<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[/] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED 31 DECEMBER 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-3677
ALCAN ALUMINIUM LIMITED
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<S> <C>
INCORPORATED IN: I.R.S. EMPLOYER IDENTIFICATION NO.:
CANADA NOT APPLICABLE
1188 Sherbrooke Street West,
Montreal, Quebec, Canada H3A 3G2
Telephone: (514) 848-8000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<S> <C>
TITLE NAME OF EACH EXCHANGE ON
WHICH REGISTERED
Common Shares without nominal or par value Chicago Stock Exchange
New York Stock Exchange
Pacific Stock Exchange
Common Share Purchase Rights Chicago Stock Exchange
New York Stock Exchange
Pacific Stock Exchange
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None
INDICATE BY CHECK MARK WHETHER THE REGISTRANT: (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS: Yes [/] No ...
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM 405
OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO THE
BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION STATEMENTS
INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY AMENDMENT TO
THIS FORM 10-K. [/]
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<S> <C>
THE AGGREGATE MARKET VALUE OF THE
VOTING STOCK HELD BY NON-AFFILIATES: $5,163 million, as of 3 March 1999
COMMON STOCK OF REGISTRANT
OUTSTANDING: 220,873,108 Common Shares,
as of 3 March 1999
DOCUMENTS INCORPORATED BY REFERENCE: Annual Report to security holders
for the fiscal year ended
31 December 1998 (Parts I, II and IV)
Management Proxy Circular for the
Annual meeting to be held on 22
April 1999 (Parts III and IV)
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CONTENTS
<TABLE>
<CAPTION>
PAGE
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PART I
Items 1 and 2 Business and Properties........................................... 2
General..................................................................... 2
Sales and Markets........................................................... 3
Raw Materials............................................................... 3
Smelting.................................................................... 5
Other Aluminum Sources...................................................... 8
Electricity................................................................. 8
Fabricating................................................................. 10
Research and Development.................................................... 12
Environmental Protection.................................................... 13
Employees................................................................... 13
Patents, Licenses and Trademarks............................................ 14
Competition and Government Regulations...................................... 14
Year 2000................................................................... 14
Property.................................................................... 15
Item 3 Legal Proceedings........................................................ 15
Environmental Matters....................................................... 15
Aboriginal Issues........................................................... 17
Other Matters............................................................... 17
Item 4 Submission of Matters to a Vote of Security Holders...................... 18
PART II
Item 5 Market for the Registrant's Common Equity and Related Stockholder Matters 18
Item 6 Selected Financial Data.................................................. 18
Item 7 Management's Discussion and Analysis of Financial Condition and
Results of Operations.................................................... 19
Item 7a Quantitative and Qualitative Disclosures about Market Risk.............. 19
Item 8 Financial Statements and Supplementary Data.............................. 20
Item 9 Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure..................................................... 20
PART III
Item 10 Directors and Executive Officers of the Registrant...................... 20
Item 11 Executive Compensation.................................................. 22
Item 12 Security Ownership of Certain Beneficial Owners and Management.......... 22
Item 13 Certain Relationships and Related Transactions.......................... 22
PART IV
Item 14 Exhibits, Financial Statement Schedules and Reports on Form 8-K......... 22
Signatures...................................................................... 27
Consent of Independent Accountants.............................................. 29
Exhibit No. 21 Subsidiaries, Related Companies, etc............................ 30
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PART I
In this report, unless the context otherwise requires, the following definitions
apply:
"Alcan", "Company" or "Registrant" means Alcan Aluminium Limited and, where
applicable, one or more Subsidiaries,
"Annual Report" means the Annual Report for the year ended 31 December
1998,
"Board" or "Board of Directors" means the Board of Directors of Alcan,
"Dollars" or "$" means U.S. Dollars,
"Joint Venture" means an association (incorporated or unincorporated) of
companies jointly undertaking some commercial enterprise and
proportionately consolidated to the extent of Alcan's participation,
"Management Proxy Circular" means the management proxy circular for Alcan's
Annual Meeting to be held on 22 April 1999,
"Related Company" means a company in which Alcan owns, directly or
indirectly, 50% or less of the voting stock and in which Alcan has
significant influence over management, but does not include a company in a
Joint Venture,
"Shares" or "Common Shares" means the Common Shares of Alcan,
"Shareholders" means holders of the Shares,
"Subsidiary" means a company controlled, directly or indirectly, by Alcan,
and
"tonne" means a metric tonne of 1,000 kilograms or 2,204.6 pounds.
Unless otherwise expressly indicated herein, the financial and other information
given in this report is presented on a consolidated basis.
Certain information called for by Items of this Form is incorporated by
reference to the Annual Report and the Management Proxy Circular. Such
information is specifically identified herein, including by the reference "See
Annual Report " or "See Management Proxy Circular ". With the exception of
such information specifically incorporated by reference, the Annual Report and
the Management Proxy Circular are not to be deemed filed as part of this Form
10-K Report.
CAUTIONARY STATEMENT
Written or oral statements made by Alcan or its representatives, including
statements set forth herein, which describe the Company's or management's
objectives, projections, estimates, expectations or predictions of the future
may be "forward-looking statements" within the meaning of
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the United States Private Securities Litigation Reform Act of 1995, which can be
identified by the use of forward-looking terminology such as "believes,"
"expects," "may," "will," "should," "estimates," "anticipates" or the negative
thereof or other variations thereon. The Company cautions that, by their nature,
forward-looking statements involve risk and uncertainty and that the Company's
actual results could differ materially from those expressed or implied in such
forward-looking statements or could affect the extent to which a particular
projection is realized.
Important factors which could cause the Company's actual performance to differ
materially from projections or expectations included in forward-looking
statements include global aluminum supply and demand conditions, aluminum ingot
prices and changes in other raw materials costs and availability, cyclical
demand and pricing within the principal markets for the Company's products,
changes in government regulations, particularly those affecting environmental,
health or safety compliance, economic developments and other factors within the
countries in which the Company operates or sells its products and other factors
relating to the Company's ongoing operations including, but not limited to,
litigation, labour negotiations and fiscal regimes.
Additional information concerning factors that could cause actual results to
differ materially from those in forward-looking statements include, but are not
necessarily limited to, those discussed under the heading "Risks and
Uncertainties" in the Management's Discussion and Analysis section of Alcan's
Annual Report, on pages 37 to 39 thereof. The text under such heading is
incorporated herein by reference.
ITEMS 1 AND 2 BUSINESS AND PROPERTIES
GENERAL
Alcan is a Canadian company, incorporated on 3 June 1902, with headquarters in
Montreal, Canada. Alcan is engaged, together with Subsidiaries, Related
Companies and Joint Ventures, in all significant aspects of the aluminum
business on an international scale.
Alcan is independent of, and operates in competition with, all other aluminum
companies.
Alcan's operations include the mining and processing of bauxite, the basic
aluminum ore; the refining of bauxite into alumina; the generation of
electricity for use in smelting aluminum; the smelting of aluminum from alumina;
the recycling of used and scrap aluminum; the fabrication of aluminum, aluminum
alloys and non-aluminum materials into semi-finished and finished products; the
distribution and marketing of aluminum and non-aluminum products; the production
and sale of industrial chemicals; and research and technology. Alcan, together
with its Subsidiaries, Related Companies and Joint Ventures, has bauxite
holdings in six countries, produces alumina in six, smelts primary aluminum in
five, operates aluminum fabricating plants in 13 and has sales outlets and
maintains warehouse inventories in the larger markets of the world. Alcan also
operates a global transportation network which includes bulk cargo vessels, port
facilities and freight trains.
For 1998, the Company reported a net income of $ 399 million. See the Annual
Report "Management's Discussion and Analysis" on page 20.
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SALES AND MARKETS
Nearly 90% of Alcan's sales and operating revenues are derived from the sale of
aluminum in ingot and fabricated form, including fees charged for converting
customer-owned alumina into primary ingot and for converting customer-owned
metal into fabricated products.
Total Western World primary aluminum shipments (excluding the countries of the
CIS, Eastern Europe and China) totalled 17.8 million tonnes in 1996, 18.9
million tonnes in 1997 and 18.8 million tonnes in 1998. For a discussion of the
Western World Market and Western World Consumption Versus Alcan Sales, see
Annual Report, pages 21 and 22.
Alcan's ingot product realizations were $ 1,558 per tonne in 1998 compared to
$1,739 per tonne in 1997 and $1,658 per tonne in 1996. These figures relate to
primary and secondary ingot and scrap.
For a review of Alcan's Raw Materials and Chemicals Operations, Primary Metals
Operations and Fabricated Products Operations, see Annual Report, pages 26
through 31. For the Geographic Review, see Annual Report, pages 32 through 35
and pages 60 and 61. For information by Product Sectors, see page 62 (note 23).
RAW MATERIALS
BAUXITE/ALUMINA
Alumina (aluminum oxide) is produced from bauxite, the basic aluminum-bearing
ore, by a chemical process. Aluminum is, in turn, produced from alumina by an
electrolytic process which uses large quantities of energy to separate the
aluminum from the oxygen in alumina. Depending upon quality, between four and
five tonnes of bauxite are required to produce approximately two tonnes of
alumina which yield approximately one tonne of aluminum. A portion of the
alumina produced by the Company is sold in the metallurgical and chemical
alumina markets.
Alcan obtains its requirements of alumina and bauxite from several sources as
described below.
CANADA The Company owns alumina facilities with a capacity of about 1.2 million
tonnes per year at Jonquiere (Quebec). Bauxite for this operation is obtained
from Brazil (see below), Guinea (see below) and other sources. Alumina and
alumina-based chemicals produced at Jonquiere supply, in part, the smelters in
Quebec and are also sold in the North American chemical market.
AUSTRALIA The Company has a 21.4% interest in a company which operates an
alumina plant at Gladstone (Queensland) which has a capacity of about 3.3
million tonnes per year. Each participant in that plant supplies bauxite for
toll conversion. Alcan's bauxite is purchased from a third party in Australia
under a long-term contract. Alcan's share of production from Gladstone is used
to supply the Alcan smelter at Kitimat (British Columbia) and is also sold to
third parties.
In 1998, Alcan and the aforementioned Australian third party signed an agreement
providing for the future development of Alcan's Ely bauxite mine in Cape York,
Australia, with that party"s adjacent operations.
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BRAZIL The Company purchased close to 2 million tonnes of bauxite in 1998 under
contracts in effect through 1999 from a 12.5%-owned company, Mineracao Rio do
Norte S.A. ("MRN"). MRN's Trombetas mine in the Amazon region has an operating
capacity of about 10 million tonnes per year. Bauxite purchased from MRN is
processed at the Jonqui#re plant (see above) and at the Alumar alumina refinery
in Sao Luis (Brazil) which has an annual capacity of about 1.2 million tonnes;
the Company owns a 10% interest and future expansion rights in the latter
refinery.
The Company owns alumina facilities (and related bauxite mining facilities) with
a capacity of about 150,000 tonnes per year at Ouro Preto which supply smelters
in Brazil.
GHANA The Company purchased about 400,000 tonnes of bauxite in 1998 from Ghana
Bauxite Co. Ltd. ("GBC"), in which it holds an interest of 80%. The bauxite
purchased is used for processing at the Burntisland plant (see below), the
Aughinish plant (see below) and the Jonquiere plant (see above).
GUINEA The Company purchased 4 million tonnes of bauxite in 1998 under
contracts in effect through 2011 from Compagnie des Bauxites de Guin#e ("CBG").
Alcan has a 33% interest in Halco (Mining) Inc.; Halco holds a 51% interest in
CBG, the remaining 49% being held by the Republic of Guinea. CBG's mine in the
Boke region of Guinea has an operating capacity of about 12 million tonnes per
year. Bauxite purchased from CBG is processed at the Aughinish plant (see
below) and the Jonqui#re plant (see above) and is also sold to third parties.
In Guinea, the Company also purchased about 100,000 tonnes of alumina in 1998
from Friguia. The Company holds a 20% interest in Frialco S.A. which held a 51%
interest in Friguia, the remaining 49% was held by the Republic of Guinea. The
Friguia alumina plant has an operating capacity of about 640,000 tonnes per
year. Alumina purchased from Friguia is sold to third parties. Frialco sold its
interest in Friguia on 12 October 1998. Frialco will be dissolved.
INDIA In May 1998, Alcan acquired a 20% interest in the proposed Utkal alumina
project in Orissa, India. A further 20% is held by Alcan's Subsidiary, Indal
Aluminium Company, Limited ("Indal"). The project consists of a one million
tonne integrated alumina plant and bauxite mine, with potential to further
expand production capacity. In February 1999, Alcan increased its direct
interest in the project to 35%, subject to regulatory approval. Alcan's
decision regarding beginning of construction is expected to be made in late 1999
or early 2000.
Indal owns bauxite mining facilities at Chandgad and Lohardaga, as well as
alumina facilities at Belgaum and Muri with a total capacity of 360,000 tonnes
of alumina per year.
IRELAND During 1998, the Company owned an alumina plant at Aughinish which has
a capacity of about 1.4 million tonnes of alumina per year. Bauxite for this
operation is purchased almost exclusively from Guinea (see above). In 1998, the
alumina produced at Aughinish was consumed by Alcan smelters in the United
Kingdom and North America or sold to third parties. The Company sold the
Aughinish plant on 25 February 1999, maintaining certain bauxite supply and
alumina purchase arrangements with the new owners.
JAMAICA The Company has a 93% interest in alumina facilities (and related
bauxite mining facilities) with an annual capacity of about 1.2 million tonnes.
The Government of Jamaica owns the remaining 7% interest in these facilities.
The Company is responsible for management of the operations. In
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1998, most of the Company's share of the alumina produced was supplied to Alcan
smelters in Canada and the United States.
UNITED KINGDOM The Company operates an alumina plant in Burntisland (Scotland),
which has an annual capacity of approximately 120,000 tonnes of special aluminas
and other chemicals. Bauxite for this operation is purchased from Ghana (see
above). Production from this plant is sold in the chemical market.
BAUXITE RESERVES
Through Subsidiaries, Related Companies and Joint Ventures, Alcan has
approximately 400 million tonnes of demonstrated bauxite reserves, which the
Company believes are sufficient to meet its needs for the next 30 years. The
Company also has access to additional resources to meet its needs beyond this
period. In 1997 and 1998, the Company spent $1.6 million and $ 2.9 million,
respectively, on exploration and development of bauxite reserves.
CHEMICALS AND OTHER MATERIALS
The Company, together with its Subsidiaries, Related Companies and Joint
Ventures, produces a wide range of specialty aluminas and aluminum hydroxides
for different markets, such as ceramics, refractories, water treatment
chemicals, catalysts and coagulants; its products are also used as flame
retardants and smoke suppressants for plastics and resins. The principal
manufacturing facilities for special aluminas and aluminum hydroxides are
located in Canada, the U.K. and India.
Certain chemicals and other materials, e.g., aluminum fluoride, required for the
production of aluminum at the Company's smelters, are also produced by its
chemical operations. Other materials, e.g., caustic soda, fuel oil, fluorspar
and petroleum coke, are purchased from third parties.
In December 1998, Alcan sold its Subsidiary, Handy Chemicals Limited, which
produces water treatment chemicals and cement superplasticizers.
SMELTING
At the end of 1998, the Company owned 16 primary aluminum smelters with a total
annual rated capacity of 1,706,000 tonnes. Seven of these smelters, having a
total annual rated capacity of 1,118,000 tonnes, are located in Canada; the
other smelters are located in Brazil, India, the U.K. and the U.S.A.
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The table below summarizes the primary aluminum production for 1998, together
with annual rated capacities of smelters referred to above:
<TABLE>
<CAPTION>
RATED
CAPACITY
OWNERSHIP AT 1998 ('000 TONNES)
COMPANY AND SUBSIDIARY 31 DECEMBER 1998 PRODUCTION (at 31 December 1998)
LOCATED IN: (%) ('000 TONNES)
<S> <C> <C> <C>
Canada 100 1,107 1,118
United States 100 129 186
United Kingdom 100 124 176
Brazil 100 103 109
India 54.6 18 117
Total 1,481 1,706
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The Company's smelter facilities are as listed below:
<TABLE>
<CAPTION>
RATED CAPACITY
SMELTER LOCATION ('000 TONNES P.A.)
- ------- -------- ------------------
<S> <C> <C>
Arvida Jonquiere, Quebec, Canada 238
Beauharnois Melocheville, Quebec, Canada 49
Grande Baie Ville de la Baie, Quebec, Canada 186
Isle Maligne Alma, Quebec, Canada 75
Laterriere Chicoutimi, Quebec, Canada 210
Shawinigan Shawinigan, Quebec, Canada 88
Kitimat Kitimat, British Columbia, Canada 272
Sebree Sebree, Kentucky, U.S.A. 186
Kinlochleven Kinlochleven, Scotland, U.K. 8
Lochaber Fort William, Scotland, U.K. 38
Lynemouth Ashington, England, U.K. 130
Ouro Preto Saramenha, Minas Gerais, Brazil 51
Aratu Bahia, Brazil 58
Belgaum Belgaum, Karnataka, India 66
Hirakud Hirakud, Orissa, India 30
Alupuram Alupuram, Kerala, India 21
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Total 1,706
</TABLE>
Utilization of smelting capacities varies from time to time according to
business conditions. Approximately 204,000 tonnes of capacity remain shut down
at smelters in the U.S.A., the U.K. and India.
For many years, the Company has been engaged in smelter modernization and
rebuilding programs to retrofit or replace some of its older facilities. It
intends to continue these programs with a view to increasing productivity,
improving working conditions and minimizing the impact of its operations on the
environment.
In 1998, Alcan announced the construction of a 375,000-tonne annual capacity
aluminum smelter in Alma, Quebec. The total cost for the new smelter is
estimated at $1.6 billion, and construction is expected to be completed in 2001.
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On 22 March 1999, Alcan announced the closure of the Isle Maligne smelter, such
closure to be completed by December 1999. It had been previously intended that
the Isle Maligne smelter be shut down when the new Alma smelter becomes
operational.
OTHER ALUMINUM SOURCES
Other sources of aluminum include the following: purchases of primary aluminum
under contracts and spot purchases, purchases of aluminum used beverage cans and
aluminum scrap for recycling and purchases of customer scrap returned against
ingot or semi-fabricated product sales contracts. In addition, some aluminum
fabricated products are purchased for re-sale. Purchases in 1998 of aluminum of
all types from all sources amounted to 1,227,000 tonnes, compared with 1,254,000
tonnes in 1997 and 1,003,000 tonnes in 1996.
The Company operates three specialized plants in the U.S.A, with a total annual
capacity of 481,000 tonnes, for the recycling of used beverage cans and process
scrap returned from customers. A similar plant in the U.K. operates with a
capacity of 70,000 tonnes per year. The Company also operates a facility in the
U.K. for the production of 70,000 tonnes per year of sheet ingot from aluminum
scrap. In Brazil, the Company operates a dedicated used beverage can recycling
facility with an initial capacity of 40,000 tonnes per year.
The Company operated secondary aluminum smelters in Italy, India, the U.S.A. and
Thailand which have capacities of 56,000, 25,000, 59,000 and 30,000 tonnes per
year, respectively, for the production of secondary aluminum from aluminum
scrap. In February 1999, the U.S. facility, at Shelbyville, Tennessee, was sold.
ELECTRICITY
Aluminum is produced from alumina by an electrolytic process requiring large
amounts of electricity. The smelting of one tonne of aluminum requires between
14 and 18.5 megawatt-hours of electric energy.
The Company produces low-cost electricity at its own hydro-electric generating
plants in Canada. These plants have an installed generating capacity of 3,600
megawatts, of which 2,700 megawatts may be considered to be hydraulically
available over the long term.
In Canada, all water rights are owned by the Company except for those relating
to the Peribonka River in Quebec. In 1984, the Company and the Quebec Government
signed a lease extending the Company's water rights relating to that river to 31
December 2033 against an annual payment based on sales realizations of aluminum
ingot. An additional charge (REDEVANCE ADDITIONNELLE) is payable to the
provincial government based on total energy generation, escalating at the same
rate as the Consumer Price Index in Canada. In British Columbia, rentals and
generation taxes for electricity used in smelting and related purposes are
directly related to the sales realizations of aluminum produced at Kitimat. For
electricity sold to third parties within that province, the Company pays
provincial water rentals at rates which are fixed by the provincial government,
similar to those paid by B.C. Hydro, the provincially-owned electric utility.
One-third of the Company's installed hydro-electric capacity in Canada was
constructed prior to the end of 1943, another third by the end of 1956 and the
remainder by the end of 1959. All these facilities are expected to remain fully
operational over the foreseeable future.
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In addition to electricity generated at its generating plants, as described
above, the Company has agreed to purchase, under a long-term agreement, between
one and three billion KWh of electrical energy annually from Hydro-Quebec
beginning in 2001.
Electricity required by the Company's smelters in Canada is obtained from the
foregoing sources. Electricity which is surplus to the Company's needs is sold
to neighbouring utilities or customers under both long-term and short-term
arrangements.
For smelters located outside of Canada, electricity is obtained from a variety
of sources. The smelters in England and Scotland operate their own coal-fired
and hydro-electric generating plants, respectively. A Subsidiary in India
operates its own coal-fired generating plant for one of its smelters, while its
two other smelters are dependent upon purchased electricity. The smelters in
Brazil obtain some of their electricity requirements from owned hydro-electric
generating plants and purchase the balance. The smelter in the U.S.A. purchases
electricity under a long-term contract.
The Company's electricity generating facilities are listed below:
<TABLE>
<CAPTION>
INSTALLED CAPACITY
METHOD OF (NAMEPLATE RATING)
GENERATING STATION GENERATION LOCATION (MEGAWATTS)
- ------------------ ---------- -------- ------------------
<S> <C> <C> <C>
Chute-des-Passes Hydro-electric Peribonka River, Quebec, Canada 750
Chute-du-Diable Hydro-electric Peribonka River, Quebec, Canada 205
Chute-a-la-Savane Hydro-electric Peribonka River, Quebec, Canada 210
Isle Maligne Hydro-electric Saguenay River, Quebec, Canada 402
Chute-a-Caron Hydro-electric Saguenay River, Quebec, Canada 224
Shipshaw Hydro-electric Saguenay River, Quebec, Canada 896
Kemano Hydro-electric Kemano, British Columbia, Canada 896
Kinlochleven Hydro-electric Kinlochleven, Scotland, U.K. 24
Lochaber Hydro-electric Fort William, Scotland, U.K. 76
Lynemouth Coal-fired Ashington, England, U.K. 390
Hirakud Coal-fired Hirakud, Orissa, India 60
Piranga Hydro-electric Saramenha, Minas Gerais, Brazil 15
Mynart Hydro-electric Saramenha, Minas Gerais, Brazil 14
-----
Total 4,162
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</TABLE>
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FABRICATING
The conversion of aluminum ingot into semi-fabricated and finished products
requires the application of a variety of intermediate processes, known generally
as FABRICATING. Many other producers of primary aluminum are also in the
business of supplying those products. In addition, there are many independent
fabricators which purchase primary and recycled aluminum from the primary
producers and the post-consumer market.
Although Alcan is a leader in international markets for aluminum ingot products,
the Company's principal sales are in fabricated aluminum products. In 1998,
Alcan shipped 1,823,000 tonnes of fabricated products and manufactured another
289,000 tonnes from customer-owned metal, which together represented 72% of
Alcan's total volume for the year.
Alcan's fabricated aluminum products business is mainly composed of a number of
large, capital-intensive rolling operations as well as some smaller downstream
businesses, and represents over 75% of Alcan's total sales and operating
revenues.
Alcan, together with its Subsidiaries, Related Companies and Joint Ventures,
carries out fabricating operations in more than 50 plants in 13 countries.
Flat-rolled Products
Alcan is the world's largest producer and marketer of flat-rolled aluminum
products (sheet and foil), which constitute 90% of Alcan's fabricated product
volume. At the end of 1998, the Company's annual sheet and foil manufacturing
capacity in its principal fabricating markets was as follows: over 1,100,000
tonnes in North America; 150,000 tonnes in South America; over 950 tonnes in
Europe; and 140 tonnes in Asia.
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Alcan's principal rolling operations are as follows:
<TABLE>
<CAPTION>
Rolling Mill Location
<S> <C>
Kingston Kingston, Ontario, Canada
Saguenay Jonquiere, Quebec, Canada
Oswego Oswego, New York, U.S.A.
Fairmont Fairmont, West Virginia, U.S.A.
Louisville Louisville, Kentucky, U.S.A.
Terre Haute Terre Haute, Indiana, U.S.A.
Warren Warren, Ohio, U.S.A.
Logan Logan County, Kentucky, U.S.A.
Rogerstone Newport, Wales, U.K.
Falkirk Falkirk , Scotland, U.K.
Glasgow Glasgow, Scotland, U.K.
Gottingen Gottingen , Germany
Ludenscheid Ludenscheid , Germany
Ohle Plettenberg, Germany
Norf Neuss, Germany
Nachterstedt Nachterstedt, Germany
Bresso Milan, Italy
Pieve Emanuele Milan, Italy
Pindamonhangaba Pindamonhangaba, Brazil
Utinga Santo Andre, Brazil
Belur Belurmath, West Bengal, India
Taloja Taloja, Maharashtra, India
Bukit Raja Klang, Malaysia
Rangsit Rangsit, Thailand
</TABLE>
A major portion of Alcan sheet is in the form of can stock for beverage
containers. Other important end-use markets for sheet include building and
construction, transportation, the printing industry and the industrial
distribution market. Alcan foil is used for household and commercial packaging
applications and for industrial products.
The Company's project to expand capacity at its Pindamonhangaba, Brazil
rolling mill to 280,000 tonnes is expected to be completed by the second half of
1999.
The Company will invest $46 million to expand production of aluminum rolled
sheet for the automotive and distribution markets at its Kingston, Ontario mill.
The expansion is expected to be complete by the end of 2000.
Wire and Cable
Aluminum is also cast and rolled into rod, which is then drawn into wire and
stranded into cable for the transmission and distribution of electricity. Rod
is also used for mechanical applications such as
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<PAGE> 14
screen wire and cable armouring. Alcan's main wire and cable businesses are
located in Canada and the U.S.A.
Castings
Another method of fabrication is the casting of molten aluminum into components
for machinery, automotive products and aircraft. During 1998, Alcan was a
supplier of aluminum pistons and other engine components to the automotive
industry in Germany, the U.S.A. and Canada. On 7 January 1999, Alcan reached an
agreement to sell its piston plant in Nuremberg, Germany. During 1998, Alcan
closed its Joint Venture casting operation in St. Catharines, Ontario, Canada.
The Company also sells aluminum alloys to independent foundries in Canada,
Italy, the U.K. and the U.S.A.
Extrusions
The Company's Subsidiaries, Related Companies and Joint Ventures produce
extruded products in several countries (including France, India, Italy, China,
Malaysia and Thailand) and sell these products locally and in other countries
for the building, construction, transportation and engineering markets. Examples
of end-products using extrusions include windows, doors and automotive
components. The Company is also a major supplier of extrusion ingot in many
countries.
Acquisitions / Divestment / Restructuring
Since 1994, Alcan has divested several fabricating businesses which were not
considered to be a strategic fit for the Company and which did not create
long-term value for its Shareholders. As part of this process, in 1996, Alcan
sold 12 non-strategic downstream businesses in the U.K. and in the U.S.A. During
1998, the Company increased its shareholding in Indian Aluminium Company,
Limited from 34.6% to 54.6%, which thereby became a Subsidiary. The Company
also decreased its shareholding in Nippon Light Metal Company, Ltd from 45.6% to
11.2%.
RESEARCH AND DEVELOPMENT
Alcan's resource for technology is a global system of research laboratories,
applied engineering centres and technical departments. Some of these are
operated on a Company-wide basis by the R&D division of Alcan, while others are
managed and operated locally by Subsidiaries, Related Companies and Joint
Ventures.
The R&D division of Alcan constitutes the largest single body of research effort
within Alcan. Responsible for about 60% of total R&D expenses, the division
plays a major role in innovation, through basic and applied research. The
organization consists of about 500 employees located largely in three
laboratories: two in Canada (at Kingston, Ontario and Jonquiere, Quebec) and one
in the U.K. (Banbury, Oxfordshire). At Kingston and Banbury, efforts are
related mainly to fabricating processes and aluminum product systems as well as
developing and improving aluminum alloys. At Jonquiere, efforts are directed
more towards primary alumina production, smelter operations and molten metal
treatment.
The Company's expenditures on research and development amounted to $70 million
in 1998 compared to $ 72 million in 1997 and $ 71 million in 1996. Corresponding
expenditures are expected to be approximately $ 79 million for 1999.
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<PAGE> 15
ENVIRONMENTAL PROTECTION
In most of the countries where the Company operates production facilities,
environmental control regulations have been established or are in the process of
being established. The Company believes that its existing and planned
anti-pollution measures will enable it to satisfy statutory and regulatory
demands without material effect on its competitive position. The Company's
capital expenditures to protect the environment and improve working conditions
at the smelters and other locations were $71 million in 1998. Similar
expenditures for 1999 and 2000 are expected to be $115 million and $190 million,
respectively. In addition, expenditures charged against revenue for
environmental protection were $91 million in 1998 and are expected to be $95
million in 1999 and $90 million in 2000. In respect of years beyond 2000, the
Company expects that capital and operating expenditures will continue at
approximately the same levels.
EMPLOYEES
The following table shows the average number of employees of Alcan on a
geographical basis for the year ended 31 December 1998:
<TABLE>
<CAPTION>
COUNTRY / REGION EMPLOYEES ('000)
- ---------------- ----------------
<S> <C>
Canada 11
United States 4
United Kingdom 3
Germany 5
Other Europe 3
South America 3
Asia and Pacific 5
Other 2
--
Total 36
</TABLE>
A majority of the hourly-paid employees is represented by labour unions. There
are 24 collective labour agreements in effect in Canada, the majority of which
expire in 2003 or later.
In February 1998, Alcan and the unions representing Alcan hourly-paid employees
in Quebec signed agreements with 18-year terms collectively known as the
"Framework Agreement on Operational Stability", under which the parties commit
to attempt all means to renew collective agreements and settle disputes without
recourse to traditional leverage tools such as strikes, lockouts and pressure
tactics.
13
<PAGE> 16
PATENTS, LICENSES AND TRADEMARKS
The Company owns, directly or through Subsidiaries, a large number of patents in
Canada, the United States and other countries which relate to the products, uses
and processes of its businesses. The Company has also acquired certain
intellectual property rights under licenses from others for use in its
businesses. The Company owns a number of trademarks which are used to identify
its businesses and products. The Company's patents, licenses and trademarks
constitute valuable assets; however, the Company does not regard any single
patent, license or trademark as being material to its sales and operations
viewed as a whole.
COMPETITION AND GOVERNMENT REGULATIONS
The aluminum business is highly competitive in price, quality and service. The
Company experiences competition in the sale of aluminum from a large number of
companies in all major markets. In addition, aluminum products face competition
from products fabricated from several other materials such as plastic, steel,
iron, copper, glass, wood, zinc, lead, tin, titanium, magnesium, cement and
paper. The Company believes that its competitive standing is enhanced by its
ability to supply virtually all its own power requirements for its Canadian and
U.K. smelters at low cost.
The operations of the Company, like those of other international companies,
including its access to and cost of raw materials and repatriation of earnings,
may be affected by such matters as fluctuations in monetary exchange rates,
currency and investment controls, withholding taxes and changes in import duties
and import restrictions. Imports of ingot and other aluminum products into
certain markets are subject to import regulations and, where applicable, import
duties. These affect the Company's sales realizations and may affect the
Company's competitive position. Shipments of the Company's products are also
subject to anti-dumping laws of the importing country, which prohibit sales of
imported merchandise at less than defined fair values.
The INVESTMENT CANADA ACT provides that the acquisition of control of a Canadian
business enterprise, such as Alcan, by a "non-Canadian" (as defined in the Act)
is subject to review under the Act and may not be implemented unless the
Minister of the Government of Canada responsible for the administration of the
Act determines that the proposed acquisition is, or is likely to be, of net
benefit to Canada. The acquisition by a non-Canadian of a majority of the
voting shares of a Canadian company is deemed to constitute the acquisition of
control of that company. The acquisition by a non-Canadian of more than
one-third but less than the majority of the common shares of a Canadian company
is, unless the contrary is established, deemed to constitute the acquisition of
control.
YEAR 2000
See the Annual Report, the section titled "The Year 2000 Issue" on pages 38 and
39 and page 58, note 19. Such disclosure is "Year 2000 Readiness Disclosure"
as defined by the Year 2000 Information and Readiness Disclosure Act of 1998
(Public Law 105-271, 112 Stat. 2386, a U.S. statute) enacted on 19 October
1998, to the extent applicable under the Act.
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<PAGE> 17
PROPERTY
Alcan believes that its properties, most of which are owned, are suitable and
adequate for its operations.
ITEM 3 LEGAL PROCEEDINGS
ENVIRONMENTAL MATTERS
LITIGATION
The Company's U.S. Subsidiary (Alcan Aluminum Corporation, or "Alcancorp") and
third parties are defendants in a lawsuit instituted in May 1983 before the
Federal District Court for the Central District of California, by the U.S.
Environmental Protection Agency ("EPA") and the State of California, involving
the Stringfellow hazardous waste site. Alcancorp was held liable in that
lawsuit. In January 1992, Alcancorp and the U.S. Justice Department entered
into a four-year Partial Consent Decree. On the basis of that arrangement,
Alcancorp has funded a total of $13,100,000 for a treatment plant designed to
help clean up the site. In December 1998, Alcancorp and several other parties
filed appeals with the Circuit Court on numerous counts including whether
liability was correctly imposed on Alcancorp. In January 1999, Alcancorp
entered into a structured settlement with the State of California whereby
California will accept liability for all clean-up costs from 1 January 1999
onward and Alcancorp will accept responsibility for past clean-up costs. The
appeals have been stayed pending finalization of the settlement and satisfaction
of certain other conditions.
In a lawsuit brought in July 1987 relating to the Pollution Abatement Services
site in Oswego, New York, the Federal District Court for the Northern District
of New York found (in January 1991) Alcancorp liable for a share of the clean-up
costs for the site, and in December 1991 determined the amount of such share to
be $3,175,683. Alcancorp appealed this decision to the United States Circuit
Court of Appeals for the Second Circuit. In April 1993, the Second Circuit
reversed the District Court and remanded the case for a hearing on what, if any,
liability might be assigned to Alcancorp depending on whether Alcancorp can
prove that its waste did not contribute to the response costs at the site.
Furthermore, the case was consolidated with another case, instituted in October
1991, in which the EPA sued Alcancorp in the Federal District Court for the
Northern District of New York seeking clean-up costs in regard to the Fulton
Terminals site in Oswego County, New York.
In an EPA lawsuit in 1989 before the Federal District Court for the Middle
District of Pennsylvania involving the Butler Tunnel site, in which Alcancorp is
a party, the Court in May 1991 granted summary judgment against Alcancorp in the
amount of $473,790. After unsuccessful appeals, Alcancorp paid $652,371.09
representing the judgment amount plus interest, and is disputing about $400,000
associated with that judgment representing additional enforcement costs incurred
after the date of the initial judgment. Alcancorp has been notified by the EPA
that it may seek additional sums for further remedial activities at the Butler
Tunnel site.
In February 1996, the Company's U.K. Subsidiary (British Alcan Aluminium plc
("British Alcan")) sold its investments in several of its Subsidiaries,
including Magnesium Elektron, Inc. and Luxfer USA
15
<PAGE> 18
Limited, both located in the U.S.A. As part of the sale, British Alcan agreed
to indemnify the purchaser for certain liabilities including those, inter alia,
arising out of the following proceedings:
(a) Magnesium Elektron, Inc. ("MEI"; at the time, a Subsidiary of British
Alcan) was sued, together with approximately 70 other defendants, alleging
that MEI is a former owner / operator of a site which the plaintiffs
currently own and that MEI's activities contributed to environmental
contamination on the site. British Alcan believes that it has legal
defences and intends to pursue them vigorously.
(b) Luxfer USA Limited ("Luxfer"; at the time, a Subsidiary of British Alcan)
is a participant in a joint defence group with regard to waste Luxfer sent
to the Omega hazardous waste site in Whittier, California. At various times
during 1995, Luxfer contributed various amounts totalling $11,800 for
defence group costs and the removal of waste from the site, and is now
waiting for a report on the cost of the remediation that is needed at the
site.
(c) Luxfer is also a participant in a joint defence group formed to defend
claims by numerous homeowners against various companies who allegedly
disposed of industrial waste at a landfill in Monterey Park, California.
There are many defendants and Luxfer was a minor contributor to the site.
The discovery process is underway.
In connection with a property in New York State which was the site of an
extrusion operation, Alcancorp retained liability for alleged contamination
though the property was sold in 1996. The State has approved a Remedial
Investigation Report negotiated between the New York State Department of
Environmental Conservation ("NYDEC") and Alcancorp. A record of decision has
been issued. The parties are negotiating a consent order to implement a
modified record of decision. The clean up costs are estimated to be in the order
of $500,000.
Under the terms of sale of its metal goods division, Alcancorp retains liability
for defending, as a third party defendant, a suit initiated in December 1995 by
the State of New Jersey alleging that a disposal company used by the division
disposed of hazardous material in a landfill. Including Alcancorp, there are
277 third-party defendants in this action.
Under the terms of sale of Alcan Building Products US, Alcancorp retains
liability for defending against an administrative order and notice of civil
penalty issued by the New Jersey EPA in October 1995 in connection with an
alleged permit violation involving volatile organic compound emissions.
Alcancorp filed an appeal in July 1998.
INVESTIGATIONS
In certain government investigations of contamination by alleged hazardous
wastes at sites in Illinois, New York, Pennsylvania, Ohio, New Jersey, North
Carolina, Michigan, Missouri and Massachusetts (on which waste material is
alleged to have been deposited by disposal contractors employed in the past
directly or indirectly by Alcancorp and other industrial companies), Alcancorp
has contested its liability. The EPA has responded that it may file lawsuits
against Alcancorp as to these sites. Alcancorp was advised of additional sites
being similarly investigated. Alcancorp has been advised by the various
authorities that it may be liable to contribute to the cost of the
investigations and any possible remedial action for such sites. There can be no
assurance that Alcancorp will not incur material cleanup costs as a result of
these investigations.
16
<PAGE> 19
At a plant site in Indiana, testing has revealed traces of trichloroethylene in
the groundwater. Alcancorp investigated the matter with a third party who is
believed to be responsible for the contamination and a voluntary remediation
plan was filed with the State of Indiana. Under an interim settlement
agreement, the third party agreed to assume 90% of the costs.
REVIEWS AND REMEDIAL ACTIONS
The Company has established procedures for reviewing, on a regular basis,
environmental investigations and any possible remedial action. Although the
Company cannot estimate the costs which may ultimately be borne by it, the
Company has no reason to believe that any remedial action will materially impair
its operations or materially affect its financial condition.
ABORIGINAL ISSUES
A 100-member Indian Band filed a suit against Canada, British Columbia and Alcan
on 14 April 1998, seeking a declaration that it be entitled to the exclusive
occupancy or possession of certain claimed lands, to damages and to other
relief. Alcan obtained its title to certain of its lands in the claimed
territory under valid grants from the Government of Canada upon due payment to
that Government; other lands were purchased from third parties.
The claim appears to rely on the December 1997 decision of the Supreme Court of
Canada in the DELGAMUUKW case which deals with issues of aboriginal rights and
title, as a consequence of which specific aboriginal rights and titles in Canada
will be determined by the courts on a case-by-case basis. Alcan has filed a
statement of defence.
On 1 March 1999, the suit was withdrawn by the plaintiffs, but, prior to such
withdrawal, an organization apparently purporting to represent the same band had
filed a suit against Canada and British Columbia, seeking a declaration that it
be entitled to fishing rights in an area downstream from Alcan's Nechako
Reservoir. Alcan is preparing to join this suit as a defendant in order to
protect its water rights.
In March 1998, the Haisla Nation wrote to Alcan and to the governments of Canada
and British Columbia asserting that Alcan's private lands in Kitimat and Kemano
are subject to the aboriginal title of the Haisla Nation, also apparently
relying on the decision in the DELGAMUUKW case.
OTHER MATTERS
In March 1996, Alcancorp, along with other U.S. aluminum producers, was sued by
a U.S. bicycle manufacturer for alleged price-fixing stemming from the
Memorandum of Understanding entered into by six Governments in January 1994. In
a summary judgment, rendered in July 1996, the U.S. District court for the
Central District of California (county of Los Angeles) dismissed the case. The
U.S. Supreme Court has denied the plaintiff's appeal and subsequent motion for
reconsideration.
There are no proceedings which, according to management's belief, could have a
material effect on the Company's financial position or results of operation.
17
<PAGE> 20
ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company has not submitted any matter to a vote of security holders, through
solicitations of proxies or otherwise, during the fourth quarter of the year
ended 31 December 1998
PART II
ITEM 5 MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information required is incorporated by reference to the Annual Report, the
section titled "Common Shares" on page 68.
The number of holders of record of Shares on 3 March 1999 was approximately
20,041.
While the Company intends to pursue a policy of paying quarterly dividends, the
level of future dividends will be determined by the Board of Directors in light
of earnings from operations, capital requirements and the financial condition of
the Company. The Company's cash flow is generated principally from operations
and also by dividends and interest payments from Subsidiaries, Joint Ventures
and Related Companies. These dividend and interest payments may be subject,
from time to time, to regulatory or contractual restraints, withholding taxes
(see Annual Report, page 55, note 15 to Consolidated Financial Statements) and
foreign governmental restrictions affecting repatriation of earnings. (See
section titled "Competition and Government Regulations" on page 14 of this
report.)
Dividends paid on Shares held by non-residents of Canada generally will be
subject to Canadian withholding tax. This withholding tax is levied at the basic
rate of 25%, although this rate may be reduced depending on the terms of any
applicable tax treaty. For residents of the United States, the treaty-reduced
rate is currently 15%.
ITEM 6 SELECTED FINANCIAL DATA
The information required is incorporated by reference to the Annual Report, on
pages 64 and 65, for the following items:
- - under the heading "Consolidated Income Statement Items":
- Revenues
- Net income (Loss)
- - under the heading "Consolidated Balance Sheet Items":
- Total assets
- Total debt
- - under the heading "Per Common Share":
18
<PAGE> 21
- Net income (Loss)
- Dividends paid
Commencing 1995, the Company adopted the recommendations of the Canadian
Institute of Chartered Accountants ("CICA") concerning the accounting for joint
ventures.
Commencing 1996, the Company retroactively adopted the recommendations of the
CICA concerning the disclosure and presentation of financial instruments.
Commencing 1998, the Company retroactively adopted, without restating prior
years, the recommendations of the CICA concerning accounting for income taxes.
Commencing 1998, the Company retroactively adopted the recommendations of the
CICA concerning segment disclosures.
See Annual Report, pages 46 to 48, note 5 to Consolidated Financial Statements
for a comparison, for certain items listed, of the amounts as reported by the
Company under Generally Accepted Accounting Principles ("GAAP") in Canada with
amounts that would have been reported under U.S. GAAP.
ITEM 7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The information required is incorporated by reference to the Annual Report,
pages 20 through 39, the section titled "Management's Discussion and Analysis".
As the Company follows Canadian GAAP, reference should be made to note 5 to the
Consolidated Financial Statements on pages 46 to 48 of the Annual Report which
compares, for certain items listed, the amounts as reported with the amounts
that would have been reported under U.S. GAAP.
Refer to the section titled "Competition and Government Regulations" on page 14
of this report for a brief description of the Investment Canada Act as it
applies to the Company.
ITEM 7A QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has estimated the impact on 1999 net income of a 10% adverse change
in interest rates, in foreign currency exchange rates or in aluminum prices
based upon its financial instrument and derivative commodity contract positions
outstanding at 31 December 1998.
INTEREST RATES
The net income impact of a 10% movement in interest rates on the Company's
invested surplus cash and time deposits at 31 December 1998 net of its variable
rate debt outstanding at 31 December 1998 is immaterial.
FOREIGN CURRENCY EXCHANGE RATES
The effect of an adverse movement of 10% in foreign currency exchange rates on
the Company's financial instruments (principally Canadian dollar forward and
option contracts) outstanding at 31
19
<PAGE> 22
The term of office of each Director runs from the time of his or her election to
the next succeeding annual meeting or until they cease to hold office as such.
(b) IDENTIFICATION OF EXECUTIVE OFFICERS
The required particulars with respect to the Officers of the Issuer are as
follows:
<TABLE>
<CAPTION>
NAME AND MUNICIPALITY OF RESIDENCE POSITION AGE
<S> <C> <C>
J. BOUGIE, O.C. President and Chief Executive 51
Outremont, Quebec Officer
R. L. BALL Executive Vice President 52
Beaconsfield, Bucks., England
C. CHAMBERLAND Executive Vice President, 59
Montreal, Quebec Technology and Major
Projects
J.-P. M. ERGAS Executive Vice President, 59
London, England Europe
R. B. EVANS Executive Vice President, 51
Shaker Heights, Ohio Fabricated Products, North
America
E. P. LEBLANC Executive Vice President, 58
Westmount, Quebec Alumina & Primary Metal
E. N. SANTOS Executive Vice President, 59
Sao Paulo, Brazil South America
B. W. STURGELL Executive Vice President, 49
Kiawah Island, South Carolina Asia/Pacific and Corporate
Development
S. THADHANI Executive Vice President and 59
Westmount, Quebec Chief Financial Officer
C. CARROLL Vice President, Bauxite, 43
Westmount, Quebec Alumina & Chemicals
D. GAGNIER Vice President, Corporate and 52
Beaconsfield, Quebec Environmental Affairs
G. OUELLET Vice President, Human 56
Montreal, Quebec Resources, Occupational
Health and Safety
P.K. PAL Vice President, Chief Legal 63
Montreal, Quebec Officer and Secretary
G.R. LUCAS Treasurer 45
(effective 1 April 1999)
D.G. O'BRIEN Controller 56
Westmount, Quebec
</TABLE>
All of the Officers of the Company have held their present positions or other
executive positions with the Company or its Subsidiaries during the past five
years, except as hereinafter described:
- - prior to joining the Company in January 1995, Mr. Ergas held senior
management positions with the Pechiney group of companies;
20
<PAGE> 23
December 1998 would be to reduce 1999 net income by approximately $ 60 million
of which $5 million relates to the cost of unexercised option premiums.
Because all of the Company's foreign currency forward positions are taken out to
hedge identifiable foreign currency commitments to purchase or sell goods and
services, any negative impact of currency movements on the forward exchange
contracts would be offset by an equal and opposite favourable exchange impact on
the commitments being hedged.
