

Corporate Governance ■■ 1 ■■ 2 ■■ 3 ■■ 4 ■■ 5 ■■ 6 ■■ 7 ■■ 8 ■■ 9 ■■ 10

Environmental Progress ■■ 1 ■■ 2 ■■ 3 ■■ 4 ■■ 5 ■■ 6 ■■ 7 ■■ 8 ■■ 9 ■■ 10

Social Progress ■■ 1 ■■ 2 ■■ 3 ■■ 4 ■■ 5 ■■ 6 ■■ 7 ■■ 8 ■■ 9 ■■ 10

Financial Performance ■■ 1 ■■ 2 ■■ 3 ■■ 4 ■■ 5 ■■ 6 ■■ 7 ■■ 8 ■■ 9 ■■ 10

3. a) Compared to other sustainability reports, how do you rate the Alcoa Sustainability Report?■■ 1 ■■ 2 ■■ 3 ■■ 4 ■■ 5 ■■ 6 ■■ 7 ■■ 8 ■■ 9 ■■ 10

b) Which company’s sustainability report did you like best?

c) Why?

4. Rate the usefulness of the case studies in adding value to the information and data on Alcoa’s programs.■■ 1 ■■ 2 ■■ 3 ■■ 4 ■■ 5 ■■ 6 ■■ 7 ■■ 8 ■■ 9 ■■ 10

5. a) What did you like best about the Alcoa report?

b) The report could be improved by:

6. Please specify your relationship to Alcoa:

■■ Employed by Alcoa ■■ Member of a non-governmental organization (NGO)

■■ Shareholder ■■ Member of a community where Alcoa has a presence

■■ Customer ■■ Other, please specify

■■ Supplier

7. Where are you from?

■■ Africa ■■ Latin America

■■ Australia ■■ North America

■■ Europe

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