DERIVATIVE COMMODITY CONTRACTS
The effect of a reduction of 10% in aluminum prices on the Company's aluminum
forward purchase and options contracts outstanding at 31 December 1998 would be
to reduce 1999 net income by approximately $44 million, of which $14 million
relates to the cost of unexercised option premiums and $30 million to forward
purchase contracts. These results reflect a 10% reduction from the 1998
year-end, three-month LME aluminum closing price of $1241 and assume an equal
10% drop has occurred throughout the aluminum forward price curve existing as at
31 December 1998.
Because all of the Company's aluminum forward purchase contract positions are
taken out to hedge future purchases of metal required for firm sales commitments
to fabricated products customers, any negative impact of movements in the price
of aluminum on the forward purchase contracts would be offset by an equal and
opposite impact on the purchases being hedged.
ITEM 8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information required is incorporated by reference to the Annual Report,
Consolidated Financial Statements on pages 41 through 62 and the "Auditors'
Report" on page 40; the section titled "Quarterly Financial Data" on page 63.
Location of Financial Statements and other material required under this Item is
found under Item 14 of this report.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
The Company has nothing to report under this Item.
PART III
INFORMATION IN THIS PART IS BASED ON INFORMATION CONTAINED IN THE COMPANY'S
MANAGEMENT PROXY CIRCULAR DATED 3 MARCH 1999.
ITEM 10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) IDENTIFICATION OF DIRECTORS
The information required is incorporated by reference to the Management Proxy
circular pages 5 to 8.
21
<PAGE> 24
- - prior to joining the Company in January 1997, Mr. Evans held senior
management positions with the Kaiser Aluminum organization;
- - prior to joining the Company in January 1995, Mr. Gagnier was president of
a manufacturers' association in Canada and, prior to that, had held senior
administrative positions with the Government of Canada (including its Privy
Council Office).
ITEM 11 EXECUTIVE COMPENSATION
The information required is incorporated by reference to the Management Proxy
Circular, pages 12 to 22, the section titled "Executive Compensation".
ITEM 12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required is incorporated by reference to the Management Proxy
Circular, page 9, the sections titled "Holdings of Shares and Deferred Share
Units by Directors" and "Holdings of Shares by Others".
Directors and Executive Officers as a group beneficially own 132,763 Shares
(including Shares over which control or direction is exercised). This represents
0.06% of Shares issued and outstanding. In addition, Executive Officers as a
group have Options (as defined in the Management Proxy Circular) to purchase
2,321,500 Shares.
ITEM 13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
The information required is incorporated by reference to the Management Proxy
Circular, pages 23 to 24, the section titled "Indebtedness of Directors and
Executive Officers".
PART IV
ITEM 14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. FINANCIAL STATEMENTS
The information required is incorporated by reference to the Annual
Report, pages 41 to 62 and the Auditors' Report on page 40 thereof.
2. FINANCIAL STATEMENT SCHEDULES
The required information is shown in the consolidated financial
statements or notes thereto.
22
<PAGE> 25
3. EXHIBITS
References to documents filed by the Company prior to April 1987 are
to SEC File No. 1-3555. References to documents filed by the Company
after April 1987 are to SEC File No. 1-3677.
(3) Articles of Incorporation and By-laws:
3.1 Certificate of Amalgamation dated 1 January 1995,
Certificate of Amendment dated 8 May 1995. (Incorporated by
reference to exhibit 3.1 to the Annual Report on Form 10-K
of the Company for 1996.)
3.2 By-law No. 1A. (Incorporated by reference to exhibit 3.5 to
the Annual Report on Form 10-K of the Company for 1987.)
(4) Instruments defining the rights of security holders:
4.1 No long-term debt instrument is required to be filed
herewith, and the Company agrees to furnish a copy of any
such instrument to the Commission upon request.
4.2 Form of certificate for the Registrant's Common Shares.
(Incorporated by reference to exhibit 4.2 to the Annual
Report on Form 10-K of the Company for 1989.)
4.3 Shareholder Rights Agreement as amended and restated on 24
April 1995 between Alcan Aluminium Limited and The R-M Trust
Company as Rights Agent, which Agreement includes the form
of Rights Certificates. (Incorporated by reference to
exhibit 4 to the Company's Report on Form 8-K filed on 5 May
1995.)
(10) Material Contracts
10.1 Alcan Pension Plan (Canada), restated version, as of October
1990. (Incorporated by reference to exhibit 10.1 to the
Annual Report on Form 10-K of the Company for 1990.)
10.1.1 Amendments dated 1 January 1992. (Incorporated by reference
to exhibit 10.1.1 to the Annual Report on Form 10-K of the
Company for 1991.)
10.1.2 Amendments dated 1 January 1990, Schedule 93-2.
(Incorporated by reference to exhibit 10.1.2. to the Annual
Report on Form10-K of the Company for 1994.)
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<PAGE> 26
10.1.3 Amendments dated 1 January 1994, Schedule 93-3 and Schedule
93-4. (Incorporated by reference to exhibit 10.1.3. to the
Annual Report on Form 10-K of the Company for 1994.)
10.1.4 Amendments dated 31 December 1994, for Schedule 95-1, 1
January 1996 for Schedule 95-2, 1 January 1992 for Schedule
95-3 and 1 January 1995 for Schedule 95-4. (Incorporated by
reference to exhibit 10.1.4 to the Annual Report on Form
10-K of the Company for 1995.)
10.1.5 Amendments dated 1 July 1996 for Schedule 96-1, 1 November
1996 for Schedule 96-2, 1 January 1992 for paragraphs 1, 2
and 3 of Schedule 96-3 and 1 January 1996 for paragraph 4 of
Schedule 96-3. (Incorporated by reference to exhibit 10.1.5
to the Annual Report on Form 10-K of the Company for 1996.)
10.1.6 Amendments dated 1 January 1998 in Schedule 97-1, 30 March
1998 in Schedule 98-1 and 1 November 1998 in Schedule 98-2.
(filed herewith.)
10.2 Alcan Executive Share Option Plan. (Incorporated by
reference to the section titled "The Plan" on pages 3
through 8 and on pages 3 through 7 of the Prospectuses dated
30 April 1990 and 28 April 1993, respectively, filed as part
of the Company's Registration Statements on Form S-8,
Registration Nos. 33-34716 and 33-61790.)
10.3 Alcan Aluminium Limited Executive Performance Award Plan
revised as of October 1994. (Incorporated by reference to
exhibit 10.3 to the Annual Report on Form 10-K of the
Company for 1994.)
10.4 Alcan Aluminium Limited Financial Counselling Plan.
(Incorporated by reference to the exhibit of that name filed
with the Annual Report on Form 10-K of the Company for
1981.)
10.5 Alcan Aluminium Limited Executive Automobile Programme
revised as of 1 January 1992. (Incorporated by reference to
exhibit 10.5 to the Annual Report on Form 10-K of the
Company for 1991.)
10.6 Alcan Aluminium Limited Flexible Perquisites Program.
(Incorporated by reference to exhibit 10.6 to the Annual
Report on Form 10-K of the Company for 1995.)
10.7 Form of Supplemental Retirement Benefits Agreement.
(Incorporated by reference to exhibit 10.6 filed with the
Annual Report of the Company on Form 10-K for 1983.)
10.8 Alcan Supplemental Retirement Benefit Plan (Canada),
February 1992 edition. (Incorporated by reference to exhibit
10.8 to the Annual Report on Form 10-K of the Company for
1991.)
24
<PAGE> 27
10.8.1 Amendments dated 1 January 1994, Schedule 93-1.
(Incorporated by reference to exhibit 10.7.1 to the Annual
Report on Form 10-K of the Company for 1994.)
10.8.2 Amendments dated 23 September 1993. (Incorporated by
reference to exhibit 10.8.2 to the Annual Report on Form
10-K of the Company for 1994.)
10.8.3 Amendments dated 1 November 1998 in Schedule 98-1. (filed
herewith.)
10.9 Indemnity Agreement with Jacques Bougie. Substantially
similar agreements have been entered into with all current
Directors of Alcan Aluminium Limited. (Incorporated by
reference to exhibit 10.9 to the Annual Report on Form 10-K
of the Company for 1995.)
10.10 Alcan Aluminium Limited Retirement Compensation Plan for
Non-Executive Directors dated 27 April 1995. (Incorporated
by reference to exhibit 10.10 to the Annual Report on Form
10-K of the Company for 1995.)
10.10.1 Amendment dated 1 January 1997. (Incorporated by reference
to exhibit 10.10.1 to the Annual Report on Form 10-K of the
Company for 1996.)
10.11 Alcan Aluminium Limited Deferred Share Unit Plan for
Non-Executive Directors dated 1 January 1997. (Incorporated
by reference to exhibit 10.11 to the Annual Report on Form
10-K of the Company for 1996.)
10.12 B.C./Alcan 1997 Agreement. (Incorporated by reference to
exhibit 10.1 to the Quarterly Report on Form 10-Q of the
Company for the quarter ended 30 June 1997.)
10.13 Employment Agreement dated 24 July 1997 with Jacques Bougie.
(Incorporated by reference to exhibit 10.13 to the Annual
Report on Form 10-K of the Company for 1997.)
(13) Annual Report. (Filed herewith.)
(21) Subsidiaries and Related Companies of the Company. (Filed
herewith.)
(23) Consent of Independent Accountants is on page 29.
(24) Powers of Attorney. (Filed herewith.)
24.1 Power of attorney of W. Chippindale
24.2 Power of attorney of T. Engen
24.3 Power of attorney of J.R. Evans
24.4 Power of attorney of J.E. Newall
24.5 Power of attorney of P.H. Pearse
24.6 Power of attorney of G. Russell
24.7 Power of attorney of G. Saint-Pierre
24.8 Power of attorney of G. Schulmeyer
25
<PAGE> 28
(27) Financial Data Schedule. (Filed herewith.)
(99) Cautionary statement for purposes of the "Safe Harbor" provisions
of the Private Securities Litigation Reform Act of 1995.
(Incorporated by reference to exhibit 99 to the Annual Report on
Form 10-K of the Company for 1997.)
(99) Management Proxy Circular. (Filed herewith).
(b) REPORTS ON FORM 8-K
The Company has filed reports on Form 8-K dated 16 October 1998, 28 October 1998
and 27 November 1998 during the quarter ended 31 December 1998 concerning Item 5
thereof: "Other Events".
26
<PAGE> 29
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ALCAN ALUMINIUM LIMITED
<TABLE>
<S> <C>
25 March 1999 By /s/
-------------------------------------
John R. Evans, Chairman of the Board
By P.K. Pal, as Attorney-in-Fact
</TABLE>
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the Registrant and
in the capacities indicated, on 25 March 1999.
- -------------------------------------
Sonja I. Bata, Director
- -------------------------------------
W. R. C. Blundell, Director
/s/
- -------------------------------------
Jacques Bougie, Director, President
and Chief Executive Officer
(Principal Executive Officer)
/s/
- -------------------------------------
Warren Chippindale, Director
By P.K. Pal, as Attorney-in-Fact
/s/
- -------------------------------------
Travis Engen, DIRECTOR
By Robert des Trois Maisons,
as Attorney-in-Fact
27
<PAGE> 30
/s/
- -------------------------------------
John R. Evans, Chairman of the Board
By P.K. Pal, as Attorney-in-Fact
- -------------------------------------
Allan E. Gotlieb, Director
/s/
- -------------------------------------
J. E. Newall, Director
By Robert des Trois Maisons,
as Attorney-in-Fact
/s/
- -------------------------------------
Peter H. Pearse, Director
By P.K. Pal, as Attorney-in-Fact
/s/
- -------------------------------------
Sir George Russell, Director
By P.K. Pal, as Attorney-in-Fact
/s/
- -------------------------------------
Guy Saint-Pierre, Director
By Robert des Trois Maisons,
as Attorney-in-Fact
/s/
- -------------------------------------
Gerhard Schulmeyer, Director
by Robert des Trois Maisons,
as Attorney-in-Fact
- -------------------------------------
Paul M. Tellier, Director
/s/
- -------------------------------------
Suresh Thadhani, Executive Vice
President and Chief Financial Officer
(Principal Financial Officer)
/s/
- -------------------------------------
Denis G. O'Brien, Controller
(Principal Accounting Officer)
28
<PAGE> 31
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Directors of Alcan Aluminium Limited:
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (Nos. 33-6070,
33-34716 and 33-61790) and on Form S-3 (Nos. 2-78568, 2-78713 and 33-82754 )
of Alcan Aluminium Limited of our Report, dated 11 February 1999 appearing
on page 40 of the 1998 Annual Report to Shareholders. Our Report is
incorporated by reference in this Annual Report on Form 10-K. We also
consent to the reference to us under the caption "Experts" in such
Prospectuses.
Montreal, Canada
25 March 1999
/s/
---------------------------
PricewaterhouseCoopers LLP.
COMMENTS BY AUDITORS FOR U.S. READERS ON
CANADA-U.S. REPORTING DIFFERENCES
In the United States of America, reporting standards for auditors require the
addition of an explanatory paragraph (following the opinion paragraph) when
there is a change in accounting principles that has a material effect on the
comparability of a company's financial statements, such as the change described
in Note 3 to the Consolidated Financial Statements. Our report to the
Shareholders dated 11 February 1999 is expressed in accordance with Canadian
reporting standards which do not require a reference to such a change in
accounting principles in the auditor's report when the change is properly
accounted for and adequately disclosed in the financial statements.
Montreal, Canada
25 March 1999
/s/
---------------------------
PricewaterhouseCoopers LLP.
29
<PAGE> 1
Exhibit 10.1.6
ALCAN PENSION PLAN (CANADA)
SCHEDULE OF AMENDMENTS 97-1
As of 1 January 1998, the Alcan Pension Plan (Canada) is amended by adding the
following subsection after subsection 19.4.
19.5 Pension Augmentation at 1 January 1998
19.5.1 The retirement pension, the deferred retirement pension and the
Disability Pension of a Member who has retired, terminated his
employment or became disabled as the case may be, before 2
September 1996, including the pension payable under any attached
elected pension payment guarantee, either contingent or in
payment, and the pension, either deferred or in payment, to a
surviving spouse, shall be augmented on 1 January 1998.
Notwithstanding the preceding, this pension augmentation is not
applicable if a Member at his Commencement Date has less than
100% of the Company's contributions to his retirement income
vested.
19.5.2 For the purposes of this subsection 19.5 only, the following
expressions shall have the meanings set out below:
"Commencement Date" means the earliest of a Member's retirement
date; the date he became disabled; the date of termination of
service, however, in the case where the date of termination of
service falls before 1 January 1983 and at such date a Member
had not
1
<PAGE> 2
commenced to receive a pension, then in such case the date of
termination of service shall be deemed to be 1 January 1983;
and, in the case of a pre-retirement surviving spouse's pension,
the first of the month following the Member's date of death.
"Monthly Pension Amount" means the monthly equivalent of the
pension referred to in paragraph 19.5.1 less, in the case where
the pension commenced between 1 April 1975 and 1 January 1976
inclusively or in the case where the termination date was before
1 February 1976, any increase paid under the provisions of the
Government Annuity Improvement Act, Chapter 83, Statutes of
Canada 1974-75-76.
"Adjusted Monthly Pension Amount" means the Monthly Pension
Amount payable at 1 January 1998, excluding that portion which
ceases to be paid at age 65, or payable at normal retirement
date in the case of a deferred pension.
"Canadian Augmentation Factor" means the augmentation factor in
respect of a Member's Commencement Date determined as follows:
(A) in respect of a Member whose Commencement Date falls after
1 April 1996 but before 2 September 1996, 1.0%;
(B) in respect of a Member whose Commencement Date falls after
1 June 1995 but before 2 April 1996, the lesser of
(i) 1.0% plus the amount obtained when 0.2% is multiplied
by the number of complete months that the Commencement
Date precedes 1 May 1996
2
<PAGE> 3
and
(ii) 2.0%
(C) in respect of a Member whose Commencement Date falls after
1 January 1995 but before 2 June 1995, 1.5%;
(D) in respect of a Member whose Commencement Date falls after
1 June 1989 but before 2 January 1995, 2.5%;
(E) in respect of a Member whose Commencement Date falls after
1 December 1981 but before 2 June 1989, 2.5% plus the
amount obtained when 0.1% is multiplied by the number of
complete months that the Commencement Date precedes 1 July
1989;
(F) in respect of a Member whose Commencement Date falls after
1 December 1980 but before 2 December 1981, 11.5% plus the
amount obtained when 0.25% is multiplied by the number of
complete months that the Commencement Date precedes 1
January 1982;
(G) in respect of a Member whose Commencement Date falls after
1 December 1979 but before 2 December 1980, 14.5% plus the
amount obtained when 1.0% is multiplied by the number of
complete months that the Commencement Date precedes 1
January 1981;
3
<PAGE> 4
(H) in respect of a Member whose Commencement Date falls before
2 December 1979, the lesser of
(i) 26.5% plus the amount obtained when 0.25% is
multiplied by the number of complete months that the
Commencement Date precedes 1 January 1980
and
(ii) 41.5%.
"Adjusted Canadian Augmentation Factor" means the augmentation
factor determined as follows:
Canadian Augmentation Factor x A + 1.0% x B
-------------------------------------------
Adjusted Monthly Pension Amount
where A equals the lesser of
(i) the Adjusted Monthly Pension Amount
and
(ii) $8,916.67,
where B equals the amount, if any, that the Adjusted Monthly
Pension Amount exceeds $8,916.67.
"American Augmentation Factor" means the augmentation factor
determined as follows: 4.8% plus the amount obtained when 0.15%
4
<PAGE> 5
is multiplied by the number of complete months that the
Commencement date precedes 1 January 1990.
"Adjusted American Augmentation Factor" means the augmentation
factor determined as follows:
American Augmentation Factor x A + 1.9% x B
-------------------------------------------
Adjusted Monthly Pension Amount
where A equals the lesser of
(i) the Adjusted Monthly Pension Amount
and
(ii) US $6,416.67,
where B equals the amount, if any, that the Adjusted Monthly
Pension Amount exceeds US $6,416.67.
"British Augmentation Factor" means the augmentation factor
determined as follows: the lesser of
(i) 4.0% plus the amount obtained when 0.25% is multiplied by
the number of complete months that the Commencement date
precedes 1 May 1991
and
(ii) 23.0%.
5
<PAGE> 6
"Adjusted British Augmentation Factor" means the augmentation
factor determined as follows:
British Augmentation Factor x A + 1.8% x B
------------------------------------------
Adjusted Monthly Pension Amount
where A equals the lesser of
(i) the Adjusted Monthly Pension Amount
and
(ii) pound sterling (pound)3,833.33,
where B equals the amount, if any, that the Adjusted Monthly
Pension Amount exceeds pound sterling 3,833.33.
"Swiss Augmentation Factor" means the augmentation factor
determined as follows: the lesser of
(i) 1.0% plus the amount obtained when 2.0% is multiplied by
the number of years that the year of the Commencement date
precedes 1992
and
(ii) 9.0%.
"Adjusted Swiss Augmentation Factor" means the augmentation
factor determined as follows:
6
<PAGE> 7
Swiss Augmentation Factor x A + 0.5% x B
----------------------------------------
Adjusted Monthly Pension Amount
where A equals the lesser of
(i) the Adjusted Monthly Pension Amount
and
(ii) SF 8,916.67,
where B equals the amount, if any, that the Adjusted Monthly
Pension Amount exceeds SF 8,916.67.
"German Augmentation Factor" means the augmentation factor
determined as follows: 5.0% plus the amount obtained when 1.5%
is multiplied by the number of years that the year of the
Commencement date precedes 1993.
"Adjusted German Augmentation Factor" means the augmentation
factor determined as follows:
German Augmentation Factor x A + 1.6% x B
-----------------------------------------
Adjusted Monthly Pension Amount
where A equals the lesser of
(i) the Adjusted Monthly Pension Amount
and
7
<PAGE> 8
(ii) DM 11,000.00,
where B equals the amount, if any, that the Adjusted Monthly
Pension Amount exceeds DM 11,000.00
"French Augmentation Factor: means the augmentation factor
determined as follows: 1.5% plus the amount obtained when 0.6%
is multiplied by the number of years that the year of the
Commencement date precedes 1995.
"Adjusted French Augmentation Factor" means the augmentation
factor determined as follows:
French Augmentation Factor x A + 1.0% x B
-----------------------------------------
Adjusted Monthly Pension Amount
where A equals the lesser of
(i) the Adjusted Monthly Pension Amount
and
(ii) FF 36,833.33,
where B equals the amount, if any, that the Adjusted Monthly
Pension Amount exceeds FF 36,833.33.
19.5.3 Other than as provided for in paragraph 19.5.4, the monthly
amount of the augmentation on the date of calculation is equal
to the amount obtained when the Adjusted Canadian Augmentation
Factor is applied to the Monthly Pension Amount.
8
<PAGE> 9
19.5.4 If the Monthly Pension Amount is paid in a currency other than
in Canadian dollars at a fixed rate of exchange, the monthly
amount of the augmentation is equal to:
(A) in respect of a Monthly Pension Amount paid in United
States Dollars, the amount obtained when the Adjusted
American Augmentation Factor is applied to the Monthly
Pension Amount;
(B) in respect of a Monthly Pension Amount paid in Pounds
Sterling, the amount obtained when the Adjusted British
Augmentation Factor is applied to the Monthly Pension
Amount;
(C) in respect of a Member's Monthly Pension Amount paid in
Swiss Francs, the amount obtained when the Adjusted Swiss
Augmentation Factor is applied to the Monthly Pension
Amount;
(D) in respect of a Member's Monthly Pension Amount paid in
German Marks, the amount obtained when the Adjusted German
Augmentation Factor is applied to the Monthly Pension
Amount;
(E) in respect of a Member's Monthly Pension Amount paid in
French Francs, the amount obtained when the Adjusted French
Augmentation Factor is applied to the Monthly Pension
Amount.
9
<PAGE> 10
19.5.5 The compounded augmentation factor under this and any previous
pension augmentation, shall, unless it is an integral number of
tenths of 1%, be rounded to the next higher multiple of 0.1%.
19.5.6 The retirement pension of a Member, who retires on or after
1 January 1998 and who immediately prior to such retirement was
in receipt of an Approved Disability Benefit, shall be augmented
from his retirement date by the same augmentation percentage
that would otherwise have applied to his retirement pension had
his date of disability been his Commencement Date for the
purpose of calculating such augmentation.
19.5.7 The compounded augmentation factor under this and any previous
pension augmentation granted from Pension Commencement Date,
multiplied by the retirement pension payable for a particular
month on or after the effective date of this augmentation, plus
any other pension increase which may have been granted in
previous schedules of amendments, cannot exceed the maximum
pension augmented with increases of the Consumer Price Index as
determined by Revenue Rules.
10
<PAGE> 11
ALCAN PENSION (CANADA)
SCHEDULE OF AMENDMENT 98-1
(Reciprocal Transfer Agreement
9 June 1997/Gentek)
Certified copy:
(signed)
____________________________________
Suresh Thadhani
Secretary, Pension Committee
Alcan Pension Plan (Canada)
Date: 30 March 1998
<PAGE> 12
RECIPROCAL TRANSFER AGREEMENT
This Agreement is made as of the 9th of June, 1997
BETWEEN ALCAN ADMINCO INC., incorporated under the Canada Business
Corporations Act, ("ADMINCO")
AND 1087509 ONTARIO INC./ GENTEK BUILDING PRODUCTS
LIMITED ("GENTEK")
WHEREAS 1087509 ONTARIO INC. and ALCAN ALUMINIUM LIMITED ("ALCAN") entered into
a Canadian Asset Purchase Agreement dated as of June 30, 1994 with respect to
the assets of Alcan Building Products (Canadian) Division;
WHEREAS ALCAN sponsors the Alcan Pension Plan (Canada) ("APP") for the benefit
of certain of its employees and former employees;
WHEREAS ADMINCO is the delegated administrator of APP;
WHEREAS GENTEK sponsors and is the administrator of the GENTEK Building Products
Limited Pension Plan for Salaried Employees (Canada) (the "Gentek Plan");
<PAGE> 13
WHEREAS THE GENTEK Plan provides benefits (calculated on the basis of a member's
highest average earnings), early retirement rights and form of pension benefit
payments that are substantially similar to the comparable terms contained in APP
as of December 31, 1994;
WHEREAS ALCAN AND GENTEK intend to maintain their respective pension plan
indefinitely although they reserve the right to amend it or terminate it at any
time;
WHEREAS ALCAN and GENTEK have agreed to enter into a reciprocal transfer
agreement in respect of APP and the Gentek Plan providing for the transfer of
projected accrued pension benefit liabilities at the option of an employee of
Alcan or Gentek who transfers employment, and have further agreed that such
reciprocal transfer agreement be effective at a date agreed upon by the two
parties notwithstanding that the effective date targeted in the Purchase
Agreement was 21 December 1995.
THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS
1.1 "Authorized Leave of Absence" means a paid or unpaid leave of
absence, a disability leave, a maternity, paternity or adoption
leave or other statutory leave of absence.
1.2 "Effective Date" is the date determined under Section 13.
1.3 "Minimum Transfer Value" means the value of the benefits that the
Transferred Member had accumulated in the Transferor Plan at the
date of transfer to the Recipient Plan which would have been
transferred to a plan
2
<PAGE> 14
not governed by this agreement, determined according to actuarial
assumptions and methods identical to those which, at the date of
transfer, are used in the Transferor Plan to determine the value of
pension benefits to which apply sections of the applicable pension
benefits legislation in respect of the determination of 50% minimum
rule.
1.4 "Purchase Agreement" means the Canadian Asset Purchase Agreement
dated as of June 30, 1994 between 1087509 ONTARIO INC. and ALCAN,
and amendment No. 1 to such agreement.
1.5 "Recipient Plan" means the Plan into which the Transferred Member
transfers.
1.6 "Transfer Value" has the meaning set out in Section 3.
1.7 "Transferor Plan" means the Plan from which the Transferred Member
transfers.
1.8 "Transferred Employee" means an employee of the Building Products
Division of Alcan at 21 December 1994 ("Closing Date"), and who
accepted offers of employment and began active employment with
Gentek as of that date. Any employee of the Division on an
Authorized Leave of Absence on the Closing Date who accepted offers
of employment by Gentek and began active employment with Gentek as
of a date after the Closing Date is a Transferred Employee as of the
date of the commencement of active employment.
1.9 "Transferred Member" means an individual who meets the conditions set
out in Section 2.
3
<PAGE> 15
2. ELIGIBILITY
2.1 The following individuals, who in addition meet all of the
conditions set out in subsections 2.2, 2.3 and 2.4, are eligible
to be Transferred Members under this Agreement:
a) Any individual who was actively participating in APP at 21
December 1994 and is a Transferred Employee and whose
employment with Gentek is terminated prior to the Effective
Date of this Agreement, if at the time of such termination of
employment, the individual has elected to be given the option
to make an election for a transfer of pension benefits at the
Effective Date of this Agreement and has made such an election
at that date;
b) any individual who was actively participating in APP at 21
December 1994, and who is a Transferred Employee and is
actively participating in the Gentek Plan on the Effective Date
of this Agreement; or
c) any employee of Alcan or Gentek who transfers to the other
employer and who is actively participating in APP or the Gentek
Plan, as the case may be, immediately prior to the date of
transfer while this Agreement is in force.
For the purpose of this subsection "actively participating in (the
plan at the date)" means "contributing to (the plan at the date)"
or, if the Transferred Member was on an Authorized Leave of Absence
immediately prior to accepting offers of beginning active employment
with the sponsor of the Recipient Plan, "contributing to (the plan)
immediately prior to the Authorized Leave of Absence".
4
<PAGE> 16
2.2 Termination of participation
The individual must have terminated active participation in the
Transferor Plan and must be actively participating in the Recipient
Plan at the date of his election to transfer (or of being given an
option to transfer in the case of an individual described in
subsection 2.1a).
2.3 No receipt of benefits
The individual must not have received reimbursement of his
contributions in the Transferor Plan nor have received any pension
benefit under the Transferor or Recipient Plan, other than a
disability pension which had ceased to be payable.
2.4 Request for transfer
The individual must deliver to the Administrator of the Recipient
Plan the Option Statement in the form set out in Schedule I within
sixty (60) days of its mailing by the Administrator of the Recipient
Plan. The administrator of the Recipient Plan shall upon receipt
deliver the Option Statement to the Administrator of the Transferor
Plan.
3. TRANSFER VALUE
3.1 The Transfer Value of a Transferred Member's benefits shall be
calculated by the actuary of the Transferor Plan according to the
formula set out in Schedule II or Schedule III as applicable.
3.2 The Transfer Value shall not be less than the Minimum Transfer
Value.
5
<PAGE> 17
3.3 Each party's actuary shall have the right to review and approve the
calculation of each Transfer Value, and in the event that the
actuaries do not agree on the amount of such Transfer Value, within
thirty (30) days notice thereof, they shall jointly choose a third
independent actuary to make such determination using the actuarial
methods and assumptions described in Schedule II or Schedule III as
the case may be, whose determination shall be final and binding upon
both parties. The independent actuary shall be instructed to make
such determination within thirty (30) days of the issue being
submitted. Each party shall pay any costs and fees incurred in
connection with the services of its actuaries, and in the event that
a third independent actuary is appointed pursuant to this Section,
each party shall pay one-half of the cost and fees incurred in
connection with the services of such third actuary.
4. ADMINISTRATION AND TRANSFER OF AMOUNTS
4.1 Within sixty (60) days of the Effective Date, each Transferred
Member, as defined in Section 2, shall be given an Option Statement
in the form set out in Schedule I.
4.2 After receipt of the Option Statement provided for in Section 2,
signed by the Transferred Member, the Administrator of the
Transferor Plan shall within 30 days forward it to the Administrator
of the Recipient Plan together with a record of the individual's
credited service and payment of the Transfer Value. Payment of the
Transfer Values in respect of Transferred Members referred to in
subsection 4.1 shall be made in a single payment within 30 days
following the end of the 60 day period.
6
<PAGE> 18
5. RECOGNITION OF CREDITED SERVICE BY RECIPIENT PLAN
The Recipient Plan will recognize, for all purposes, such Transferred
Member's pensionable service to the extent recognized by the Transferor
Plan.
6. BENEFIT ACCRUAL AFTER TRANSFER
The Recipient Plan will provide benefits in respect of such pensionable
service which are no lower than the benefits accrued in the Transferor Plan
at the date of transfer. The Parties acknowledge that benefits of
Transferred Employees were accrued in APP to December 31, 1994 even though
offers of employment were made December 21, 1994.
The Recipient Plan is not required, however, to guarantee to the
Transferred Member a pension benefit in respect of such pensionable service
recognized under the Transferor Plan that is equal in value to the amount
of the Transfer Value.
7. EMPLOYEE CONTRIBUTIONS WITH INTEREST
Employee contributions with interest at the date of transfer under the
Transferor Plan shall be recognized as such under the Recipient Plan.
8. RIGHTS AND BENEFITS
8.1 This Agreement shall not have the effect of reducing the rights and
benefits to which a Transferred Member would be entitled to under
the applicable pension benefits legislation with respect to
participation in the Transferor Plan.
7
<PAGE> 19
8.2 Any Transferred Employee who does not elect to transfer rights and
benefits from APP to the Gentek Plan shall nevertheless:
(i) continue to accumulate credited service in APP for the period
of employment with Gentek, and
(ii) be entitled to credit in the Gentek Plan for the period of
membership in APP,
for the sole purpose of determining entitlement to benefits under
each plan.
9. PLAN AMENDMENTS AND SUSPENSION OF AGREEMENT
9.1 The parties recognize that APP and the Gentek Plan have
substantially the same provisions, rights and benefits as of
December 31, 1994 and acknowledge that if either plan is amended to
alter benefits, this Agreeement will be suspended until the parties
review and either confirm that Schedules II and III then in force
continue to apply or agree on new Schedules to apply after the
effective date of the amendment.
9.2 Each party shall provide the other with a copy of the plan text and
undertakes to notify the other of any amendment to APP or the
Gentek Plan as the case may be, and to provide copies of any such
amendments within 30 days of their effective date.
10. MODIFICATION OF SCHEDULES
The parties may agree to amend the Schedules form time to time. However any
amendments will only apply to requests for transfer after the effective
date of such amendments unless both parties agree otherwise.
8
<PAGE> 20
11. TERMINATION OF AGREEMENT
This Agreement shall be terminable on the first anniversary of its
Effective Date at the option of either party and thereafter upon 90 days
prior written notice to the other party.
12. NO LIABILITY
Upon the payment of the Transfer Value by the Administrator of the
Transferor Plan to the Administrator of the Recipient Plan, the Transferor
Plan shall have no further liability for any amount in respect of such
Transferred Member.
13. EFFECTIVE DATE
13.1 The Effective Date of this Agreement shall be, if possible, no later
than May 1, 1997.
13.2 This Agreement shall not become effective until the Gentek Plan has
been duly registered with Revenue Canada and with the applicable
provincial pension authorities.
13.3 This Agreement shall not become effective until it has been filed
and accepted as satisfactory where required, by Revenue Canada and
the applicable provincial pension authorities.
13.4 Upon fulfillment of the conditions set out in subsections 13.2 and
13.3, the parties may agree on the Effective Date. Either party may
otherwise give notice to the other of an Effective Date not later
than thirty (30) days after fulfillment of the conditions set out
in subsections 13.2 and 13.3.
9
<PAGE> 21
14. APPLICABLE LAW
This Agreement shall be interpreted according to the laws of Ontario.
THE PARTIES HAVE SIGNED
ALCAN ADMINCO INC. GENTEK BUILDING PRODUCTS
LIMITED
(signed) (signed)
- ---------------------------- ----------------------------
(signed) (signed)
- ---------------------------- ----------------------------
10
<PAGE> 22
ALCAN PENSION PLAN (CANADA)
SCHEDULE OF AMENDMENTS 98-2
PREAMBLE
The amendments under this schedule introduce a reduced age limit for the start
of pension benefits, improved and more flexible bridging benefits, a temporary
pension, an 85-point rule and finally several minor technical modifications.
Following amendments to the Income Tax Regulations (Canada), the Plan is amended
to require that benefits start to be paid at the latest by the end of the year
in which an individual reaches 69 (instead of 71) years of age.
Bridging benefits before age 60 are increased from $250 to $325 per year of
credited service and several optional forms of payment of the bridge benefit are
introduced.
Following amendments introduced to the Supplemental Pension Plans Act (Quebec),
the option of electing to receive a temporary pension is introduced replacing
the level income benefit option previously offered under the Plan. The new
option offers individuals greater flexibility to front load pension benefits in
the 55 to 65 age bracket which is prior to entitlement to Old Age Security
benefits and unreduced Canada/Quebec Pension Plan benefits.
The 90-point rule under the Plan which figures in the calculation of the early
retirement factor and eligibility to a bridge benefit and towards which up to 5
extra points were granted in June 1996 is replaced by an 85-point rule. The
extra points granted in 1996 will continue to apply only towards the 75-point
rule.
Several technical modifications with no impact on Plan benefits are made.
AMENDMENTS
1. Paragraph 4.03(g) is amended by replacing the first word of the paragraph
by the word "for" and by inserting the following words at the beginning of
the paragraph:
"Except for the purpose of qualifying after 31 October 1998 under a
provision of the Plan requiring a Number of Points equal to at least
85, there shall be added".
1
<PAGE> 23
2. Subsection 6.03 is amended by replacing the words "first of January of the
year following the year in which he attains the age of 71 years" by the
following words:
"end of the year in which he attains age 69 or such other time as is
acceptable under Revenue Rules".
3. Subsection 6.04 is amended by replacing the words "first of January of the
year following the year in which he attains the age of 71 years" by the
following words:
"end of the year in which he attains age 69 or such other time as is
acceptable under Revenue Rules".
4. Paragraph 8.02(b) is amended by replacing throughout the paragraph the
number "90" by the number "85".
5. Paragraph 8.02(c) is replaced by the following:
"(c) For the exclusive purposes of this paragraph 8.02(c), the following
definitions apply:
"limit date" means the earlier of the following dates: (i) the
earliest date on which a retirement pension under the
Canada/Quebec Pension Plan is payable without any
reduction and, (ii) the Normal Retirement Date;
"A" equals the Credited Service of a Member at his
Pension Commencement date;
"B" equals the number of years (including any fraction of
a year) by which the Member's Pension Commencement
Date precedes the first day of the month next
following the day he attains age 60;
"C" equals (i) if the Member's Pension Commencement Date
precedes the first day of the month next following
the day he attains age 60, the number of years
(including any fraction of a year) by which the first
day of the month in which he attains age 60 precedes
the limit date or, (ii) if the Member's Pension
Commencement Date occurs on or after the first day of
the month next following the day he attains age 60,
the number of years (including any fraction of a
year) by which that Pension Commencement Date
precedes the first of the month following the limit
date;
2
<PAGE> 24
"D" equals the total of all amounts paid as a bridge
benefit on and before the first day of the month next
following the day he attains age 60;
"E" equals the number of years (including any fraction of
a year) by which the first day of the month next
following the day he attains age 60 precedes the
limit date;
"F" equals the number of years (including any fraction of
a year) by which the Member's Pension Commencement
Date precedes the first day of the month following
the limit date.
A Member whose Early Retirement Date occurs on or after his
attainment of the age of 60 and whose Number of Points is equal to
at least 75 at that Date, or whose Early Retirement Date occurs
before his attainment of the age of 60 and whose Number of Points is
equal to at least 85 at that Date, and who is
(i) contributing to the Plan at his Early Retirement Date, or
(ii) on an authorized leave of absence without pay and in receipt
of an Approved Disability Benefit other than a Disability
Pension under the Plan in respect of a Member whose
commencement date of his permanent disability is on or
after 1 January 1992
is entitled to a bridge benefit in addition to his retirement
pension.
The bridge benefit begins on the Pension Commencement Date of his
retirement pension and is payable in monthly installments until the
earlier of the following dates: (i) his date of death and, (ii) the
limit date and, is reduced by any bridge benefit or its equivalent
payable from a pension plan of an Affiliated Company or a
Predecessor Company to the extent that credited service under such
plan is recognized as Credited Past Service under the Plan in
accordance with paragraphs 4.03(a) or 4.03(b).
A Member who is entitled to a bridge benefit may subject to the
limitations below, in the written form prescribed by and filed with
the Administrator not later than three months prior to his Pension
Commencement Date, elect from the following alternate forms of
bridge benefit determined at his Pension Commencement date:
3
<PAGE> 25
(i) up to the first day of the month in which he attains age 60, an
annual amount determined by the formula
$325 x A
and thereafter, an annual amount determined by the formula
$250 x A
(ii) up to the first day of the month next following the day he
attains age 60, an annual amount equal to the maximum annual
amount permitted under Revenue Rules and thereafter, an annual
amount determined by the formula
($325 x A x B) + ($250 x A x C) - D
___________________________________
E
Form (i) of the bridge benefit is payable if the Member fails to
elect within the allowable delay. Form (ii) of the bridge benefit
may only be selected if the Member's Pension Commencement Date
precedes the first day of the month next following the day he
attains age 60.
Notwithstanding the options described above, the bridge benefit of a
Member
(i) who is entitled to benefits from other plans sponsored by a
Participating Company shall be adjusted as required to
coordinate with those other plans and with the condition that,
at its determination, the total of all amounts shall equal the
amount determined by the formula
($325 x A x B) + ($250 x A x C)
(ii) who elects to receive a temporary pension under subsection
10.06 shall be determined by the formula
($325 x A x B) + ($250 x A x C)".
_________________________________
F
6. Subparagraph 9.01.3 (iii) is amended by inserting after the words "Number
of Points" the following words:
", without taking into account paragraph 4.03(g),".
4
<PAGE> 26
7. Subsection 9.02 is amended by replacing throughout the subsection the
words "at the Date of Determination" by the words "for a particular
month", by replacing the words "(a), (b) and (c)" by the words "(a) and
(b)", by deleting paragraph (a) and by redesignating paragraphs (b) and
(c) as paragraphs (a) and (b) respectively.
8. Subsection 10.06 is replaced by the following:
10.06 Temporary Pension
"A Member entitled to a retirement pension (other than a Member
whose Pension Commencement Date is more than ten years from his
Normal Retirement Date and who is a Provincial Employee of
Quebec) may, under conditions prescribed by Applicable Pension
Laws, elect before Pension Commencement Date to receive a
temporary pension, payable in monthly installments, the amount of
which is fixed by him before payment begins and which meets the
following requirements:
(i) the annual amount of the temporary pension must not exceed
maximum pension under the Canada/Quebec Pension Plan and the
Old Age Security Act at Pension Commencement Date (except for
a Provincial Employee of Quebec where the annual amount of
the temporary pension must not exceed 40% of the YMPE at
Pension Commencement Date or such lesser amount prescribed by
Revenue Rules), reduced, where applicable, by the annual
amount of the bridge benefit to which he is entitled under
paragraph 8.02(c);
(ii) payment of the temporary pension must end on (except for a
Provincial Employee of Quebec where payment of the temporary
pension must end on or before) the last day of the month
following the month in which he attains age 65;
The retirement pension of the Member who elects to receive a
temporary pension is reduced by an Actuarially Equivalent amount
for his lifetime. Any payments continuing after the Member's death
(whether such payments are for the balance of the term provided
for in the normal guarantee or in the 10 year guarantee or are
payable under the terms of the Spouse's guarantee or the
Contingent Annuitant guarantee) shall be calculated based upon
such reduced retirement pension.
5
<PAGE> 27
The temporary pension is subject to the Spouse's pension payment
guarantee elected by the member in respect of his retirement
pension. If the Member dies prior to the end of the period
selected for the payment of the temporary pension, the Spouse
shall be paid the guaranteed percentage of the temporary pension
for the remainder of the period.
The temporary pension is not subject to the normal guarantee or
the 10 year guarantee or the Contingent Annuitant guarantee and
accordingly ends with the last payment due on the first day of the
month in which the death of the Member occurs.
A Member's Spouse who elects the form of settlement under
paragraph 11.04(a) and who, if a Spouse of a Provincial Employee
of Quebec, has attained age 55 may elect before payment begins to
receive a temporary pension in accordance with the provisions set
out in this subsection."
TECHNICAL MODIFICATIONS
9. The second paragraph of subsection 2.21 is amended by replacing the word
"member" by the world "Member".
10. Subsection 2.30 is amended by replacing the word "practitioner" by the word
"doctor".
11. Subparagraph 3.07(ii)(a) is amended by replacing the word "members" by the
word "Members".
12. Paragraph 4.03(d) is amended by replacing the word "affiliated" by the word
"Affiliated".
13. The third paragraph of subsection 8.03 is amended by replacing the word
"member" by the word "Member".
14. Paragraph 9.01.1A is amended by inserting the word "RILA" immediately after
the words "for Members who were members of" and immediately after the words
"the pension computed on the basis of the terms of".
15. Paragraph 10.02(a) is amended by replacing the words "a Company" by the
words "the Company".
6
<PAGE> 28
16. Paragraph 10.03(b) is amended by replacing the punctuation "," immediately
before the words "66 2/3%" by the word "or".
17. Subsection 11.03 is amended by replacing the word "nul" by the word "null".
18. Subsection 14.04 is amended by replacing the words "disability pension" by
the words "Disability Pension" and by further replacing the word
"sub-section" by the word "subsection".
19. Subsection 16.09 is amended by replacing the word "sub-section" by the word
"subsection".
20. The first paragraph of subsection 16.25 is amended by replacing the word
"beneficiary" by the word "Beneficiary".
21. Subsection 19.1(5) is amended by replacing in the first paragraph the word
"factor" by the word "Factor" and by replacing in paragraph (5.2) the word
"my" by the word "by".
22. Annex B, Names and Addresses of Participating Companies, is amended as
attached.
EFFECTIVE DATE
Sections 2 and 3 shall be effective as of 1 January 1997, section 22 as of
1 January 1998 and the remaining sections as of 1 November 1998.
7
<PAGE> 29
ANNEX B
NAME AND ADDRESSES OF PARTICIPATING COMPANIES
1. ALCAN ALUMINIUM LIMITED 6. ALCAN ASIA PACIFIC LIMITED
1188 Sherbrooke Street West 1188 Sherbrooke Street West
Montreal, Quebec Montreal, Quebec
H3A 3G2 H3A 3G2
2. ALCAN ADMINCO INC. 7. ALCAN SHIPPING SERVICES LIMITED
1188 Sherbrooke Street West 1188 Sherbrooke Street West
Montreal, Quebec Montreal, Quebec
H3A 3G2 H3A 3G2
3. ALCAN ALUMINIO (AMERICA 8. ALCAN SMELTERS AND CHEMICALS
LATINA) INC. LIMITED
1188 Sherbrooke Street West 1188 Sherbrooke Street West
Montreal, Quebec Montreal, Quebec
H3A 3G2 H3A 3G2
4. ALCAN INTERNATIONAL LIMITED 9. THE ROBERVAL AND SAGUENAY
1188 Sherbrooke Street West RAILWAY COMPANY
Montreal, Quebec 1188 Sherbrooke Street West
H3A 3G2 Montreal, Quebec
H3A 3G2
5. ALCAN MANAGEMENT SERVICES
CANADA LIMITED
1188 Sherbrooke Street West
Montreal, Quebec
H3A 3G2
8
<PAGE> 1
EXHIBIT 10.8.3
ALCAN SUPPLEMENTAL RETIREMENT BENEFIT PLAN (CANADA)
SCHEDULE OF AMENDMENTS 98-1
1. Subsection 20.6 is amended by replacing the opening paragraph by the
following paragraph:
"Approved Disability Benefit" means a benefit described in (i) or (ii)
below paid while the Member is an Executive Employee and suffers from a
physical or mental impairment, as certified in writing by a qualified
medical doctor, that prevents the Member from performing the duties of
employment in which the Member was engaged before the commencement of the
impairment:".
2. Subsection 2.10 is amended by replacing the words "a person other than
the Member's Spouse" by the words "the person".
3. Subsection 2.27 is amended by adding after the first paragraph the
following paragraph:
"However, in the event that a Member's contract for employment with a
Participating Company for any Plan Year is for less than the number of
hours required for full-time employment by the Participating Company, his
Pensionable Earnings will be assumed to be that amount that would have
been paid had the Member worked full time for the purpose of calculating
the Highest Average Earnings".
4. Paragraph 9.02(c) is amended by replacing the words, "66 2/3% (only
available to Provincial Employees of Manitoba), 75% or 100%" by the words
"or 66 2/3% (only available to Provincial Employees of Manitoba)" and by
deleting "85%" and "80%" in the Table A.
5. Subsection 10.01 is amended by replacing the words "section 7" by the
words "sections 7 and 8".
6. Subsection 13.02 is amended by deleting the words "with the Royal Trust
Corporation of Canada".
7. Subsection 2.24 is amended by inserting after the word "months" the
words "which for greater certainty includes the number of years granted
by virtue of paragraph 4.03(g) of the Plan".
1
<PAGE> 2
8. Paragraph 8.02(b) is amended by inserting the following subparagraph at
the end:
"Notwithstanding the above, the early retirement factor is 100% if the
Member meets the following conditions at Early Retirement Date:
(i) his Number of Points equals 90 or more or
his Number of Points is 75 and he is age 60 or over; and
(ii) he is in receipt of an Approved Disability Benefit which is fully
integrated with this early retirement pension.
The Member on a leave of absence without pay who is in receipt of an
Approved Disability Benefit, stops accruing Credited Service upon meeting
the above conditions".
9. Subsection 2.24 is amended by inserting after the words "4.03(g) of the
Plan" the words "except for the purpose of qualifying after 31 October
1998 under a provision of the Plan requiring a number of points equal to
at least 85".
10. Subsection 6.03 is amended by replacing the words "first day of the month
in which he attains the age of 71 years" by the words "end of the year
in which he attains age 69".
11. Subsection 6.04 is amended by replacing the words "first day of the month
in which he attains the age of 71 years" by the words "end of the year
in which he attains age 69".
12. Subsection 8.02(b) is amended by replacing throughout the paragraph the
number "90" by the number "85".
13. Subsection 8.02 is amended by adding the following paragraph:
"(c) For the exclusive purposes of this paragraph 8.02(c), the following
definitions apply:
"limit date" means the earlier of the following dates: (i) the
earliest date on which a retirement pension under the
Canada/Quebec Pension Plan is payable without any
reduction and, (ii) the Normal Retirement Date;
"A" equals the Credited Service of a Member at his Payment
Commencement date;
2
<PAGE> 3
"B" equals the number of years (including any fraction of a
year) by which the Member's Payment Commencement Date
precedes the first day of the month next following the
day he attains age 60;
"C" equals (i) if the Member's Payment Commencement Date
precedes the first day of the month next following the
day he attains age 60, the number of years (including
any fraction of a year) by which the first day of the
month in which he attains age 60 precedes the limit
date or, (ii) if the Member's Payment Commencement Date
occurs on or after the first day of the month next
following the day he attains age 60, the number of
years (including any fraction of a year) by which that
Payment Commencement Date precedes the limit date;
"D" equals the total of all amounts paid as a bridge
benefit on and before the first day of the month next
following the day he attains age 60;
"E" equals the number of years (including any fraction of a
year) by which the first day of the month next
following the day he attains age 60 precedes the limit
date;
"F" equals the number of years (including any fraction of a
year) by which the Member's Payment Commencement Date
precedes the first day of the month following the limit
date.
A Member whose Early Retirement Date occurs on or after his attainment
of the age of 60 and whose Number of Points is equal to at least 75 at
that Date, or whose Early Retirement Date occurs before his attainment
of the age of 60 and whose Number of Points is equal to at least 85 at
that Date, and who is
(i) contributing to the Plan at his Early Retirement Date, or
(ii) on an authorized leave of absence without pay and in receipt of
an Approved Disability Benefit
is entitled to a bridge benefit in addition to his retirement benefit.
The bridge benefit begins on the Payment Commencement Date of his
retirement benefit and is payable in monthly instalments until the
earlier of the following date: (i) his date of death and, (ii) the
limit date and, is reduced by any bridge benefit or its equivalent
payable from the Plan and from a pension plan of an Affiliated Company
or a Predecessor Company to
3
<PAGE> 4
the extent that credited service under such plan is recognized as
credited past service under the Plan in accordance with paragraphs
4.03(a) or 4.03(b) of the Plan.
A Member who is entitled to a bridge benefit may subject to the
limitations below, in the written prescribed by and filed with the
Administrator not later than three months prior to his Pension
Commencement Date, elect from the following alternate forms of bridge
benefit determined at his Payment Commencement date:
(i) up to the first day of the month in which he attains age 60, an
annual amount determined by the formula
$325 x A
and thereafter, an annual amount determined by the formula
$250 x A
(ii) up to the first day of the month next following the day he
attains age 60, an annual amount equal to the maximum annual
amount permitted under Revenue Rules and thereafter, an annual
amount determined by the formula
($325 x A x B) + ($250 x A x C) - D
-----------------------------------
E
Form (i) of the bridge benefit is payable if the Member fails to elect
within the allowable delay. Form (ii) of the bridge benefit may only
be selected if the Member's Payment Commencement Date precedes the
first day of the month next following the day he attains age 60.
Notwithstanding the options described above, the bridge benefit of a
Member
(i) who is entitled to benefits from the Plan or from other plans
sponsored by a Participating Company shall be adjusted as
required to coordinate with the Plan or with those other plans
and with the condition that, at its determination, the total of
all amounts shall equal the amount determined by the formula
($325 x A x B) + ($250 x A x C)
4
<PAGE> 5
(ii) who elects to receive a temporary pension under subsection 10.06
of the Plan shall be determined by the formula
($325 x A x B) + ($250 x A x C)
-------------------------------
F
(iii) whose form of payment of his retirement benefit is a lump sum
amount shall receive his bridge benefit in a lump sum amount equal to the
Actuarial Equivalent of his bridge benefit otherwise payable in monthly
installments".
EFFECTIVE DATE
Sections 1, 2, 3, 4 and 5 shall be effective as of 1 January 1992, section 6 as
of 1 January 1990, sections 7 and 8 as of 1 July 1996, sections 10 and 11 as of
1 January 1997 and sections 9, 12 and 13 as of 1 November 1998.
5
<PAGE> 1
Exhibit 13
Alcan Aluminium Limited (Logo)
1998 ANNUAL REPORT
GROWTH
VALUE
STRENGTH
(Photo of product.)
CONTENTS
Highlights of the Year....................................................... 5
Profile: Strength, Growth, Value............................................. 6
Message to Shareholders...................................................... 8
Growing with Our Partners.................................................... 12
Corporate Social Responsibility.............................................. 16
The Alcan Group's Businesses at a Glance..................................... 18
Management's Discussion and Analysis......................................... 22
Responsibility for the Annual Report, OECD Guidelines and Auditors' Report... 43
Consolidated Financial Statements............................................ 45
Notes to Consolidated Financial Statements................................... 49
Quarterly Financial Data..................................................... 76
Eleven-Year Summary.......................................................... 78
Corporate Governance......................................................... 80
Directors and Officers....................................................... 81
Shareholder Information...................................................... 84
The Alcan Group Worldwide.................................................... 86
ANNUAL MEETING
The Annual Meeting of the holders of common shares of Alcan Aluminium Limited
will be held on Thursday, April 22, 1999. The meeting will take place at 10:00
a.m. in the Assembly Hall of the International Civil Aviation Organization,
Atrium Entrance, 999 University Street, Montreal, Quebec, Canada.
DEFINITIONS
The word "Alcan" or "Company" means Alcan Aluminium Limited and, where
applicable, one or more consolidated subsidiaries. A "subsidiary" is a company
controlled by Alcan. A "joint venture" is an association (incorporated or
unincorporated) of companies jointly undertaking some commercial enterprise and
proportionately consolidated to the extent of Alcan's participation. A "related
company" is one in which Alcan has significant influence over management but
owns 50% or less of the voting stock. The "Alcan Group" refers to Alcan
Aluminium Limited, its subsidiaries, joint ventures and related companies.
2
<PAGE> 2
In this report, unless stated otherwise, all dollar amounts are stated in
United States dollars and all quantities in metric tons, or tonnes. A tonne is
1,000 kilograms, or 2,204.6 pounds.
The following abbreviations are used:
/t per tonne
kt thousand tonnes
kt/y thousand tonnes per year
Mt million tonnes
Mt/y million tonnes per year
GLOSSARY
ALUMINA: Most alumina is a white, powdery substance produced from bauxite by a
chemical process during which aluminum oxide is extracted from the ore. Between
four and five tonnes of bauxite are required to produce about two tonnes of
alumina, which yield one tonne of aluminum.
ALUMINUM: Although aluminum is the most common metal on earth, constituting 8%
of the planet's crust, it is never found in its pure form. Aluminum metal is
produced by separating aluminum from oxygen in alumina.
BAUXITE: The most economic source of aluminum is bauxite, an ore or rock
composed of hydrous aluminum oxides and aluminum hydroxides. It is predominantly
found in tropical and sub-tropical regions.
CHEMICALS: The Alcan Group also produces chemical-grade alumina (alumina
hydrate), the starting material for a wide variety of specialty chemical
products.
FABRICATED PRODUCTS: Generally, fabricated products are rolled products (sheet
and foil) as well as rod, wire and cable, extruded and drawn products and
castings.
LITHO SHEET: Aluminum sheet is widely used as the metal plate on which an image
is produced for lithographic printing.
LONDON METAL EXCHANGE (LME): The LME is a metals trading centre for the Western
World. The LME also determines the metal price (per tonne) for aluminum trading
for current and future delivery.
ROLLED PRODUCTS: At rolling mills, sheet ingots are reduced in thickness by
passing them between rollers in a series of reversing hot mills and, finally, in
a cold mill. For example, a 30-tonne sheet ingot can be rolled into a coil of up
to 2.7 metres in diameter.
SECONDARY (RECYCLED) METAL: Aluminum ingot can be made by remelting Used
Beverage Cans (UBCs) or any other post-consumer scrap, as well as customer
process scrap. Recycling aluminum only requires about 5% of the energy required
to produce primary metal.
3
<PAGE> 3
SHEET AND FOIL: Sheet is a flat-rolled metal primarily used for the
container, lithography, transportation and building end-use markets. Foil is a
thin sheet of metal, usually less than 0.006 inch (0.15 millimeter) thick, and
it is widely used in household and commercial packaging and industrial product
applications.
SMELTING: Primary aluminum is originally produced through the electrolytic
reduction of alumina (smelting process). The molten aluminum is then cast into
ingots and then fabricated into a variety of products.
TOLLING: Alcan rolls or converts customer-owned metal. This activity is called
tolling.
4
<PAGE> 4
Alcan Aluminium Limited
HIGHLIGHTS OF THE YEAR
(Graph) (Graph)
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
FINANCIAL DATA
(in millions of US$, except per common share amounts)
Sales and operating revenues 7,789 7,777 7,614
Net income before extraordinary item 399 468 410
Net income 399 485 410
Economic Value Added (EVA(R))* (285) (285) (310)
Return (%) on average common shareholders' equity 7 10 9
Total assets (at year-end) 9,901 9,374 9,228
Capital expenditures 877 641 482
Ratio of borrowings to equity (at year-end) 24:76 23:77 23:77
Per common share (in US$)
Net income before extraordinary item 1.71 2.02 1.74
Net income 1.71 2.09 1.74
Cash from operating activities 3.25 3.17 4.34
Dividends 0.60 0.60 0.60
Common shareholders' equity (at year-end) 23.71 21.43 20.57
===== ===== =====
OPERATING DATA
(in thousands of tonnes)
Fabricated products shipments** 2,112 1,970 1,797
Ingot products shipments*** 829 858 810
Primary aluminum production 1,481 1,429 1,407
Secondary/recycled aluminum production 684 670 639
===== ===== =====
AVERAGE THREE-MONTH LME PRICE
(in US$/tonne) 1,379 1,620 1,536
===== ===== =====
</TABLE>
[FN]
* EVA is a registered trademark of Stern Stewart & Co.
** Includes products fabricated from customer-owned metal.
*** Includes primary and secondary ingot and scrap.
</FN>
5
<PAGE> 5
PROFILE
Alcan Aluminium Limited, a Canadian corporation, is the parent company of an
international group involved in all aspects of the aluminum industry. Through
subsidiaries, joint ventures and related companies around the world, the
activities of the Alcan Group include bauxite mining, alumina refining, power
generation, aluminum smelting, manufacturing and recycling as well as research
and technology. Close to 40,000 people are directly employed by the Company.
In the 97 years since it was established, Alcan has developed a unique
combination of competitive strengths. The Alcan Group is a multicultural and
multilingual enterprise reflecting the differing corporate and social
characteristics of the many countries in which it operates. Within a universal
framework of policies and objectives, individual subsidiaries conduct their
operations with a large measure of autonomy. With operations and sales offices
in more than 30 countries, the Alcan Group is one of the most international
aluminum companies and a leading producer of flat-rolled aluminum products.
Alcan Aluminium Limited has approximately 20,340 registered holders of its
common shares and 860 registered holders of its preference shares. While
distributed internationally, the Company's shares are mostly held in North
America. The word ALCAN and the Alcan symbol are registered trademarks in more
than 100 countries and are synonymous with aluminum the world over.
(Pull out)
Alcan... the partner of choice.
(Sidebar)
GROWING WITH OUR PARTNERS
Growing with Our Partners is the focus of this year's Annual Report, and
strength, growth and value are at the core of our strategic intent.
Strength reflects Alcan's strong financial state, its healthy debt-to-equity
ratio and improved profitability. It also signifies the quality and dedication
of Alcan's 40,000 employees. Finally, strength together with light weight,
thermal and electrical conductivity, barrier qualities, infinite recyclability
and many other characteristics make aluminum... the material of choice.
Growth is working with all our stakeholders to develop and deliver value-added,
differentiated aluminum products, bringing increased value to our customers. It
means continuous improvement in everything we do - earnings, technology,
employee development, safety, and environmental stewardship. Growth is about
looking to a new future as we enter the new millennium -- fully optimizing our
existing assets and aggressively pursuing opportunities to grow shareholder
value.
6
<PAGE> 6
Value is the reason we're here. It is an ongoing commitment -- to our
shareholders, to our customers, to and by our employees -- to create value in
everything we do. It also symbolizes Alcan's values -- our ethics, our conduct,
our reputation.
7
<PAGE> 7
MESSAGE TO SHAREHOLDERS
VALUE
(Photo of John R. Evans & Jacques Bougie)
(Caption)
John R. Evans (left), Chairman of the Board, and Jacques Bougie, President and
Chief Executive Officer.
OUR STRATEGIC PRIORITIES
- - Establish and implement aggressive new Full Business Potential targets for
1999 and beyond.
- - Strengthen the position of aluminum in the marketplace through industry
leadership and position Alcan as the multinational partner of choice for global
customers in select primary and semi-fabricated aluminum markets.
- - Aggressively seek out opportunities to maximize shareholder value.
Alcan's aggressive Full Business Potential process helped offset difficult
business conditions during 1998, as commodity markets were under pressure and
the price of aluminum declined by 20% in the course of the year. We made
significant progress towards meeting our commitments in regard to all three
strategic priorities that had been identified for 1998.
FULL BUSINESS POTENTIAL ON TARGET
In terms of Full Business Potential, we are right on target, having reached
two-thirds of our ambitious goal -- to improve pre-tax earnings by $450 million
over a three-year period. A substantial portion of the improvement realized
during 1998 was accounted for by our fabricated products sector where we gained
market share and our shipments worldwide grew by 7% -- for a total increase of
60% since 1993. Also, in our alumina operations we achieved a $10-per-tonne
savings in production costs on top of a similar reduction the previous year.
Alcan's Full Business Potential program is a continuous improvement process in
pursuit of earning, at a minimum, our cost of capital -- the key to creating
shareholder value. We are currently setting ambitious new targets for 1999 and
beyond.
STRENGTHENING ALUMINUM IN THE MARKETPLACE
Through active participation of senior managers in major North American and
European trade associations, we exercised global leadership on key industry
issues ranging from the value of aluminum recycling to trade issues and
environmental matters.
MAXIMIZING SHAREHOLDER VALUE
Certain strategic initiatives in our alumina and chemicals sector were
undertaken in 1998, such as our bauxite-related arrangements in Australia and
Ghana, modernization of our alumina refinery in Quebec and disposal of certain
assets in Ireland, Guinea and Quebec. Other significant achievements in 1998
were:
- - A 10-year strategic alliance with General Motors.
- - Commencement of construction of the US$1.6-billion Alma, Quebec, smelter
project.
8
<PAGE> 8
- - An 18-year agreement on operational stability with unionized employees in
Quebec.
- - Repositioning and consolidation in the Asia/Pacific region, obtaining majority
interest in Indian Aluminium Company, Limited (54.6%) in India and reducing our
share in Nippon Light Metal Company, Ltd. in Japan to 11.2%.
- - Major expansion of the Pindamonhangaba, Brazil, rolling mill, now close to
completion with over 5 million construction hours without an accident, and a new
recycling plant up and running.
- - Dynamic performance by Alcan's North American fabricated products operations,
which achieved positive EVA(R) in each of its businesses.
Insofar as EVA, or Economic Value Added, is concerned, neither Alcan nor others
in the industry have earned their cost of capital for some years now. That was
the case again in 1998. On a positive note, however, Alcan was able to maintain
the same EVA as in 1997 despite much lower metal prices. In other words, we
continue to increase the underlying profitability of the Company.
EVA is a registered trademark of Stern Stewart & Co.
CUSTOMER FOCUS PAYING OFF
There is no doubt that the stellar performance of Alcan's North American
fabricating operations -- which are now able to boast of industry-best practices
in a number of areas -- was a factor in attaining the multi-billion-dollar
General Motors supply agreement. The operational stability agreement with our
Quebec workers helps ensure that automobile manufacturers and other customers
will have a reliable supply of metal.
Alcan's determination to position itself as the most-responsive and lowest-cost
supplier in its chosen markets is the main motivation behind the current
realignment of our European operations. As such, we must be able to anticipate
the changing needs of our customers in Europe, and to provide a consistently
high level of customer service.
In Brazil, too, Alcan's customer focus is evident in our decision to invest in
the expansion of our Pindamonhangaba rolling facility and enhance our position
as the only domestic supplier of can sheet to that country's rapidly growing
beverage industry -- another of the global customer groups that we have
targeted.
SETTING NEW STANDARDS FOR WORKPLACE SAFETY AND THE ENVIRONMENT
At Alcan, we view our record in the area of employee health and safety as an
important indicator of the organization's overall performance. Our ultimate goal
is zero work-related injuries and illnesses. We are pleased to note a
much-improved performance throughout the Alcan Group in 1998, with significant
reductions in key indicators such as Recordable Case and Days Lost rates.
Especially noteworthy is the achievement of the workers and managers at our
rolling mill expansion project in Brazil, who surpassed 5 million construction
hours without a lost-time accident. That is a truly remarkable feat -- and
augurs well for a smooth start-up of the expanded facility.
(Graph)
During the year, Alcan also exercised industry leadership in terms of
environmental responsibility, with the revision to its corporate environmental
policy. The comprehensive policy statement encompasses six guiding principles,
which raise the bar in terms of the standards by which the aluminum industry
facilitates sustainable development and operates in a manner compatible with the
environment.
9
<PAGE> 9
ACKNOWLEDGMENTS
An organization's performance stands or falls on the strength of its people --
and the results of Alcan's second global survey of employees underscore how
fortunate we are in terms of the remarkable esprit de corps that exists
throughout the Alcan family. In terms of teamwork, for instance, the favourable
response by Alcan employees was almost 20 percentage points higher than the
average for major North American-based businesses. We would like to thank the
entire Alcan team for their hard work and dedication during a difficult year.
Alcan's Board of Directors also wishes to express its sincere appreciation to
Sonja Bata and Bill Blundell, who will not be standing for re-election at the
Annual Meeting of Shareholders in April this year, having reached retirement
age. We are grateful to Mrs. Bata for her 20 years of valued contribution,
serving on the Audit Committee from 1981 to 1992 and then as an ardent member of
the Environment Committee. We also wish to express our thanks for the wise
counsel of Mr. Blundell, who joined the Board in 1988 and served as a member of
the Audit Committee, becoming its Chairman in 1996.
We welcome Paul M. Tellier, President and Chief Executive Officer of Canadian
National Railway Company, to Alcan's Board of Directors, and wish to thank our
fellow Board members for their unstinting support and counsel.
OUTLOOK
It appears that 1999 will be another challenging year for the aluminum industry,
with Western World aluminum consumption forecast to grow by only 1% and metal
prices expected to remain low. However, Alcan has a strong balance sheet and
intends to be an active participant in the on- going restructuring of the
industry. We will seek out appropriate acquisition opportunities as an
additional way of building shareholder value.
We will optimize our growth potential by strong customer partnerships and market
leadership, providing value-added, differentiated aluminum products. We believe
we can be the best partner in our chosen markets. Strength, growth and value are
the core of our strategic intent.
(Signature)
John R. Evans
Chairman of the Board
(Signature)
Jacques Bougie
President and Chief Executive Officer
February 11, 1999
10
<PAGE> 10
(Sidebar)
EVA -- A KEY MEASURE OF PERFORMANCE FOR ALCAN
Alcan has made excellent progress over the past several years in terms of
achieving its strategic objectives, thanks in large part to the success of our
ongoing Full Business Potential process. As we continue to move forward, it is
imperative that we have tools in place that enable us to assess our performance
by a consistent measure and -- perhaps more importantly -- help us identify
areas that offer the greatest opportunity for further improvement.
EVA, an acronym for economic value added, provides us with such a tool. It
measures real profitability -- the difference between the return on capital and
the cost for using that capital over the same period. If returns exceed our cost
of capital, we have created value. EVA also provides a platform for linking
management compensation to the creation of value. It enforces an entrepreneurial
culture wherein employees think and act like owners of the Company.
Dozens of other major corporations worldwide already have adopted EVA, and have
found there is a correlation between an improving EVA and an increasing share
price. Not surprisingly, many investors now look to EVA as a key indicator of
the real return they are receiving on their investments.
With EVA in place, Alcan is in a better position to fulfill its commitment to
increasing shareholder value and realizing the full potential of all its
operations.
(Pull out)
GROWTH
Fabricated products shipments worldwide grew by 7% -- for a total increase of
60% since 1993.
STRENGTH
We are determined to optimize our growth potential by strong customer
partnerships and market leadership, providing value-added, differentiated
aluminum products.
11
<PAGE> 11
(Photo of plant)
GROWING WITH OUR PARTNERS
GROWTH
STRENGTH, GROWTH AND VALUE
(Photo of employee)
Are at the core of Alcan's strategic intent. We do more than make and sell
aluminum -- we build alliances with all our stakeholders. We also take pride in
developing and delivering value-added, technically advanced aluminum products,
making Alcan the partner of choice.
(Photo of David Moore and Roland Harings)
(Caption)
David Moore (right), vice president and director of technology for Alcan Global
Automotive Products, examines an aluminum deck lid with Roland Harings, sales
and marketing manager for European auto sheet.
The automotive sector represents one of aluminum's -- and Alcan's -- most
exciting opportunities for the next millennium. Significant market growth is
anticipated in everything from car structures and body panels to powertrains,
chassis components and brake rotors.
A decade of automotive research and development has established Alcan as a world
leader in delivering solutions to bring the benefits of aluminum to every aspect
of the vehicle value chain -- from design to recycling. Alcan's patented alloys
and proprietary technologies are key contributors to the growing acceptance of
aluminum as the preferred material for a new generation of safe, light-weight
and fuel-efficient vehicles.
(Photo of product)
(Caption)
Alcan's technology allows the application of aluminum sheet using techniques
that are compatible with existing high-volume automobile production methods --
easing the transition to aluminum.
(Graph)
(Caption)
Aluminum's high strength-to-weight ratio enables car structures and body panels
to be lighter than steel but just as strong.
As a result, Alcan is positioned to be the leading supplier of aluminum sheet to
the global auto industry. This market represents potential annual sales of
300,000 tonnes for Alcan within a decade.
Alcan's automotive success is the product not only of technology, creativity and
commitment but also the result of building strategic alliances with leading
automakers worldwide. An example is the landmark partnership and ten-year supply
agreement signed with General Motors in late 1998. This strategic alliance not
only helps to resolve the long-standing issue of stable metal costs, it also
provides a framework for continued joint research and development aimed at
expanding the use of aluminum in GM's cars and trucks.
Alcan has planned ahead to meet the demanding requirements of the automotive
market, particularly in sheet applications. In the last decade, we have invested
over $1 billion in our world-class rolling system. Moreover, the $1.6-billion
Alma smelter under construction in Quebec will further ensure the reliability of
metal supply to all our customers.
Moreover, the recent creation of Alcan Global Automotive Products as a new
business unit will enable the seamless, system-wide integration of Alcan's
automotive business initiatives worldwide -- advancing our pursuit of
aluminum-intensive vehicles with high-volume automakers.
12
<PAGE> 12
(Sidebar)
Aluminum's combination of light weight and high strength allows automakers to
improve fuel economy and reduce emissions without compromising safety. With
crash test studies on aluminum cars showing equal or better performance than
steel equivalents, aluminum will be key to safely bridging society's
environmental needs with regional preferences for size, comfort and
affordability.
(Pull out)
STRENGTH
Alcan is positioned to be the leading supplier of aluminum sheet to the global
auto industry.
GROWTH
Alcan has planned ahead to meet the demanding requirements of the automotive
market, particularly in sheet applications.
(Caption)
Kingston Works, in Canada, is an integral part of Alcan's North
American rolling system producing aluminum sheet with the exceptional surface
quality and formability required by automakers. This plant was the first of
several Alcan facilities to earn QS-9000 status -- the auto industry's quality
supplier designation.
(Photo of product)
(Caption)
Aluminum use is growing in automotive applications ranging from fenders to
radiators, while DURALCAN aluminum-matrix composites are finding increased
favour for products such as brake rotors and drums.
(Graph)
(Caption)
The use of aluminum in automobiles is expected to reach between seven and eight
million tonnes by 2005.
(Graph)
(Caption)
Extensive use of aluminum could cut the weight of a family sedan by 40% and
improve fuel efficiency by 24-32%.
13
<PAGE> 13
(Photo of product)
By the time the next generation takes to the road, cars will be lighter, even
more energy efficient and more responsive. Aluminum will be the prime reason for
these advances and Alcan's technology will help to make that happen.
Not only is Alcan a supplier of choice in the automotive market, but we also
have strategic partnerships in the all-important containers and packaging sector
as well as in other products such as lithographic sheet. Similarly, we are
pursuing relationships with customers in the fin stock product sector. In the
electrical cable market, strong customer alliances build extra value in our
products and service, while in the building and construction sector our metal is
frequently specified for major projects around the globe.
Through these partnerships, Alcan offers unique value. We develop and produce
technically advanced, differentiated, semi-fabricated products and our continued
investment in rolling and recycling facilities strengthens our position as a
market leader in our chosen product sectors.
(Photo of product)
(Caption)
Aluminum beverage cans have a higher salvage value than competing materials --
the economic value of the used beverage cans recycled by Alcan worldwide in 1998
is estimated at $370 million.
(Photo of product)
(Caption)
Aluminum's light weight, formability, barrier qualities and thermal conductivity
make it the ideal material for food and beverage packaging. Aluminum containers
can be shaped, coated and embossed for functional and decorative purposes.
The aluminum beverage can continues to grow as a premier package for end users.
Aluminum's properties, including complete recyclability with no deterioration in
quality as well as the value incentive for collection, provide a unique market
niche for aluminum beverage cans when compared to competing materials. Alcan's
North American can stock shipments were up in 1998, eclipsing the previous
record, outperforming the industry average and increasing market share. Industry
gains were driven by a rise in can shipments to 103 billion cans in the U.S.
alone. Alcan's recycling levels in North America also topped the previous year
with over 20 billion cans.
In South America, can sheet consumption has grown by about 20% per year since
1996. Alcan's $370-million expansion of the Pindamonhangaba plant in Brazil will
start up in 1999 -- the largest aluminum rolling operation in the region and the
only one capable of producing can sheet. A new recycling facility, with an
ultimate capacity of 80,000 tonnes per year, is already operational as part of
the Brazilian expansion.
In Europe, aluminum food packaging represents about 35% of the European rolled
products market, while in Asia, aluminum continues to gain market acceptance.
Alcan's other markets for aluminum include lithographic offset printing, where
aluminum sheets with unsurpassed surface quality and flatness are imperative.
For the printing process, an image is transferred to a flat lithographic sheet,
ink is applied and a print is made by passing the image via a rubber roll to the
paper. Aluminum lithographic sheets are ideal for this process and, once used,
they are easily recycled.
Alcan is also a major supplier of aluminum transmission and distribution cable
to public utilities as well as a producer of aluminum alloy building wire for
the construction industry. Once again, Alcan's strength in innovation, quality
and delivery distinguish the Company from the competition and clear the way for
developing strategic alliances with customers.
14
<PAGE> 14
In addition, Alcan produces value-added extrusion ingot for independent
extruders who fabricate products in an almost unlimited range of profiles and
shapes. Extrusions are generally destined for the building and construction
market, but no matter what the application, architects and designers find that
aluminum's high strength-to-weight ratio, versatility, durability and decorative
potential offer unique advantages.
(Photo of product)
(Caption)
Alcan aluminum lithographic sheet offers the printing industry unsurpassed
surface quality and flatness -- it is also 100% recyclable.
(Sidebar)
Aluminum is an indispensable part of our modern technological society.
Perhaps it is most evident in the form of aluminum beverage cans and foil
products, but the metal is now found all around us -- ranging from high speed
trains and supersonic airplanes to building products and sporting equipment. The
newspapers and magazines that we read are often printed using aluminum
lithographic sheets and our refrigeration and electronic components frequently
contain aluminum.
Aluminum is the material of choice in many applications -- from bridges in
Scandinavia and Canada to the curtain-wall cladding on the world's tallest
building, the Twin Towers complex in Malaysia. In the automotive sector,
fenders, doors and deck lids are now being made of aluminum sheet and soon we'll
see more aluminum body structures. Driveshafts and brake rotors made from
DURALCAN aluminum-matrix composites are already in production. And we see
aluminum signs at the side of the road as we pass towers supporting aluminum
electrical cable.
As society continues to look for products that can be recycled economically,
aluminum will continue to gain ground against competing materials.
(Pull out)
VALUE
Strong customer alliances build extra value in our products and service.
(Caption)
A body-in-white for an aluminum-intensive vehicle, built with Alcan's exclusive
Aluminum Vehicle Technology (AVT) system.
15
<PAGE> 15
CORPORATE SOCIAL RESPONSIBILITY
STRENGTH
(Photo of Jamaican Student and Teacher)
(Caption)
Community investment programs include initiatives such as this one at Alcan
Jamaica Company, where environmental studies for primary school students are
part of an Outreach Program.
ALCAN IS COMMITTED
to industry leadership in occupational health and safety, community relations
and environmental performance. The strength of this commitment stems from the
participation and determination of our employees, both on the job and as
volunteers in local community initiatives.
COMMUNITY AND ENVIRONMENT
Just as sustainable growth requires an integrated business strategy, Alcan's
community programs frequently combine the concepts of environmental management
and education with aluminum's recyclability and unique properties.
Community recycling programs often depend on collecting used aluminum beverage
cans, demonstrating one aspect of aluminum's growing value as a material of
choice. Protection of the environment is a high priority for every Alcan
employee, requiring a continuing effort to improve our products and processes.
HEALTH AND SAFETY
A continued trend in the reduction of Alcan's work-related injuries and
illnesses was evident in 1998. The commitment of all employees is a key factor
in creating a work environment that enhances safety excellence.
As we strive for continual improvement in occupational health, industrial
hygiene and safety, we are focused on reviewing and updating our methodology for
managing these areas within all Alcan Group companies. Similar to the management
system approach used to achieve accreditation to quality or environmental
standards, these efforts will lead to a global shift in the manner in which all
Alcan employees approach workplace health and safety.
(Photo Safety helmet)
(Caption)
All employees have the responsibility of identifying occupational health and
safety hazards.
In 1998, Behavioural Based Safety (BBS) was reviewed as an innovative tool to
improve health and safety performance. Founded on scientific principles, BBS
incorporates ongoing problem solving and employee involvement. It identifies and
corrects existing systems that produce at-risk behaviour and develops new
systems to encourage safe behaviours. BBS will complement our existing
management approach and strengthen Alcan's position in occupational health and
safety.
(Photo of Chantal Petitclerc)
(Caption)
Alcan sponsors wheelchair athlete Chantal Petitclerc who is on her way -- riding
on aluminum -- to the 2000 Olympic Games.
COMMUNITY AND EDUCATION
Alcan recognizes the need to contribute to the advancement of knowledge and
know-how, especially with the leaders of tomorrow.
Initiated by Alcan, the popular program, Working for a Better Tomorrow, is now
mushrooming into a global network of elementary school, environment-related
microbusinesses. Since its launch ten years ago in Quebec, the program has grown
to include two regional efforts in Brazil, nine schools in Canada and, this
year, the first U.S. project was inaugurated near Alcan's Sebree smelter in
Kentucky.
16
<PAGE> 16
(Photo of Teacher and Students)
(Caption)
Ecole Saint-Pierre in Alma, Quebec, was the first school to embark on Alcan's
program, Working for a Better Tomorrow. Among other activities, students
recycle paper into greeting cards and collect and sell aluminum cans.
Mentorship programs in Europe and Canada continue to be very successful. For
example, as one of the largest participants in the Canadian apprenticeship
program, Career Edge, Alcan has provided, in the past two years, over 100
university graduates with their first work experience. Also, Alcan introduced a
Research Fellowships Program for masters or doctoral level students at selected
universities in Canada.
Sponsoring an international athlete is not an everyday occurrence for Alcan, but
with Chantal Petitclerc, a world-class, wheelchair athlete, it is a golden
opportunity. Chantal is a five-time medal winner at the 1996 Paralympics at
Atlanta and a world-record holder in the 100-metre event. She has also won the
hearts of Alcan employees around the globe.
Alcan employees worldwide are involved in their communities, offering support to
charitable causes and recycling projects. Alcan continues to assist communities
in need, such as those affected by hurricanes Georges and Mitch in North and
Central America.
(Sidebar)
In 1998, Alcan set a goal to strive for environmental leadership within the
industry. We will continue to develop and implement state-of-the-art
environmental systems and adopt world-class practices for land use and residue
disposal.
And, by working in partnership with customers and suppliers, we will help to
create products that take full advantage of aluminum's properties throughout the
product life cycle. For all our stakeholders, the message is clear -- at Alcan,
environmental standards are not negotiable.
(Pull out)
VALUE
Protection of the environment is a high priority for every Alcan employee.
GROWTH
Alcan recognizes the need to contribute to the advancement of knowledge and
know-how, especially with the young leaders of tomorrow.
17
<PAGE> 17
THE ALCAN GROUP'S* BUSINESSES AT A GLANCE
(As at February 11, 1999)
EUROPE AND PACIFIC
(Graph)
NORTH AND SOUTH AMERICA
(Graph)
(Caption)
*Includes subsidiaries, joint ventures and related companies and reflects the
sale of alumina refining operations in Ireland and Guinea and of a chemicals
operation in Canada as well as the reduction of the interest held in Nippon
Light Metal Company, Ltd. (NLM) in Japan.
ALUMINA AND CHEMICALS
(Photo of bauxite)
(Caption)
Between four-to-five tonnes of bauxite are needed to produce about two tonnes of
alumina, which yield one tonne of aluminum.
OPERATIONS*
- - 10 bauxite mines/reserves in 6 countries with 400 Mt of demonstrated reserves.
- - 9 alumina plants in 6 countries with 3.7 Mt of annual capacity.
- - 6 specialty chemicals plants in 3 countries.
1998 HIGHLIGHTS
- - 11.3 Mt used.
- - $29 million in bauxite third-party sales.
- - 5.0 Mt produced.
- - $288 million in alumina third-party sales.
- - $184 million in sales.
In addition to the sales of bauxite, alumina and specialty chemicals indicated
above, Alcan's non- aluminum products account for $207 million in sales.
STRATEGY AND 1998 ACHIEVEMENTS
Optimize Alcan's alumina and bauxite asset base, while providing low-cost
alumina to the primary metal business.
- - Acquired majority control of Ghana Bauxite Company Limited in Africa.
- - Agreement on sale of alumina refining operations in Ireland and in Guinea, as
well as a chemicals business unit in Quebec.
- - Achieved production records in all core refineries.
- - Acquired a 20% equity participation in the Utkal alumina project in India.
18
<PAGE> 18
PRIMARY METAL
(Photo of smelting process)
(Caption)
Primary aluminum is produced through the electrolytic reduction of alumina
(smelting process).
OPERATIONS*
- - 16 smelters in 5 countries with 1.7 Mt of annual capacity.
1998 HIGHLIGHTS
- - 1.5 Mt of ingot produced.
- - 648 kt of ingot purchased.
- - $1.0 billion (648 kt) in ingot sales.+
STRATEGY AND 1998 ACHIEVEMENTS
Be the best producer of low-cost primary aluminum in the world.
- - Concluded an 18-year agreement for operational stability with Quebec unionized
employees.
- - Construction of the 375-kt/y smelter in Alma, Quebec, proceeding on time and
on budget.
Six smelters achieved record volume production.
FABRICATED PRODUCTS
(Photo of rolled product)
(Caption)
Fabricated products are rolled products (sheet and foil) as well as rod, wire
and cable, extruded and drawn products and castings. The principal end-use
markets are: Containers and Packaging, Transportation, Electrical, and Building
and Construction.
OPERATIONS*
- - Rolled Products
- - Other Fabricated Products
- - Total Fabricated Products
Over 50 manufacturing plants in 13 countries and 2.5 Mt of annual capacity.
- - Secondary/Recycled Aluminum
9 recycling plants in 6 countries with 752 kt of annual capacity.
1998 HIGHLIGHTS
- - $4.2 billion (1,604 kt) in sales.++
- - $1.1 billion (219 kt) in sales.
- - 44 kt of fabricated products purchased.
- - $5.3 billion in sales.++
- - 2.1 Mt of aluminum fabricated in Alcan facilities.
- - 684 kt produced.
- - 535 kt of scrap purchased.
- - $142 million (96 kt) in ingot sales.
- - $101 million (85 kt) in scrap sales.
19
<PAGE> 19
STRATEGY AND 1998 ACHIEVEMENTS
Grow Alcan's leading position in differentiated, semi-fabricated products in our
chosen markets through long-term customer partnerships and low-cost
manufacturing excellence.
- - Concluded a 10-year preferred supply agreement with General Motors.
- - Realigned our interests in the Asia/Pacific region. Obtained majority interest
in Indian Aluminium Company, Limited and divested part of stake in Nippon
Light Metal Company, Ltd.
- - Negotiated the sale of piston business in Nurnberg, Germany.
- - Increased North American sheet sales from existing facilities by 13%,
recording market share gain in major segments.
* As at February 11, 1999
20
<PAGE> 20
ALUMINA AND CHEMICALS
ALUMINA HYDRATE PRODUCTION
Production increased at most alumina refineries and, in addition, Indian
Aluminium Company, Limited in India is included as of the third quarter of 1998.
(Graph)
TOTAL SECTOR OPERATING INCOME
Lower prices for alumina were offset by increased production and cost
reductions.
(Graph)
PRIMARY METAL
PRIMARY PRODUCTION
(Graph)
Record production volume was achieved at six of the Company's smelters.
TOTAL SECTOR OPERATING INCOME
(Graph)
The decline in income reflects lower metal prices mitigated in part by lower
alumina costs and higher production.
FABRICATED PRODUCTS
FABRICATED PRODUCTS SHIPMENTS
(Graph)
In 1998, market share increased in North America and was consolidated in Europe
after a sharp increase the previous year.
TOTAL SECTOR OPERATING INCOME
(Graph)
All North American businesses achieved positive EVA in 1998 and improvements
were made in Europe.
+ also includes purchased ingot.
++ excluding fabrication of customer-owned metal.
21
<PAGE> 21
MANAGEMENT'S DISCUSSION AND ANALYSIS
VALUE
In a tough external environment, Alcan continues to improve its profitability.
Despite metal prices 15% lower, Economic Value Added (EVA(R))*
was unchanged in 1998.
(Graph) (Graph)
* EVA is a registered trademark of Stern Stewart & Co.
WORLD MARKET REVIEW
PRIMARY ALUMINUM
Consumption of aluminum in the Western World* fell 1.1% in 1998 as Asia's
financial difficulties worsened and spread to the rest of the world. This was
the first decline in demand for aluminum since 1982. The Asian downturn spread
to the United States and Europe where the rate of growth slowed towards the end
of the year. Latin America remained the strongest market, with consumption up
4.9%, but this was far below the 16.7% increase in 1997. Growth rates for both
North America and Europe declined by more than half in 1998, to 3.0% and 3.1%,
respectively. Aluminum consumption in Asia dropped by 11.6%, after a small gain
of 0.7% in 1997. In sum, Western World aluminum demand for 1998 totalled 25.4 Mt
of which demand for primary metal was 18.8 Mt.
Primary aluminum production in the Western World increased 2.3% in 1998 to
16.4 Mt as brownfield and greenfield capacity came on-stream and some idle
capacity was restarted. During the year, about 400 thousand tonnes (kt)
of capacity was unutilized because of labour, technical and weather problems.
Of this, 300 kt is expected to return to production in 1999. Voluntarily idled
capacity accounted for another 700 kt.
Exports of primary aluminum from the C.I.S. to the West totalled 2.7 Mt,
an increase of some 2% over 1997. Chinese primary production is estimated at
2.38 Mt, an increase of 16% over 1997, which, with lower GDP growth, has
eliminated the net imports into China from the West.
Supply of primary aluminum increased by 2.1% so, with the decline in demand of
1.1%, the market went into surplus. Inventories in the hands of primary aluminum
producers and in London Metal Exchange (LME) warehouses were little changed at
3.7 Mt, equivalent to about 10.3 weeks of consumption. However, total
inventories, including unreported stocks are estimated to have increased some
325 kt during 1998 and, assuming only a modest recovery in demand, are expected
to build up further in 1999.
Ingot prices declined during most of 1998, closing the year near the low point
at an LME three-month price of $1,244/t. The average price for the year was
$1,379/t, 15% lower than the average of $1,620/t in 1997.
* Defined as the world excluding the Commonwealth of Independent States
(C.I.S.), Eastern Europe and China.
22
<PAGE> 22
WESTERN WORLD CONSUMPTION VERSUS ALCAN SALES
(Graph)
It is estimated that total Western World aluminum consumption in 1998 was
25.4 Mt, three-quarters of which was supplied from primary sources and
the remainder from recycled metal. This decrease of 1.1% from the previous year
follows an increase of 5.4% in 1997.
Alcan's total shipments increased 4% to 2.9 Mt. Ingot shipments fell 3.4%, while
fabricated products shipments rose 7.2% reflecting the achievement of increased
market share in a number of key segments. The increased shipments largely offset
the metal price decline, resulting in revenues being unchanged at $7.8 billion.
(Graph)
The largest market for aluminum, namely transportation, grew by only 0.4% to
6.9 Mt following growth of 8.5% the previous year. In the United States,
aluminum consumed in the transportation sector grew by 4.9% to 3.1 Mt despite
a strike by workers at General Motors Corporation that hurt light vehicle
production, but this was offset by a 10% decline in Japan as vehicle production
declined. Alcan's revenues from this market increased some 10% in 1998 and
accounted for 9% of its revenue.
The containers and packaging market held steady at the 1997 level to consume
4.8 Mt of aluminum. It accounted for 45% of Alcan's revenues. Industry can sheet
shipments rose 1.3% to 3.4 Mt, with a large 15.4% rise in Brazil, despite the
country's economic difficulties. The can sheet market in the United States
continued its growth, increasing by 1.5% to 1,849 kt. Alcan's revenues from
containers and packaging worldwide increased about 8% led by an increased share
of the substantial North American can sheet market.
(Photo of Alcan Cable)
Strategic alliances and long-term supply partnerships build a strong future at
Alcan Cable.
Building and construction suffered a 5.2% fall, to 4.8 Mt. Growth in the United
States due to strong residential housing starts was offset by major declines in
Asian countries such as Japan, where housing starts were down sharply, resulting
in a decline in demand from construction of 15%. Alcan's revenues from this
sector increased 10% and accounted for 17% of the Company's sales revenue.
Consumption of aluminum in the electrical market rose a modest 0.9% to 2.3 Mt.
Growth included a strong 28% rise in Brazil with increased investment in
electrical distribution. Alcan's revenues from this market were little changed,
accounting for 9% of the Company's total revenue.
Other markets include machinery and equipment, and durable goods. Total aluminum
consumption in these smaller markets fell approximately 1.5%. Alcan's revenues
in the "other" category, which include sales of alumina and chemicals, were
about 7% lower in 1998, with a strong increase in distributor shipments in the
U.S. offset by lower prices for alumina. This comprised 20% of Alcan's revenue.
23
<PAGE> 23
(Graph)
RESULTS OF OPERATIONS
Alcan reported consolidated net income for 1998 of $399 million compared to
$485 million in 1997 and $410 million in 1996.
The chart above analyzes the principal components of the change in net income
between 1997 and 1998. Metal prices were sharply lower -- the average
three-month LME price declined 15% from $1,620/t to $1,379/t and was 10% below
the 1996 level of $1,536/t. This was offset in large part by continued increases
in fabricated products sales volume and improved margins due to cost reductions,
improvement in product mix and the lag in passing on lower metal prices.
In terms of Economic Value Added (EVA), the metal price decline was fully offset
- -- EVA for 1998 was the same as 1997 at $(285) million and improved over
the 1996 level of $(310) million.
Also included in the 1998 result were a number of offsetting items totalling a
net after-tax loss of $9 million. Operating losses and business rationalization
costs at Nippon Light Metal Company, Ltd. (NLM) in Japan of $53 million and
restructuring costs elsewhere of $15 million were incurred. As a result of the
impending sale of the Company's alumina refinery in Ireland, the book value of
that asset was written down to the level of the expected sale proceeds,
resulting in an after-tax charge of $120 million. These charges were offset by
gains on the sale of shares in NLM and a chemicals business in Canada of $148
million after taxes, and a gain on currency revaluation of deferred income taxes
of $31 million which resulted from the adoption of a new accounting standard.
The 1997 result included an extraordinary gain of $17 million arising from the
sale of a portion of a contract to supply power to B.C. Hydro, net of additional
write-downs of remaining Kemano Completion Project (KCP) assets. In addition,
1997 earnings included a net after-tax gain of $6 million arising from a
favourable tax adjustment and gain on sale of businesses offset in part by
contract losses and restructuring at NLM. Operating losses at NLM were $7
million in 1997.
For 1996, net income included net after-tax charges of $23 million relating to
restructuring and early retirement of debt, offset by gains on business
disposals and prior-period tax adjustments.
The Company's Full Business Potential program, launched in 1997, continued to
make good progress towards achieving its goal of a $450 million pre-tax
improvement in profitability compared to the 1996 base, by the end of 1999.
Following improvements of $160 million in 1997, a further $140 million has been
achieved in 1998 for a total of $300 million at the end of 1998. In the alumina
and chemicals sector, gains of $80 million have been made through lower costs
and increased production volume. Primary metal operations have achieved $20
million through improved smelter efficiencies resulting in increased output. In
fabricated products operations, North America and Europe have achieved
improvements of $220 million in the two- year period through higher capacity
utilization leading to lower unit costs as well as absolute cost
(Graph)
24
<PAGE> 24
reductions in Europe. Other regions have shown some slippage amounting to
$20 million due to adverse economic conditions in Asia and Brazil. It is
anticipated that the goals of the current program will be achieved by the end
of 1999 and a further challenging target of earnings improvement will be set
for the years beyond.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
REVENUES
(millions of US$) 1998 1997 1996
---- ---- ----
Sales and operating revenues 7,789 7,777 7,614
----- ----- -----
Total aluminum shipments (kt) 2,941 2,828 2,607
----- ----- -----
Average sales price realizations (US$/t)
Ingot products 1,558 1,739 1,658
Fabricated products 2,923 2,999 3,279
===== ===== =====
</TABLE>
Sales and operating revenues, at $7,789 million, were slightly above the 1997
level and 2% higher than in 1996. This essentially stable level of revenues, in
the face of lower metal prices, reflects continued increases in sales volume
and, in 1998, an improved spread of fabricated products prices over the
underlying metal price. This reflects, in part, the time-lag in changes in metal
prices flowing through to fabricated products prices. In addition, realizations
are affected by the translation into U.S. dollars of sales expressed in European
currencies that weakened in 1997 and showed some recovery against the dollar in
1998.
Other income, which comprises interest income and other non-operating gains, was
$231 million in 1998 compared to $88 million in 1997 and $75 million in 1996.
Other than interest received on surplus cash, the main items included under this
heading were gains on disposal of assets which, in 1998, amounted to $156
million before taxes, primarily from the sale of shares in NLM.
COSTS AND EXPENSES
Despite progressively higher sales volumes, cost of sales and operating expenses
increased only 1.2% in 1998 and 1.5% in 1997. This improvement in unit costs
primarily reflects higher capacity utilization, cost reductions and the lower
cost, in 1998, of purchased metal.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
(kt) 1998 1997 1996
---- ---- ----
Purchases of aluminum
Ingot products 648 732 509
Scrap 535 482 446
Fabricated products 44 40 48
----- ----- -----
1,227 1,254 1,003
===== ===== =====
</TABLE>
Purchases of primary ingot declined in 1998 as more of the fabricating sector's
requirements were met by the Company's own smelters and increased recycling of
scrap.
Depreciation expense increased to $462 million from $436 million in the previous
year and a similar level in 1996 reflecting the higher levels of capital
expenditure in 1997 and 1998.
25
<PAGE> 25
Selling, administrative and general expenses, at $448 million, were little
changed from the 1997 level, which was some 5% higher than 1996. This reversal
of the declining trend of recent years was due to expenses of some $36 million
in 1998 and $42 million in 1997 incurred in renewing and updating information
technology systems. These latter expenses are expected to decline in 1999.
Research and development expenses were $70 million in 1998, little changed from
1997 and 1996. Alcan's R & D activities are closely aligned with the needs of
its core businesses, principally, raw materials, smelting and rolling. The
Company is continuing to maintain a strong program for the development of sheet
applications and technology for the automotive industry and is working closely
with a number of automotive companies in this regard. In addition, opportunities
for process optimization to improve EVA are continuing to be explored and
implemented in all technology streams.
Other expenses were $219 million compared to $54 million in 1997 and $88 million
in 1996. The 1998 increase results from the write-down by $143 million before
taxes of the Aughinish alumina refinery in anticipation of its sale, and from
costs associated with the Company's Year 2000 software remediation program.
<TABLE>
<CAPTION>
INTEREST COSTS
(millions of US$) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Interest expense 92 101 125
Interest capitalized 15 2 -
---- ---- ----
Total interest costs 107 103 125
Effective average interest rate 6.3% 6.9% 7.3%
==== ==== ====
</TABLE>
Total interest rose slightly in 1998 as borrowings increased, with $15 million
being capitalized relating to the Pindamonhangaba (Pinda) and Alma projects in
Brazil and Quebec, respectively. From its peak of $267 million in 1992, the
Company's interest costs have now fallen by $160 million or 60%. This reflects
the debt reduction over that period as well as the benefit of lower interest
rates. The pre-tax interest expense coverage ratio was 6.3 times in 1998
compared to 7.4 times in 1997 and 5.6 times in 1996.
INCOME TAXES
Income taxes of $210 million for 1998 represent an effective rate of 32%,
similar to 1997, compared to a composite statutory rate of 40.4%. The difference
in the rates in 1998 is due primarily to investment and other allowances,
reduced rate or tax-exempt items and the impact of the accounting change related
to the currency revaluation of deferred income taxes, partially offset by other
exchange translation items.
EQUITY COMPANIES
Alcan's share of losses of equity-accounted companies in 1998 was $48 million
compared to $33 million in 1997 and $10 million in 1996. Business conditions in
Japan continued to deteriorate
26
<PAGE> 26
and Alcan's Japanese affiliate, NLM, recorded further operating and
restructuring losses. In the third quarter, Alcan increased its ownership in
Indian Aluminium Company, Limited (Indal) from 34.6% to 54.6% and accordingly
that company is now consolidated as a subsidiary. During the fourth quarter, the
Company reduced its ownership in NLM from 45.6% to 11.2% and the investment in
NLM is now treated as a portfolio investment.
PRODUCT SECTOR REVIEW
The following information is reported by major product sector, viewing each
sector on a stand- alone basis. Transactions between sectors are conducted on an
arm's-length basis and reflect market prices. Thus, profit on all alumina
produced by the Company, whether sold to third-parties or used in the Company's
smelters, is included in the alumina and chemicals sector. Similarly, income
from primary metal operations includes profit on metal produced by the Company,
whether sold to third-parties or used in the Company's fabricating operations.
Income from the fabricated products sector represents only the fabricating
profit from rolled products and downstream businesses. Additional product sector
information is presented in note 23 to the financial statements.
<TABLE>
<CAPTION>
ALUMINA AND CHEMICALS OPERATIONS
(millions of US$) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Sales and operating revenues
Third parties 509 536 529
Intersector 516 520 507
Operating income 113 118 84
--- --- --
Shipments - third-parties (kt)
Smelter-grade alumina 1,641 1,679 1,585
Alumina chemicals 433 399 387
--- --- ---
Alumina hydrate production (kt) 5,013 4,727 4,536
===== ===== =====
</TABLE>
Profits from this sector are little changed from 1997 and ahead of 1996. Alumina
prices decreased on average by 14% in 1998, reflecting the decline in metal
prices. Alcan reduced its alumina production costs per tonne by 8% compared to
1997. This was the result of continued improvements to productivity and
efficiencies in conjunction with the Company's Full Business Potential program.
Production costs also benefited from lower market prices for oil and caustic
soda.
BAUXITE
Through subsidiaries, joint ventures and related companies, Alcan has
approximately 400 Mt of demonstrated bauxite reserves, which is more than
sufficient to meet its needs for the next 30 years. The Company also has access
to additional resources to meet its needs beyond this period.
27
<PAGE> 27
Having reached agreement with Comalco Limited in February 1998 with regard to
integrated mining of Alcan's Ely bauxite deposit with Comalco reserves in
Australia, progress was made during 1998 to define the mining plan for these
resources. From the beginning of 2000, Alcan's bauxite costs in Australia will
benefit significantly from the economies of scale resulting from this agreement.
In March 1998, Alcan increased its equity position in the Ghana Bauxite Company
from 45% to 80%, and is pursuing an initiative to expand the mining capacity of
that company.
ALUMINA
Alumina hydrate production reached 5.0 Mt in 1998, a 4% increase over 1997 on a
comparable basis. For the second consecutive year, hydrate production was the
highest level ever for the Company. Total third-party sales were unchanged at
2,074 kt.
In May 1998, Alcan acquired a 20% interest in the proposed Utkal alumina project
in Orissa, India, a further 20% of which is held by Alcan's 54.6%-owned
subsidiary, Indal. The project consists of a one-million-tonne integrated
alumina plant and bauxite mine, with the opportunity to further expand
production capacity. This project has the potential to be the lowest cost
alumina plant in the world. The detailed feasibility study, most of the
environmental clearances, licenses and land acquisitions have been completed. In
February 1999, Alcan increased its direct interest in this project to 35%. The
Utkal shareholders' decision regarding commencement of construction is expected
to be made in late 1999 or early 2000.
In December 1998, Alcan announced a $105-million modernization program at its
alumina plant in Jonquiere, Quebec. This project will be completed over a
four-to-five year period, in conjunction with a major reorganization and
substantial reduction in employment levels, in order to significantly reduce the
facility's alumina production cost, as well as improve environmental, health and
safety conditions.
In January 1999, Alcan reached agreement in principle with Glencore Limited for
the sale of the Aughinish alumina refinery in Ireland. In anticipation of this
sale, the book value of this asset has been written down to the expected sale
value resulting in a charge of $120 million after tax. The sale is expected to
be completed by the end of the first quarter of 1999 and will make a further
contribution towards the reduction of the Company's overall alumina costs.
(Photo of Truck)
An agreement with Comalco Limited will achieve economies of scale in mining the
Ely bauxite reserves in Australia, adding substantial value to Alcan's strategy
for raw material supply.
CHEMICALS
Operating results in 1998 were similar to prior year results, as continued
progress made on shifting Alcan's position to specialty alumina chemicals was
offset by reduced profit margins in Europe. In December 1998, Alcan concluded
the sale of Handy Chemicals Limited located in Candiac, Quebec, in accordance
with its strategy to focus on specialty alumina chemicals.
28
<PAGE> 28
PRIMARY METAL OPERATIONS
(millions of US$)
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Sales and operating revenues
Third parties 1,304 1,487 1,321
Intersector 1,394 1,486 1,628
Operating income 346 606 523
----- ----- -----
Shipments (kt)
Primary aluminum
Third parties 648 661 592
Intersector 904 867 1,017
----- ----- -----
Primary production (kt) 1,481 1,429 1,407
===== ===== =====
</TABLE>
Operating profits from this sector declined some 43%, to reflect the lower
average ingot prices prevailing in 1998 mitigated by lower alumina costs and the
benefit of increased production levels. Profits from this sector arise not only
from third-party sales but also from the sale of metal at market prices to the
Company's own fabricating operations. Intersector shipments increased in 1998
reflecting higher demand from Alcan's North American fabricating operations.
Third-party sales of primary ingot are nearly all in added-value forms such as
extrusion billet and foundry ingot. Reduced Asian demand for ingot products was
offset by a continued high level of demand from the North American market.
Billet sales and profitability improved with Alcan's strong market position
supported by casting facilities at four smelters. Sales of foundry ingot were
maintained despite the 1998 ice storm affecting output in Quebec and a strike at
General Motors affecting demand. Increased foundry ingot casting capacity has
been installed at the Sebree smelter in the U.S. to support Alcan's automotive
products strategy. The average realized price on third-party sales of primary
ingot was $1,618/t compared to $1,803/t in 1997 and $1,721/t in 1996.
(Photo of smelting plant)
(Caption)
Alcan's smelting and power strategy moves into a new phase with the
construction of the US$1.6-billion, 375,000-tonne capacity smelter in Alma,
Quebec, scheduled for start-up in late 2000.
Alcan's average cost of production of primary aluminum (mainly in the form of
sheet ingot and extrusion billet), including alumina at market prices, was
$1,327/t compared to $1,352/t in 1997 and $1,328/t in 1996. The reduction in
1998 was due to lower alumina costs and the benefits to unit costs of increased
output.
PRIMARY PRODUCTION
Primary metal production again increased in 1998 with improved output from most
smelters offset by the loss of some 7 kt of production at a Canadian smelter due
to the loss of power following an ice storm in January 1998. Alcan continues to
have approximately 134 kt/y of production capacity temporarily idled,
representing 8% of its capacity. This capacity will be restarted only when
warranted by industry conditions. In addition, some 70 kt of capacity in India
are idle due to non-availability of power.
In February 1998, the Company announced its decision to proceed with
construction of a new 375-kt/y smelter at Alma, Quebec. Construction is
proceeding according to plan and the first metal will be produced in late 2000.
In conjunction with this expansion, the existing 75-kt/y
29
<PAGE> 29
smelter at Isle-Maligne, Quebec will be closed. The Alma smelter will employ
state-of-the-art technology and will have among the lowest operating costs of
new smelter projects in the world today.
Feasibility studies are under way into potential smelter projects in British
Columbia and Kentucky as well as a potential joint-venture project in Shanxi
Province, China. These studies represent opportunities to grow Alcan's low-cost
smelting capacity and their completion will allow the Company to move quickly
when market conditions are appropriate.
In the U.K., the refurbishment of the idle potline at Lynemouth is complete and
the line is ready to restart when market conditions allow. In anticipation of
the eventual closure of the Kinlochleven smelter, planning permission has been
sought to upgrade the power line from the Kinlochleven power system to the
Lochaber smelter.
<TABLE>
<CAPTION>
FABRICATED PRODUCTS OPERATIONS
(millions of US$) 1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Sales and operating revenues 5,963 5,737 5,744
Operating income 310 280 124
----- ----- -----
Shipments (kt) 1,823 1,694 1,539
Fabrication of customer-owned metal 289 276 258
Total volume 2,112 1,970 1,797
===== ===== =====
</TABLE>
Alcan's fabricated products volume, including fabrication of customer-owned
metal, grew 7% in 1998 to a record level of 2.1 Mt, following 10% growth in
1997. Adjusted for acquisitions and disposals, fabricated products volume has
grown 60% in the five years since 1993. This performance reflects the
achievement of increased market share in the Company's chosen market segments.
<TABLE>
<CAPTION>
ROLLED PRODUCTS
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Shipments (kt) 1,604 1,476 1,304
Fabrication of customer-owned metal 289 276 258
----- ----- -----
Total volume 1,893 1,752 1,562
----- ----- -----
Average price realizations (US$/t) 2,599 2,637 2,797
===== ===== =====
</TABLE>
Alcan continues to consolidate its position of leadership in rolled products
markets in North and South America and Europe following capacity expansions and
modernization in recent years.
The decline in the average price realized on shipments of rolled products was
much less than the decline in the underlying metal price due to the time-lag in
metal prices flowing through to fabricated products prices as well as to the
impact of currency translation. Realizations on sales
30
<PAGE> 30
denominated in European currencies declined in dollar terms in 1997 but
increased in 1998 as those currencies recovered against the dollar.
North American industry aluminum sheet demand grew an estimated 1.5% in 1998 but
Alcan achieved growth of 13%, recording market share gains in all major segments
and increased exports. Industry can sheet growth was in line with overall sheet
demand growth at an estimated 1.5% increase in 1998 driven by an increase in
beverage can shipments of about 2.2% to a level of 103 billion cans in the U.S.
Alcan continued to increase its share of this market with shipments up 11.6%.
The Company made further inroads to the distributor market with shipments up 12%
in a relatively flat market. In light gauge products, volume was up 10%, over
twice the market growth, led by gains in transportation, packaging and
construction.
(Graph)
Following growth of 7% in 1997, the rolled products market in Western Europe
rose by an estimated 1.5% in 1998. However, market conditions weakened as the
year progressed with the rolled products market contracting at a rate of 2%
during the second half-year, after growth of 5% in the first six months. Having
achieved sales growth of 16% in 1997, Alcan consolidated its position with
shipments almost unchanged from the previous year, but with improved margins and
with a higher added-value product mix.
In South America, rolled products growth of 9% slowed somewhat from previous
years and was mixed, with can sheet growing an estimated 16% but declines for
consumer durable goods, transportation and machinery markets due to very high
real interest rates in Brazil. A large proportion of Alcan's shipments is can
sheet and the Pinda mill is the only rolling mill in the region with can sheet
production capability. This plant is being expanded from 100 kt/y to 280 kt/y
with the new capacity scheduled to start coming on stream late in 1999 to
continue supporting the expanding South American can sheet market.
(Photo of laboratory)
(Caption)
Alcan's patented allows and proprietary technologies are key contributors to
the growing acceptance of aluminum sheet in automobiles. Working in close
partnership with the customer, an Alcan laboratory technologist at Kingston,
Ontario, simulates a test for the uniformity of temperature distribution on an
aluminum hood.
AUTOMOTIVE
The year 1998 was again one of substantial progress for the automotive group,
with significant commercial breakthroughs advancing Alcan's leadership in the
application of aluminum sheet and metal matrix composites. During the year,
Alcan secured new business with both General Motors and Ford for the increased
use of aluminum exterior body panels (closures) on cars and light trucks. Over
the next two years, Alcan will begin to supply multiple major new closure panel
applications to the two manufacturers, making Alcan the leading supplier of
aluminum closures to both companies. Volkswagen selected DURALCAN brake drums
for production on its new lightweight, 3.0 liter/100 km Lupo. The Lupo, weighing
in at just 800 kg, capitalizes on the lightweight benefits of aluminum
throughout the vehicle. Production of this vehicle is now under way. In addition
to these successes, significant progress was made toward the prospect of a high-
volume aluminum-intensive vehicle (AIV).
Alcan Global Automotive Products, a new organization, was created in 1998 to
extend Alcan's business development approach into Europe and other regions to
ensure the success of critical customer programs, while capturing the value of
these business opportunities for Alcan. The strategic alliance signed with
General Motors in November, along with continued progress with
31
<PAGE> 31
Ford toward developing lighter, more efficient vehicles, provides the
underpinning for long-term sustainable market growth.
Alcan's reputation as a reliable, quality supplier was also recognized through
the achievement of both the QS-9000 and Ford Q1 certifications at the Company's
three North American plants involved in the production of automotive sheet.
<TABLE>
<CAPTION>
OTHER FABRICATED PRODUCTS
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Shipments (kt) 219 218 235
--- --- ---
Average price realizations (US$/t) 5,292 5,445 5,946
===== ===== =====
</TABLE>
Sales of other fabricated products were flat in 1998 after having declined over
the previous five years as a result of the divestment of non-strategic
downstream businesses, most of which was completed by 1996. The slight decline
in realizations in 1998 largely reflects the underlying metal price.
In North America, shipments of Alcan Cable products increased in 1998,
continuing the positive trend of the past several years. Building wire demand
continued to grow and market demand for service cable and transmission cable was
stable in 1998, supporting the sales volume needed to maintain continuing
excellent profit performance. Alcan Cable employees in Canada and the U.S.
extended special efforts in early 1998 in response to emergency demand for cable
caused by a severe ice storm that blanketed eastern Canada and the northeastern
United States in January. Most dramatic was Alcan Cable's rapid production and
delivery of a special high strength alloy conductor cable that electric utility
Hydro-Quebec desperately needed to replace steel-reinforced high-voltage lines
brought down by the storm.
In France, conditions in the building systems market improved, and the overseas
business of Alcan France generally performed well. However, sales to Southeast
Asia were affected by the much weaker economies in that region. In Germany,
Alcan reached agreement to sell the piston manufacturing business during the
first quarter of 1999. In Brazil, the flexible packaging business suffered weak
market demand.
RECYCLING ACTIVITIES
Alcan's aluminum can recycling in North America increased by 8.2% in 1998 to
a new record, 20.1 billion cans. This represents more than 30% of all the
aluminum beverage cans recycled by Americans in the year. In Canada, Alcan
collected approximately 2.1 billion cans in Ontario, Quebec and British
Columbia during 1998. The economic value of the cans Alcan recycled
during the year in North America totalled nearly $325 million.
Alcan also operates a used beverage can (UBC) recycling plant in the U.K.
and, in early 1998, commissioned a UBC recycling facility with an ultimate
capacity of 80 kt/y in Brazil, the first of its kind in South America,
supporting growth of the beverage can market in those regions.
32
<PAGE> 32
In addition to its UBC recycling facilities, Alcan recycles other forms of
aluminum scrap at four facilities in India, Italy, Thailand and the U.K. with a
total capacity of 181 kt/y. Third-party sales totalled 96 kt compared to 82 kt
in 1997 and 119 kt in 1996. Late in 1996, the Company sold its facility in
Guelph, Ontario, and, in the first quarter of 1999, sold its plant in
Shelbyville, Tennessee. These steps reflect the decision to concentrate
secondary production on supplying sheet ingot to the Company's own fabricating
operations and supporting the fabricated products market with a recycling
infrastructure.
GEOGRAPHIC REVIEW
The economic downturn in Japan and the rest of Asia felt in late 1997
accelerated into 1998 and, because of the impact on global demand and prices,
adversely affected results in all regions.
Net income data included in this Geographic Review relate to Alcan's operations
in each region, whereas the shipment data are classified according to
third-party customer location.
<TABLE>
<CAPTION>
CANADA
(millions of US$) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income* 133 245 175
Net income excluding special items* 103 219 188
--- --- ---
Shipments (kt)
Ingot products 110 101 120
Fabricated products 115 110 120
=== === ===
</TABLE>
[FN]
* Net income in 1997 is before extraordinary gain. Special items include: 1998
currency revaluation of deferred income taxes and gain on sale of a business,
1997 prior year tax adjustments, 1996 rationalization expenses and loss on early
retirement of debt.
</FN>
Earnings from Canadian operations, principally primary metal and alumina,
declined in 1998 due to lower aluminum ingot prices more than reversing the
improvement in 1997.
(Graph)
The Canadian economy experienced slower growth with the impact of reduced
exports to Asia. Alcan's shipments to customers in Canada increased some 7% to
225 kt.
The 375-kt/y Alma smelter project in Quebec received its go-ahead early in 1998,
and construction is underway. In the fourth quarter, Handy Chemicals was sold in
accordance with the Company's strategy of concentrating its chemicals activities
on specialty alumina chemicals.
33
<PAGE> 33
<TABLE>
<CAPTION>
UNITED STATES
(millions of US$) 1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Net income 144 136 70
Net income excluding special items* 144 136 72
----- ----- -----
Shipments (kt)**
Ingot products 388 379 380
Fabricated products 1,016 905 874
===== ===== =====
</TABLE>
[FN]
* Special items comprise loss on sale of business and tax write-backs in 1996.
** Includes fabrication of customer-owned metal.
</FN>
The increase in U.S. net income reflects continued improvements in profitability
of the fabricated products business partly offset, in 1998, by reduced earnings
from the U.S. smelter operations due to lower metal prices.
The U.S. economy remained robust but with some slowing of the growth rate
towards the end of the year. Aluminum consumption rose 2.8% after a high, 6.7%,
growth rate in 1997. Strong housing activity and transportation markets as well
as continuing growth in the can market were the main factors.
Despite the slowing in the U.S. growth rate, Alcan's fabricated products
operations experienced an excellent year and are achieving good order levels
going into 1999.
<TABLE>
<CAPTION>
SOUTH AMERICA
(millions of US$) 1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Net income 13 27 42
Net income excluding special items* 13 17 29
----- ----- -----
Shipments (kt)
Ingot products 26 27 21
Fabricated products 162 146 153
===== ===== =====
</TABLE>
[FN]
* Special items include 1997 and 1996 gain on sale of businesses.
</FN>
Operating results in 1998 were affected by the impact of lower metal prices on
raw materials and smelting operations. The decline in 1997 was largely due to
the divestment of non-core downstream operations.
In Brazil, the imposition of very high interest rates in defence of the currency
pushed the economy into recession in the fourth quarter. Cars, trucks and
consumer durable goods production declined sharply. Despite weakness in these
sectors, aluminum consumption grew some 5% with increased demand from the
electrical distribution and beverage can markets. The outlook for 1999 is
uncertain after the devaluation of the Real in January 1999. It is expected that
the first quarter will be difficult with a substantial reduction in GDP.
34
<PAGE> 34
The Pinda rolling mill expansion is proceeding well -- on time, on budget and
with over 5 million construction hours worked without a lost-time accident. The
expansion is scheduled to start coming on stream in the second half of 1999.
EUROPE
Overall GDP growth in the European Union (EU) 15 countries continued at just
under 3% in 1998, a similar rate to the previous year. The economies of Germany
and France experienced slightly higher growth, whereas Italy's growth was
unchanged, and the U.K. economy began to slow down.
Operating profits and net income from the European fabricating businesses showed
a significant increase in 1998, partly due to the effect of the improved
conversion margins, but mostly due to the benefits of the cost reduction program
underway across Europe. Employee numbers in Europe were reduced by some 550, or
5%, during the year and restructuring charges of $19 million before tax were
made as Alcan Europe took steps to move towards its full business potential. In
1998, however, this improvement was offset by reduced earnings from alumina and
primary metal operations.
GERMANY
<TABLE>
<CAPTION>
(millions of US$) 1998 1997 1996
- ----------------- ---- ---- ----
<S> <C> <C> <C>
Net income 7 - (25)
Net income excluding special items* 10 - (20)
---- ---- ----
Shipments (kt)**
Ingot products 19 10 8
Fabricated products 180 183 151
==== ==== ====
<FN>
* Special items include 1998 and 1996 rationalization costs.
** Includes fabrication of customer-owned metal.
</TABLE>
Alcan's fabricating operations in Germany turned profitable in 1998 but
continued to be EVA-negative. Further improvements are expected in 1999, based
on actions taken in 1998 and to be taken in 1999.
UNITED KINGDOM
<TABLE>
<CAPTION>
(millions of US$) 1998 1997 1996
- ----------------- ---- ---- ----
<S> <C> <C> <C>
Net income 2 22 51
Net income excluding special items* 8 22 49
---- ---- ----
Shipments (kt)**
Ingot products 25 25 16
Fabricated products 151 152 141
==== ==== ====
<FN>
* Special items include 1998 rationalization costs, 1996 tax write-backs.
** Includes fabrication of customer-owned metal.
</TABLE>
35
<PAGE> 35
Fabricating operations in the U.K. were affected by the competitive impact of
the strength of the pound sterling against continental currencies and by the
slowing U.K. economy. In addition, primary metal operations suffered a decline
in profitability due to lower metal prices.
<TABLE>
<CAPTION>
OTHER EUROPE
(millions of US$) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income (98) 33 (5)
Net income excluding special items* 25 33 (3)
---- ---- ----
Shipments (kt)**
Ingot products 64 71 65
Fabricated products 366 391 338
==== ==== ====
</TABLE>
[FN]
* Special items include 1998 write-down of assets and rationalization costs,
1996 rationalization costs.
** Includes fabrication of customer-owned metal.
</FN>
Improved fabricated products earnings were offset by the impact of lower alumina
prices on the raw materials operations. Included in the reported earnings for
the year is a $120 million after-tax write-down of the Aughinish alumina
refinery in anticipation of its sale early in 1999.
(Photo of shop floor)
(Caption)
Indian Aluminium Company, Limited, now a fully consolidated subsidiary,
manufactures a range of products such as the high-value rolled products at the
Belur sheet mill in West Bengal, India, all the way across the spectrum to
specialty alumina chemicals.
<TABLE>
<CAPTION>
ASIA AND PACIFIC
(millions of US$) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income 117 (1) 13
Net income excluding special items* 8 29 25
---- ---- ----
Shipments (kt)
Ingot products 196 245 199
Fabricated products 119 76 13
==== ==== ====
</TABLE>
[FN]
* Special items include: 1998 gain on sale of NLM shares, 1998 and 1997
construction contract losses and rationalization expenses and 1996
rationalization expenses.
</FN>
Income, excluding special items, from this region deteriorated further in 1998
as the weak Japanese economy resulted in increased operating losses from the
Company's affiliate, NLM. In the fourth quarter, in line with the strategy of
concentrating on upstream and large-scale fabricating operations, Alcan sold
shares in NLM reducing its holding to 11.2% and realizing net cash proceeds of
$193 million and an after-tax gain of $140 million. This company is now
accounted for as a portfolio investment and is no longer equity-accounted.
In July 1998, Alcan acquired a further 20% of the shares of Indal for
$70 million bringing its total stake to 54.6%. Accordingly, Indal has been
consolidated as a subsidiary from that date. Despite slower economic growth
in India, Indal improved its profitability by some 50%.
The economic crisis, which gripped Southeast Asia in the latter half of 1997,
worsened during 1998, plunging most countries in the region into their first
recession in over a decade. Alcan's
36
<PAGE> 36
exports of ingot products to the region declined by 20%. For fabricated
products, the construction and automotive markets, which are important to
Alcan's businesses, were especially hard hit, leading to a sharp decline in
shipments into these markets.
Alcan's businesses in Thailand and Malaysia responded with aggressive cost
reduction and productivity improvement, rigorous management of working capital
and the development of export opportunities. While profitability declined, cash
generation was positive and substantially higher than in 1997. With business
conditions expected to remain difficult, all companies will be accelerating
their efforts to strengthen their competitive position in the year ahead.
In Australia, earnings from raw materials operations declined due to lower
alumina prices.
<TABLE>
<CAPTION>
OTHER AREAS
(millions of US$) 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Net income 39 35 31
Net income excluding special items* 41 35 35
---- ---- ----
Shipments (kt)
Ingot products - - 1
Fabricated products 3 7 7
==== ==== ====
</TABLE>
[FN]
* Special items include 1998 loss on sale of business, 1996 rationalization
expenses.
</FN>
Activities in other areas include raw materials operations in Jamaica, Guinea
and Ghana, and trading, shipping and insurance activities in Bermuda. Alcan also
sells its products in other parts of the world such as the Middle East and
Africa.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES
Cash generation in 1998 was close to 1997, despite the lower net income.
Calculated by taking net income for the year and adding back depreciation and
deferred income taxes, cash generation was $890 million compared to $913 million
in 1997 and $856 million in 1996.
Net operating working capital requirements increased by $106 million in 1998 and
by $125 million in 1997 due in part to higher fabricated products sales volumes.
Inventories increased at the end of 1998 reflecting lower than expected
shipments at the end of the year in Europe and realignment of sheet ingot
work-in-progress in North America.
(Graph)
(Photo of recycling facility)
(Caption)
With can sheet consumption in South America growing by about 20% per year since
1996, Alcan's new recycling facility at Pindamonhangaba, Brazil, completes the
circle of domestic production, consumption and recycling of aluminum cans.
INVESTMENT ACTIVITIES
Capital investment in the year was $877 million, an increase from the previous
two years, which were $641 million and $482 million respectively. On an ongoing
basis approximately $450 million is required annually to maintain the integrity
and competitiveness of the Company's assets. Additional investment during 1998
principally comprised the expansion of rolling capacity in Brazil, initial
expenditure on the Alma smelter project in Quebec and the acquisition of a
controlling interest in Indal, India.
37
<PAGE> 37
(Graph)
In 1999, total investment is anticipated to be approximately $1.2 billion
including, in addition to projects to maintain existing assets, the Alma smelter
construction and the conclusion of the Pinda rolling mill expansion in Brazil.
Disposal proceeds from the sale of non-strategic businesses were $221 million in
1998, compared to $54 million in 1997 and $660 million in 1996.
Disposal of assets in 1998 comprised the sale of shares in NLM, Japan, and the
sale of Handy Chemicals in Quebec. In addition, the divestment of a recycling
facility in Shelbyville, Tennessee, was completed in the first quarter of 1999,
and the sale of the Aughinish alumina refinery in Ireland and a piston
manufacturing business in Nurnberg, Germany, are under way.
FINANCING ACTIVITIES
Total borrowings at the end of 1998 were $1.8 billion, which was $274 million
above the 1997 level. Alcan's debt-to-equity ratio rose slightly to 24:76
compared to 23:77 at the end of 1997, which was the lowest level in decades. Net
of surplus cash, the 1998 ratio was 18:82.
The quarterly common share dividend remained at 15 cents per share in 1998.
Total dividends paid to common shareholders were $136 million, the same as in
1996 and 1997. Dividends to preference shareholders were $10 million in both
1998 and 1997 compared to $16 million in 1996.
In March of 1998, Alcan redeemed $43 million of its Series D preference shares.
These shares were relatively high cost financing in the current interest rate
environment. In addition, in September, the Company took advantage of
historically low long-term interest rates to issue debentures totalling $300
million -- $200 million 6.25% debentures due 2008 and $100 million 7.25%
debentures due 2028.
In September 1998, Alcan announced a common share repurchase program for up to
22.7 million common shares over a 12-month period. During the fourth quarter,
Alcan purchased 1.73 million common shares. Purchases under this program may be
made until September 28, 1999, at the Company's discretion.
Cash reserves totalled $615 million at the end of 1998 compared to $608 million
and $546 million at the ends of 1997 and 1996 respectively. The Company
continues to have a $1-billion global, multi-year and multi-currency credit
facility with a syndicate of major international banks. At December 31, 1998, no
funds had been borrowed under this facility and the full amount continues to be
available. The Company's investment grade rating also provides Alcan with access
to global capital markets through the issuance of debt and equity instruments.
The Company expects that cash generated from operations, combined with the above
resources, will be more than sufficient to meet the cash requirements of
operations, planned capital expenditures and dividends. In addition, ready
access to capital markets should provide adequate liquidity to meet unforeseen
events.
38
<PAGE> 38
ENVIRONMENTAL MATTERS
Alcan is committed to the continued environmental improvement of its operations
and products. The Company has devoted, and will continue to devote, significant
resources to control air and water pollutants, to dispose of wastes and to
remediate sites of past waste disposal. Alcan estimates that annual
environment-related spending, both capital and expense, will average about
$190 million per year over the next several years and is not expected to have
a material effect on its competitive position. While the Company does not
anticipate a material increase in the projected level of such expenditures,
there is always a possibility that such increases may occur in the future in
view of the uncertainties associated with environmental exposures, including new
information concerning sites with identified environmental liabilities and
changes in laws and regulations and their application.
Included in total operating costs and expenses for the year are amounts for
safeguarding the environment and improving working conditions in plants. In
1998, such expenses totalled $91 million. This amount was largely for costs
associated with reducing air emissions and mitigating the impact of waste and
by-products. In 1996 and 1997, these expenses totalled $96 million and
$88 million, respectively.
Included in capital spending in 1998 was $71 million for environment-related
projects. Such spending was largely on equipment designed to reduce or contain
air emissions generated by Alcan plants. Spending in 1996 and 1997 was
$60 million and $84 million, respectively.
RISKS AND UNCERTAINTIES
RISK MANAGEMENT
As a multinational company engaged in a commodity-related
business, Alcan's financial performance is heavily influenced by fluctuations in
metal prices and exchange rates. In order to reduce the associated risks, the
Company uses a variety of financial instruments and commodity contracts. All
risk management activities are governed by clearly defined policies and
management controls. Transactions in financial instruments for which there is no
underlying exposure are prohibited.
The decision whether and when to commence a hedge, along with the duration of
the hedge, can vary from period to period depending on market conditions and the
relative costs of various hedging instruments. The duration of a hedge is always
linked to the timing of the underlying transaction, with the connection between
the two being constantly monitored.
39
<PAGE> 39
FOREIGN CURRENCY EXCHANGE
Exchange rate movements, particularly between the Canadian dollar and U.S.
dollar, have an important impact on Alcan's results. For example, on an annual
basis, each US$0.01 permanent change in the value of the Canadian dollar has an
after-tax impact of approximately $11 million on the Company's long-term
profitability. Alcan benefits from a weakening in the Canadian dollar, but,
conversely, is disadvantaged if it strengthens. In order to reduce the
short-term volatility in costs arising from movements in exchange rates, Alcan
hedges a substantial portion of its Canadian dollar exposure through the use of
forward exchange contracts and currency options.
For further details, refer to note 17 of the financial statements.
From the beginning of 1998, following a change to the accounting standards of
the Canadian Institute of Chartered Accountants on accounting for income taxes,
the Company's deferred income tax liability is translated into U.S. dollars at
current rates. The resultant exchange gains or losses are included in income.
The impact of a US$0.01 movement in the value of the Canadian dollar on deferred
income taxes is approximately $6 million. During 1998, a gain of $31 million was
recorded in this regard.
ALUMINUM PRICES
Depending on market conditions and logistical considerations, Alcan may sell
primary aluminum to third parties and may purchase primary aluminum and
secondary aluminum, including scrap, on the open market to meet the requirements
of its fabricating businesses. In addition, depending on pricing arrangements
with fabricated products customers, Alcan may hedge some of its purchased metal
supply in support of those sales.
Through the use of forward purchase and sale contracts and options, Alcan seeks
to limit the impact of lower metal prices, while retaining the ability to
benefit from higher prices. The Company may also, through a combination of
hedging instruments, establish a range of sales prices for a certain portion of
its future revenues.
Alcan estimates that on an annual basis, each $100 per tonne change in the price
of aluminum has an after-tax impact of approximately $100 million on the
Company's long-term profitability.
For further details, refer to note 17 of the financial statements.
THE YEAR 2000 ISSUE
Alcan is addressing the Year 2000 issue through a formal program (the Project)
designed with the assistance of outside consultants. Products made and sold by
Alcan do not contain date-sensitive software or electronic components. The
Project is therefore focused on evaluation and remediation of systems hardware
and related software used in business applications, process controls and
instrumentation used in the manufacturing process, and on risks associated with
suppliers and other third-parties not being Year 2000 compliant.
40
<PAGE> 40
Remediation of all critical systems was approximately 90% complete at the
target date of December 31, 1998. Although minor slippage has occurred, Alcan
expects to complete remediation of the remaining critical systems in a timely
manner and this is not expected to have a material adverse effect on Alcan's
Year 2000 preparedness. Remediation means an item has been repaired or replaced
and has been unit tested or otherwise demonstrated to be compliant.
Other key project phases are generally on target with Alcan's milestone dates.
Testing is expected to be substantially complete by the end of the second
quarter of 1999. All critical systems are being evaluated for full integration
testing; however, integration testing will not necessarily be undertaken for all
systems.
Alcan is dependent upon a number of third parties including utilities and raw
material suppliers. Alternative suppliers are not available in all cases. Alcan
operates or controls, through direct ownership or joint ventures, the supply of
a majority of its requirements for bauxite and alumina. This will assist Alcan
in assessing and managing risk with respect to these key raw materials.
Additionally, Alcan generates its own power for its core North American smelter
facilities which will enable Alcan to deal directly with those power supply
risks.
Contingency planning and business continuity planning will receive increased
attention over the next several months. Contingency planning includes examining
options for minimizing impact where third-party supplies are interrupted, the
availability of alternative electrical power from third-party sources and
examining how dual source energy options, available at several key fabricating
facilities, can best be utilized. As systems testing and integration testing
advances, Alcan will evaluate most reasonably likely worst case scenarios. These
will also become clearer in relation to third-party dependencies as the position
of key suppliers becomes better known. Detailed business continuity plans will
then be developed in light of the results of these reviews.
Alcan believes that the Project continues to reduce significantly the
possibility of material interruptions in normal operations. Third-party failures
or unexpected impediments to timely completion of Year 2000 remediation could
result in business interruptions or delays that could have a material adverse
effect on Alcan's business and financial condition.
Costs of repair and replacement of systems at Alcan facilities are expensed as
incurred and are estimated at $50 million. Costs to the end of 1998 were $23
million. Any additional costs for testing, implementation and contingency
planning are not expected to have a material adverse effect on Alcan's
liquidity, results or financial condition.
ABORIGINAL ISSUES
In April 1998, the 100-member Cheslatta Nation Indian Band filed suit against
Alcan, Canada and British Columbia (B.C.) seeking a declaration that they be
entitled to the exclusive occupancy or possession of certain claimed lands, to
damages and to other relief, relying on the decision of the Supreme Court of
Canada in the Delgamuukw case. Alcan obtained its title to certain land in the
claimed territory under valid grants from the Government of Canada upon due
payment. Alcan filed its statement of defence in October 1998. The day-to-day
operations of Alcan's facilities will not be impeded. Alcan believes that this
claim is without merit and will not succeed in court.
41
<PAGE> 41
In March 1998, the Haisla Nation wrote to Alcan, Canada and B.C. asserting that
Alcan's lands in Kitimat and Kemano are subject to their aboriginal title, also
apparently relying on the Delgamuukw case.
CAUTIONARY STATEMENT
Statements in this report that describe the Company's objectives, projections,
estimates, expectations or predictions may be "forward looking statements"
within the meaning of applicable securities laws and regulations. The Company
cautions that such statements involve risk and uncertainty and that actual
results could differ materially from those expressed or implied. Important
factors that could cause differences include global aluminum supply and demand
conditions, aluminum ingot prices and other raw materials' costs or
availability, cyclical demand and pricing in the Company's principal markets,
changes in government regulations, economic developments within the countries in
which the Company conducts business, and other factors relating to the Company's
operations, such as litigation, labour negotiations and fiscal regimes.
(Pull out)
GROWTH
Fabricated products shipments continued to rise in 1998 as Alcan increased its
share of key markets.
STRENGTH
Alcan's leadership in automotive sheet and metal matrix composites is evidenced
by a strategic alliance with General Motors.
42
<PAGE> 42
RESPONSIBILITY FOR THE ANNUAL REPORT
Alcan's management is responsible for the preparation, integrity and fair
presentation of the financial statements and other information in the Annual
Report. The financial statements have been prepared in accordance with
accounting principles generally accepted in Canada and include, where
appropriate, estimates based on the best judgement of management. They conform
in all material respects with accounting principles established by the
International Accounting Standards Committee. A reconciliation with accounting
principles generally accepted in the United States is also presented. Financial
and operating data elsewhere in the Annual Report are consistent with that
contained in the accompanying financial statements.
Alcan's policy is to maintain systems of internal accounting and administrative
controls of high quality consistent with reasonable cost. Such systems are
designed to provide reasonable assurance that the financial information is
accurate and reliable and that Company assets are adequately accounted for and
safeguarded. The Board of Directors oversees the Company's systems of internal
accounting and administrative controls through its Audit Committee, which is
comprised of directors who are not employees. The Audit Committee meets
regularly with representatives of the shareholders' independent auditors and
management, including internal audit staff, to satisfy themselves that Alcan's
policy is being followed.
The Audit Committee has recommended the appointment of PricewaterhouseCoopers
LLP as the independent auditors, subject to approval by the shareholders.
The financial statements have been reviewed by the Audit Committee and, together
with the other required information in this Annual Report, approved by the Board
of Directors. In addition, the financial statements have been audited by
PricewaterhouseCoopers LLP, whose report is provided below.
(Signature)
Jacques Bougie, Chief Executive Officer
(Signature)
Suresh Thadhani, Chief Financial Officer
February 11, 1999
43
<PAGE> 43
OECD GUIDELINES
The Organization for Economic Cooperation and Development (OECD), which consists
of 24 industrialized countries including Canada, has established guidelines
setting out an acceptable framework of reciprocal rights and responsibilities
between multinational enterprises and host governments.
Alcan supports and complies with the OECD guidelines, and the Company's own
statement, Alcan, Its Purpose, Objectives and Policies, is consistent with them.
This statement, first published in 1978, has been distributed in 11 languages to
Alcan employees worldwide to strengthen the awareness of the basic principles
and policies which have guided the conduct of Alcan's business over the years.
The statement of Alcan's purpose, objectives and policies, the Company's annual
information form and its 10-K report are all available to shareholders on
request. The latter two documents contain a complete list of significant Alcan
Group companies worldwide.
AUDITORS' REPORT
TO THE SHAREHOLDERS OF ALCAN ALUMINIUM LIMITED
We have audited the consolidated balance sheet of Alcan Aluminium Limited as at
December 31, 1998, 1997 and 1996 and the consolidated statements of income,
retained earnings and cash flows for each of the years in the three-year period
ended December 31, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
In our opinion, these consolidated financial statements present fairly, in all
material respects, the financial position of the Company as at December 31,
1998, 1997 and 1996 and the results of its operations and its cash flows for
each of the years in the three-year period ended December 31, 1998 in accordance
with Canadian generally accepted accounting principles.
(Signature)
PricewaterhouseCoopers LLP
Chartered Accountants
February 11, 1999
Montreal, Canada
44
<PAGE> 44
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF INCOME
(in millions of US$, except per share amounts)
<TABLE>
<CAPTION>
Year ended December 31 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
REVENUES
Sales and operating revenues $7,789 $7,777 $7,614
Other income (note 10) 231 88 75
------ ------ ------
8,020 7,865 7,689
------ ------ ------
COSTS AND EXPENSES
Cost of sales and operating expenses 6,076 6,005 5,919
Depreciation (note 2) 462 436 431
Selling, administrative and general expenses 448 444 422
Research and development expenses 70 72 71
Interest 92 101 125
Other expenses (note 9) 219 54 88
------ ------ ------
7,367 7,112 7,056
------ ------ ------
Income before income taxes and other items 653 753 633
Income taxes (notes 3 and 6) 210 248 212
------ ------ ------
Income before other items 443 505 421
Equity loss (note 8) (48) (33) (10)
Minority interests 4 (4) (1)
------ ------ ------
NET INCOME BEFORE EXTRAORDINARY ITEM $ 399 $ 468 $ 410
Extraordinary gain (note 4) -- 17 --
------ ------ ------
NET INCOME $ 399 $ 485 $ 410
Dividends on preference shares 10 10 16
------ ------ ------
NET INCOME ATTRIBUTABLE TO COMMON SHAREHOLDERS $ 389 $ 475 $ 394
------ ------ ------
NET INCOME PER COMMON SHARE BEFORE
EXTRAORDINARY ITEM (note 2) $ 1.71 $ 2.02 $ 1.74
Extraordinary gain per common share (note 4) -- 0.07 --
------ ------ -------
NET INCOME PER COMMON SHARE (note 2) $ 1.71 $ 2.09 $ 1.74
====== ====== =======
DIVIDENDS PER COMMON SHARE $ 0.60 $ 0.60 $ 0.60
====== ====== =======
</TABLE>
45
<PAGE> 45
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
(in millions of US$)
<TABLE>
<CAPTION>
Year ended December 31 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
RETAINED EARNINGS -- BEGINNING OF YEAR
As previously reported $3,556 $3,217 $2,959
Accounting change (note 3) 306 -- --
------ ------ ------
As restated 3,862 3,217 2,959
Net income 399 485 410
------ ------ ------
4,261 3,702 3,369
Amount related to common shares purchased
for cancellation 37 -- --
Dividends - Common 136 136 136
- Preference 10 10 16
------ ------ ------
RETAINED EARNINGS - END OF YEAR (note 15) $4,078 $3,556 $3,217
====== ====== ======
</TABLE>
46
<PAGE> 46
CONSOLIDATED BALANCE SHEET
(in millions of US$)
<TABLE>
<CAPTION>
December 31 1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and time deposits $ 615 $ 608 $ 546
Receivables 1,401 1,292 1,262
Inventories
Aluminum 826 800 736
Raw materials 345 307 325
Other supplies 242 234 244
------- ------- -------
1,413 1,341 1,305
------- ------- -------
3,429 3,241 3,113
------- ------- -------
Deferred charges and other assets 517 424 314
Investments (notes 8 and 10) 58 251 331
Property, plant and equipment (note 9)
Cost (excluding Construction work
in progress) 11,758 11,133 11,122
Construction work in progress 911 582 395
Accumulated depreciation 6,772 6,257 6,047
------- ------- -------
5,897 5,458 5,470
------- ------- -------
Total assets $ 9,901 $ 9,374 $ 9,228
======= ======= =======
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Payables $ 1,104 $ 1,052 $ 1,008
Short-term borrowings 86 238 178
Income and other taxes 28 98 98
Debt maturing within one year
(note 12) 166 36 19
------- ------- -------
1,384 1,424 1,303
------- ------- -------
Debt not maturing within one year
(notes 12 and 17) 1,537 1,241 1,319
Deferred credits and other liabilities
(note 11) 604 623 673
Deferred income taxes (notes 3 and 6) 747 969 996
Minority interests (note 10) 110 43 73
SHAREHOLDERS' EQUITY
Redeemable non-retractable preference shares
(note 13) 160 203 203
Common shareholders' equity
Common shares (note 14) 1,251 1,251 1,235
Retained earnings (note 15) 4,078 3,556 3,217
Deferred translation adjustments
(note 16) 30 64 209
------- ------- -------
5,359 4,871 4,661
------- ------- -------
5,519 5,074 4,864
------- ------- -------
Commitments and contingencies
(notes 18 and 19)
------- ------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 9,901 $ 9,374 $ 9,228
======= ======= =======
</TABLE>
Approved by the Board:
(Signature) (Signature)
Jacques Bougie, Director W.R.C. Blundell, Director
47
<PAGE> 47
CONSOLIDATED STATEMENT OF CASH FLOWS
(in millions of US$)
<TABLE>
<CAPTION>
Year ended December 31 1998 1997 1996
- ---------------------- ------ ------ ------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 399 $ 485 $ 410
Adjustments to determine cash from operating activities:
Depreciation 462 436 431
Deferred income taxes 29 (8) 15
Equity loss - net of dividends 53 39 21
Change in operating working capital
Change in receivables (109) (30) 187
Change in inventories (72) (37) 185
Change in payables 52 44 (99)
Change in income and other taxes payable (70) -- (3)
Changes in operating working capital due to:
Deferred translation adjustments 46 (93) (29)
Acquisitions, disposals and
consolidations/deconsolidations 47 (9) (178)
------ ------ ------
(106) (125) 63
Change in deferred charges, other assets,
deferred credits and other liabilities - net (113) (139) 25
Gain on sales of businesses - net (156) (12) (8)
Impairment in value of property, plant and equipment 143 -- --
Other - net 28 43 24
------ ------ ------
CASH FROM OPERATING ACTIVITIES 739 719 981
------ ------ ------
FINANCING ACTIVITIES
New debt 359 22 56
Debt repayments (57) (25) (459)
------ ------ ------
302 (3) (403)
Short-term borrowings - net (169) 90 (11)
Common shares purchased for cancellation (46) -- --
Common shares issued 9 16 16
Redemption of preference shares (43) -- (150)
Dividends - Alcan shareholders (including preference) (146) (146) (152)
- Minority interests (2) (3) --
------ ------ ------
CASH USED FOR FINANCING ACTIVITIES (95) (46) (700)
------ ------ ------
INVESTMENT ACTIVITIES
Property, plant and equipment (805) (641) (482)
Investments (72) -- --
------ ------ ------
(877) (641) (482)
Net proceeds from disposal of businesses,
investments and other assets 221 54 660
------ ------ ------
CASH FROM (USED FOR) INVESTMENT ACTIVITIES (656) (587) 178
------ ------ ------
Effect of exchange rate changes on cash and time deposits 2 (12) (1)
------ ------ ------
INCREASE (DECREASE) IN CASH AND TIME DEPOSITS (10) 74 458
Cash of companies consolidated (deconsolidated) - net 17 (12) 22
Cash and time deposits - beginning of year 608 546 66
------ ------ ------
Cash and time deposits - end of year $ 615 $ 608 $ 546
====== ====== ======
</TABLE>
48
<PAGE> 48
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(in millions of US$, except where indicated)
1. NATURE OF OPERATIONS
Alcan is engaged, together with subsidiaries, joint ventures and related
companies, in all aspects of the aluminum business on an international scale.
Its operations include the mining and processing of bauxite, the basic aluminum
ore; the refining of bauxite into alumina; the generation of electric power for
use in smelting aluminum; the smelting of aluminum from alumina; the recycling
of used and scrap aluminum; the fabrication of aluminum, aluminum alloys and
non-aluminum materials into semi-fabricated and finished products; the
distribution and marketing of aluminum and non-aluminum products; and, in
connection with its aluminum operations, the production and sale of industrial
chemicals. Alcan, together with its subsidiaries, joint ventures and related
companies, has bauxite holdings in six countries, produces alumina in six,
smelts primary aluminum in five, operates aluminum fabricating plants in 13 and
has sales outlets and maintains warehouse inventories in the larger markets of
the world. Alcan also operates a global transportation network that includes
bulk cargo vessels, port facilities and freight trains.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles (GAAP) requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements, which are expressed in U.S. dollars, the
principal currency of Alcan's business, are prepared in accordance with GAAP in
Canada. They include the accounts of companies controlled by Alcan, virtually
all of which are majority owned. Joint ventures, irrespective of percentage of
ownership, are proportionately consolidated to the extent of Alcan's
participation. Consolidated net income also includes Alcan's equity in the net
income or loss of companies owned 50% or less where Alcan has significant
influence over management, and the investment in these companies is increased or
decreased by Alcan's share of their undistributed net income or loss and
deferred translation adjustments since acquisition. Investments in companies in
which Alcan does not have significant influence over management are carried at
cost less amounts written off. Income is recorded to the extent of dividends
received.
Intercompany balances and transactions, including profits in inventories, are
eliminated.
FOREIGN CURRENCY
The financial statements of self-sustaining foreign operations (located
principally in Europe and Asia) are translated into U.S. dollars at prevailing
exchange rates. Differences arising from
49
<PAGE> 49
exchange rate changes are included in the Deferred translation adjustments
(DTA) component of Common shareholders' equity. If there is a reduction in the
Company's ownership in a foreign operation, the relevant portion of DTA is
recognized in Other income or Other expenses at that time.
Gains or losses on forward exchange contracts or currency options, all of which
serve to hedge certain future identifiable foreign currency exposures, are
included, together with related hedging costs, in Sales and operating revenues,
Cost of sales and operating expenses or Property, plant and equipment, as
applicable, concurrently with recognition of the underlying items being hedged.
Unrealized gains or losses on currency swaps, all of which are used to hedge
certain identifiable foreign currency debt obligations, are recorded
concurrently with the unrealized gains or losses on the debt obligations being
hedged.
Other gains and losses from foreign currency denominated items are included in
Other income or Other expenses.
COMMODITY CONTRACTS AND OPTIONS
Gains or losses on forward metal contracts and options, all of which serve to
hedge certain future identifiable aluminum price exposures, are included,
together with related hedging costs, in Sales and operating revenues or Cost of
sales and operating expenses, as applicable, concurrently with recognition of
the underlying items being hedged.
INTEREST RATE SWAPS
Amounts receivable or payable under interest rate swaps are recorded in Interest
concurrently with the interest expense on the underlying debt.
INVENTORIES
Aluminum, raw materials and other supplies are stated at cost (determined for
the most part on the monthly average method) or net realizable value, whichever
is the lower.
CAPITALIZATION OF INTEREST COSTS
The Company capitalizes interest costs associated with the financing of major
capital expenditures.
DEPRECIATION
Depreciation is calculated on the straight-line method using rates based on the
estimated useful lives of the respective assets. The principal rates are 2 1/2%
for buildings and range from 1% to 4% for power assets and 3% to 12 1/2% for
chemical, smelter and fabricating assets.
ENVIRONMENTAL COSTS AND LIABILITIES
Environmental expenses are accrued when it is probable that a liability for past
events exists. For future removal and site restoration costs, provision is made
in a systematic manner by periodic charges to income, except for assets that are
no longer in use, in which case full provision is charged immediately to income.
Environmental expenses are normally included in Cost of sales and operating
expenses except for large, unusual amounts which are included in Other expenses.
50
<PAGE> 50
Accruals related to environmental costs are included in Payables and Deferred
credits and other liabilities.
Environmental expenditures of a capital nature that extend the life, increase
the capacity or improve the safety of an asset or that mitigate or prevent
environmental contamination that has yet to occur are included in Property,
plant and equipment and are depreciated generally over the remaining useful life
of the underlying asset.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
The costs of postretirement benefits other than pensions are recognized on an
accrual basis over the working lives of employees.
INCOME TAXES
Beginning in 1998, the Company uses the liability method for income taxes, under
which deferred income tax liabilities are revalued for all changes in tax rates
and exchange rates (see note 3). Prior to 1998, the Company used the deferral
method.
NET INCOME PER COMMON SHARE
Net income per common share is calculated by dividing Net income attributable to
common shareholders by the average number of common shares outstanding (1998:
227.4 million; 1997: 227.0 million; 1996: 226.2 million).
3. Accounting Changes
In 1998, the Company adopted the new recommendations of the Canadian Institute
of Chartered Accountants (CICA) dealing with accounting for income taxes. The
principal change under the new recommendations is the requirement to revalue
deferred income taxes for changes in tax rates and exchange rates.
The Company has adopted the new recommendations retroactively without restating
prior years. The cumulative effect of adopting the new recommendations at
January 1, 1998, is to decrease Deferred income taxes by $285, to increase
retained earnings by $306 and to decrease Deferred translation adjustments by
$21.
The impact of the revaluation of deferred income taxes to reflect current
exchange rates is to decrease the Company's 1998 income tax provision by $31.
In 1998, the Company adopted, retroactively, the new recommendations of the CICA
dealing with segment disclosures (see note 23).
51
<PAGE> 51
4. EXTRAORDINARY ITEMS - KEMANO COMPLETION PROJECT
An extraordinary gain of $26 ($17 after tax or 7 cents per common share) in the
fourth quarter of 1997 arose from the sale of a portion of a contract to supply
power to B.C. Hydro, net of additional write-downs of remaining Kemano
Completion Project ("KCP") assets. In addition to the commitment by the
government of British Columbia to supply replacement power at attractive rates
for a possible smelter expansion, the settlement of the dispute regarding the
cancellation of KCP allowed the Company to sell to a third party the right to
supply a specified amount of power to B.C. Hydro under an ongoing contract. An
extraordinary loss of $420 ($280 after tax or $1.24 per common share) was
recorded in 1995 following the cancellation of the project.
5. DIFFERENCES BETWEEN CANADIAN AND UNITED STATES GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (GAAP)
CURRENCY TRANSLATION
Under Canadian GAAP, unrealized exchange gains and losses on translation of
long-term monetary items are deferred and amortized over the life of those
items, whereas, under U.S. GAAP, such gains and losses are absorbed in income
immediately.
DEFERRED INCOME TAXES
Beginning in 1998, the Company adopted the new accounting standards approved by
the Canadian Institute of Chartered Accountants dealing with accounting for
income taxes. These new standards are substantially identical to U.S. GAAP as
contained in FASB Statement No. 109.
Prior to 1998, under Canadian GAAP, deferred income taxes were measured at tax
rates prevailing at the time the provisions for deferred taxes were made.
Deferred income taxes for U.S. GAAP were revalued each period using currently
enacted tax rates.
Also, prior to 1998, under Canadian GAAP, deferred income taxes of operations
using the temporal method were translated at historical exchange rates, while
under U.S. GAAP, deferred income taxes of all operations were translated at
current exchange rates.
INVESTMENTS
Under U.S. GAAP, certain portfolio investments which are considered to be
"available-for-sale" securities are measured at market value, with the
unrealized gains or losses included in Comprehensive income. Under Canadian
GAAP, these investments are measured at cost.
COMPREHENSIVE INCOME
Beginning in 1998, U.S. GAAP requires the disclosure of Comprehensive income
which, for the Company, is Net income under U.S. GAAP plus the movement in
Deferred translation adjustments under U.S. GAAP (see note 16) plus the
unrealized gain or loss for the period on "available-for-sale" securities. The
concept of Comprehensive income does not exist under Canadian GAAP.
52
<PAGE> 52
RECONCILIATION OF CANADIAN AND U.S. GAAP
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
As U.S. As U.S. As U.S.
Reported GAAP Reported GAAP Reported GAAP
-------- ------ -------- ------ -------- ------
<S> <C> <C> <C> <C> <C> <C>
Net income from continuing
operations before
extraordinary item $ 399 $ 417 $ 468 $ 504 $ 410 $ 420
Extraordinary gain -- -- 17 17 -- --
------ ------ ------ ------ ------ ------
Net income* $ 399 $ 417 $ 485 $ 521 $ 410 $ 420
------ ------ ------ ------ ------ ------
Net income attributable
to common shareholders $ 389 $ 407 $ 475 $ 511 $ 394 $ 404
------ ------ ------ ------ ------ ------
Extraordinary gain per
common share $ -- $ -- $ 0.07 $ 0.07 $ -- $ --
------ ------ ------ ------ ------ ------
Net income per
common share
(basic and diluted) $ 1.71 $ 1.79 $ 2.09 $ 2.25 $ 1.74 $ 1.79
====== ====== ====== ====== ====== ======
Comprehensive income n/a $ 435 n/a $ 383 n/a $ 347
------ ------ ------ ------ ------ ------
Investments - December 31 $ 58 $ 103 $ 251 $ 251 $ 331 $ 331
------ ------ ------ ------ ------ ------
Deferred income taxes
- December 31 $ 747 $ 747 $ 969 $ 684 $ 996 $ 755
------ ------ ------ ------ ------ ------
Retained earnings
- December 31 $4,078 $4,129 $3,556 $3,895 $3,217 $3,520
------ ------ ------ ------ ------ ------
Deferred translation
adjustments (DTA)
- December 31 $ 30 $ (24) $ 64 $ 3 $ 209 $ 141
====== ====== ====== ====== ====== ======
</TABLE>
[FN]
* In 1997, $37 ($2 in 1996) of the net difference between "As Reported" and
"U.S. GAAP" relates to accounting for deferred income taxes. In 1997, $23 of
this difference arose from changes in tax rates and regulations enacted during
the year.
</FN>
53
<PAGE> 53
For 1997 and 1996, the principal items included in Deferred income taxes under
U.S. GAAP were:
<TABLE>
<CAPTION>
DECEMBER 31
-------------------
1997 1996
---- ----
<S> <C> <C>
LIABILITIES:
Property, plant and equipment $767 $810
Undistributed earnings 29 60
Inventory valuation 52 43
Other 64 77
---- ----
912 990
==== ====
ASSETS:
Tax benefit carryovers 114 121
Accounting provisions not currently deductible for tax 164 180
Other 26 18
---- ----
304 319
VALUATION ALLOWANCE (AMOUNT NOT LIKELY TO BE RECOVERED) 76 84
---- ----
228 235
---- ----
NET DEFERRED INCOME TAX LIABILITY $684 $755
==== ====
</TABLE>
The difference between DTA under Canadian GAAP and U.S. GAAP arises principally
from the impact of FASB Statement No. 109 and from the different treatment of
exchange on long-term debt at January 1, 1983, resulting from the adoption of
accounting standards on foreign currency translation.
Net income from continuing operations on a U.S. GAAP basis for the years 1995
and 1994 was $266 and $175, respectively, compared to $263 and $96,
respectively, as reported. Net income from continuing operations per common
share on a U.S. GAAP basis for the years 1995 and 1994 was $1.07 and $0.69,
respectively, compared to $1.06 and $0.34, respectively, as reported.
Beginning in 2000, the Company will be implementing, for U.S. GAAP only, FASB
Statement No. 133, Accounting for Derivatives and Hedging Activities. The
Company is currently assessing the impact of the new standard, which will affect
how the Company measures and reports the various financial instruments that it
uses in its risk management activities.
54
<PAGE> 54
6. INCOME TAXES
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
INCOME BEFORE INCOME TAXES AND OTHER ITEMS
Canada $175 $360 $235
Other countries 478 393 398
653 753 633
---- ---- ----
CURRENT INCOME TAXES
Canada 65 251 87
Other countries 116 5 110
---- ---- ----
181 256 197
---- ---- ----
DEFERRED INCOME TAXES
Canada (22) (28) (5)
Other countries 51 20 20
---- ---- ----
29 (8) 15
---- ---- ----
INCOME TAX PROVISION $210 $248 $212
==== ==== ====
</TABLE>
The composite of the applicable statutory corporate income tax rates in Canada
is 40.4% (1997: 40.3%; 1996: 40.1%). The following is a reconciliation of income
taxes calculated at the above composite statutory rates with the income tax
provision:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Income taxes at the composite statutory rate $264 $303 $254
Differences attributable to:
Exchange translation items 46 13 11
Exchange revaluation of deferred income taxes (31) n/a n/a
Effect of tax rate changes on deferred
income taxes (4) n/a n/a
Unrecorded tax benefits on losses - net (3) (12) (33)
Investment and other allowances (21) (32) (24)
Large corporations tax 4 3 3
Withholding taxes 5 5 6
Reduced rate or tax exempt items (47) (3) 17
Foreign tax rate differences (16) (5) (18)
Prior years' tax adjustments 3 (31) (11)
Other - net 10 7 7
---- ---- ----
INCOME TAX PROVISION $210 $248 $212
==== ==== ====
</TABLE>
55
<PAGE> 55
At December 31, 1998, the principal items included in Deferred income taxes are:
LIABILITIES:
<TABLE>
<S> <C>
Property, plant and equipment $773
Undistributed earnings 20
Inventory valuation 49
Other 73
----
915
----
ASSETS:
Tax benefit carryovers 99
Accounting provisions not currently deductible for tax 167
Other 13
----
279
VALUATION ALLOWANCE (AMOUNT NOT LIKELY TO BE RECOVERED) 111
----
168
----
NET DEFERRED INCOME TAX LIABILITY $747
====
</TABLE>
In 1997, $19 ($7 in 1996) of benefits related to income tax loss carryforwards
were recorded in deferred income tax expense.
Based on rates of exchange at December 31, 1998, tax benefits of approximately
$50 relating to prior and current years' operating losses and $45 of benefits
related to capital losses and tax credits carried forward will be recognized in
income when it is more likely than not that such benefits will be realized.
In 1997, income taxes on Canadian operations for the years 1988 to 1991 were
reassessed by the Canadian tax authorities. Most of the additional taxes and
interest relate to transfer pricing issues and are recoverable in other
countries (see note 22). The process to obtain recoveries from other countries
is under way. Existing provisions are adequate to cover any amounts not
recoverable.
7. JOINT VENTURES
The activities of the Company's major joint ventures are the procurement and
processing of raw materials in Australia, Brazil, Guinea and Jamaica, as well as
aluminum rolling operations in Germany and the United States.
Alcan's proportionate interest in all joint ventures is included in the
consolidated financial statements. Summarized financial information relating to
Alcan's share of these joint ventures is provided below.
Because most of the activities of the Company's joint ventures relate to
supplying the Company's other operations, the portion of the Company's
third-party revenues, and related costs and expenses, conducted through joint
ventures is insignificant.
56
<PAGE> 56
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
FINANCIAL POSITION AT DECEMBER 31
Inventories $ 174 $ 189 $ 159
Property, plant and equipment - net 959 943 1,001
Other assets 101 60 95
------ ------ ------
Total assets $1,234 $1,192 $1,255
------ ------ ------
Short-term debt $ 19 $ 38 $ 17
Debt not maturing within one year 123 100 106
Other liabilities 167 156 152
------ ------ ------
Total liabilities $ 309 $ 294 $ 275
------ ------ ------
CASH FLOW INFORMATION FOR THE
YEAR ENDED DECEMBER 31
Cash from (used for) financing activities $ (1) $ 10 $ 12
Cash used for investment activities $ (85) $ (78) $ (76)
====== ====== ======
</TABLE>
8. INVESTMENTS
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Companies accounted for under the
equity method $ 13 $ 245 $ 324
Portfolio investments - at cost, less
amounts written off 45 6 7
------ ------ ------
$ 58 $ 251 $ 331
====== ====== ======
</TABLE>
As described in note 10, in the fourth quarter of 1998, the Company reduced its
45.6% interest in Nippon Light Metal Company, Ltd. (NLM) to 11.2%. With the
reduction in Alcan's interest to below 20%, NLM is no longer accounted for on an
equity basis but is treated as a portfolio investment.
As described in note 10, in July 1998, the Company acquired a controlling
interest in Indian Aluminium Company, Limited (Indal), the accounts of which are
now consolidated with those of the Company. Indal was previously treated as an
equity investment.
For 1997 and 1996, the combined results of operations and financial position for
NLM and Indal are included in the summary below. For 1998, the combined results
of operations include information for NLM and Indal to the dates these entities
ceased to be equity accounted investments.
In 1998, the Company recorded a special after-tax charge of $27 ($30 in 1997),
included in Equity loss, reflecting the Company's share of construction contract
losses and restructuring provisions in NLM. The 1996 information for NLM
excludes, from the date of acquisition, the interest in those subsidiaries
acquired by the Company from NLM as a result of the restructuring of the
Company's holdings in Asia, explained in note 10.
57
<PAGE> 57
<TABLE>
<CAPTION>
1998 1997 1996
---- ----
<S> <C> <C> <C>
RESULTS OF OPERATIONS FOR THE
YEAR ENDED DECEMBER 31
Revenues $3,626 $5,572 $6,483
Costs and expenses 3,719 5,622 6,457
------ ------ ------
Income (loss) before income taxes (93) (50) 26
Income taxes 12 35 65
------ ------ ------
Net loss $ (105) $ (85) $ (39)
------ ------ ------
Alcan's share of Net loss $ (48) $ (33) $ (10)
------ ------ ------
Dividends received by Alcan $ 5 $ 6 $ 11
====== ====== ======
FINANCIAL POSITION AT DECEMBER 31
Current assets n/a $2,600 $3,013
Current liabilities n/a 2,519 2,735
------ ------ ------
Working capital n/a 81 278
Property, plant and equipment - net n/a 1,737 1,916
Other assets - net n/a 335 261
n/a 2,153 2,455
Debt not maturing within one year n/a 1,376 1,422
------ ------ ------
Net assets n/a $ 777 $1,033
------ ------ ------
Alcan's equity in net assets n/a $ 245 $ 324
====== ====== ======
</TABLE>
9. PROPERTY, PLANT AND EQUIPMENT
<TABLE>
<CAPTION>
1998 1997 1996
---- --- ----
<S> <C> <C> <C>
COST (EXCLUDING CONSTRUCTION WORK
IN PROGRESS)
Land and property rights $ 236 $ 219 $ 236
Buildings, machinery and equipment 11,522 10,914 10,886
------- ------- -------
$11,758 $11,133 $11,122
======= ======= =======
</TABLE>
Accumulated depreciation relates primarily to Buildings, machinery
and equipment.
In early 1999, the Company announced the sale of the Aughinish alumina refinery.
Negotiations of the sale began in late 1998 and, as a result of that process,
the Company determined that the value of these assets was impaired as at
December 31, 1998. A charge of $143 reflecting the impairment is included in
Other expenses. Excluding the impairment charge, these assets contributed
approximately $27 of income before taxes in 1998.
On an ongoing basis, capital expenditures of the Company are estimated at $450
per year. In addition, the Company expects to spend approximately $650 in 1999
on the construction of a new smelter at Alma, Quebec, and the continuation of
its rolling mill expansion in Brazil.
58
<PAGE> 58
10. RESTRUCTURING OF HOLDINGS IN ASIA
JAPAN
In the fourth quarter of 1998, the Company reduced its 45.6% investment in
Nippon Light Metal Company, Ltd. (NLM) to 11.2%. The net cash proceeds from the
sale of shares were approximately $193 with a corresponding gain, included in
Other income, of approximately $146 ($140 after tax), including a previously
deferred gain of $87 after tax related to the sale in 1996 of Toyo Aluminium
K.K. (Toyal) to NLM.
In the third quarter of 1996, the Company sold its equity-accounted investment
in Toyal to NLM, for cash proceeds of $207. Approximately $31 of the total
after-tax gain of $128, including deferred translation adjustments, on this sale
continues to be deferred and will be recognized if Alcan further reduces its
remaining investment in NLM. In 1998, $87 of the gain was recognized ($7 in 1997
and $3 in 1996).
INDIA
In 1998, the Company acquired an additional 20% of Indian Aluminium Company,
Limited (Indal) for $70 in cash. As a result, Alcan obtained a controlling
interest of 54.6% in Indal. The accounts of Indal have been consolidated with
effect from July 1998. Prior to this date, Alcan accounted for its investment in
Indal under the equity method.
Included in the Company's balance sheet at the date of acquisition were the
following assets and liabilities of Indal:
<TABLE>
<CAPTION>
<S> <C>
Working capital $ 40
Property, plant and equipment 212
Other assets - net (5)
----
247
Long-term debt 75
Minority interest 58
----
Net assets $114
====
</TABLE>
59
<PAGE> 59
SOUTHEAST ASIA
In November 1996, the Company and NLM created a new company, Alcan Nikkei Asia
Holdings Ltd. (ANAH), owned 60% by Alcan and 40% by NLM. In exchange for shares
in ANAH, the Company contributed a portion of its holdings in NLM while NLM
contributed its shareholdings in a number of companies located in Malaysia,
Thailand and China. At December 31, 1997 and 1996, the Company's effective
ownership of ANAH was 78.2%, including its interest held through NLM, then
accounted for under the equity method. As a result of the Company's sale during
1998 of most of its interest in NLM, now accounted for under the cost method,
the Company's effective ownership in ANAH is 60%.
11. DEFERRED CREDITS AND OTHER LIABILITIES
Deferred credits and other liabilities comprise the following elements:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
Deferred revenues $ 56 $ 56 $ 74
Deferred profit on sale of investments 2 14 16
Postretirement and post-employment benefits 395 390 405
Environmental liabilities 40 37 32
Rationalization costs 23 32 31
Claims 43 40 39
Other 45 54 76
---- ---- ---
$604 $623 $673
==== ==== ====
</TABLE>
60
<PAGE> 60
12. DEBT NOT MATURING WITHIN ONE YEAR
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- -------
<S> <C> <C> <C>
ALCAN ALUMINIUM LIMITED
Deutschmark bank loans, due 1999/2005
(DM364 million) (a) $ 218 $ 213 $ 251
5.875% Debentures, due 2000 150 150 150
5.375% Swiss franc bonds, due 2003 (b) 130 123 132
CARIFA loan, due 2006 (c) 60 60 60
6.25% Debentures, due 2008 200 -- --
9.5% Debentures, due 2010 (d) 100 100 100
9.625% Sinking fund debentures, due 2000/2019 (d) 150 150 150
8.875% Debentures, due 2022 (e) 150 150 150
7.25% Debentures, due 2028 100 -- --
Other debt, due 2001 7 7 8
ALCAN ALUMINUM CORPORATION
7.25% Debentures, due 1999 (f) 100 100 100
Other debt, due 1999/2004 2 3 6
ALCAN DEUTSCHLAND GMBH AND SUBSIDIARY COMPANIES
6.78% Bank loans -- -- 2
5.65% Bank loans, due 2001 (DM15 million) 9 8 10
Bank loans, due 2000/2008 (DM107 million) (a) 64 56 65
INDIAN ALUMINIUM COMPANY, LIMITED
Bank loans, due 1999/2006 (a) 51 -- --
6.55% Bank loans, due 2000/2002 18 -- --
Other debt, due 1999/2006 28 -- --
QUEENSLAND ALUMINA LIMITED
Bank loans, due 2000/2003 (a) 78 79 71
OTHER COMPANIES
Bank loans, due 1999/2011 (a) 71 51 48
4% Eurodollar exchangeable debentures, due 2003 (g) 14 24 24
Other debt, due 2002/2036 3 3 11
------- ------- -------
1,703 1,277 1,338
Debt maturing within one year included in
current liabilities (166) (36) (19)
------- ------- -------
$1,537 $1,241 $1,319
======= ======= =======
</TABLE>
61
<PAGE> 61
(a) Interest rates fluctuate principally with the lender's prime commercial
rate, the commercial bank bill rate, or are tied to LIBOR rates.
(b) The Swiss franc bonds were issued as SFr178 million and were swapped for
$105 at an effective interest rate of 8.98%.
(c) The Caribbean Basin Projects Financing Authority (CARIFA) loan bears
interest at a rate related to U.S. LIBOR.
(d) The Company can redeem the 9.5% debentures between the years 2000 and 2007
at amounts declining from 104% to 100% of the principal and can redeem the
9.625% debentures between the years 1999 and 2009 at amounts declining from 105%
to 100% of the principal. In certain circumstances prior to January 30, 2000,
for the 9.5% debentures, or prior to July 30, 1999, for the 9.625% debentures,
the holders may retract the debentures at 100%.
(e) The Company has the right to redeem the debentures during the years 2002 to
2012 at amounts declining from 104% to 100% of the principal amount.
(f) The following is summarized consolidated financial information for Alcan
Aluminum Corporation, a wholly-owned subsidiary which consolidates virtually all
of the Company's operations in the United States:
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
RESULTS OF OPERATIONS FOR THE YEAR
ENDED DECEMBER 31
Revenues $3,766 $3,624 $3,389
Costs and expenses 3,482 3,438 3,242
------ ------ ------
Income before income taxes 284 186 147
Income taxes 110 81 55
------ ------ ------
Net income $ 174 $ 105 $ 92
------ ------ ------
FINANCIAL POSITION AT DECEMBER 31
Current assets $ 883 $ 801 $ 868
Current liabilities 483 376 578
------ ------ ------
Working capital 400 425 290
Property, plant and equipment - net 714 736 756
Other liabilities - net (67) (199) (186)
------ ------ ------
1,047 962 860
Debt not maturing within one year 2 102 105
------ ------ ------
Net assets $1,045 $ 860 $ 755
====== ====== ======
</TABLE>
The above figures are prepared using the accounting principles followed by the
Company (see note 2), except that inventories have been valued principally by
the last-in, first-out (LIFO) method.
62
<PAGE> 62
(g) Debenture holders are entitled to receive at their option 1,772 common
shares held by the Company in NLM, a portfolio investment, in exchange for each
ten thousand dollar principal amount of debentures. The Company can redeem the
debentures in 1999 at 100% of the principal.
The Company had swapped, to 1998, the interest payments on $100 of its floating
rate debt in exchange for fixed interest payments.
Based on rates of exchange at year-end, debt repayment requirements over the
next five years amount to $166 in 1999, $239 in 2000, $96 in 2001, $93 in 2002
and $255 in 2003.
The Company has a $1,000 global, multi-year and multi-currency facility with a
syndicate of major international banks. At December 31, 1998, no funds had been
borrowed under this facility and the full amount was available.
13. PREFERENCE SHARES
AUTHORIZED
An unlimited number of Preference Shares issuable in series. All shares are
without nominal or par value.
AUTHORIZED AND OUTSTANDING
In each of the years 1998, 1997 and 1996, there were authorized and outstanding
5,700,000 series C and 3,000,000 series E, redeemable non-retractable preference
shares with stated values of $106 and $54, respectively.
The 1,700,000 series D redeemable non-retractable preference shares with stated
value of $43, authorized and outstanding throughout 1996 and 1997, were redeemed
in June 1998.
Preference shares, series C and E are eligible for quarterly dividends based on
an amount related to the average of the Canadian prime interest rates quoted by
two major Canadian banks for stated periods.
Preference shares, series C and E may be called for redemption at the option of
the Company on 30 days' notice at CAN$25.00 per share.
Any partial redemption of preference shares must be made on a pro rata basis or
by lot.
In 1996, 300 series G redeemable non-retractable shares with stated value of
$150 were redeemed.
63
<PAGE> 63
14. COMMON SHARES
The authorized common share capital is an unlimited number of common shares
without nominal or par value. Changes in outstanding common shares are
summarized below:
<TABLE>
<CAPTION>
NUMBER (IN THOUSANDS) STATED VALUE
--------------------------- ------------------------
1998 1997 1996 1998 1997 1996
------- ------- ------- ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
OUTSTANDING - BEGINNING
OF YEAR 227,344 226,620 225,913 $1,251 $1,235 $1,219
ISSUED FOR CASH:
Executive share option plan 135 550 549 2 11 11
Dividend reinvestment and
share purchase plans 254 174 158 7 5 5
PURCHASED FOR CANCELLATION (1,730)* -- -- (9) -- --
------- ------- ------- ------ ------ ------
OUTSTANDING - END OF YEAR 226,003 227,344 226,620 $1,251 $1,251 $1,235
======= ======= ======= ====== ====== ======
</TABLE>
[FN]
* 1,645 were cancelled in 1998 and 85 in 1999.
</FN>
Under the executive share option plan, certain employees may purchase common
shares at market value on the effective date of the grant of each option. The
average price of the shares covered by the outstanding options is CAN$38.16 per
share. The vesting period for options granted after September 1998 is linked to
Alcan's share price performance, but does not exceed nine years. Options granted
before September 1998 vest generally over a fixed period of four years from the
grant date and expire at various dates during the next 10 years. Changes in the
number of shares under option are summarized below:
<TABLE>
<CAPTION>
NUMBER (IN THOUSANDS)
-------------------------------------
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
OUTSTANDING - BEGINNING OF YEAR 4,193 3,715 3,473
Granted 1,122 1,100 853
Exercised (134) (550) (549)
Cancelled (25) (72) (62)
----- ----- -----
OUTSTANDING - END OF YEAR 5,156 4,193 3,715
===== ===== =====
</TABLE>
During 1998, the Company also granted 774,700 options, which grants become
effective, subject to certain restrictions, upon the exercise of options
previously granted.
At December 31, 1998, the Company had reserved for issue under the executive
share option plan 19,266,536 shares.
The Company does not recognize compensation expense for options granted under
the executive share option plan. If the Company had elected to recognize
compensation expense for these options in accordance with the methodology
prescribed by Statement No. 123 of the U.S. Financial Accounting Standards
Board, net income would have been lower by $9, or $0.04 per share, ($10, or
$0.04 per share, in 1997 and $8, or $0.04 per share, in 1996).
64
<PAGE> 64
Under a normal course issuer bid, which terminates on September 28, 1999, the
Company is authorized to repurchase up to 22,700,000 common shares, representing
approximately 10% of the outstanding shares. In 1998, 1,730,000 common shares
were purchased under this authorization.
SHAREHOLDER RIGHTS PLAN
In 1990, shareholders approved a plan whereby each common share of the Company
carries one right to purchase additional common shares. The plan, with certain
amendments, was reconfirmed at the 1995 Annual Meeting. The rights under the
plan are not currently exercisable but may become so upon the acquisition by a
person or group of affiliated or associated persons ("Acquiring Person") of
beneficial ownership of 20% or more of the Company's outstanding voting shares
or upon the commencement of a takeover bid. Holders of rights, with the
exception of an Acquiring Person, in such circumstances will be entitled to
purchase from the Company, upon payment of the exercise price (currently
$100.00), such number of additional common shares as can be purchased for twice
the exercise price based on the market value of the Company's common shares at
the time the rights become exercisable.
The plan has a permitted bid feature which allows a takeover bid to proceed
without the rights under the plan becoming exercisable, provided that it meets
certain minimum specified standards of fairness and disclosure, even if the
Board does not support the bid.
The rights expire in 1999, but may be redeemed earlier by the Board, with the
prior consent of the holders of rights or common shares, for 1 cent per right.
In addition, should a person or group of persons acquire outstanding voting
shares pursuant to a permitted bid or a share acquisition in respect of which
the Board has waived the application of the plan, the Board shall be deemed to
have elected to redeem the rights at 1 cent per right.
The shareholders will be asked at the 1999 Annual Meeting to approve amendments
to the plan described in the Management Proxy Circular for that meeting which,
if approved, will extend the plan until May 1, 2008, unless terminated earlier,
with reconfirmation at the Annual meeting of shareholders in 2002 and 2005. If
the amendments are not approved, the plan will remain in effect until December
14, 1999, unless terminated earlier.
15. RETAINED EARNINGS
Consolidated retained earnings at December 31, 1998, include $2,410 of
undistributed earnings of subsidiaries and joint ventures, some part of which
may be subject to certain taxes and other restrictions on distribution to the
parent company; no provision is made for such taxes because these earnings are
reinvested in the business.
65
<PAGE> 65
16. CURRENCY GAINS AND LOSSES
The following are the amounts recognized in the financial statements:
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
CURRENCY GAINS (LOSSES) EXCLUDING REALIZED DEFERRED
TRANSLATION ADJUSTMENTS:
Forward exchange contracts and currency options $(58) $ 22 $ 40
Other 4 1 (4)
------ ------ ------
$(54) $ 23 $ 36
------ ------ ------
DEFERRED TRANSLATION ADJUSTMENTS - BEGINNING OF YEAR
As previous reported $ 64 $ 209 $304
Accounting change (note 3) (21) -- --
------ ------ ------
AS RESTATED 43 209 304
Effect of exchange rate changes 28 (143) (94)
Gains realized* (41) (2) (1)
------ ------ ------
BALANCE - END OF YEAR $ 30 $ 64 $209
====== ====== ======
<FN>
* The gain realized in 1998 relates principally to the sale of a portion of
the Company's investment in Nippon Light Metal Company, Ltd.
</FN>
</TABLE>
In 1998, $5 of exchange losses related to hedging of Canadian dollar
construction costs of the new smelter at Alma, in Quebec, are included in
Construction work in progress.
17. FINANCIAL INSTRUMENTS AND COMMODITY CONTRACTS
In conducting its business, the Company uses various instruments, including
forward contracts and options, to manage the risks arising from fluctuations in
exchange rates, interest rates and aluminum prices. All such instruments are
used for risk management purposes only.
FINANCIAL INSTRUMENTS - CURRENCY
The Company seeks to manage the risks arising from movements in exchange rates
on identifiable firm cost commitments (principally Canadian dollar) and certain
foreign currency denominated revenues. A combination of forward exchange
contracts and options, covering periods of up to three years, are used to manage
these risks.
At December 31, 1998, the contract amount of forward exchange contracts
outstanding used to hedge future firm operating cost commitments was $426
($1,296 in 1997 and $1,791 in 1996) while the contract amount of purchased
options outstanding used to hedge future firm operating cost commitments was
$1,499 ($1,512 in 1997 and $614 in 1996). At December 31, 1998, the contract
amount of outstanding forward exchange contracts used to hedge future revenues
was $47 ($268 in 1997 and $387 in 1996). At December 31, 1998, the contract
amount of forward exchange contracts outstanding used to hedge future Canadian
dollar commitments for the construction of a new smelter at Alma, Quebec, was
$281 (nil in 1997 and 1996) while the contract amount of purchased options
outstanding used to hedge the Canadian dollar commitments for the new smelter
was $315 (nil in 1997 and 1996).
66
<PAGE> 66
The market value of outstanding forward exchange contracts related to hedges of
operating costs or revenues at December 31, 1998 was such that if these
contracts had been closed out, the Company would have paid $18 (paid $24 in 1997
and received $17 in 1996). Based on prevailing market prices, if the currency
option contracts related to operating cost commitments had been closed out on
December 31, 1998, the Company would have paid $33 (paid $36 in 1997 and
received $1 in 1996). The market value at December 31, 1998 of outstanding
forward exchange contracts related to hedges of cost commitments for the new
smelter at Alma, Quebec, was such that if these contracts had been closed out,
the Company would have paid $8. Based on prevailing market prices, if the
currency option contracts relating to smelter construction cost commitments had
been closed out at December 31, 1998, the Company would have paid $2. Unrealized
gains and losses on outstanding forward contracts and options are not recorded
in the financial statements until maturity of the underlying transactions.
In addition, certain intercompany foreign currency denominated loans are hedged
through the use of forward exchange contracts. At December 31, 1998, the
contract amount of such forward contracts was $212 ($220 in 1997 and $231 in
1996) and the market value was such that if these contracts had been closed out,
the Company would have received $4 ($16 in 1997 and $2 in 1996).
Included in Deferred charges and other assets and Receivables was an amount of
$71($2 in 1996) consisting of net losses on terminated forward exchange
contracts and options, as well as the net cost of outstanding options, used to
hedge future costs, including costs related to the construction of the new
smelter at Alma. These deferred charges are included in the cost of the items
being hedged at the same time as the underlying transactions being hedged are
recognized.
FINANCIAL INSTRUMENTS - DEBT NOT MATURING WITHIN ONE YEAR
As explained in note 12, the 5.375% Swiss franc bonds of principal amount SFr178
have been swapped for $105 at an effective interest rate of 8.98%. If the swap
had been closed out at December 31, 1998, the Company would have received a net
amount of $24 ($15 in 1997 and $32 in 1996), of which an amount of $25 related
to the swap of the principal ($18 in 1997 and $27 in 1996) has been recorded in
Deferred charges and other assets.
FINANCIAL INSTRUMENTS - INTEREST RATES
The Company sometimes enters into interest rate swaps to manage funding costs as
well as the volatility of interest rates. Amounts receivable or payable related
to swaps are recorded in Interest concurrently with the interest expense on the
underlying debt.
Changes in the fair value of the interest rate swaps are not recognized on a
mark to market basis since these relate specifically to interest costs on
identifiable debt.
There were no significant interest rate swap agreements outstanding at December
31, 1998. If all interest rate swap agreements had been closed out on December
31, 1997, the Company would have paid $2 ($6 in 1996), based on prevailing
interest rates.
COMMODITY CONTRACTS - METAL
Depending on supply and market conditions, as well as for logistical reasons,
the Company may sell primary metal to third parties and may purchase primary and
secondary aluminum on the open market to meet its fabricated products
requirements. In addition, the Company may hedge certain commitments arising
from pricing arrangements with some of its customers.
67
<PAGE> 67
Through the use of forward purchase and sales contracts and options, the Company
seeks to limit the negative impact of low metal prices whilst retaining most of
the benefit from higher metal prices.
At December 31, 1998, the Company had outstanding forward purchase contracts
covering 465,600 tonnes (418,800 tonnes at December 31, 1997 and 474,300 tonnes
at December 31, 1996), maturing at various dates principally in 1999, 2000 and
2001 (1998, 1999 and 2000 at December 31, 1997 and 1997, 1998 and 1999 at
December 31, 1996). In addition, the Company held call options outstanding for
346,000 tonnes (657,800 tonnes at December 31, 1997 and 591,300 tonnes at
December 31, 1996) maturing at various dates in 1999 and 2000 (1998 and 1999 at
December 31, 1997 and 1997 and 1998 at December 31, 1996).
At December 31, 1998, the Company held put options, maturing in 1999, which
establish a minimum price for the metal component of 20,000 tonnes of the
Company's future sales (60,000 tonnes maturing in 1998 and 1999 at December 31,
1997).
Included in Receivables or Deferred charges and other assets is $22 ($33 in 1997
and $25 in 1996) representing the net cost of outstanding options.
The option premiums paid and received, together with the realized gains or
losses on the contracts, are included in Sales and operating revenues or Cost of
sales and operating expenses, as applicable, concurrently with recognition of
the underlying items being hedged.
Based on metal prices prevailing on December 31, 1998, if all commodity forward
purchase contracts and options had been closed out, the Company would have paid
$30 (paid $9 in 1997 and received $20 in 1996).
COUNTERPARTY RISK
As exchange rates, interest rates and metal prices fluctuate, the above
contracts will generate gains and losses that will be offset by changes in the
value of the underlying items being hedged. The Company may be exposed to losses
in the future if the counterparties to the above contracts fail to perform.
However, the Company is satisfied that the risk of such non-performance is
remote, due to its controls on credit exposures.
FINANCIAL INSTRUMENTS - MARKET VALUE
On December 31, 1998, the fair value of the Company's long-term debt totalling
$1,703 ($1,277 in 1997 and $1,338 in 1996) was $1,762 ($1,321 in 1997 and $1,363
in 1996), based on market prices for the Company's fixed rate securities and the
book value of variable rate debt.
At December 31, 1998, the quoted market value of the Company's portfolio
investments having a book value of $45 was $90. Prior to 1998, portfolio
investments held by the Company were not significant.
68
<PAGE> 68
At December 31, 1998, the market value of the Company's preference shares having
a book value of $160 was $140. (In 1997 and 1996, the market value was
approximately equal to book value.)
The market values of all other financial assets and liabilities are
approximately equal to their carrying values.
18. COMMITMENTS AND CONTINGENCIES
The Company has guaranteed the repayment of approximately $7 of indebtedness by
third parties. Alcan believes that none of these guarantees is likely to be
invoked. Commitments with third parties and certain related companies for
supplies of goods and services are estimated at $373 in 1999, $212 in 2000, $35
in 2001, $35 in 2002, $25 in 2003, and $97 thereafter. Most of the commitments
in 1999 and 2000 relate to the construction of the new smelter at Alma, Quebec.
Total fixed charges from these entities, excluding $175 in relation to the
smelter at Alma, were $23 in 1998, $9 in 1997 and $14 in 1996.
Minimum rental obligations are estimated at $41 in 1999, $36 in 2000, $23 in
2001, $21 in 2002, $19 in 2003 and $51 thereafter. Total rental expenses
amounted to $83 in 1998, $70 in 1997 and $80 in 1996.
Alcan, in the course of its operations, is subject to environmental and other
claims, lawsuits and contingencies. Accruals have been made in specific
instances where it is probable that liabilities will be incurred and where such
liabilities can be reasonably estimated. Although it is possible that
liabilities may arise in other instances for which no accruals have been made,
the Company does not believe that such an outcome will significantly impair its
operations or have a material adverse effect on its financial position.
In addition, see reference to income taxes in note 6, capital expenditures in
note 9, debt repayments in note 12, financial instruments and commodity
contracts in note 17 and year 2000 compliance in note 19.
19. YEAR 2000 COMPLIANCE
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in possible errors when
information using year 2000 dates is processed. In addition, similar problems
may arise in some systems which use certain dates in 1999 to represent something
other than a date. The effects of the Year 2000 Issue may be experienced before,
on, or after January 1, 2000, and, if not addressed, the impact on operations
and financial reporting may range from minor errors to significant systems
failure which could affect an entity's ability to conduct normal business
operations. It is not possible to be certain that all aspects of the Year 2000
Issue affecting the Company, including those related to the efforts of
customers, suppliers, or other third parties, will be fully resolved.
Generally, costs associated with the Year 2000 Issue are being expensed as
incurred.
69
<PAGE> 69
20. SUPPLEMENTARY INFORMATION
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
INCOME STATEMENT
Interest on long-term debt $ 93 $ 91 $109
Capitalized interest $(15) $ (2) $ --
------ ------ ------
BALANCE SHEET
Payables
Accrued employment costs $196 $170 $167
Short-term borrowings (principally from banks) $ 86 $238 $178
At December 31, 1998, the weighted average interest
rate on short-term borrowings was 4.7%
(5.3% in 1997 and 4.8% in 1996).
STATEMENT OF CASH FLOWS
Interest paid $ 96 $101 $133
Income taxes paid $298 $261 $214
---- ---- ----
All time deposits qualify as cash equivalents.
</TABLE>
21. POSTRETIREMENT BENEFITS
Alcan and its subsidiaries have established pension plans in the principal
countries where they operate, for the greater part contributory and generally
open to all employees. Most plans provide pension benefits that are based on the
employee's highest average eligible compensation during any consecutive 36-month
period before retirement. Plan assets consist primarily of listed stocks and
bonds.
Alcan's funding policy is to contribute the amount required to provide for
benefits attributed to service to date, with projection of salaries to
retirement, and to amortize unfunded actuarial liabilities for the most part
over periods of 15 years or less, generally corresponding to the expected
average remaining service life of the employees.
The Company provides life insurance benefits under some of its retirement plans.
Certain early retirement arrangements also provide for medical benefits,
generally only until the age of 65. These plans are not funded.
70
<PAGE> 70
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
---------------------- -----------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
CHANGE IN THE ACTUARIAL
PROJECTED BENEFIT
OBLIGATION (PBO) FOR
PENSION BENEFITS AND
ACCUMULATED BENEFIT
OBLIGATION (ABO)
FOR OTHER BENEFITS
PBO/ABO at January 1 $3,550 $3,506 $3,210 $ 172 $ 178 $ 191
Service cost 84 73 69 4 4 4
Interest cost 236 231 225 11 12 12
Members' contributions 20 20 19 -- -- --
Benefits paid (200) (189) (195) (9) (9) (11)
Amendments 80 47 80 -- -- (16)
Acquisitions/divestitures (1) (176) (25) -- -- --
Actuarial (gain) loss 45 63 54 (2) (13) (2)
Currency (gains) losses 13 (25) 69 -- -- --
------ ------ ------ ----- ----- -----
PBO/ABO at December 31 $3,827 $3,550 $3,506 $ 176 $ 172 $ 178
====== ====== ====== ===== ===== =====
CHANGE IN MARKET VALUE OF
PLAN ASSETS (ASSETS)
Assets at January 1 $4,231 $3,986 $3,447 $ -- $ -- $ --
Actual return on assets 204 566 617 -- -- --
Members' contributions 20 20 19 -- -- --
Benefits paid (200) (189) (195) -- -- --
Company contributions 36 38 36 -- -- --
Acquisitions/divestitures -- (176) (13) -- -- --
Currency gains (losses) 7 (14) 75 -- -- --
------ ------ ------ ----- ----- -----
Assets at December 31 $4,298 $4,231 $3,986 $ -- $ -- $ --
====== ====== ====== ===== ===== =====
Assets in excess of PBO/ABO $ 471 $ 681 $ 480 $(176) $(172) $(178)
Unamortized
- actuarial (gains) losses (736) (943) (779) (24) (24) (13)
- prior service cost 263 276 313 (5) (9) (13)
- net initial (surplus)
liability (27) (48) (71) 2 2 2
------ ------ ------ ----- ----- -----
NET LIABILITY IN
BALANCE SHEET $ (29) $ (34) $ (57) $(203) $(203) $(202)
====== ======= ====== ===== ===== =====
</TABLE>
The ABO of pension plans is $3,414 ($3,156 in 1997 and $3,136 in 1996). For
certain plans, the ABO exceeds the market value of the assets. For these plans,
the ABO is $1,239 ($1,086 in 1997 and $212 in 1996) while the market value of
the assets is $1,041 ($951 in 1997 and $65 in 1996).
71
<PAGE> 71
<TABLE>
<CAPTION>
PENSION BENEFITS OTHER BENEFITS
-------------------- ------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
COMPONENTS OF NET PERIODIC
BENEFIT COST
Service cost $ 84 $ 73 $ 69 $ 4 $ 4 $ 4
Interest cost 236 231 225 11 12 12
Expected return on assets (293) (274) (248) - - -
Amortization
- actuarial (gains) losses (74) (67) (21) (2) (2) (1)
- prior service cost 94 83 33 (4) (4) (3)
- net initial (surplus)
liability (21) (22) (23) - - -
Curtailment/settlement
(gains) losses - - (5) - - (1)
----- ----- ----- ----- ----- -----
NET PERIODIC BENEFIT COST $ 26 $ 24 $ 30 $ 9 $ 10 $ 11
===== ===== ===== ===== ===== =====
WEIGHTED-AVERAGE ASSUMPTIONS
AT DECEMBER 31
Discount rate 6.3% 6.8% 7.2% 6.4% 6.7% 7.0%
Average compensation growth 4.3% 4.9% 4.9% 4.5% 4.9% 5.2%
Expected return on assets 7.2% 7.3% 7.3% n/a n/a n/a
===== ===== ===== ===== ===== =====
</TABLE>
The assumed health care cost trend rate used for measurement purposes was 8.5%
for 1999, decreasing gradually to 4.0% in 2006 and remaining at that level
thereafter. A one percentage point change in assumed health care cost trend
rates would have the following effects:
<TABLE>
<CAPTION>
OTHER BENEFITS
----------------------
1% 1%
INCREASE DECREASE
-------- --------
<S> <C> <C>
SENSITIVITY ANALYSIS
Effect on service and interest cost 1 (1)
Effect on ABO 9 (8)
======== ========
</TABLE>
72
<PAGE> 72
22. INFORMATION BY GEOGRAPHIC AREAS
<TABLE>
<CAPTION>
LOCATION 1998 1997 1996
-------- ------- ------- -------
<S> <C> <C> <C> <C>
SALES AND OPERATING Canada $ 1,980 $ 1,926 $ 2,169
REVENUES United States 504 541 499
- - SUBSIDIARIES South America 37 41 25
United Kingdom 294 369 256
Germany 143 203 184
Other Europe 301 318 318
Asia and Pacific 70 68 78
All other 358 350 349
------ ------- -------
Sub-total 3,687 3,816 3,878
Consolidation eliminations (3,687) (3,816) (3,878)
------- ------- -------
Total $ -- $ -- $ --
======= ======= =======
Sales to subsidiary companies are made at fair market
prices recognizing volume, continuity of supply and
other factors.
SALES AND OPERATING Canada $ 1,004 $ 1,169 $ 1,210
REVENUES United States 3,229 3,063 2,871
- - THIRD PARTIES South America 369 395 579
United Kingdom 515 538 576
Germany 1,379 1,291 1,289
Other Europe 777 780 768
Asia and Pacific 491 515 290
All other 25 26 31
------- ------- -------
Total $ 7,789 $ 7,777 $ 7,614
======= ======= =======
NET INCOME* Canada $ 133 $ 245 $ 175
United States 144 136 70
South America 13 27 42
United Kingdom 2 22 51
Germany 7 -- (25)
Other Europe (98)** 33 (5)
Asia and Pacific 117*** (1) 13
All other 39 35 31
Consolidation eliminations 42 (29) 58
------ ------ ------
Net income before
extraordinary item 399 468 410
Extraordinary gain - Canada -- 17 --
------ ------ ------
Total $ 399 $ 485 $ 410
====== ====== ======
</TABLE>
73
<PAGE> 73
<TABLE>
<S> <S> <C> <C> <C>
TOTAL ASSETS Canada $ 4,959 $ 4,077 $ 4,159
AT DECEMBER 31 United States 2,008 1,848 1,820
South America 880 729 739
United Kingdom 953 946 921
Germany 1,195 1,228 1,262
Other Europe 837 1,094 1,082
Asia and Pacific 830 741 886
All other 516 498 477
Consolidation eliminations (2,277) (1,787) (2,118)
------- ------- -------
Total $ 9,901 $ 9,374 $ 9,228
------- ------- -------
CAPITAL EXPENDITURES Canada $ 326 $ 186 $ 143
AND INVESTMENTS United States 62 71 55
South America 188 118 43
United Kingdom 85 97 50
Germany 44 55 79
Other Europe 35 54 56
Asia and Pacific 84 21 7
All other 53 39 49
------- ------ ------
Total $ 877 $ 641 $ 482
------- ------ ------
AVERAGE NUMBER Canada 11 11 11
OF EMPLOYEES United States 4 4 4
(in thousands) South America 3 3 4
United Kingdom 3 3 4
Germany 5 5 4
Other Europe 3 3 4
Asia and Pacific 5 2 1
All other 2 2 2
------ ------ -----
Total 36 33 34
------ ------ -----
</TABLE>
[FN]
* If presented to reflect the effect of prior years' income tax reassessments
described in note 6, net income in Canada in 1997 would be reduced by $109
and increased by $93 in the United States, $8 in the United Kingdom and
$8 in Germany.
** Includes write-down of $120 after tax related to the Aughinish alumina
refinery.
*** Includes gain of $140 after tax related to the sale of a portion of the
Company's investment in Nippon Light Metal Company, Ltd.
</FN>
23. INFORMATION BY PRODUCT SECTORS
The following presents selected information by major product sector, viewed on a
stand-alone basis and as viewed by senior management. Transactions between
product sectors are conducted on an arm's-length basis and reflect market
prices. Thus, profit on all alumina produced by the Company, whether sold to
third parties or used in the Company's smelters, is included in the alumina and
chemicals sector. Similarly, income from primary metal operations is mainly
profit on metal produced by the Company, whether sold to third parties or used
in the Company's fabricating operations. Income from fabricated products
businesses represents only the fabricating profit on rolled products and
downstream businesses.
74
<PAGE> 74
<TABLE>
<CAPTION>
SALES AND OPERATING REVENUES OPERATING INCOME
------------------------------------------------------------- -------------------------
INTERSECTOR THIRD PARTIES
---------------------------- ----------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
------ ------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Alumina
and chemicals $ 516 $ 520 $ 507 $ 509 $ 536 $ 529 $113 $118 $ 84
Primary metal 1,394 1,486 1,628 1,304 1,487 1,321 346 606 523
Fabricated products -- -- -- 5,963 5,737 5,744 310 280 124
Intersector and
other items (1,910) (2,006) (2,135) 13 17 20 117 (28) 143
------ ------ ------ ------ ------ ------ ---- ---- ----
$ -- $ -- $ -- $7,789 $7,777 $7,614 $886 $976 $874
====== ====== ====== ====== ====== ======
RECONCILIATION TO NET INCOME
BEFORE EXTRAORDINARY ITEM
Equity loss (48) (33) (10)
Corporate offices (137) (126) (117)
Interest (92) (101) (125)
Income taxes (210) (248) (212)
---- ---- ----
NET INCOME BEFORE EXTRAORDINARY ITEM $399 $468 $410
==== ==== ====
</TABLE>
Included in 1998 Intersector and other items are the gain of $146 from the sale
of a portion of the Company's interest in NLM and the loss of $143 related to
the impairment of the Aughinish alumina refinery assets to be sold in 1999.
Included in 1998 operating income for Fabricated products is $16 related to
rationalization costs in Europe and Asia.
<TABLE>
<CAPTION>
TOTAL ASSETS AT DECEMBER 31 1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Alumina and chemicals $1,501 $1,409 $1,357
Primary metal 3,037 2,880 2,795
Fabricated products 4,706 4,318 4,198
Cash, equity companies and other items 657 767 878
------ ------ ------
$9,901 $9,374 $9,228
====== ====== ======
</TABLE>
<TABLE>
<CAPTION>
DEPRECIATION CAPITAL EXPENDITURES
---------------------------- -------------------------
1998 1997 1996 1998 1997 1996
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Alumina and chemicals $ 80 $ 78 $ 75 $ 137 $ 126 $ 142
Primary metal 147 138 136 338 220 127
Fabricated products 225 210 211 395 282 207
Intersector and other items 10 10 9 7 13 6
------ ------ ------ ------ ------ ------
$ 462 $ 436 $ 431 $ 877 $ 641 $ 482
====== ====== ====== ====== ====== ======
</TABLE>
24. PRIOR YEAR AMOUNTS
Certain prior year amounts have been reclassified to conform with the 1998
presentation.
75
<PAGE> 75
QUARTERLY FINANCIAL DATA
(in millions of US$, except where indicated)
<TABLE>
<CAPTION>
(unaudited) FIRST SECOND THIRD FOURTH YEAR
- ----------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
1998
REVENUES $1,971 $2,005 $1,960 $2,084 $8,020
COST OF SALES AND OPERATING EXPENSES 1,497 1,549 1,514 1,516 6,076
DEPRECIATION 110 113 116 123 462
INCOME TAXES 78 76 44 12 210
OTHER ITEMS 169 181 179 344 873
------- ------- ------- ------- -------
NET INCOME(1) $ 117 $ 86 $ 107 $ 89 $ 399
DIVIDENDS ON PREFERENCE SHARES 3 2 3 2 10
------- ------- ------- ------- -------
NET INCOME ATTRIBUTABLE TO
COMMON SHAREHOLDERS $ 114 $ 84 $ 104 $ 87 $ 389
------- ------- ------- ------- -------
NET INCOME PER COMMON SHARE
(IN US$)(2) $ 0.50 $ 0.37 $ 0.46 $0.38 $ 1.71
NET INCOME UNDER U.S. GAAP(3) $ 117 $ 94 $ 103 $ 103 $ 417
======= ======== ======= ======= =======
1997
Revenues $1,898 $2,030 $1,965 $1,972 $7,865
Cost of sales and operating expenses 1,453 1,555 1,506 1,491 6,005
Depreciation 107 110 106 113 436
Income taxes 42 69 76 61 248
Other items 153 180 197 178 708
------- ------- ------- ------- -------
Net income before extraordinary item 143 116 80 129 468
Extraordinary gain -- -- -- 17 17
------- ------- ------- ------- -------
Net income(1) $ 143 $ 116 $ 80 $ 146 $ 485
Dividends on preference shares 3 2 2 3 10
------- ------- ------- ------- -------
Net income attributable to
common shareholders $ 140 $ 114 $ 78 $ 143 $ 475
Net income before extraordinary item
per common share (in US$)(2) $ 0.62 $ 0.50 $ 0.34 $ 0.56 $ 2.02
Extraordinary gain per common share
(in US$) -- -- -- 0.07 0.07
------- ------- ------- ------- -------
Net income per common share
(in US$)(2) $ 0.62 $ 0.50 $ 0.34 $ 0.63 $ 2.09
Net income before extraordinary
item under U.S. GAAP(3) $ 142 $ 141 $ 90 $ 131 $ 504
Net income under U.S. GAAP(3) $ 142 $ 141 $ 90 $ 148 $ 521
------- ------- ------- ------- -------
</TABLE>
76
<PAGE> 76
<TABLE>
<CAPTION>
1996
<S> <C> <C> <C> <C> <C>
Revenues $2,015 $1,972 $1,881 $1,821 $7,689
Cost of sales and
operating expenses 1,532 1,506 1,464 1,417 5,919
Depreciation 110 108 108 105 431
Income taxes 65 69 53 25 212
Other items 183 177 155 202 717
------ ------ ----- ----- ======
Net income(1) $ 125 $ 112 $ 101 $ 72 $ 410
Dividends on preference
shares 5 5 4 2 16
------ ------ ------ ------ ------
Net income attributable
to common shareholders $ 120 $ 107 $ 97 $ 70 $ 394
Net income per common
share (in US$)(2) $ 0.53 $ 0.47 $ 0.43 $ 0.31 $ 1.74
Net income under
U.S. GAAP(3) $ 120 $ 118 $ 111 $ 71 $ 420
====== ====== ====== ====== ======
</TABLE>
(1) The first quarter of 1998 included an after-tax charge of $11 related to
Alcan's share of construction contract losses and restructuring costs at Nippon
Light Metal Company, Ltd. (NLM) in Japan. The second quarter of 1998
included an after-tax charge of $16 related to Alcan's share of restructuring
costs at NLM. The third quarter of 1998 included an after-tax gain of $20 for
exchange revaluation of the Company's accumulated deferred tax liability and
after-tax charges of $7 for rationalization costs in Europe. The fourth quarter
of 1998 included an after-tax gain of $140 from the sale of a portion of the
Company's investment in NLM, an after-tax loss of $120 from the write-down
for impairment of the Aughinish alumina refinery assets to be sold in 1999, an
after-tax gain of $8 principally from the sale of Handy Chemicals Ltd., and $9
from rationalization costs in Europe and Asia.
The first quarter of 1997 included an after-tax gain of $10 from the sale of a
business and $26 from a favourable tax adjustment related to prior years. The
third quarter of 1997 included a special charge of $30 after tax related to
Alcan's share of contract losses and restructuring provisions at 45.6%-owned
NLM.
The first quarter of 1996 included an after-tax charge of $12 on the in-
substance defeasance of debentures. The third quarter of 1996 included an
after-tax gain of $8 from the sale of businesses.
(2) Net income per common share calculations are based on the average
number of common shares outstanding in each period.
(3) See note 5 to the consolidated financial statements for explanation of
differences between Canadian and U.S. GAAP.
77
<PAGE> 77
ELEVEN-YEAR SUMMARY
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME STATEMENT ITEMS
(in millions of US$)
REVENUES
Sales and operating revenues 7,789 7,777 7,614 9,287 8,216 7,232 7,596 7,748 8,757 8,839 8,529
Other income 231 88 75 100 109 75 69 82 162 208 97
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total revenues 8,020 7,865 7,689 9,387 8,325 7,307 7,665 7,830 8,919 9,047 8,626
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
COSTS AND EXPENSES
Cost of sales and
operating expenses 6,076 6,005 5,919 7,247 6,740 6,002 6,300 6,455 6,996 6,682 6,072
Depreciation 462 436 431 447 431 443 449 429 393 333 316
Selling, administrative and
general expenses 448 444 422 484 528 551 596 635 659 600 525
Research and development expenses 70 72 71 76 72 99 125 131 150 136 132
Interest 92 101 125 204 219 212 254 246 197 130 137
Other expenses 219 54 88 61 95 106 118 163 65 62 91
Income taxes 210 248 212 326 112 (13) (17) (104) 126 350 497
Equity income (loss) (48) (33) (10) (3) (29) (12) 53 89 211 97 97
Minority interests 4 (4) (1) 4 (3) 1 (5) -- (1) (16) (22)
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net income (Loss) before
extraordinary item 399 468 410 543 96 (104) (112) (36) 543 835 931
Extraordinary gain (loss) -- 17 -- (280) -- -- -- -- -- -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net income (Loss) 399 485 410 263 96 (104) (112) (36) 543 835 931
Preference dividends 10 10 16 24 21 18 23 20 22 21 30
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net income (Loss) attributable to
common shareholders 389 475 394 239 75 (122) (135) (56) 521 814 901
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
CONSOLIDATED BALANCE SHEET ITEMS
(in millions of US$)
Operating working capital 1,682 1,483 1,461 1,731 1,675 1,314 1,460 1,717 1,842 1,774 1,764
Property, plant and equipment - net 5,897 5,458 5,470 5,672 5,534 6,005 6,256 6,525 6,167 5,260 4,280
Total assets 9,901 9,374 9,228 9,736 10,003 9,812 10,154 10,843 10,681 9,518 8,627
Total debt 1,789 1,515 1,516 1,985 2,485 2,652 2,794 3,024 2,648 1,734 1,530
Deferred income taxes 747 969 996 979 914 888 955 1,126 1,092 1,044 1,006
Preference shares 160 203 203 353 353 353 353 212 212 212 211
Common shareholders' equity 5,359 4,871 4,661 4,482 4,308 4,096 4,266 4,730 4,942 4,610 4,109
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
PER COMMON SHARE
(in US$)
Net income (Loss) before
extraordinary item 1.71 2.02 1.74 2.30 0.34 (0.54) (0.60) (0.25) 2.33 3.58 3.85
Net income (Loss) 1.71 2.09 1.74 1.06 0.34 (0.54) (0.60) (0.25) 2.33 3.58 3.85
Dividends paid 0.60 0.60 0.60 0.45 0.30 0.30 0.45 0.86 1.12 1.12 0.59
Common shareholders' equity 23.71 21.43 20.57 19.84 19.17 18.28 19.06 21.17 22.19 20.30 18.06
Market price - NYSE close 26.81 27.69 33.63 31.13 25.38 20.75 17.63 20.00 19.50 22.88 21.75
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
78
<PAGE> 78
OPERATING DATA
(in thousands of tonnes except for LME price)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED ALUMINUM SHIPMENTS
Ingot products* 829 858 810 801 897 887 870 866 857 743 832
Fabricated products 1,823 1,694 1,539 1,733 1,763 1,560 1,389 1,333 1,488 1,518 1,446
Fabrication of
customer-owned metal 289 276 258 225 189 91 206 145 81 75 80
----- ----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total aluminum shipments 2,941 2,828 2,607 2,759 2,849 2,538 2,465 2,344 2,426 2,336 2,358
Consolidated primary
aluminum production 1,481 1,429 1,407 1,278 1,435 1,631 1,612 1,695 1,651 1,643 1,619
Consolidated aluminum
purchases 1,227 1,254 1,003 1,365 1,350 865 675 591 646 718 716
Consolidated aluminum
inventories (end of year) 469 451 408 449 435 403 418 463 447 539 480
PRIMARY ALUMINUM CAPACITY **
Consolidated subsidiaries 1,706 1,558 1,561 1,561 1,561 1,711 1,711 1,676 1,685 1,685 1,680
Total consolidated
subsidiaries and
related companies 1,706 1,695 1,698 1,712 1,712 1,862 1,862 1,827 1,836 1,836 1,831
Average three-month LME price
(US$ per tonne) 1,379 1,620 1,536 1,830 1,500 1,161 1,278 1,333 1,636 1,916 2,306
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
OTHER STATISTICS
Cash from operating activities
(in millions of US$) 739 719 981 1,044 65 444 465 659 760 970 1,370
Capital expenditures
(in millions of US$) 877 641 482 441 356 370 474 880 1,367 1,466 676
Ratio of total borrowings
to equity (%) 24:76 23:77 23:77 29:71 35:65 37:63 37:63 37:63 33:67 26:74 26:74
Average number of employees
(in thousands) 36 33 34 39 42 46 49 54 57 57 56
Common shareholders - registered
(in thousands at end of year) 20 21 22 23 26 28 32 34 38 40 41
Common shares outstanding
(in millions at end of year) 226 227 227 226 225 224 224 223 223 227 228
Registered in Canada (%) 60 61 61 61 55 59 69 68 54 44 54
Registered in the
United States (%) 39 39 39 38 44 40 30 31 44 54 43
Registered in other
countries (%) 1 -- -- 1 1 1 1 1 2 2 3
Return on average common
shareholders' equity (%) 7 10 9 5 2 (3) (3) (1) 11 19 24
Before extraordinary item (%) 10 11
===== ===== ===== ===== ===== ===== ===== ===== ===== ===== =====
</TABLE>
* Includes primary and secondary ingot and scrap.
** Primary aluminum capacity has been restated to reflect better the actual
production levels achieved over a period of time.
All per-share amounts reflect the three-for-two share split on May 9, 1989.
See note 5 to the consolidated financial statements for U.S. GAAP information.
79
<PAGE> 79
CORPORATE GOVERNANCE
The business and affairs of Alcan are managed by its Board of Directors acting
through the Management of the Company. The Directors and Officers of Alcan are
named on the opposite page. In discharging its duties and obligations, the Alcan
Board acts in accordance with the provisions of the Canada Business Corporations
Act, the Company's constituting documents and by-laws and other applicable
legislation and Alcan policies.
Alcan does not have a controlling shareholder nor do any of the Directors
represent the investment of any minority shareholder.
Corporate governance has traditionally received the active attention of Alcan's
Board. For instance, an intensive review of the guiding principles of Alcan
conducted by the Board in the 1970s led to the publication in 1978 of a policy
statement entitled Alcan, Its Purpose, Objectives and Policies, which has
remained fundamentally unchanged. This statement represents the basic business
principles that guide Alcan employees in conducting a widespread international
enterprise and has helped Alcan achieve public understanding and trust. To that
original document, a Code of Conduct was added in 1996 to reinforce it with more
detailed guidelines for Alcan employees as well as consultants and contractors
engaged by Alcan.
The Montreal and Toronto stock exchanges now require a formal description of
corporate governance practices by all listed companies. Alcan's disclosure in
this regard is published in the Management Proxy Circular issued in connection
with the forthcoming Annual Meeting; a copy is available from Shareholder
Services at the address on page 69.
Committees of the Board (described briefly at right) assist the Board in
carrying out its functions and make recommendations to it on various matters.
Membership of these Committees is indicated on the opposite page.
The CORPORATE GOVERNANCE COMMITTEE has the responsibility for reviewing Board
practices and performance, candidates for directorship and Board Committee
membership. It also considers recommendations from the Personnel Committee
regarding Board compensation and the appointments of the Chairman of the Board
and the Chief Executive Officer.
The AUDIT COMMITTEE assists the Board in fulfilling its functions relating to
corporate accounting and reporting practices as well as financial and accounting
controls, in order to provide effective oversight of the financial reporting
process; it also reviews financial statements as well as proposals for issues of
securities.
The ENVIRONMENT COMMITTEE has the responsibility for reviewing policy,
management practices and performance of Alcan in environmental matters.
The PERSONNEL COMMITTEE has the responsibility for reviewing all personnel
policy and employee relations matters (including compensation), and for making
recommendations to the Corporate Governance Committee on Board compensation and
on the appointments of the Chairman of the Board and the Chief Executive
Officer.
A special committee composed of members of the Personnel Committee administers
the Alcan Executive Share Option Plan.
80
<PAGE> 80
DIRECTORS AND OFFICERS
(As at February 11, 1999)
DIRECTORS
JOHN R. EVANS, C.C.1, 3, 8
Chairman of the Board
of Alcan Aluminium Limited, Montreal
Age 69, director since 1986
SONJA I. BATA, O.C.5, 7
Vice Chairman, Bata Shoe Foundation, Toronto
Age 72, director since 1979
W. R. C. BLUNDELL, O.C.2, 7
Director of various companies, Toronto
Age 71, director since 1987
JACQUES BOUGIE, O.C.5
President and Chief Executive Officer
of Alcan Aluminium Limited, Montreal
Age 51, director since 1989
WARREN CHIPPINDALE, F.C.A., C.M.1, 4, 7
Director of various companies, Montreal
Age 70, director since 1986
TRAVIS ENGEN1, 5, 7
Chairman, President and Chief Executive Officer of ITT Industries, Inc.,
New York
Age 54, director since 1996
ALLAN E. GOTLIEB, C.C.3, 5, 7
Director of various companies, Toronto
Age 70, director since 1989
J. E. NEWALL, O.C.3, 6, 7
Chairman and Director of
NOVA Chemicals Corporation, Calgary
Age 63, director since 1985
DR. PETER H. PEARSE, C.M.5, 7
Natural resources consultant, Vancouver
Age 66, director since 1989
81
<PAGE> 81
SIR GEORGE RUSSELL, C.B.E.1, 3, 7
Chairman of 3i Group plc, London
Age 63, director since 1987
GUY SAINT-PIERRE, O.C.1, 7
Chairman of SNC-Lavalin Group Inc., Montreal
Age 64, director since 1994
GERHARD SCHULMEYER1, 7
President and Chief Executive Officer
of Siemens Corp., New York
Age 60, director since 1996
PAUL M. TELLIER, C.C.7
President and Chief Executive Officer
of Canadian National Railway Company, Montreal
Age 59, director since 1998
OFFICERS
JACQUES BOUGIE
President and Chief Executive Officer
ROBERT L. BALL
Executive Vice President
CLAUDE CHAMBERLAND
Executive Vice President,
Technology and Major Projects
JEAN-PIERRE M. ERGAS
Executive Vice President,
Europe
RICHARD B. EVANS
Executive Vice President,
Fabricated Products - North America
EMERY P. LEBLANC
Executive Vice President,
Alumina and Primary Metal
EVERALDO N. SANTOS
Executive Vice President,
South America
82
<PAGE> 82
BRIAN W. STURGELL
Executive Vice President, Asia /Pacific
and Corporate Development
SURESH THADHANI
Executive Vice President and
Chief Financial Officer
CYNTHIA CARROLL
Vice President, Bauxite, Alumina and Chemicals
DANIEL GAGNIER
Vice President, Corporate and
Environmental Affairs
GASTON OUELLET
Vice President, Human Resources,
Occupational Health and Safety
P.K. PAL
Vice President, Chief Legal Officer
and Secretary
GLENN R. LUCAS*
Treasurer
DENIS G. O'BRIEN
Controller
1 Member of Audit Committee
2 Chairman of Audit Committee
3 Member of Personnel Committee
4 Chairman of Personnel Committee
5 Member of Environment Committee
6 Chairman of Environment Committee
7 Member of Corporate Governance Committee
8 Chairman of Corporate Governance Committee
[FN]
* Effective April 1, 1999.
[FN]
83
<PAGE> 83
SHAREHOLDER INFORMATION
COMMON SHARES
The principal markets for trading in Alcan's common shares are the New York
and Toronto stock exchanges. The common shares are also traded on the
Montreal, Vancouver, Chicago, Pacific, London, Paris, Brussels, Amsterdam,
Frankfurt and Swiss stock exchanges.
The transfer agents for the common shares are CIBC Mellon Trust Company in
Montreal, Toronto, Winnipeg, Regina, Calgary and Vancouver, Chase Mellon
Shareholder Services, L.L.C. in New York, and CIBC Mellon Trust Company
in England.
Common share dividends are paid quarterly on or about the 20th of March,
June, September and December to shareholders of record on or about the 20th of
February, May, August and November, respectively.
PREFERENCE SHARES
The preference shares are listed on the Montreal, Toronto and Vancouver stock
exchanges. The transfer agent for the preference shares is CIBC Mellon Trust
Company.
INVESTMENT PLANS
The Company offers holders of common shares two convenient ways of buying
additional Alcan common shares without payment of brokerage commissions.
These are known as the Dividend Reinvestment Plan and the Share Purchase
Plan. Copies of the prospectus describing these Plans may be obtained from
Shareholder Services at the address on page 69.
SECURITIES REPORTS FOR 1998
The Company's Annual Information Form, to be filed with the Canadian
securities commissions, and the annual 10-K report, to be filed with the
Securities and Exchange Commission in the United States, will be available
to shareholders after April 1, 1999. Copies of both may be obtained from
Shareholder Services at the address on page 69.
84
<PAGE> 84
<TABLE>
<CAPTION>
DIVIDEND PRICES* AND AVERAGE DAILY TRADING VOLUMES
-------- -----------------------------------------------------------------------------------
NEW YORK STOCK EXCHANGE (US$) TORONTO STOCK EXCHANGE (CAN$)
---------------------------------------------------- ----------------------------------
1998 US$ HIGH LOW CLOSE AVG. DAILY HIGH LOW CLOSE AVG. DAILY
QUARTER Volume Volume
======= ===== ======== ======== ======== ========== ===== ===== ====== ==========
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
FIRST 0.150 34 1/2 24 1/2 31 1/4 371,616 48.50 35.10 44.25 563,447
SECOND 0.150 33 7/16 25 15/16 27 10/16 400,443 47.95 38.25 40.50 482,864
THIRD 0.150 28 3/16 18 11/16 23 7/16 322,500 41.60 28.30 36.15 486,748
FOURTH 0.150 28 15/16 21 3/4 27 1/16 456,005 44.85 33.60 41.50 585,815
======= ===== ======== ======== ======== ========== ===== ===== ====== ==========
YEAR 0.600
- ------- -----
1997
QUARTER
======= ===== ======== ======== ======== ========== ===== ===== ====== ==========
First 0.150 38 1/4 33 3/8 33 7/8 562,300 52.25 45.70 46.75 641,900
Second 0.150 37 7/8 30 1/2 34 11/16 430,900 52.10 42.65 47.10 587,800
Third 0.150 40 5/16 33 1/2 34 3/4 470,600 55.70 46.65 48.40 547,600
Fourth 0.150 35 13/16 26 1/16 27 5/8 499,133 49.25 37.10 39.40 679,694
======= ===== ======== ======== ======== ========== ===== ===== ====== ==========
Year 0.600
- ------- -----
</TABLE>
[FN]
* The share prices are those reported as "New York Stock Exchange --
Consolidated Trading" and reported by The Toronto Stock Exchange. Since April
15, 1996, share prices on The Toronto Stock Exchange are expressed in
decimals. </FN>
FURTHER INFORMATION
Contact for shareholder account inquiries:
Linda Burton
Manager, Shareholder Services
Telephone: (514) 848-8050
or 1-888-252-5226 (toll free)
[email protected]
Investor contact:
Alan G. Brown
Director, Investor and Media Relations
Telephone: (514) 848-8368
[email protected]
Media contact:
Alain Bergeron
Manager, Investor and Media Relations
Telephone: (514) 848-8232
[email protected]
85
<PAGE> 85
THE ALCAN GROUP WORLDWIDE*
(As at February 11, 1999)
PARENT COMPANY AND WORLD HEADQUARTERS
ALCAN ALUMINIUM LIMITED
1188 Sherbrooke Street West
Montreal, Quebec, Canada
H3A 3G2
MAILING ADDRESS:
P.O. Box 6090
Montreal, Quebec, Canada
H3C 3A7
Telephone: (514) 848-8000
Telecopier: (514) 848-8115
www.alcan.com
NORTH AMERICA
BERMUDA
Alcan (Bermuda) Limited
Alcan Nikkei Asia Holdings Ltd. (60%)1
CANADA
Alcan Aluminium Limited
Alcan Cable
Alcan Chemicals
Alcan Foil Products
Alcan International Limited
Alcan Smelters and Chemicals Limited
JAMAICA
Alcan Jamaica Company
UNITED STATES
Alcan Aluminum Corporation
Alcan Cable
Alcan Chemicals
Alcan Foil Products
Alcan Global Automotive Products
Alcan Ingot
Alcan Light Gauge Products
Alcan Sheet Products
86
<PAGE> 86
SOUTH AMERICA
BRAZIL
Alcan Aluminio do Brasil Ltda.
Consorcio Aluminio do Maranhao - Alumar (10%)2
Mineracao Rio do Norte S.A. (12.5%)
Petrocoque S.A. - Industria & Comercio (25%)
AFRICA
GHANA
Ghana Bauxite Company Limited (80%)
GUINEA
Compagnie des Bauxites de Guinee (16.8%)
EUROPE
FRANCE
Alcan France (Technal)
GERMANY
Alcan Deutschland GmbH
Aluminium Norf GmbH (50%)
ITALY
Alcan Alluminio S.p.A.
NORWAY
Vigeland Metal Refinery A/S (50%)
SPAIN
Alcan Iberica S.A.
SWITZERLAND
Alcan Aluminium AG
Alcan Rorschach AG
UNITED KINGDOM
British Alcan Aluminium plc
PACIFIC
AUSTRALIA
Alcan South Pacific Pty Ltd.
Queensland Alumina Limited (21.4%)
CHINA
Alcan Asia Limited
Alcan Asia Pacific Limited
Alcan Nikkei China Limited (49%)1
Alcan Nikkei Korea Limited (49%)1
Nonfemet International (China-Canada-Japan) Aluminium Company Limited (27%)1
87
<PAGE> 87
INDIA
Indian Aluminium Company, Limited (54.6%)
JAPAN
Alcan Asia Limited (Tokyo Branch)
KOREA
Alcan Nikkei Korea Limited (Seoul Branch)
MALAYSIA
Alcan Nikkei Asia Company Ltd. (60%)1
Aluminium Company of Malaysia Berhad (35.5%)1
Alcom Nikkei Specialty Coatings Sdn Bhd (47.7%)1
THAILAND
Alcan Nikkei Siam Limited (42%)1
Alcan Nikkei Thai Limited (46.6%)1
* This list names only the principal businesses of the Alcan Group and
reflects the sale of alumina refining operations in Ireland and Guinea and
of a chemicals operation in Canada as well as the reduction of the interest
held in Nippon Light Metal Company, Ltd. (NLM) in Japan. A complete list is
contained in the Company's 10-K Report, available from Alcan's headquarters
in Montreal.
1 Alcan holds additional interest indirectly through its portfolio
investment, NLM.
2 Interest in the Alumar alumina refinery is held through Alcan Aluminio do
Brasil Ltda.
VISIT ALCAN'S WEB SITE:
WWW.ALCAN.COM
Further information on Alcan and its activities is available on Alcan's World
Wide Web site and contained in various Company publications. These publications,
such as A Commitment to Continual Environmental Improvement as well as Alcan's
Environmental and Health and Safety policies, are available by writing to the
address shown at upper left.
VERSION FRANCAISE
Pour obtenir la version francaise de ce rapport, veuillez ecrire aux Services
aux actionnaires dont l'adresse figure dans le coin superieur gauche.
This report was printed using vegetable-based inks and is recyclable.
88
<PAGE> 88
ALCAN . . . THE PARTNER OF CHOICE
(Logo) Alcan Aluminium Limited
www.alcan.com
Printed in Canada
89
<PAGE> 1
EXHIBIT NO. 21.: SUBSIDIARIES, RELATED COMPANIES, ETC. - VOTING SHARES
With the exception of a number of subsidiaries which, considered in the
aggregate, would not constitute a significant Subsidiary, the Subsidiaries of
Alcan, as of 1 March 1999, are listed below. All Subsidiaries and Joint Ventures
named below are consolidated in the financial statements incorporated by
reference in this report. The list also includes several Related Companies for
which Alcan reports its interest in the net income or loss of such companies.
Alcan is the direct owner of the stock of each Subsidiary or Related Company,
except where the name is indented. Indentation signifies that the principal
ownership by Alcan is through the company under which the indentation is made;
where there is additional ownership through another company also listed below,
that additional ownership is described in the end-note on page 33.
<TABLE>
<CAPTION>
SUBSIDIARIES, RELATED COMPANIES, ETC. ORGANIZED UNDER % OF VOTING
THE LAWS OF SHARES HELD BY
IMMEDIATE
OWNER
<S> <C> <C>
Alcan Adminco Inc. Canada 100
Alcan Aluminio (America Latina) Inc. Canada 100
Alcan Aluminum Corporation Ohio 100
Alcan Automotive Castings, Inc. Ohio 100
Altek Automotive Castings Partnership Delaware 50
Alcan Cable (Mexico), Inc. Georgia 100
Alcan Management Services U.S.A. Inc. Ohio 100
Erieview Cartage, Inc. Ohio 100
Logan Aluminum Inc. Delaware 40
Alcan Asia Pacific Limited Canada 100
Alcan Empreendimentos Ltda. Brazil 100
Alcan Aluminio do Brasil Ltda. Brazil 100
Alcan Aluminio Pocos de Caldas S.A. Brazil 100
Consorcio de Aluminio do Maranhao
("Consorcio Alumar") (UNINCORPORATED) Brazil 10
Petrocoque S.A. - Industria e Comercio Brazil 25
Mineracao Rio do Norte S.A. Brazil 12.5
Alcan Europe Limited England 100
Alcan Finances (Bda) Ltd. Bermuda 100
Alcan Asia Limited Hong Kong 100
Alcan (Bermuda) Limited Bermuda 100
Alcan Shipping (Bermuda) Limited Bermuda 100
Alcan Nikkei Asia Holdings Ltd. Bermuda 60 (1)
Alcan Nikkei Siam Limited Thailand 33 (2)
Alcan Nikkei Thai Limited Thailand 75 (3)
Alcom Nikkei Specialty Coatings Sdn. Bhd. Malaysia 50 (4)
Aluminium Company of Malaysia Berhad Malaysia 59.2
Aluminium Development Company (Thailand)
Limited Thailand 16 (5)
Nikkei Holdings Pte. Limited Singapore 100
Nonfemet International (China-Canada-Japan)
Aluminium Company Limited China 45
Alcan Nikkei China Limited China 49 (6)
Champlain Insurance Company Ltd. Bermuda 100
Frialco S.A. Cayman Islands 20
Halco (Mining) Inc. Delaware 33
Compagnie des Bauxites de Guinee Delaware 51
Alcan Finances B.V. Netherlands 100
Alcan Finances (Ireland) Limited Canada 100
Alcan Aluminium AG Switzerland 100
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
SUBSIDIARIES, RELATED COMPANIES, ETC. ORGANIZED UNDER % OF VOTING
THE LAWS OF SHARES HELD BY
IMMEDIATE
OWNER
<S> <C> <C>
Alcan Rorschach AG Switzerland 100
Alcan Finances (Ireland) Company Ireland 100
Alcan Finances (U.K.) England 100
Alcan France Holdings France 100
Alcan France France 91.1 (7)
Evolutis S.A. France 100
Evolutis Espinos-Roy France 95 (8)
Technal AB Sweden 99
Technal Aluminium Systems SA Switzerland 100
Technal Iberica Spain 100
Technal Portuguesa Systemas de Aluminio
Limitada Portugal 100
Evolutis Conforto e Ambiante Ltda Portugal 100
Technal Limited England 100
Technal South East Asia Co. Ltd. Thailand 49
Transports et Aluminium Industries
S.A.R.L. France 100
Alcan International Limited Canada 100
Alcan Ireland Limited Ireland 100
Alcan Luxembourg S.A. Luxembourg 100
Alcan Alluminio S.p.A. Italy 100
Alcanital Services S.r.l. Italy 100
Alcan Deutschland GmbH Germany 98.6 (9)
Alcan Austria GmbH Austria 100
Alcan Lamines France France 40 (10)
Aluminium Norf GmbH Germany 50
Alcan Iberica, S.A. Spain 100
BAA Holdings S.A. Luxembourg 100
British Alcan Aluminium plc England 100
Alcan Automotive Structures (UK)
Ltd. England 100
Alcan BAP Limited England 100
Alcan BAS Limited England 100
Alcan Chemicals Europe Limited England 100
Alcan Chemicals Limited England 100
Alcan Colwick Holdings Limited England 100
Alcan Colwick Limited England 100
Alcan Contracts Limited England 100
Alcan Farms Limited England 100
Alcan Metal Centres (Midlands)
Limited England 100
Alcan Metal Centres Limited Scotland 100
Alcan Shipping Services (UK) Limited England 100
Alcan Speciality and Aerospace
Limited England 100
Alcan St Helens Limited England 100
Alcan Stockists South Limited England 100
Alcan Swinton Limited England 100
Alcan Systems and Conservatories
Limited England 100
Alcan Systems Limited England 100
Alcan Windows Limited England 100
Alliance Aluminium Holdings Limited England 100
Aluminium Corporation Limited England 100
Aluminium Sulphate Limited England 50
Aluminium Supply (Aerospace) Limited England 100
Aylesford (Packaging) Limited England 100
BA Chemicals Limited England 100
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
SUBSIDIARIES, RELATED COMPANIES, ETC. ORGANIZED UNDER % OF VOTING
THE LAWS OF SHARES HELD BY
IMMEDIATE
OWNER
<S> <C> <C> <C>
ALCAN LUXEMBOURG S.A. (CONTINUED)
BAA HOLDINGS S.A. (CONTINUED)
BRITISH ALCAN ALUMINIUM PLC (CONTINUED)
BA Finance Limited England 100
BA Metals Limited England 100
Belfast Aluminium Limited Northern Ireland 100
British Alcan Conductor Limited England 100
British Alcan Consumer Products Limited England 100
British Alcan Extrusions Limited England 100
British Alcan Highland Estates Limited England 100
British Alcan Primary and Recycling Limited England 100
British Alcan Rolled Products Limited England 100
British Alcan Snappies Limited England 100
British Alcan Wire and Conductor Limited England 100
Four County Windows Limited England 100
Gentrin Limited England 100
Pearhouse Limited England 100
Pentagon Radiator (Stafford) Limited England 100
Propax Packaging Products Limited England 100
Saguenay Shipping (U.K.) Limited England 100
TBAC Limited England 100
Alcan Aluminium UK Limited England 90 (11)
British Alcan Overseas Investments Limited England 100
Saratoga Resources N.V. Netherland Antilles 20
Vigelands Metal Refinery A/S Norway 50
Ghana Bauxite Company Limited Ghana 80
Isleburn Limited Scotland 21.7
MacKay & MacLeod Engineering Limited Scotland 100
Kinlochleven Road Transport Company Limited Scotland 25
The Lochaber Power Company Scotland 100
Venesta Foils Limited England 100
Vigelands Brug A/S Norway 100
Thames Alum Limited England 100
The Bowling Back Land Company England 50
Ulster Aluminium Stockists Limited Northern Ireland 100
Westbro Welding Wire Limited England 100
Alcan Management Services Canada Limited Canada 100
Alcan Nikkei Asia Company Ltd. Bermuda 60 (1)
Alcan Nikkei Korea Limited China 49 (6)
Alcan Realty Limited Canada 100
Alcan Shannon Company Ireland 100
Alcan Shipping Services Limited Canada 100
Alcan Smelters and Chemicals Limited Canada 100
Alcan-Sprostons Limited Jamaica 100
Alpac Aluminium Inc. Canada 50 (12)
Aluminio de Venezuela, C.A. Venezuela 49
Aluminum Company of Canada, Limited Canada 100
Cable Alcan de Mexico, S.A. de C.V. Mexico 100
Indian Aluminium Company, Limited India 54.62
Jamalcan (UNINCORPORATED) Jamaica 93
Nippon Light Metal Company, Ltd. Japan 6.1 (13)
N.V. Alcan Aluminium Products Benelux S.A. Belgium 100
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
SUBSIDIARIES, RELATED COMPANIES, ETC. ORGANIZED UNDER % OF VOTING
THE LAWS OF SHARES HELD BY
IMMEDIATE
OWNER
<S> <C> <C>
Societe des Alumines et Bauxites de Provence France 100
The Roberval and Saguenay Railway Company Quebec 100
3088405 Canada Inc. Canada 100
Alcan South Pacific Pty Ltd. Australia 100
Alcan Queensland Smelter Pty Ltd. Australia 100
Queensland Alumina Limited Australia 21.4
Queensland Alumina Security Corporation Delaware 20
Wenlock Bauxite Pty Limited Australia 100
</TABLE>
<TABLE>
<CAPTION>
NOTE ADDITIONAL OWNERSHIP THROUGH % OF VOTING
SHARES HELD
<S> <C> <C>
(1) Nippon Light Metal Company, Ltd. 40.0
(2) Nikkei Holdings Pte. Limited 37.0
(3) Nikkei Holdings Pte. Limited 2.6
(4) Aluminium Company of Malaysia Berhad 50.0
(5) Alcan Nikkei Thai Limited 84.0
(6) Nippon Light Metal Company, Ltd. 51.0
(7) Alcan Aluminium Limited 8.9
(8) Transports et Aluminium Industries S.A.R.L. 5.0
(9) Alcan Aluminium AG 1.4
(10) British Alcan Aluminium plc 30.0
Alcan Alluminio S.p.A. 30.0
(11) British Alcan Aluminium plc 10.0
(12) Nippon Light Metal Company, Ltd. 50.0
(13) Alcan Nikkei Asia Holdings Ltd. 8.5*
* non-voting
</TABLE>
<PAGE> 1
Exhibit 24.1
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS
WHEREAS ALCAN ALUMINIUM LIMITED, a Canadian company (the "Company"),
proposes shortly to file with the Securities and Exchange Commission, under the
provisions of the Securities Act of 1934 as amended (the "Act"), the Annual
Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.
WHEREAS the undersigned is an Officer and/or a Director of the Company as
indicated below:
NOW, THEREFORE, the undersigned hereby constitutes and appoints Robert des
Trois Maisons, Serge Fecteau, P.K. Pal, and each of them, as attorneys for the
undersigned and in the undersigned's name, place and stead, and in each of the
undersigned's offices and capacities as an Officer and/or a Director of the
Corporation, to execute and file such Annual Report on Form 10-K, hereby giving
and granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in and
about the premises as fully, to all intents and purposes, as the undersigned
might or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause to be
done, by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 25th day of March
1999.
[signed]
______________________________
Name: Warren Chippindale
Title: Director
<PAGE> 2
Exhibit 24.2
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS
WHEREAS ALCAN ALUMINIUM LIMITED, a Canadian company (the "Company"),
proposes shortly to file with the Securities and Exchange Commission, under the
provisions of the Securities Act of 1934 as amended (the "Act"), the Annual
Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.
WHEREAS the undersigned is an Officer and/or a Director of the Company as
indicated below:
NOW, THEREFORE, the undersigned hereby constitutes and appoints Robert des
Trois Maisons, Serge Fecteau, P.K. Pal, and each of them, as attorneys for the
undersigned and in the undersigned's name, place and stead, and in each of the
undersigned's offices and capacities as an Officer and/or a Director of the
Corporation, to execute and file such Annual Report on Form 10-K, hereby giving
and granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in and
about the premises as fully, to all intents and purposes, as the undersigned
might or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause to be
done, by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 25th day of March
1999.
[signed]
__________________________
Name: Travis Engen
Title: Director
<PAGE> 3
Exhibit 24.3
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS
WHEREAS ALCAN ALUMINIUM LIMITED, a Canadian company (the "Company"),
proposes shortly to file with the Securities and Exchange Commission, under the
provisions of the Securities Act of 1934 as amended (the "Act"), the Annual
Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.
WHEREAS the undersigned is an Officer and/or a Director of the Company as
indicated below:
NOW, THEREFORE, the undersigned hereby constitutes and appoints Robert des
Trois Maisons, Serge Fecteau, P.K. Pal, and each of them, as attorneys for the
undersigned and in the undersigned's name, place and stead, and in each of the
undersigned's offices and capacities as an Officer and/or a Director of the
Corporation, to execute and file such Annual Report on Form 10-K, hereby giving
and granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in and
about the premises as fully, to all intents and purposes, as the undersigned
might or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause to be
done, by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 25th day of March
1999.
[signed]
__________________________
Name: John R. Evans
Title: Director
<PAGE> 4
Exhibit 24.4
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS
WHEREAS ALCAN ALUMINIUM LIMITED, a Canadian company (the "Company"),
proposes shortly to file with the Securities and Exchange Commission, under the
provisions of the Securities Act of 1934 as amended (the "Act"), the Annual
Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.
WHEREAS the undersigned is an Officer and/or a Director of the Company as
indicated below:
NOW, THEREFORE, the undersigned hereby constitutes and appoints Robert des
Trois Maisons, Serge Fecteau, P.K. Pal, and each of them, as attorneys for the
undersigned and in the undersigned's name, place and stead, and in each of the
undersigned's offices and capacities as an Officer and/or a Director of the
Corporation, to execute and file such Annual Report on Form 10-K, hereby giving
and granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in and
about the premises as fully, to all intents and purposes, as the undersigned
might or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause to be
done, by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 25th day of March
1999.
[signed]
___________________________
Name: J.E. Newall
Title: Director
<PAGE> 5
Exhibit 24.5
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS
WHEREAS ALCAN ALUMINIUM LIMITED, a Canadian company (the "Company"),
proposes shortly to file with the Securities and Exchange Commission, under the
provisions of the Securities Act of 1934 as amended (the "Act"), the Annual
Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.
WHEREAS the undersigned is an Officer and/or a Director of the Company as
indicated below:
NOW, THEREFORE, the undersigned hereby constitutes and appoints Robert des
Trois Maisons, Serge Fecteau, P.K. Pal, and each of them, as attorneys for the
undersigned and in the undersigned's name, place and stead, and in each of the
undersigned's offices and capacities as an Officer and/or a Director of the
Corporation, to execute and file such Annual Report on Form 10-K, hereby giving
and granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in and
about the premises as fully, to all intents and purposes, as the undersigned
might or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause to be
done, by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 25th day of March
1999.
[signed]
_____________________________
Name: Peter H. Pearse
Title: Director
<PAGE> 6
Exhibit 24.6
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS
WHEREAS ALCAN ALUMINIUM LIMITED, a Canadian company (the "Company"),
proposes shortly to file with the Securities and Exchange Commission, under the
provisions of the Securities Act of 1934 as amended (the "Act"), the Annual
Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.
WHEREAS the undersigned is an Officer and/or a Director of the Company as
indicated below:
NOW, THEREFORE, the undersigned hereby constitutes and appoints Robert des
Trois Maisons, Serge Fecteau, P.K. Pal, and each of them, as attorneys for the
undersigned and in the undersigned's name, place and stead, and in each of the
undersigned's offices and capacities as an Officer and/or a Director of the
Corporation, to execute and file such Annual Report on Form 10-K, hereby giving
and granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in and
about the premises as fully, to all intents and purposes, as the undersigned
might or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause to be
done, by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 25th day of March
1999.
[signed]
________________________________
Name: Sir George Russell
Title: Director
<PAGE> 7
Exhibit 24.7
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS
WHEREAS ALCAN ALUMINIUM LIMITED, a Canadian company (the "Company"),
proposes shortly to file with the Securities and Exchange Commission, under the
provisions of the Securities Act of 1934 as amended (the "Act"), the Annual
Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.
WHEREAS the undersigned is an Officer and/or a Director of the Company as
indicated below:
NOW, THEREFORE, the undersigned hereby constitutes and appoints Robert des
Trois Maisons, Serge Fecteau, P.K. Pal, and each of them, as attorneys for the
undersigned and in the undersigned's name, place and stead, and in each of the
undersigned's offices and capacities as an Officer and/or a Director of the
Corporation, to execute and file such Annual Report on Form 10-K, hereby giving
and granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in and
about the premises as fully, to all intents and purposes, as the undersigned
might or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause to be
done, by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 25th day of March
1999.
[signed]
____________________________
Name: Guy Saint-Pierre
Title: Director
<PAGE> 8
Exhibit 24.8
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS
WHEREAS ALCAN ALUMINIUM LIMITED, a Canadian company (the "Company"),
proposes shortly to file with the Securities and Exchange Commission, under the
provisions of the Securities Act of 1934 as amended (the "Act"), the Annual
Report on Form 10-K pursuant to Section 13 or 15 (d) of the Act.
WHEREAS the undersigned is an Officer and/or a Director of the Company as
indicated below:
NOW, THEREFORE, the undersigned hereby constitutes and appoints Robert des
Trois Maisons, Serge Fecteau, P.K. Pal, and each of them, as attorneys for the
undersigned and in the undersigned's name, place and stead, and in each of the
undersigned's offices and capacities as an Officer and/or a Director of the
Corporation, to execute and file such Annual Report on Form 10-K, hereby giving
and granting to said attorneys full power and authority to do and perform all
and every act and thing whatsoever requisite and necessary to be done in and
about the premises as fully, to all intents and purposes, as the undersigned
might or could do if personally present at the doing thereof, hereby ratifying
and confirming all that said attorneys may or shall lawfully do, or cause to be
done, by virtue hereof.
IN WITNESS WHEREOF, I have hereunto set my hand this 25th day of March
1999.
[signed]
_______________________________
Name: Gerhard Schulmeyer
Title: Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FORM
10-K OF ALCAN ALUMINIUM LIMITED FOR THE YEAR ENDED 31 DECEMBER 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 608
<SECURITIES> 0
<RECEIVABLES> 1,292
<ALLOWANCES> 0
<INVENTORY> 1,341
<CURRENT-ASSETS> 3,241
<PP&E> 11,715
<DEPRECIATION> 6,257
<TOTAL-ASSETS> 9,466
<CURRENT-LIABILITIES> 1,424
<BONDS> 1,241
0
203
<COMMON> 1,251
<OTHER-SE> 3,620
<TOTAL-LIABILITY-AND-EQUITY> 9,466
<SALES> 7,777
<TOTAL-REVENUES> 7,865
<CGS> 5,995
<TOTAL-COSTS> 5,995
<OTHER-EXPENSES> 436
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 101
<INCOME-PRETAX> 763
<INCOME-TAX> 258
<INCOME-CONTINUING> 468
<DISCONTINUED> 0
<EXTRAORDINARY> 17
<CHANGES> 0
<NET-INCOME> 485
<EPS-PRIMARY> 2.09
<EPS-DILUTED> 2.09
</TABLE>
<PAGE> 1
Exhibit 99
(Alcan LOGO)
Notice of Annual Meeting
22 April 1999
Management Proxy Circular
(1999 LOGO)
Please complete, sign and date
your proxy and return it promptly in
the enclosed postage-paid envelope.
<PAGE> 2
CONTENTS
<TABLE>
<S> <C>
Page
NOTICE OF ANNUAL MEETING .................................. 1
MANAGEMENT PROXY CIRCULAR ................................. 2
Proxy Solicitation ...................................... 2
Voting Shares and Record Date ........................... 3
Voting by Shareholders .................................. 3
Voting by Proxyholders .................................. 3
Appointment of Proxyholders and Revocation of
Proxies ............................................. 3
Confidential Proxy Voting Procedures ................. 4
Business at Annual Meeting .............................. 4
Financial Statements and Auditors' Report ............... 4
Election of Directors ................................... 5
Holdings of Shares and Deferred Share Units by
Directors ............................................ 9
Holdings of Shares by Others ............................ 9
Corporate Governance Practices .......................... 9
Board Meetings and Board Committees ..................... 10
Corporate Governance Committee ....................... 11
Audit Committee ...................................... 11
Environment Committee ................................ 11
Personnel Committee .................................. 11
Options Committee .................................... 11
Executive Compensation .................................. 12
Report on Executive Compensation ..................... 12
Performance Graph .................................... 16
Summary Compensation Table ........................... 17
Executive Performance Award .......................... 18
Other Compensation ................................... 18
Alcan Executive Share Option Plan .................... 19
Retirement Benefits .................................. 21
Retiring Allowances .................................. 22
Board Fees ........................................... 22
Compensation of Non-Executive Directors ................. 23
Fees and Expenses .................................... 23
Share Investment Plan for Directors .................. 23
Retirement Arrangements .............................. 23
Indebtedness of Directors and Executive Officers ........ 23
Directors' and Officers' Liability Insurance ............ 25
Appointment of Auditors ................................. 25
Special Business: Amendment and Restatement of the
Shareholder Rights Plan .............................. 26
Approval of Board of Directors .......................... 29
SCHEDULE A .............................................. 30
SCHEDULE B .............................................. 31
</TABLE>
La version francaise du present document ainsi que la formule de procuration qui
l'accompagne seront envoyees aux actionnaires sur demande. Veuillez communiquer
avec Alcan Aluminium Limitee -- Services aux actionnaires, en appelant au
1-888-252-5226 (sans frais).
<PAGE> 3
(LOGO)
NOTICE OF ANNUAL MEETING
The 97th Annual Meeting of the holders of the Common Shares of Alcan Aluminium
Limited will be held on Thursday, 22 April 1999 at 10:00 a.m. in the Assembly
Hall, International Civil Aviation Organization, 999 University Street, Atrium
entrance, Montreal, Quebec, Canada, for the following purposes:
1. receiving the financial statements and the Auditors' Report for the year
ended 31 December 1998,
2. electing Directors,
3. appointing Auditors and authorizing the Directors to fix their remuneration,
and
4. as special business, approving amendments to, and a restatement of, the
Shareholder Rights Plan as described in the attached Management Proxy
Circular.
Shareholders who cannot attend the Annual Meeting may submit their proxies in
accordance with the procedures set out in the attached Management Proxy
Circular.
By order of the Board of Directors,
(Signature)
P.K. Pal
Montreal, Canada Vice President,
3 March 1999 Chief Legal Officer and Secretary
1
<PAGE> 4
(LOGO)
3 March 1999
MANAGEMENT PROXY CIRCULAR
THIS MANAGEMENT PROXY CIRCULAR IS FURNISHED IN CONNECTION WITH THE SOLICITATION
OF PROXIES BY THE BOARD OF DIRECTORS AND MANAGEMENT OF ALCAN ALUMINIUM LIMITED
FOR USE AT THE ANNUAL MEETING TO BE HELD IN MONTREAL ON 22 APRIL 1999 (AND ANY
ADJOURNMENT THEREOF) FOR THE PURPOSES SET OUT IN THE ATTACHED NOTICE OF ANNUAL
MEETING.
Unless stated otherwise, the following expressions used in this Management Proxy
Circular have the meanings indicated:
"Alcan" or "Company" means Alcan Aluminium Limited,
"Board" or "Board of Directors" means the Board of Directors of Alcan,
"Chief Executive Officer" means the Chief Executive Officer of Alcan,
"Director" means a Director of Alcan,
"Executive Officers" means the President and Chief Executive Officer, the
Executive Vice Presidents, the Vice Presidents (including the Secretary),
the Treasurer and the Controller of Alcan,
"Meeting" means the Annual Meeting to be held on 22 April 1999 and any
adjournment thereof,
"Non-Executive Director" means a Director of Alcan who is not an employee of
Alcan or its Subsidiaries or Related Companies,
"Notice" means the attached Notice of Annual Meeting,
"Related Company" means a company in which Alcan has significant influence over
management but owns 50% or less of the voting stock,
"Shareholder" means a holder of the Shares,
"Share" means a Common Share in the capital of Alcan,
"Subsidiary" means a company controlled by Alcan, and
"$" means U.S. Dollars.
PROXY SOLICITATION
The solicitation of proxies will be made primarily by mail, but may also be made
by electronic means, by telephone or in person. The cost of soliciting proxies
will be borne by Alcan. CIBC Mellon Trust Company and Morrow & Co., Inc. have
been retained by Alcan in Canada and the United States of America, respectively,
to assist in the solicitation of proxies from Shareholders. For these services,
CIBC Mellon Trust Company and Morrow & Co., Inc. are expected to receive, from
Alcan, fees of approximately Can. $15,000 and $20,000, respectively, plus
reimbursement of reasonable expenses. In addition, employees of Alcan may
solicit proxies without compensation. CIBC Mellon Trust Company is responsible
for the tabulation of proxies.
2
<PAGE> 5
VOTING SHARES AND RECORD DATE
The Shares are the only class of outstanding shares of Alcan which entitle
holders to vote at the Meeting. Each Share entitles the holder to one vote at
the Meeting. As at 3 March 1999, there were 220,873,108 Shares outstanding. Only
Shareholders of record at the close of business on that date are entitled to
receive the Notice. They will also be entitled to vote unless their Shares have
been transferred and the transferee has produced a properly-endorsed
certificate(s) representing the transferred Shares or has otherwise established
ownership of the transferred Shares and has requested, at least 10 days before
the Meeting, that such transferee's name be included on the list of
Shareholders, in which case the transferee will be entitled to vote such Shares
instead of the transferor.
VOTING BY SHAREHOLDERS
A vote at the Meeting may be given by the Shareholder attending in person. The
participation by a Shareholder in such a vote will automatically revoke any
proxy which has been previously given by the Shareholder in respect of business
covered by that vote.
VOTING BY PROXYHOLDERS
APPOINTMENT OF PROXYHOLDERS AND REVOCATION OF PROXIES
A vote at the Meeting may, instead, be given by proxy, and the proxyholder need
not be a Shareholder. If the Shareholder is a body corporate or association, the
form of proxy must be signed by a person duly authorized by that body corporate
or association.
The authority granted by a proxy may be revoked by the Shareholder with a letter
of revocation or another proxy with a later date.
All proxies or letters of revocation must be delivered NO LATER THAN THE CLOSE
OF BUSINESS (5:00 P.M. E.D.T.) ON 21 APRIL 1999 TO:
<TABLE>
<S> <C>
Alcan at Maison Alcan
1188 Sherbrooke Street West
Montreal, Quebec, Canada H3A 3G2
Telecopier: (514) 848-8115,
CIBC Mellon Trust Company at 200 Queen's Quay East Unit 6
Toronto, Ontario, Canada M5A 4K9
Telecopier: (416) 368-2502,
Morrow & Co., Inc. at 445 Park Avenue
New York, N.Y. 10022, U.S.A.
Telecopier: (212) 754-8300,
</TABLE>
or hand-delivered on 22 APRIL 1999 to the Chairman prior to the commencement of
the Meeting.
3
<PAGE> 6
CONFIDENTIAL PROXY VOTING PROCEDURES
The accompanying form of proxy represents all Shares registered in the
Shareholder's name, including any whole Shares which the Shareholder may own as
a participant in Alcan's Dividend Reinvestment Plan and/or Share Purchase Plan.
Three persons, who are not Directors or employees of Alcan or its Subsidiaries
or Related Companies, are proposed in the accompanying form of proxy as
proxyholders to attend the Meeting and vote the Shares represented by the proxy.
Their names are printed on the form of proxy. If the form of proxy is signed and
returned, these proxyholders will vote in accordance with the instructions the
Shareholder marks on it. IF NO INSTRUCTIONS ARE MARKED, THEY WILL VOTE THE
SHARES FOR THE ELECTION OF DIRECTORS (SEE PAGES 5 TO 8), FOR THE APPOINTMENT OF
AUDITORS (SEE PAGE 25), AND FOR THE APPROVAL OF THE AMENDMENTS TO AND
RESTATEMENT OF THE SHAREHOLDER RIGHTS PLAN (SEE PAGE 26).
A Shareholder may appoint any other person as proxyholder either by writing that
person's name in the blank space provided for that purpose on the form of proxy
or by completing another appropriate form of proxy. In either of these cases,
the Shareholder is advised in his or her own interest to specify a choice with
respect to each of the matters to be presented for action at the Meeting.
Proxies will not be submitted to Management except where they contain comments
clearly intended for Management or in the event of a proxy contest or in order
to meet legal requirements.
BUSINESS AT ANNUAL MEETING
Only the business described in the Notice may be presented for action at the
Meeting. The form of proxy provides discretionary authority to vote only on
matters concerning the conduct of the Meeting.
FINANCIAL STATEMENTS AND AUDITORS' REPORT
The consolidated financial statements of Alcan and the Auditors' Report for 1998
will be submitted to Shareholders at the Meeting, but no vote with respect
thereto is required or proposed to be taken.
4
<PAGE> 7
ELECTION OF DIRECTORS
Mrs. S.I. Bata and Mr. W.R.C. Blundell, each having attained retirement age,
will not seek election at the Meeting and will retire from the Board at the
close of the Meeting.
Twelve Directors are to be elected to serve until the close of the 2000 Annual
Meeting or until they cease to hold office as such. The Board of Directors and
Management recommend the election of the nominees named below, all of whom are
existing Directors except Ms. E.R. Clitheroe.
<TABLE>
<CAPTION>
Director
since
--------
<C> <S> <C>
(photo) JACQUES BOUGIE, O.C. 1989
Jacques Bougie, 51, has been President and Chief Executive Officer of
Alcan since November 1993, having served earlier as President and
Chief Operating Officer since July 1989. Mr. Bougie joined Alcan in
1979 and held a number of senior management positions until 1989,
including having responsibility for all of Alcan's fabricating
operations in North America other than rolling. Mr. Bougie is also a
director of Bell Canada.
Mr. Bougie is a member of the Environment Committee.
(photo) WARREN CHIPPINDALE, F.C.A., C.M. 1986
Warren Chippindale, 70, was chairman and chief executive partner of
Coopers & Lybrand (Canada) from 1971 to 1986 and chairman of Coopers &
Lybrand (International) for five years during that period. Mr.
Chippindale is a director of The Spectrum United Funds.
Mr. Chippindale is a member of the Corporate Governance Committee and
the Audit Committee, and is Chairman of the Personnel Committee.
(photo) ELEANOR R. CLITHEROE Nominated
Eleanor Clitheroe, 45, is president and chief executive officer of in 1999
Ontario Hydro Services Company. Ms. Clitheroe had earlier served as
managing director and chief financial officer in that organization.
Prior to joining Ontario Hydro in 1993, Ms. Clitheroe served as deputy
minister of finance for the Province of Ontario, before which she was
vice president of Canadian Imperial Bank of Commerce.
</TABLE>
5
<PAGE> 8
<TABLE>
<CAPTION>
Director
since
--------
<C> <S> <C>
(photo) TRAVIS ENGEN 1996
Travis Engen, 54, is chairman and chief executive officer of ITT
Industries, Inc. in the United States of America and has held several
important positions within the ITT organization, including that of
executive vice president of ITT Corporation from 1991 to 1995. Mr.
Engen is a member of the U.S. President's National Security
Telecommunications Advisory Committee. He is a director of Fundacion
Chile. He is also a director of Lyondell Chemical Company and a member
of the Business Roundtable and the Manufacturers Alliance Board of
Trustees, all of which are located in the United States of America.
Mr. Engen is a member of the Corporate Governance Committee, the Audit
Committee and the Environment Committee.
(photo) DR. JOHN R. EVANS, C.C. 1986
John Evans, 69, is Chairman of Alcan as well as chairman of Allelix
Biopharmaceuticals Inc. and Torstar Corporation. Dr. Evans was
chairman and chief executive officer of Allelix Inc. from 1983 to
1989, president of the University of Toronto from 1972 to 1978 and
director of the Population, Health and Nutrition Department of the
World Bank from 1979 to 1983. He is past chairman of the Rockefeller
Foundation. He is also a director of Connaught Laboratories Ltd., MDS
Health Group Ltd. and Pasteur Merieux Serums & Vaccines.
Dr. Evans is Chairman of the Corporate Governance Committee and member
of the Audit Committee and the Personnel Committee.
(photo) ALLAN E. GOTLIEB,C.C. 1989
Allan Gotlieb, 71, was Ambassador of Canada to the United States of
America from 1981 to 1989 and chairman of the Canada Council from 1989
to 1994. Mr. Gotlieb is a director of Hollinger Inc., Champion
International Corporation, Livent Inc. and Peoples Jewellers, a senior
consultant with the law firm of Stikeman, Elliott, a member of the
advisory boards of Nestle Canada Inc., Hollinger International Inc.,
Investment Co. of America and senior advisor to Julius Baer Investment
Advisory (Canada) Ltd., co-chairman of Saturday Night magazine,
chairman of the Donner Canadian Foundation and Ontario Heritage
Foundation.
Mr. Gotlieb is a member of the Corporate Governance Committee, the
Environment Committee and the Personnel Committee.
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
Director
since
--------
<C> <S> <C>
(photo) J.E. NEWALL, O.C. 1985
Ted Newall, 63, is chairman and a director of NOVA Chemicals
Corporation. He was chairman and chief executive officer of Du Pont
Canada Inc. from 1980 to 1991. Mr. Newall is a director of BCE Inc.,
BCI Inc., Bell Canada Ltd., Canadian Pacific Ltd., Maple Leaf Foods
Inc. and Royal Bank of Canada. He is also honorary chairman and member
of the executive and policy committees of the Business Council on
National Issues.
Mr. Newall is a member of the Corporate Governance Committee and the
Personnel Committee and is Chairman of the Environment Committee.
(photo) DR. PETER H. PEARSE, C.M. 1989
Peter Pearse, 66, is a consultant on natural resources economics and
policies and president of a private investment company. He is a
Professor Emeritus at the University of British Columbia where he was
a member of the faculty from 1962 to 1996. Dr. Pearse has served on
the Economic Council of Canada, the Canadian Consumer Council, the
Board of Governors of the University of British Columbia, the
executive board of the Law of the Sea Institute and the board of
directors of World Wildlife Fund Canada. Dr. Pearse has conducted two
Royal Commissions on natural resources policies and has been an
advisor on natural resources matters to Canadian and foreign
governments and to the World Bank.
Dr. Pearse is a member of the Corporate Governance Committee and the
Environment Committee.
(photo) SIR GEORGE RUSSELL, C.B.E. 1987
Sir George Russell, 63, is chairman of 3i Group plc, an industrial
investment bank in the United Kingdom. Sir George had previously
served with Alcan from 1972, becoming managing director of British
Alcan Aluminium plc, a Subsidiary of Alcan, in 1981. He resigned from
that company in 1986, but rejoined its board in 1997. He is also
chairman of Camelot plc and director of Northern Rock Building Society
and Taylor Woodrow, all of which are located in the United Kingdom.
Sir George is a member of the Corporate Governance Committee, the
Audit Committee and the Personnel Committee.
</TABLE>
7
<PAGE> 10
<TABLE>
<CAPTION>
Director
since
--------
<S> <C> <C>
(photo) GUY SAINT-PIERRE, O.C. 1994
Guy Saint-Pierre, 64, is chairman and a director of SNC-Lavalin Group
Inc., having served as president and chief executive officer from 1989
to 1996. From 1970 to 1976, he served with the Government of Quebec,
first as Minister of Education and then as Minister of Industry and
Commerce. Between 1978 and 1989, he was president and chief executive
officer of Ogilvie Mills Ltd. Mr. Saint-Pierre is a director of BCE
Inc., General Motors of Canada and Royal Bank of Canada.
Mr. Saint-Pierre is a member of the Corporate Governance Committee and
the Audit Committee.
GERHARD SCHULMEYER 1996
(photo) Gerhard Schulmeyer, 60, is president and chief executive officer of
Siemens Corporation in the United States of America, having been
president and chief executive officer of Siemens Nixdorf
Informationssysteme AG and chairman of its managing board since 1994.
Prior to joining Siemens Nixdorf, Mr. Schulmeyer was executive vice
president and a member of the executive committee of Asea Brown Boveri
Ltd. as well as president and chief executive officer of ABB Inc.,
U.S.A. From 1980 to 1989, he held various senior positions with
Motorola Inc., culminating with that of executive vice president,
deputy to the chief executive officer, responsible for European
business. He is a member of the supervisory board of Thyssen-
Bornemisza Holding N.V. and of the boards of Zurich Financial Services
and A.D. Little, Inc. He is also a member of the board of trustees of
the MIT Corporation.
Mr. Schulmeyer is a member of the Corporate Governance Committee and
the Audit Committee.
(photo) PAUL M. TELLIER, C.C. 1998
Paul M. Tellier, 59, has been president and chief executive officer of
the Canadian National Railway Company since October 1992. From 1985 to
1992, Mr. Tellier held the position of Canada's most senior civil
servant as Clerk of the Privy Council Office and Secretary to the
Cabinet of the Government of Canada. During his service in the
Canadian civil service since 1967, Mr. Tellier held several senior
positions including deputy minister of Indian Affairs and Northern
Development, deputy minister of Energy, Mines and Resources,
directorships of Petro Canada and Atomic Energy of Canada Limited and
chairman of the International Energy Agency. Mr. Tellier is a director
of Bombardier Inc., Bell Canada and McCain Foods, and is past chairman
of the Conference Board of Canada.
Mr. Tellier is a member of the Corporate Governance Committee.
</TABLE>
8
<PAGE> 11
HOLDINGS OF SHARES AND DEFERRED SHARE UNITS BY DIRECTORS
All Directors named below are present Directors (with the exception of Ms.
Clitheroe) and are nominees for election as Directors at the Meeting, there
being no other nominees.
The second column in the table below shows Shares which are beneficially owned
(including Shares over which control or direction is exercised) as well as
Shares subject to Options granted under the Alcan Executive Share Option Plan
described on page 19. The third column shows Units held under the Deferred Share
Unit Plans described on pages 13 and 23; these Units do not carry voting rights.
<TABLE>
<S> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------
Number of
Name Number of Shares Deferred Share Units
- ----------------------------------------------------------------------------------------------------------------------------
J. Bougie 785,514(1) 51,874(2)
- ----------------------------------------------------------------------------------------------------------------------------
W. Chippindale 1,810 942(3)
- ----------------------------------------------------------------------------------------------------------------------------
E.R. Clitheroe 430 --
- ----------------------------------------------------------------------------------------------------------------------------
T. Engen 5,500 806(3)
- ----------------------------------------------------------------------------------------------------------------------------
J.R. Evans 3,429 2,458(3)
- ----------------------------------------------------------------------------------------------------------------------------
A.E. Gotlieb 1,539 819(3)
- ----------------------------------------------------------------------------------------------------------------------------
J.E. Newall 6,154 942(3)
- ----------------------------------------------------------------------------------------------------------------------------
P.H. Pearse 2,338 717(3)
- ----------------------------------------------------------------------------------------------------------------------------
G. Russell 4,629 819(3)
- ----------------------------------------------------------------------------------------------------------------------------
G. Saint-Pierre 10,141 717(3)
- ----------------------------------------------------------------------------------------------------------------------------
G. Schulmeyer 1,184 704(3)
- ----------------------------------------------------------------------------------------------------------------------------
P.M. Tellier 1,084 228(3)
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Made up as follows: 37,614 Shares and Options to purchase 747,900 Shares.
(2) Held as EDSUs described on page 13; Mr. Bougie may be entitled to additional
deferred share units as mentioned in paragraph 3 on page 14.
(3) Held as DDSUs described on page 23.
A trust in which Sir George Russell's children have an interest owns 10,701
Shares. Sir George disclaims beneficial ownership in the Shares owned by his
children.
Mr. Engen owns his Shares jointly with his wife.
HOLDINGS OF SHARES BY OTHERS
As of 31 December 1998, Sanford C. Bernstein & Co., Inc. beneficially owned
25,085,051 Shares, with sole dispositive power over this entire amount, sole
voting power over 13,948,336 of these and shared voting power over 2,676,976 of
these, according to a Schedule 13G filing; this shareholding amounted to 11% of
the outstanding Shares.
CORPORATE GOVERNANCE PRACTICES
The following description of corporate governance practices in Alcan is made in
response to regulations of The Montreal Exchange and The Toronto Stock Exchange.
The Guidelines referred to below are the Guidelines set out in the aforesaid
regulations.
The mandate of the Board is to "manage the business and affairs" of the Company
through the Company's Management and to discharge its duties and obligations in
accordance with the provisions of (a) the Canada Business Corporations Act, (b)
the Company's constituting documents and by-laws, and (c) other applicable
legislation and Company policies. The Company's system of corporate governance
covers the items listed in Guideline 1.
9
<PAGE> 12
The Board is satisfied that the number of Directors should range from between 11
to 15. Of the present Board of 13 Directors, J. Bougie is the President and
Chief Executive Officer of the Company and Sir George Russell is a former
employee of Alcan (having retired in 1986) and is also a director of British
Alcan Aluminium plc (a wholly-owned Subsidiary of Alcan). The composition of the
Board, accordingly, meets the test in Guideline 2.
As Alcan does not have a controlling Shareholder, none of the Directors
represents the investment of minority Shareholders.
The Board has a Chairman (J.R. Evans) who is not a member of Management; this
structure allows the Board to function independently of Management. This is in
accordance with Guideline 12.
The Board has appointed five committees, whose mandates and activities are
described on page 11. These are in accordance with Guidelines 4, 5, 10 and 13.
Each Committee is made up of a majority of unrelated Directors and, therefore,
meets the requirements in Guideline 9.
In addition to the statutory duties under the Canada Business Corporations Act,
the Company's corporate governance practices require that the following matters
be subject to Board approval:
(1) capital expenditure budgets and significant investments and
divestments (over $50 million),
(2) at the discretion of the Chief Executive Officer, any business which
may have the potential for important impact on the Company,
(3) the number of Directors within the minimum (9) and maximum (20) limits
provided in the Company's Articles of Incorporation,
(4) the terms of appointment of Non-Executive Directors, and
(5) the appointment and remuneration of Officers of the Company.
The Corporate Governance Committee is responsible for recommending candidates to
the Board for appointment as Directors. Nominees are selected as potential
representatives of Shareholders as a whole and not as representatives of any
particular Shareholder or group of Shareholders. Care is taken to ensure that
the Board of Directors is constituted with a majority of individuals who qualify
as unrelated Directors. An unrelated Director is a Director who is free from any
interest and any business or other relationship which could, or could reasonably
be perceived to, materially interfere with the Director's ability to act with a
view to the best interests of the Company, other than interests and
relationships arising from shareholding.
The Corporate Governance Committee is also responsible for assessing the
performance of the Board. The Committee ensures the adequacy of the time
commitment of individuals to Alcan matters.
In order to receive Shareholder feedback and respond to Shareholder concerns,
Alcan maintains an experienced investor relations staff whose primary
responsibility is to provide information and analysis to the investing community
in accordance with Alcan's policy on public disclosures. This policy has been
established in compliance with applicable legal disclosure requirements in
Canada and in the U.S.A. and is reviewed periodically. The investor relations
staff meets periodically with investors and analysts and is accessible to
Shareholders by telephone during business hours. These services facilitate the
receiving of Shareholder comments.
The Management of Alcan is responsible for conducting the business and
operations of the Company in accordance with a business strategy approved by the
Board. Management's authority to act in certain matters which may have the
potential for important impact on the Company, including decisions by the Chief
Executive Officer, is subject to prior Board approval as described above.
However, before being submitted to the Board, certain matters (e.g., dividends,
securities issues, proxy circulars, annual reports and significant
investment/divestment proposals) are prepared and reviewed by Management with
external professional advice, as necessary.
BOARD MEETINGS AND BOARD COMMITTEES
The Board held 10 meetings during 1998, one of which was held by telephone
conference.
The Board has appointed the Committees described below but has not appointed an
executive committee of the Board.
10
<PAGE> 13
CORPORATE GOVERNANCE COMMITTEE
This Committee is composed of Directors who are not officers or employees of
Alcan or its Subsidiaries or Related Companies. S.I. Bata, W.R.C. Blundell, W.
Chippindale, T. Engen, J.R. Evans (Committee Chairman), A.E. Gotlieb, J.E.
Newall, P.H. Pearse, Sir George Russell, G. Saint-Pierre, G. Schulmeyer and P.M.
Tellier serve on this Committee. It met six times in 1998.
As mentioned above (page 10), the Committee has the broad responsibility of
reviewing corporate governance within Alcan (including Board practices and
performance) and of making recommendations with respect to such matters to the
Board. The Committee also maintains an overview of the composition of the Board
and reviews candidates for nomination as Directors as well as membership of all
Board Committees. It also considers recommendations from the Personnel Committee
regarding compensation of Non-Executive Directors as well as the appointments of
the Chairman of the Board and the Chief Executive Officer of Alcan.
AUDIT COMMITTEE
This Committee consists of not less than three Directors who are not officers or
employees of Alcan or its Subsidiaries or Related Companies. W.R.C. Blundell
(Committee Chairman), W. Chippindale, T. Engen, J.R. Evans, Sir George Russell,
G. Saint-Pierre and G. Schulmeyer serve on this Committee. It met three times in
1998.
The objective of the Committee is to assist the Board in fulfilling its
functions relating to corporate accounting and reporting practices as well as
financial and accounting controls, to provide effective oversight of the
financial reporting process, and to review financial statements as well as
proposals for issues of securities.
This Committee is established in accordance with the provisions of the Canada
Business Corporations Act.
ENVIRONMENT COMMITTEE
This Committee is composed of the Chief Executive Officer and not less than
three Directors who are not officers or employees of Alcan or its Subsidiaries
or Related Companies. S.I. Bata, J. Bougie, T. Engen, A.E. Gotlieb, J.E. Newall
(Committee Chairman) and P.H. Pearse serve on this Committee. It met three times
in 1998.
The Committee has the broad responsibility of reviewing the policy, management
practices and performance of Alcan in environmental matters and of making
recommendations to the Board with respect to such matters.
PERSONNEL COMMITTEE
This Committee is composed of the Chairman and not less than three Directors who
are not officers or employees of Alcan or its Subsidiaries or Related Companies.
W. Chippindale (Committee Chairman), J.R. Evans, A.E. Gotlieb, J.E. Newall and
Sir George Russell serve on this Committee. It met four times in 1998.
As mentioned on page 7, Sir George Russell is a former officer of a Subsidiary.
The Committee has the broad responsibility of reviewing any and all personnel
policy and employee relations matters and of making recommendations with respect
to such matters to the Board or the Chief Executive Officer, as appropriate. It
also reviews and approves Alcan's executive compensation policy.
The Committee also makes recommendations to the Corporate Governance Committee
on compensation of Non-Executive Directors as well as on the appointments of the
Chairman of the Board and the Chief Executive Officer of Alcan.
OPTIONS COMMITTEE
A Committee whose members are the same as the members of the Personnel Committee
administers the Alcan Executive Share Option Plan described on page 19.
11
<PAGE> 14
EXECUTIVE COMPENSATION
REPORT ON EXECUTIVE COMPENSATION
General
Alcan's executive compensation policies cover cash compensation and benefits,
including pensions, and are designed to enable Alcan to attract and retain
highly qualified people to carry out the objectives of the organization. The
Personnel Committee (the "Committee"), all of whose members are Non-Executive
Directors, has the duty and responsibility to review and approve these policies
periodically and to make recommendations with respect to such matters either to
the Board or to the Chief Executive Officer, as may be appropriate. The policies
provide a compensation package that is internally equitable, externally
competitive and reflects individual efforts and achievements. The cash
compensation structure and benefits programs, including short- and long-term
incentive plans, are designed to be competitive with the median of selected
comparator groups of companies. These companies, identified as a "Compensation
Peer Group", are comparable in size, are involved in cyclical industries as is
Alcan, and have a global presence. In the case of the Canada-based Executive
Officers, the Compensation Peer Group includes both Canada-based (12) and
U.S.-based (15) enterprises. When establishing the level of compensation, weight
is given to U.S. compensation practices. For certain Canada-based Executive
Officers, an equal weighting is given to both U.S. and Canadian practices while,
for the others, more weight is given to Canadian compensation practices. In the
case of the Chief Executive Officer, the total annual compensation is set at the
level of U.S.-based peers. These different weightings reflect the increasing
global importance of the senior management level positions in the organization.
At all other levels in the Company world-wide, the policies governing the
compensation of executives are generally related solely to their relevant
national markets; the competitiveness of senior employees' compensation in
countries other than Canada is derived from consultant surveys of the
Compensation Peer Group in their respective countries.
Alcan retains external consultants to assist its Human Resources Department and
the Committee in collecting the required comparative data and providing advice
concerning all aspects of compensation of its senior employees. From time to
time, the Committee has retained the services of its own consultant to assist it
in its deliberations, and may do so again in the future.
Annual Compensation
Annual compensation of the Executive Officers comprises base salaries, incentive
plans and benefits programs. Base salaries for Executive Officers are reviewed
annually. Any proposed changes are reviewed and approved by the Committee before
implementation and are based on an evaluation of each Executive Officer's
current performance.
A substantial proportion of the Executive Officers' compensation is related to
the performance of Alcan.
Alcan's short-term incentive plan, known as the Executive Performance Award
("EPA") Plan, has three components, each based on a different aspect of
performance: (1) the overall profitability of Alcan, (2) the performance of
Alcan against key strategic corporate objectives, and (3) the performance of
Alcan's business units. These are explained in the numbered paragraphs below.
1. The award for overall profitability of Alcan is called the
Value Creation Award ("VCA"). The VCA is related to Economic
Value Added ("EVA(R)"). The VCA for the Executive Officers has a
guideline payment range of 12% to 35% of salary grade mid-point
against which actual performance is measured. The minimum VCA
payment can be nil and the maximum, in a year of exceptionally
strong improvement in EVA, could be up to three times the
guideline amount. The Committee establishes a threshold
corporate EVA performance target which must be met before any
VCA payment will be made. All Executive Officers received an
award from this component of the EPA for the year 1998. ("EVA"
is a registered trademark of Stern Stewart & Co.)
2. The award for achieving corporate objectives, called the
Corporate Objectives Award ("COA"), focuses on Alcan's critical
corporate objectives. These objectives are established as part
of the annual business planning process by the Chief Executive
12
<PAGE> 15
Officer and are submitted to the Committee for approval at the start of
each year. The COA is independent of the VCA objective. For Executive
Officers, the COA has a guideline payment range of 12% to 30% of salary
grade mid-point. The minimum COA payment is nil and the maximum could be
up to twice the guideline amount. All Executive Officers received an
award from this component of the EPA for the year 1998.
3. The award for business unit performance is called the Business
Unit Award ("BUA"). The BUA provides for an award based on the
business unit's performance measured against pre-established
objectives for the year. The BUA is independent of the VCA and
COA objectives. For Executive Officers, the BUA has a guideline
payment range of 15% to 20% of salary grade mid-point. The
minimum BUA payment is nil and the maximum could be up to twice
the guideline amount. The criteria for rewards under this aspect
of the EPA are set annually by managements at various levels and
their respective superiors. There are 17 major business units
within Alcan world-wide. All Executive Officers received awards
from this component of the EPA for the year 1998.
An exception to the practice described in the preceding paragraphs is made in
the case of termination of employment (retirement, resignation or death). In
that year, the employee receives guideline VCA, COA and BUA amounts, prorated
for the number of months actually employed.
Under the Executive Deferred Share Unit Plan, Canada-based Executive Officers
may elect, prior to the beginning of any particular year, to receive Executive
Deferred Share Units ("EDSUs") with a value equal to 50% or 100% of their EPA in
respect of that year, instead of a cash payment. The number of EDSUs is
determined by dividing the amount so elected by the average price of a Share on
the Montreal, Toronto and New York stock exchanges at the end of the year
preceding the year in question. Additional EDSUs are credited to each holder
thereof corresponding to dividends declared on Shares. The EDSUs are redeemable
only upon termination of employment (retirement, resignation or death). The
amount to be paid by Alcan upon redemption (which must be on or before 15
December of the calendar year next following the termination) will be calculated
by multiplying the accumulated balance of EDSUs by the average price of a Share
on the said exchanges at the time of redemption.
Effective 1 June 1998, a Non-Qualified Deferred Compensation Plan was introduced
at Alcan's U.S. Subsidiary, under which Executive Officers based in the USA may
elect, prior to the beginning of any particular year, to defer up to 75% of
their base salary and up to 100% of their EPA award in respect of that year,
instead of cash payments. The deferral period elected by a participant in the
plan must not be less than three years from the date of deferral nor extend more
than five years beyond the date of normal retirement. The deferral amount is
allocated to one or more of nine investment vehicles chosen by the participant.
Final distribution of the accumulated balance is made within 90 days after
either the end of the last year of the elected period or the end of the year of
the participant's death, resignation or retirement.
Long-Term Compensation
The Alcan Executive Share Option Plan (described on page 19), which is
administered by the Options Committee, composed of Non-Executive Directors, is a
long-term incentive plan closely aligned with the interests of Shareholders and
forms part of the Executive Officers' total compensation. The purpose of the
Option Plan is to attract and retain employees and to encourage them to
contribute to growth in the price of Alcan Shares. The number of Options granted
is related to salary grade mid-point but not to the amount of Options or SARs
(described on page 19). When determining the competitiveness of senior
employees' total compensation, the compensation value of Option grants is taken
into account. For Executive Officers, the number of Options granted annually
generally produces annual compensation values which, when expressed as a
multiple of annual base salary, are much lower than those provided by U.S.-based
companies within the Compensation Peer Group but higher than those of
Canada-based companies within the Compensation Peer Group.
For the 1998 annual grant, the Options Committee introduced a market-value-based
vesting provision (waiting period) replacing the previous time-based vesting ("C
Options" described on page 19). In addition, an investment incentive feature was
added in 1998 to provide further incentive for increased Share ownership to
certain senior executives ("D Options" described on page 20); this feature
13
<PAGE> 16
encourages early exercise of the Options and retention of the resulting Shares.
The Options Committee also granted, to 14 senior executives other than the Chief
Executive Officer, D Options based upon the 1996 and 1997 Option grants, up to a
maximum of 10,000 D Options for each executive.
Compensation of the Chief Executive Officer
The Chief Executive Officer's annual compensation is administered by the
Committee according to the policies described above. The companies forming the
Compensation Peer Group for the Chief Executive Officer are specifically
selected because they and Alcan have chief executive officers with
responsibilities of similar magnitude. Alcan's Chief Executive Officer
participates in the EPA and the relationship between his compensation and
Alcan's performance is based on the same criteria as those discussed generally
for other participants in the EPA.
Given the uniqueness of Alcan as one of the largest global Canadian corporations
with two-thirds of its assets and employees located outside Canada, the
Committee has decided to set the total annual compensation of its Chief
Executive Officer, beginning in 1997, at the level of his U.S.-based peers (15
similar enterprises). In making this change, the Committee has also increased
the proportion of his compensation which is variable and "at risk" and, more
importantly, has placed greater emphasis on long-term performance linked
directly to total Shareholder return. With this change, the Committee has
decided to administer the Chief Executive Officer's total compensation on a
longer term perspective rather than through annual adjustments. To this end, the
Chief Executive Officer's compensation is now covered by an agreement with a
three-year term (1997-1999). Under this modified approach, the fixed portion of
his total compensation (the base salary and the value of pension benefits) will
represent some 33% thereof while the "at risk" portion, comprising the
short-term, medium-term and long-term incentive plans, will represent 67%
thereof. The "at risk" portion is linked directly to improved long-term
Shareholders' value through a combination of grants under the Option Plan and
the Executive Deferred Share Unit Plan.
The three-year agreement, referred to above, with the Chief Executive Officer
provides for compensation as set out below:
1. A base salary of Can. $1,000,000 per annum, commencing 1 March
1997.
2. An annual short-term incentive grant using the formula under
the EPA and based on a guideline of 85% of salary mid-point but
to be received in the form of EDSUs.
For the year 1998, the Chief Executive Officer received 29,732
EDSUs (the figure being determined by dividing the value he
would have received under the EPA by the average price of a
Share at the end of 1997, $27.16).
3. As a medium-term incentive, the Chief Executive Officer will be
entitled to receive a further award (by way of deferred share
units issued under an arrangement that generally parallels the
Executive Deferred Share Unit Plan) if, over the three-year
period (1997-1999), Alcan achieves specific financial targets
based on the objective of a sustainable improvement of $300
million in net income over 1996, subject to adjustment if
certain underlying assumptions change. The achievement of this
objective over a three-year cycle will give rise to an award of
19,400 deferred share units; lower and higher awards will be
made if the income improvement falls short or surpasses that
objective. The maximum would be 58,200 deferred share units for
an income improvement of $600 million over 1996.
The grant, if any, of deferred share units under this
medium-term incentive will be made in the year 2000.
4. As a long-term incentive in respect of the three-year period
(1997-1999) under the agreement, the Chief Executive Officer was
granted 312,800 Options on 28 May 1997 at an exercise price of
Can. $48.91 per Share, exercisable during the period from 1
January 2000 up to 28 May 2007 (10 years from the date of
grant). Upon the introduction of the additional investment
incentive in 1998, the Options Committee granted 10,000 D
Options related to the 1996 grant and 208,000 D Options related
to the
14
<PAGE> 17
1997 grant. D Options under both grants have the same waiting periods
and terminate on the same termination date as the associated 1996 and
1997 Options.
5. Pensions under the Canadian Plans (see page 21) for eligible
Alcan employees are calculated on the basis of salary plus the
EPA guideline amount but, in view of the increases in the Chief
Executive Officer's direct compensation described above, the
pensionable portion of his EPA was reduced from 85% of salary to
40% thereof. This change results in a reduction of about 25% in
the pension which would otherwise have accrued to him under the
Canadian Plans. However, under certain conditions of termination
of employment, his pension will be subject to a minimum
guaranteed amount once again based on salary and pensionable EPA
at 75% of salary.
6. The Board may adjust the compensation arrangement set out above
in order to correct for a sudden change in the relative values
of the Canadian and U.S. Dollars. On 10 February 1999, such an
adjustment was made with respect to the Chief Executive
Officer's remuneration for 1997 and 1998 in the amounts of
$20,600 and $68,900, respectively.
Approval of this Report on Executive Compensation
The Committee, whose members are set out below, has approved the issue of this
Report and its inclusion in this Management Proxy Circular.
<TABLE>
<S> <C>
W. Chippindale, Chairman of the Committee
J.R. Evans
A.E. Gotlieb
J.E. Newall
G. Russell
</TABLE>
15
<PAGE> 18
PERFORMANCE GRAPH
The following graph compares the cumulative total Shareholder return on Can.
$100 invested in Shares with the cumulative total return of the Toronto Stock
Exchange 300 Stock Index, assuming reinvestment of all dividends. Additional
comparisons, which the Personnel Committee believes to be appropriate, are
provided with respect to two U.S. Dollar-based indices, the Standard & Poor's
500 Index and the Standard & Poor's Aluminum Index.
COMPARISON OF FIVE YEAR CUMULATIVE RETURN
(graph)
16
<PAGE> 19
SUMMARY COMPENSATION TABLE
Compensation paid to the Chief Executive Officer and the four other most highly
compensated Executive Officers for each of the three most recently completed
financial years is set out in the table below. These individuals are hereinafter
collectively referred to as the "Named Executive Officers".
SUMMARY COMPENSATION TABLE
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Long-term
Annual Compensation Compensation
---------------------------------------------
Bonus
(Executive Shares Under
Performance Other Annual Options All Other
Salary Award) Compensation Granted Compensation
(1) (2) (3) (2)
Name and Principal Position Year ($) ($) ($) (#) ($)
- -----------------------------------------------------------------------------------------------------------------------------------
J. Bougie 1998 739,906 (4) 807,363 (5) 52,914 -- 20,475 (6)
President and 1997 728,543 (4) 727,142 (7) 31,786 312,800 (8) 20,900 (6)
Chief Executive Officer 1996 647,415 424,274 45,773 65,000 (9) 19,225
- -----------------------------------------------------------------------------------------------------------------------------------
J.-P. Ergas 1998 524,042 312,863 20,521 20,100 (10) 22,667
Executive Vice President 1997 508,750 296,125 2,000 20,000 (9) 21,301
1996 453,061 162,319 83,516 20,000 (9) 40,202
- -----------------------------------------------------------------------------------------------------------------------------------
E.N. Santos 1998 513,023 335,360 36,358 16,800 (10) 44,081
Executive Vice President 1997 501,270 282,305 33,757 16,700 (9) 43,093
1996 357,761 168,829 125,942 20,000 (9) 12,064
- -----------------------------------------------------------------------------------------------------------------------------------
R.L. Ball 1998 370,000 284,500 218,107 35,100 (10) 49,148
Executive Vice President 1997 340,000 246,780 64,516 18,200 (9) 46,213
1996 312,500 142,762 54,381 18,200 (9) 29,218
- -----------------------------------------------------------------------------------------------------------------------------------
B.W. Sturgell 1998 336,667 308,786 813,612 32,100 (10) 15,670
Executive Vice President 1997 284,500 246,780 345,210 20,000 (9) 18,099
1996 202,333 92,039 19,073 6,800 (11) 13,161
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) See page 12 for description of the Executive Performance Award Plan.
(2) See Other Compensation on page 18.
(3) See page 19 for description of the Alcan Executive Share Option Plan.
(4) Including adjustments described in paragraph 6 on page 15.
(5) Received in the form of 29,732 EDSUs under the Executive Deferred Share Unit
Plan (see page 13 for description) based on the Share price ($27.16) at the
end of 1997; these qualify for additional EDSUs corresponding to dividends
declared subsequently (see page 13 for description).
(6) See also paragraph 3 on page 14.
(7) Received in the form of 21,767 EDSUs, based on the Share price (Can. $46.40)
at the end of 1996; these qualify for additional EDSUs corresponding to
dividends declared subsequently (see page 13 for description).
(8) Granted as B Options. In 1998, 208,000 associated D Options were granted in
addition.
(9) Granted as B Options. In 1998, 10,000 associated D Options were granted in
addition.
(10) Granted as C Options together with the same number of associated D Options.
(11) Granted as B Options. In 1998, 6,800 associated D Options were granted in
addition.
17
<PAGE> 20
Compensation payments to each Named Executive Officer were determined in the
currency of his normal place of work (except for J.-P. Ergas and R.L. Ball who
received part of their compensation in U.S. Dollars). Unless otherwise
indicated, all compensation payments reported in this Management Proxy Circular
are stated in U.S. Dollars converted, where necessary, from the currency of
disbursement to U.S. Dollars at the average exchange rates for the respective
year. The currency and exchange rate details are given in the table below:
CURRENCY AND EXCHANGE RATE TABLE
<TABLE>
<S> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Currency of Average Exchange Rate
Name Disbursement Year to convert to U.S. Dollars
- ------------------------------------------------------------------------------------------------------------------------------
J. Bougie Canadian Dollars 1998 0.6710
Canadian Dollars 1997 0.7199
Canadian Dollars 1996 0.7329
- ------------------------------------------------------------------------------------------------------------------------------
J.-P. Ergas U.S. Dollars 1998 1.0000
British Pounds 1998 1.6625
U.S. Dollars 1997 1.0000
British Pounds 1997 1.6404
U.S. Dollars 1996 1.0000
British Pounds 1996 1.5672
- ------------------------------------------------------------------------------------------------------------------------------
E.N. Santos Brazilian Reals 1998 0.8594
Brazilian Reals 1997 0.9250
Canadian Dollars 1996 0.7329
Brazilian Reals 1996 0.9924
- ------------------------------------------------------------------------------------------------------------------------------
R.L. Ball U.S. Dollars 1998 1.0000
British Pounds 1998 1.6625
U.S. Dollars 1997 1.0000
U.S. Dollars 1996 1.0000
- ------------------------------------------------------------------------------------------------------------------------------
B.W. Sturgell U.S. Dollars 1998 1.0000
U.S. Dollars 1997 1.0000
U.S. Dollars 1996 1.0000
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
EXECUTIVE PERFORMANCE AWARD
The Executive Performance Award Plan and the related Executive Deferred Share
Unit Plan are described on pages 12 and 13.
OTHER COMPENSATION
Compensation benefits made available to senior employees under various plans
included those under (a) the Executive Performance Award Plan mentioned above,
(b) the Alcan Executive Share Option Plan described on page 19, (c) retirement
benefit plans described on pages 21 and 22, (d) life insurance plans, (e)
savings plans, (f) plans for the use and parking of automobiles, for
professional financial advice through independent organizations, for deemed
interest on loans and for the reimbursement of club membership fees, and (g) in
applicable cases, expatriate benefits, foreign taxes, housing assistance, and
directors' fees from Subsidiaries and Related Companies.
In the Summary Compensation Table on page 17, the amounts indicated for the year
1998 under the column titled Other Annual Compensation include benefits paid to
the Named Executive Officers under these plans: automobile usage (J. Bougie,
$19,150 and E.N. Santos, $22,476), deemed interest (J. Bougie, $21,831 and E.N.
Santos, $12,559), expatriate benefits (B.W. Sturgell, $450,035), financial
advice (J.-P. Ergas, $15,274), foreign taxes (R.L. Ball, $83,067) and housing
assistance (B.W. Sturgell, $317,948).
18
<PAGE> 21
ALCAN EXECUTIVE SHARE OPTION PLAN
The Alcan Executive Share Option Plan ("Option Plan") provides for the granting
to senior employees of non-transferable options ("Options") to purchase Shares
(see REPORT ON EXECUTIVE COMPENSATION -- Long-term Compensation on page 13). The
Option Plan is administered by the Options Committee referred to on page 11.
A Options
Prior to 22 April 1993, the Option Plan provided for the granting of Options
hereinafter referred to as "A Options". No further A Options have been, or may
be, issued after that date.
The exercise price per Share under A Options was initially set in 1981 at not
less than 90% of the market value on the effective date of each grant of an A
Option, but all A Options granted after 1985 were set at 100% of the market
value on their effective dates. The effective date was fixed at the time of each
grant. Each A Option is exercisable in whole or in part during a period
commencing not less than three months after the effective date and ending not
later than 10 years after that date. In the event of retirement or death of the
employee, any remainder of this 10-year period in excess of five years is
reduced to five years. Alcan may make loans ("Option Loans"), at such interest
rate, if any, as the above-mentioned committee may determine, to assist in
financing the purchase of Shares through the exercise of A Options, but not in
the case of the other Options hereinafter described (see INDEBTEDNESS OF
DIRECTORS AND EXECUTIVE OFFICERS on page 23). The interest rate is currently nil
on all outstanding Option Loans. The Option Loans have terms of up to 9 3/4
years. After exercise of an A Option, the employee may not dispose of the Shares
during a one-year period ("Holding Period"). In the event of retirement or
resignation or other termination of the employee, the Holding Period terminates
upon repayment of the Option Loan. Each A Option has connected therewith stock
appreciation rights ("SARs") in respect of one-half of the Shares covered by the
A Option. Each SAR entitles the optionee to surrender unexercised the right to
subscribe for one Share in return for a cash payment in an amount equal to the
excess of the market value of such Share at the time of surrender over the
subscription price.
B Options
Since 22 April 1993, the Option Plan provided for Options hereinafter referred
to as "B Options".
The exercise price per Share under B Options is set at not less than 100% of the
market value on the effective date of the grant of each B Option. The effective
date is fixed at the time of the grant. Each B Option is exercisable (not less
than three months after the effective date) in respect of 25%, 50%, 75% or 100%
of the grant after a Waiting Period of 12, 24, 36 and 48 months, respectively,
following the effective date. The Options expire 10 years after the effective
date; in the event of retirement or death of the employee, any remainder of this
10-year period in excess of five years is reduced to five years. The B Options
do not have SARs connected therewith.
C Options
Since 23 September 1998, the Option Plan has provided for Options hereinafter
referred to as "C Options".
The exercise price per Share under C Options is set at not less than 100% of the
market value of the Share on the effective date of the grant of each C Option.
The effective date is fixed at the time of the grant. Each C Option is
exercisable (not less than three months after the effective date) in respect of
one-third of the grant when the market value of the Share has increased by 20%
over the exercise price, two-thirds of the grant when the market value of the
Share has so increased by 40% and the entire amount of the grant when the market
value of the Share has so increased by 60%. The said market values must exceed
those thresholds for at least 21 consecutive trading days. The said thresholds
are waived 12 months prior to the expiry date which is 10 years after the
effective date. In the event of death or retirement, any remainder of this
10-year period in excess of five years is reduced to five years, and the said
thresholds are waived. The C Options do not have SARs connected therewith.
19
<PAGE> 22
D Options
In respect of B and C Options granted to certain senior executives, Alcan has
granted further Options, hereinafter referred to as "D Options", which grant
shall become effective upon the exercise of associated B or C Options and upon
the executive placing at least one-half of the Shares resulting from the
exercise of the B or C Option, as the case may be, in trust with an agency named
by Alcan for a minimum period of five years. The exercise price per Share of
each D Option is set at not less than 100% of the market value on the exercise
date of the associated B or C Option. D Options are exercisable in the same
manner as the associated B or C Option. The option period for the D Option will
terminate on the same date as the associated B or C Option. In the event of
death or retirement, any remainder of this Option period in excess of five years
is reduced to five years. The vesting provisions of the D Option are identical
to those of the associated B or C Option. The D Options do not have SARs
connected therewith.
As mentioned on page 14, Alcan has also granted D Options to certain executives
associated with each of the 1996 and 1997 option grants, up to a maximum of
10,000 D Options for each grant.
Limits on Grants of B, C and D Options
As stated above, no further A Options may be issued.
Alcan may issue in any year B, C or D Options in respect of a Yearly Allotment,
as defined in the Option Plan, in aggregate not exceeding 0.75% of the Shares
outstanding as at the end of the previous calendar year. In addition, the unused
portion of any previous Yearly Allotment may be carried forward. The cumulative
maximum number of Shares which can be issued under the Option Plan after 31
December 1995 is 20,500,000.
Grants and Exercises during 1998
The following table provides information pertaining to Options granted to the
Named Executive Officers during 1998:
OPTION GRANTS DURING 1998
<TABLE>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Shares
Under Exercise Price
Options Percent of Total and Market Value
Granted Options Granted on Date of Grant
Name (#)(1) to Employees in 1998 (Can. $/Share) Expiration Date
- ------------------------------------------------------------------------------------------------------------------------------
J. Bougie 208,000 (2) 10.9 -- 28 May 2007
10,000 (3) 0.5 -- 25 September 2006
- ------------------------------------------------------------------------------------------------------------------------------
J.-P. Ergas 20,100 (4) 1.1 34.70 4 October 2008
10,000 (2) 0.5 -- 24 September 2007
10,000 (3) 0.5 -- 25 September 2006
- ------------------------------------------------------------------------------------------------------------------------------
E.N. Santos 16,800 (4) 0.9 34.70 4 October 2008
10,000 (2) 0.5 -- 24 September 2007
10,000 (3) 0.5 -- 4 December 2006
- ------------------------------------------------------------------------------------------------------------------------------
R.L. Ball 35,100 (4) 1.9 34.70 4 October 2008
10,000 (2) 0.5 -- 24 September 2007
10,000 (3) 0.5 -- 25 September 2006
- ------------------------------------------------------------------------------------------------------------------------------
B.W. Sturgell 32,100 (4) 1.7 34.70 4 October 2008
10,000 (2) 0.5 -- 24 September 2007
6,800 (3) 0.4 -- 25 September 2006
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) Date of grant: 5 October 1998.
(2) D Option grant associated with the 1997 option grant.
(3) D Option grant associated with the 1996 option grant.
(4) C Option grant together with the same number of associated D Options (see
ALCAN EXECUTIVE SHARE OPTION PLAN -- D Options above).
20
<PAGE> 23
The following table provides certain required information pertaining to Options
exercised by the Named Executive Officers during 1998 as well as year-end
values:
AGGREGATED OPTION EXERCISES DURING 1998
AND YEAR-END OPTION VALUES
<TABLE>
<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------------------------------------------
Shares Underlying Value of
Shares Aggregate Unexercised Unexercised
Acquired Value Options at in-the-Money Options at
on Exercise Realized 31 December 1998 (1) 31 December 1998 (1)
Name (#) (Can. $) (#) (Can. $)
- --------------------------------------------------------------------------------------------------------------------------------
J. Bougie 0 0 E: 170,975 E: 975,189
U: 576,925 U: 5,654
- --------------------------------------------------------------------------------------------------------------------------------
J.-P. Ergas 0 0 E: 42,000 E: 73,305
U: 94,200 U: 157,598
- --------------------------------------------------------------------------------------------------------------------------------
E.N. Santos 0 0 E: 39,075 E: 192,297
U: 76,125 U: 111,300
- --------------------------------------------------------------------------------------------------------------------------------
R.L. Ball 0 0 E: 57,850 E: 366,957
U: 116,950 U: 234,198
- --------------------------------------------------------------------------------------------------------------------------------
B.W. Sturgell 3,000 72,920 E: 15,000 E: 30,141
U: 100,450 U: 213,098
- --------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) E: Exercisable U: Unexercisable
Stock Appreciation Rights
During 1998, the Named Executive Officers did not receive or exercise any SARs,
nor did they have any remaining unexercised SARs at the year end.
RETIREMENT BENEFITS
Canadian Plans
The Alcan Pension Plan (Canada) and the Alcan Supplemental Retirement Benefit
Plan (Canada) are together herein referred to as the "Canadian Plans". Pensions
up to a statutory limit are payable under the former and, in excess thereof,
under the latter.
The Canadian Plans provide for pensions calculated on pensionable service and
annual average earnings during the 36 consecutive months when they were the
greatest, which earnings consist of salary and the Executive Performance Award
at its guideline amount up to a maximum (for J. Bougie, see page 15). The
following table shows estimated annual retirement benefits, expressed as a
percentage of annual average earnings during the said 36 months, payable upon
normal retirement at age 65 to persons in the indicated earnings and pensionable
service classifications.
CANADIAN PLANS
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Average Annual Years of Pensionable Service
-------------------------------------------------------------------------------------
Earnings
($) 10 15 20 25 30 35
- -----------------------------------------------------------------------------------------------------------------------------
900,000 -- 2,000,000 17% 25% 34% 42% 51% 59%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Alcan Supplemental Retirement Benefits Plan also provides for an additional
pension to J. Bougie which increases the percentages in the table above by 4%.
21
<PAGE> 24
Non-Canadian Plans
During 1998, R.L. Ball and B.W. Sturgell participated in an Alcan-sponsored
pension plan in the U.S.A. ("U.S. Plan") which provides for retirement benefits
which are generally comparable with the Canadian Plans, but with a ceiling of
60% of annual average earnings and a maximum pensionable service of 35 years.
The following table shows estimated annual retirement benefits, expressed as a
percentage of annual average earnings during the three consecutive calendar
years when they were the greatest, payable upon normal retirement at age 65 to
persons in the indicated earnings and pensionable service classifications.
U.S. PLAN
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Average Annual Years of Pensionable Service
-------------------------------------------------------------------------------------
Earnings
($) 10 15 20 25 30 35
- -----------------------------------------------------------------------------------------------------------------------------
500,000 -- 900,000 17% 25% 34% 42% 51% 59%
- -----------------------------------------------------------------------------------------------------------------------------
1,000,000 -- 2,000,000 17% 26% 34% 43% 51% 60%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
J.-P. Ergas participated in an Alcan-sponsored pension plan in the United
Kingdom and also in a supplemental retirement benefit agreement which provides
for a pension based on the terms of the U.S. Plan but in excess of statutory
limitations in both countries. E.N. Santos participated in an Alcan-sponsored
pension plan in Brazil, which is comparable to the U.S. Plan.
Deductions for Social Security
In the Canadian Plans, the retirement benefits described above are reduced by
the excess (if any) of retirement benefits payable from non-Canadian social
security and the Canada Pension Plan or the Quebec Pension Plan ("C/QPP") over
the maximum retirement benefits under the C/QPP. The normal form of payment of
pensions is a lifetime annuity with a guaranteed minimum of 60 monthly payments
or a 50% lifetime pension to the surviving spouse.
Pensionable Earnings and Years of Pensionable Service
The 1998 pensionable earnings and estimated years of pensionable service on
normal retirement at age 65 (subject to a maximum of 35 years where applicable)
for the Named Executive Officers were as follows: J. Bougie, $939,408 and 33
years; J.-P. Ergas, $781,542 and 10 years; E.N. Santos, $772,992 and 35 years;
R.L. Ball, $601,300 and 35 years; B.W. Sturgell, $567,967 and 25 years.
RETIRING ALLOWANCES
Upon his retirement, E.N. Santos will be paid a retiring allowance equal to
$200,000 plus an amount determined at the rate of $10,000 per year from 1 August
1995 to his retirement date.
BOARD FEES
An employee of Alcan who is a Director is not entitled to receive fees for
serving on the Board or on any Committee thereof.
22
<PAGE> 25
COMPENSATION OF NON-EXECUTIVE DIRECTORS
FEES AND EXPENSES
During 1998, every Non-Executive Director was paid an annual fee of $25,000 and
an additional annual fee of $5,000 for serving on a Committee of the Board,
except for the Options Committee. If such Director also served as Chairman of a
Committee, a further annual fee of $6,000 was paid. J.R. Evans, as Non-Executive
Chairman of the Board, was paid a fee of $155,000 during 1998 in lieu of the
above fees.
Non-Executive Directors are reimbursed for transportation and other expenses
actually incurred in attending Board/Committee meetings. A travel fee of $1,000
is also payable to those Non-Executive Directors who require an extra day of
travel to attend any Board/Committee meeting; during 1998, travel fees were paid
as follows: P.H. Pearse, $8,000; Sir George Russell, $6,000; and G. Schulmeyer,
$3,000.
SHARE INVESTMENT PLAN FOR DIRECTORS
Non-Executive Directors may invest all or part of their fees in Shares through
the Share Investment Plan for Directors.
RETIREMENT ARRANGEMENTS
Under the Non-Executive Directors' Deferred Share Unit Plan, each Non-Executive
Director is credited with a number of Directors' Deferred Share Units ("DDSUs"),
as determined by the Board. At present, this number has been set at the
equivalent of one DDSU for every $100 of Directors' fees (as described above,
but excluding the travel fees) received by the Director. Until redemption,
additional DDSUs are credited to each Director corresponding to dividends
declared on the Shares. The DDSUs are redeemable only upon termination
(retirement, resignation or death). The amount to be paid by Alcan upon
redemption (which must be on or before 15 December of the calendar year next
following the termination) will be calculated by multiplying the accumulated
balance of DDSUs by the average price of a Share on the Montreal, Toronto and
New York stock exchanges at the time of redemption.
INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
Non-Executive Directors
Non-Executive Directors and former Non-Executive Directors are not indebted to
Alcan.
Option Loans to Executive Officers
The required details with regard to Option Loans given to Executive Officers are
shown in the following table. The aggregate indebtedness of all Executive
Officers and employees and former Executive Officers and employees of Alcan and
its Subsidiaries (including the Named Executive Officers) to Alcan in respect of
Option Loans at 8 February 1999 was $3,810,156.
The terms of Option Loans are described on page 19.
23
<PAGE> 26
TABLE OF INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
UNDER OPTION PLAN
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------
Name and Principal Position Financially
Amount Assisted
Largest Outstanding Share
Amount as at Purchases
Outstanding 8 February During 1998
Involvement During 1998 1999 (1) Security for
of Alcan ($) ($) (#) Indebtedness
- ------------------------------------------------------------------------------------------------------------------------------
R.L. Ball Executive Vice
President Lender 70,254 0 0 (2)
- ------------------------------------------------------------------------------------------------------------------------------
G.P. Batt (3) Treasurer Lender 62,471 62,471 4,000 (2)
- ------------------------------------------------------------------------------------------------------------------------------
J. Bougie (4) President and Chief
Executive Officer Lender 459,342 434,652 0 (2)
- ------------------------------------------------------------------------------------------------------------------------------
C. Chamberland Executive Vice
President Lender 28,826 23,123 0 (2)
- ------------------------------------------------------------------------------------------------------------------------------
E.P. LeBlanc Executive Vice
President Lender 52,543 51,260 2,000 (2)
- ------------------------------------------------------------------------------------------------------------------------------
G. Ouellet Vice President Lender 57,035 54,184 0 (2)
- ------------------------------------------------------------------------------------------------------------------------------
E.N. Santos Executive Vice
President Lender 265,046 251,096 0 (2)
- ------------------------------------------------------------------------------------------------------------------------------
B.W. Sturgell Executive Vice
President Lender 45,682 43,366 3,000 (2)
- ------------------------------------------------------------------------------------------------------------------------------
S. Thadhani Executive Vice
President Lender 116,923 111,077 0 (2)
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(1) In respect of A Options only.
(2) Security for the indebtedness is provided by the deposit of the certificates
representing the relevant Shares with CIBC Mellon Trust Company, as trustee,
which holds the certificates registered in its name until full repayment of
the particular Option Loan has been made to Alcan.
(3) G.P. Batt transferred to a Subsidiary during 1998.
(4) J. Bougie is a nominee proposed for election as Director.
Other Loans to Executive Officers
The required details with regard to loans other than Option Loans given to
Executive Officers are shown in the following table. The aggregate indebtedness
of all Executive Officers and employees and former Executive Officers and
employees of Alcan and its Subsidiaries (including the Named Executive Officers)
to Alcan in respect of loans other than Option Loans at 8 February 1999 was
$2,292,464.
TABLE OF INDEBTEDNESS OF DIRECTORS AND EXECUTIVE OFFICERS
OTHER THAN UNDER OPTION PLAN
<TABLE>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Largest Amount Amount Outstanding
Involvement Outstanding as at
of Alcan During 1998 8 February 1999
Name and Principal Position ($) ($)
- ----------------------------------------------------------------------------------------------------------------------
C. Carroll Vice President Lender 209,658 209,658
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
24
<PAGE> 27
DIRECTORS' AND OFFICERS' LIABILITY INSURANCE
Alcan carries insurance covering liability, including defence costs, of
directors and officers of Alcan and its Subsidiaries, incurred as a result of
their acting as such, except in the case of failure to act honestly and in good
faith. The policy provides coverage against certain risks in situations where
Alcan may be prohibited by law from indemnifying the directors or officers. The
policy also reimburses Alcan for certain indemnity payments made by Alcan to
such director or officer, subject to a $10 million deductible in respect of each
insured loss.
The premium paid by Alcan for coverage in 1998 was $345,000 and the limit of
insurance is $100 million per occurrence and in the aggregate per year.
APPOINTMENT OF AUDITORS
At the Meeting, Shareholders will be called upon to appoint Auditors to serve
until the next Annual Meeting of Alcan and to authorize the Directors to fix the
remuneration of the Auditors so appointed.
The Board of Directors and Management, on the advice of the Audit Committee,
recommend that PricewaterhouseCoopers LLP (formerly Price Waterhouse), Montreal,
Canada, be appointed as Auditors. Price Waterhouse have been the Auditors of
Alcan since 1936.
A representative of PricewaterhouseCoopers LLP will be present at the Meeting
and will have the opportunity to make a statement should he desire to do so. He
will also be available to answer questions.
25
<PAGE> 28
SPECIAL BUSINESS: AMENDMENT AND RESTATEMENT OF THE SHAREHOLDER RIGHTS PLAN
The Shareholders will be asked at the Meeting to adopt a resolution to amend and
restate the existing Shareholder Rights Plan ("Rights Plan") which is set out in
full in the Shareholder Rights Agreement ("Plan Agreement") between Alcan and
CIBC Mellon Trust Company (successor to The Royal Trust Company) as trustee
("Rights Agent") dated 14 December 1989, as subsequently amended. The resolution
is set out in Schedule A hereto, and the complete text of the Plan Agreement
(including the amendments now proposed) is set out in Schedule B hereto.
The purpose of the resolution is to enable Alcan to continue to have in place
the protection afforded by a rights plan beyond the expiry of the existing
Rights Plan (14 December 1999). The resolution extends that termination date and
makes the other amendments suitable to the form of plans being adopted by
Canadian companies currently.
Passage of the resolution mentioned above will require approval by a majority of
the votes cast on the matter at the Meeting. According to the terms of the Plan
Agreement, any Shareholder who, at the time of the vote, is an Acquiring Person
(as defined in the Plan Agreement) or any person who has made or announced an
intention to make a Take-Over Bid (as defined in the Plan Agreement) will not be
eligible to participate in the vote.
At the present time, Alcan has no knowledge of any take-over bid, or any
intended take-over bid, from any person.
If the Rights Plan is amended as proposed in the resolution in Schedule A, it
will continue in effect until 1 May 2008, unless terminated earlier in
accordance with its terms. If the said resolution is not adopted, the existing
Rights Plan will remain in effect until 14 December 1999, unless terminated
earlier.
The Rights Plan does not in any way alter the financial condition of Alcan or
its current business plans.
The Board of Directors has determined that having a rights plan continues to be
in the best interests of Alcan and its Shareholders.
Background to the Rights Plan
The primary objective of the Rights Plan is to provide the Board with sufficient
time to explore and develop alternatives for maximizing Shareholder value if a
take-over bid is made for Alcan and to provide every Shareholder with an equal
opportunity to participate in such a bid. The Rights Plan encourages a potential
acquiror to proceed either by way of a Permitted Bid (as defined in the Plan
Agreement), which requires the take-over bid to satisfy certain minimum
standards designed to promote fairness, or with the concurrence of the Board.
The Board of Directors believes that the current legislation in Canada, which
permits a take-over bid to expire in as little as 21 calendar days after it is
made, does not provide the Board with adequate time to evaluate and respond to a
take-over bid in the best interests of the Shareholders. The key objective of
the Board in a take-over bid context will be to maximize value for Shareholders.
The Rights Plan creates a sufficient opportunity for the Board, in the face of a
take-over bid, to make a proper recommendation to the Shareholders -- whether to
accept the bid, or to negotiate with the bidder for a higher value or to explore
and develop alternatives for maximizing Shareholder value, such as, locating
other potential bidders or to develop a corporate restructuring alternative.
As for the Shareholders themselves, a 21-day bid period may not provide
sufficient time to consider a take-over bid and the recommendations of the Board
(including alternatives to the bid) and, thus, to make a fully informed
decision. The Rights Plan helps address these issues.
A large percentage of Alcan Shares are currently held in the United States of
America. The Rights Plan is intended to ensure equal treatment of Shareholders
and prevent an acquiror from exploiting differences in Canadian and United
States securities laws in a way that could be detrimental to some Shareholders.
While the Rights Plan is intended to regulate certain aspects of take-over bids
for Alcan, it is not intended to deter a bona fide attempt to acquire control of
Alcan if the offer is made fairly. The Rights Plan does not diminish or
otherwise affect the duty of the Board to give due and proper consideration to
any offer that is made and to act honestly, in good faith and in the best
interests of the Shareholders.
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The Rights Plan may be terminated by the Board with Shareholder approval through
a redemption process prior to the accumulation of 20% or more of the Shares by
any person or group of persons. The Rights Plan will not interfere with any
amalgamation or other business reorganization approved by the Board. Nor does
the Rights Plan inhibit any Shareholder from utilizing the proxy mechanism of
the Canada Business Corporations Act to promote a change in the management or
direction of Alcan, including the right of holders of not less than 5% of the
outstanding Shares to requisition a meeting of Shareholders for the purpose of
transacting proper corporate business.
In contrast to many rights plans adopted in the United States, the Rights Plan
has a Permitted Bid feature which allows a take-over bid to proceed in the face
of the Rights Plan even if the Board does not support the bid, provided that the
bid meets certain minimum specified standards of fairness and disclosure.
Specifically, the Permitted Bid procedure allows persons to make a take-over bid
for all or part of the outstanding Shares, provided it is made to all
Shareholders, and is held open for a specified period longer than the statutory
period required by the Canada Business Corporations Act, which is only 21
calendar days. The Permitted Bid procedure provides Shareholders and the Board
with this additional time to assess a bid properly and to permit alternative
bids to emerge. If more than 50% of the Shares held by parties other than the
bidder, its affiliates and associates are tendered and not withdrawn at the end
of the specified period, the bid may proceed and must be held open for an
additional 10 business days to allow Shareholders who have not tendered their
Shares additional time to do so after having had an opportunity to determine
that the bid will otherwise be successful. This two-stage requirement, which
separates evaluation of the bid from the tender process, helps remove any
element of coercion that might otherwise be present in a one-stage bid process.
Amendments Now Proposed
The Rights Plan was adopted on 14 December 1989 and has been amended
subsequently, the last amendment being made on 27 April 1995. The following are
the highlights of the amendments which will be proposed to be made to the Rights
Plan at the Meeting:
- - the Rights Plan will terminate on 1 May 2008,
- - the Rights Plan must be reconfirmed by the Shareholders at the annual
meetings of the Shareholders in each of the years 2002 and 2005,
- - the definition of "Beneficial Owner" will be modified to exclude a person
holding voting rights over Shares,
- - certain residual discretion of the Board will be removed, and
- - a Permitted Bid must remain open for 60 calendar days instead of 75 calendar
days.
Prior to the Meeting, Alcan may propose further amendments to the Plan Agreement
which the Board may in good faith deem necessary or desirable. Alcan will issue
a press release relating to any significant amendment so proposed and will
advise the Shareholders of any such amendment at the Meeting.
Summary of the Rights Plan (including the amendments now proposed)
References in italics to Sections below are to Sections of the Plan Agreement,
the text of which is set out in Schedule B hereto.
Pursuant to the Plan Agreement, one right ("Right") to purchase additional
securities, subject to the terms and conditions of the Plan Agreement, has been
issued for each Share outstanding and Rights will likewise be issued in respect
of Shares issued in the future until the Separation Time (as defined below) or
until the termination of the Rights Plan. The Rights are not exercisable until
the Separation Time. (Section 2.01)
Until the Separation Time (or earlier termination or expiration of the Rights),
the Rights are evidenced by the certificates for the Shares to which the Rights
attach. The Rights are transferred with, and only with, the associated Shares.
Furthermore, until such time, Share certificates issued will contain a notation
incorporating the Plan Agreement by reference. (Section 2.01)
The Rights will separate and trade independently of the Shares after the
Separation Time. (Section 2.01)
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Promptly following the Separation Time, separate certificates evidencing the
Rights ("Rights Certificates") will be given to holders of record of Shares as
of the close of business at the Separation Time and such separate Rights
Certificates alone will evidence the Rights. (Section 2.01)
The Separation Time is the close of business on the tenth business day after
either the first date that a person has acquired beneficial ownership of 20% or
more of the Shares, or the date of commencement or announcement of a Take-Over
Bid. (Section 1.01)
The Exercise Price and the number of Rights outstanding are subject to
adjustment from time to time to prevent dilution (i) in the event of a stock
dividend on, or a subdivision, combination or reclassification of, the Shares,
(ii) upon the grant to Shareholders of certain rights or warrants to subscribe
for the Shares or convertible securities at less than the current market price
of the Shares, or (iii) upon distribution to Shareholders of evidences of
indebtedness or assets (excluding Regular Periodic Cash Dividends as defined in
the Plan Agreement) or of rights or warrants (other than those referred to
above). (Section 2.03)
A Flip-In Event occurs when a Person becomes an Acquiring Person. (Section 1.01)
Upon the occurrence of a Flip-In Event, each Right (except for Rights
beneficially owned by an Acquiring Person or a person acting in concert with an
Acquiring Person or certain transferees of an Acquiring Person, which Rights
shall be void) shall constitute the right to receive, upon the exercise thereof
at the then current Exercise Price of the Right, Shares having an aggregate
Market Price on the date of occurrence of such Flip-In Event equal to twice the
Exercise Price. For example, if at the time of the Flip-In Event, the Exercise
Price is $200 and the Shares have a Market Price of $50, the holder of each
Right will be entitled to receive $400 in market value of the Shares (8 Shares)
for $200, i.e. at a 50% discount. (Section 3.01)
The Board of Directors may, upon notice delivered to the Rights Agent, determine
to waive the application of the provisions of the Flip-In Event section of the
Plan Agreement to a particular Flip-In Event or any particular acquisition or
other transaction or event that would, but for the waiver, constitute or result
in a Flip-In Event, provided that such waiver shall automatically constitute a
waiver of the application of such provisions to all contemporaneous Flip-In
Events. (Section 5.01)
At every third annual meeting following the Meeting, the Board of Directors
shall submit a resolution to the Shareholders for approval ratifying the
continued existence of the Rights Plan. If a majority of the votes cast on such
a resolution is against the continued existence of the Rights Plan, then the
Plan Agreement, the Rights Plan and any outstanding Rights shall be of no
further force or effect. (Section 5.16)
Any Person who makes a take-over bid in compliance with the provisions of a
Permitted Bid will not become an Acquiring Person (Section 1.01). The
requirements of a Permitted Bid (Section 6.01) include the following:
- - the bid, which may be for all or part of the Shares of a particular class,
must be made to all holders thereof,
- - the bid must remain outstanding for a minimum period of 60 calendar days
after which period the Shares may be taken up and paid for only if more than
50% of the Shares held by Independent Shareholders (as defined in the Plan
Agreement) have been tendered and not withdrawn, and
- - if more than 50% of the Shares held by Independent Shareholders have been
tendered and not withdrawn at the end of the above-mentioned 60-day period,
the bid must remain open for an additional 10 business days.
A competing Permitted Bid may proceed contemporaneously provided it expires no
earlier than the initial Permitted Bid and is outstanding for a minimum period
of 21 calendar days. (Section 6.02)
The Company may from time to time supplement or amend the Plan Agreement with
the approval of the Rights Agent but without the consent of the holders of the
Rights or the holders of the Shares in order to correct a clerical or
typographical error or in order to maintain the validity of the Plan Agreement
as a result of a change in applicable legislation or regulation, provided that
such latter change is subsequently approved by the holders of the Shares or the
holders of the Rights, as applicable. (Section 5.04)
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Until a Right is exercised, the holder thereof, as such, will have no rights as
a Shareholder including, without limitation, the right to vote or to receive
dividends. (Section 5.07)
Tax Consequences
For Canadian federal income tax purposes, Alcan has not had any income as a
result of the issuance of the Rights. Under the Income Tax Act (Canada) (the
"Act"), the issuance of the Rights may be a taxable benefit which must be
included in the income of the recipient. However, no amount must be included in
the income of the recipient if the Rights do not have a monetary value at the
date of issue. Alcan views the Rights as currently having negligible monetary
value. A holder of Rights may have income or be subject to withholding tax under
the Act if the Rights become exercisable, are exercised or are otherwise
disposed of. This statement does not address the Canadian income tax
consequences of other events, e.g., separation of the Rights from Shares, a
Flip-In Event, lapse of Alcan's right to redeem the Rights and redemption of the
Rights.
For United States federal income tax purposes, the adoption and approval of the
resolution amending and restating the Rights Plan should not be a taxable
transaction to the Shareholders. The United States federal income tax
consequences of other events in connection with the Rights Plan, e.g.,
separation of the Rights from the Shares, a Flip-In Event, lapse of Alcan's
right to redeem the Rights, redemption of the Rights and exercise of the Rights,
are uncertain. The tax consequences, including the likelihood that an event will
be a taxable transaction (which, in certain cases, is probable) or, if taxable,
whether it is a distribution or a sale or exchange of a Right, can vary
depending on the facts and circumstances at the time of the event.
Shareholders should consult their own tax advisors regarding the consequences of
approval of the resolution and of receiving, holding, exercising, exchanging or
otherwise disposing of the Rights.
APPROVAL OF BOARD OF DIRECTORS
The Board of Directors has approved the contents of this Management Proxy
Circular and its issue to Shareholders.
(Signature)
P.K. Pal
Vice President,
Chief Legal Officer and Secretary
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<PAGE> 32
SCHEDULE A
AMENDMENT AND RESTATEMENT OF THE SHAREHOLDER RIGHTS PLAN
THAT, the Shareholder Rights Plan as amended and restated in its entirety in
Schedule B of the Management Proxy Circular dated 3 March 1999, which reproduces
the entire Shareholder Rights Agreement between the Company and CIBC Mellon
Trust Company (successor to The Royal Trust Company), be and is hereby approved.
------------------------------------
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SCHEDULE B
SHAREHOLDER RIGHTS AGREEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1 -- INTERPRETATION
1.01 Definitions............................................ 32
1.02 Headings............................................... 39
1.03 Extended Meanings...................................... 40
1.04 Currency............................................... 40
1.05 Schedule............................................... 40
1.06 Language Clause........................................ 40
1.07 Acting Jointly or in Concert........................... 40
1.08 As Now Enacted......................................... 40
ARTICLE 2 -- THE RIGHTS
2.01 Initial Exercise Price, Exercise of Rights and
Detachment of Rights...................................... 40
2.02 Legend on Common Share Certificates.................... 42
2.03 Adjustments............................................ 43
2.04 Date on Which Exercise is Effective.................... 46
2.05 Execution, Authentication, Delivery and Dating of
Rights Certificates....................................... 46
2.06 Registration of Rights................................. 46
2.07 Mutilated, Destroyed, Lost and Stolen Rights
Certificates.............................................. 47
2.08 Persons Deemed Owners.................................. 47
2.09 Delivery and Cancellation of Certificates.............. 48
2.10 Agreement of Rights Holders............................ 48
ARTICLE 3 -- EFFECT OF CERTAIN TRANSACTIONS
3.01 Flip-In Event.......................................... 48
ARTICLE 4 -- THE RIGHTS AGENT
4.01 General................................................ 49
4.02 Merger or Consolidation or Change of Name of the Rights
Agent..................................................... 50
4.03 Entitlements of the Rights Agent....................... 50
4.04 Change of the Rights Agent............................. 52
ARTICLE 5 -- MISCELLANEOUS
5.01 Redemption, Waiver and Termination..................... 52
5.02 Expiration............................................. 53
5.03 Issuance of New Rights Certificates.................... 53
5.04 Supplements and Amendments............................. 53
5.05 Fractional Rights and Fractional Shares................ 54
5.06 Rights of Action....................................... 55
5.07 Holder of Rights Not Deemed to be a Shareholder........ 55
5.08 Notices................................................ 55
5.09 Costs of Enforcement................................... 56
5.10 Benefit of the Agreement............................... 56
5.11 Governing Law.......................................... 56
5.12 Counterparts........................................... 56
5.13 Severability........................................... 56
5.14 Determinations and Actions by the Board................ 57
5.15 Effective Date......................................... 57
5.16 Re-confirmation after Three Years...................... 57
5.17 Regulatory Approvals................................... 57
5.18 Declaration as to Non-Canadian Holders................. 57
ARTICLE 6 -- PERMITTED BIDS
6.01 Permitted Bids......................................... 58
6.02 Competing Permitted Bids............................... 58
Schedule 1.................................................. 60
</TABLE>
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<PAGE> 34
SHAREHOLDER RIGHTS AGREEMENT
THIS AGREEMENT made as of 14 December 1989, amended on 8 February 1990 and 5
March 1990, approved by the Shareholders on 26 April 1990, further amended and
restated on 2 March 1995 and 24 April 1995, reconfirmed by the Shareholders on
27 April 1995 and amended and restated on 22 April 1999
B E T W E E N:
ALCAN ALUMINIUM LIMITED, a corporation incorporated under
the laws of Canada (hereinafter referred to as the
"Corporation"),
OF THE FIRST PART,
A N D:
CIBC MELLON TRUST COMPANY, a trust company incorporated
under the laws of Canada (hereinafter referred to as the
"Rights Agent"),
OF THE SECOND PART
WITNESSES that:
WHEREAS the Board has determined that it is advisable for the Corporation to
adopt and maintain a shareholder rights plan inter alia in order to (i) provide
a framework in which Take-Over Bids for the Corporation can be made for the
Voting Shares of the Corporation including providing the Board with sufficient
time to explore and develop alternatives, (ii) facilitate the maximization of
shareholder values if a substantial portion of the Voting Shares is to be
acquired by any Person, and (iii) protect the Corporation and its shareholders
from abusive acquisition tactics or acquisitions which may not be in the best
interests of the Corporation;
AND WHEREAS it is not the intention of the Board to adopt the Rights Plan as a
means of preventing or deterring any Person from seeking to acquire the Voting
Shares, provided they do so fairly, or of foreclosing the ability of the Board
to take any action that in its discretion it considers reasonable in the
circumstances of any such transaction;
AND WHEREAS, in order to implement the Rights Plan, the Board authorized and
declared a distribution of one Right effective 8:15 p.m. (Eastern Standard Time)
14 December 1989 ("Record Time") in respect of each Common Share outstanding as
at the Record Time and has authorized the issuance of one Right in respect of
each Common Share issued after such date and prior to the earlier of the
Separation Time and the Expiration Time;
AND WHEREAS each Right entitles the holder thereof, after the Separation Time
but prior to the Expiration Time, to purchase securities of the Corporation
pursuant to the terms and subject to the conditions set forth herein;
AND WHEREAS the Corporation desires to appoint the Rights Agent to act on behalf
of the Corporation in connection with the issuance, transfer, exchange and
replacement of Rights Certificates, the exercise of the Rights and the other
matters relating to the Corporation referred to herein and to act as the trustee
for the holders of the Rights in connection with the promise of the Corporation
herein to issue Rights Certificates to the Rights Agent for distribution to the
holders of Common Shares after the Separation Time, and the Rights Agent is
willing to so act;
NOW THEREFORE in consideration of the premises and the agreements herein
contained the parties hereto agree as follows:
ARTICLE 1 -- INTERPRETATION
1.01 DEFINITIONS
For purposes of this Agreement, the following terms have the meanings indicated:
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(a) "Agreement" means this agreement and all amendments made hereto by written
agreement between the Corporation and the Rights Agent.
(b) "Acquiring Person" means any Person (other than the Corporation or any
Subsidiary of the Corporation) who is a Beneficial Owner of 20% or more of
the outstanding Voting Shares. Notwithstanding the foregoing, no Person
shall become an "Acquiring Person"
(i) (A) as a result of the purchase, redemption or other acquisition of
Voting Shares by the Corporation which, by reducing the number of
Voting Shares then outstanding, increases the proportionate
number of shares Beneficially Owned by such Person to 20% or more
of the Voting Shares then outstanding;
(B) as a result of share acquisitions made pursuant to a Permitted
Bid or Competing Permitted Bid;
(C) as a result of share acquisitions made pursuant to a Permitted
Acquisition;
(D) as a result of an Exempt Acquisition; or
(E) as a result of a Convertible Security Acquisition;
provided, however, that if a Person becomes the Beneficial Owner of 20% or
more of the Voting Shares then outstanding as a result of a purchase,
redemption or other acquisition of Voting Shares by the Corporation as
provided for in clause (A) above, or as a result of a Permitted Bid or
Competing Permitted Bid as provided for in clause (B) above, or as a
result of a Permitted Acquisition as provided for in clause (C) above, or
as a result of the waiver of the application of Section 3.01 pursuant to
Section 5.01(2) as provided for in clause (D) above, or as a result of a
Convertible Security Acquisition as provided for in clause (E) above, or
as a result of any combination of acquisitions referred to in clauses (A)
to (E) above, and after such acquisition or acquisitions such Person
becomes the Beneficial Owner of more than an additional 1% of the Voting
Shares then outstanding other than pursuant to clauses (A), (B), (C), (D)
or (E) above or any combination thereof, such Person shall thereupon
immediately be deemed to be an "Acquiring Person";
(ii) as a result of such person (a "Grandfathered Person") being the
Beneficial Owner of 20% or more of the outstanding Voting Shares of the
Corporation determined as at the Record Time provided, however, that
this exception shall not be, and shall cease to be, applicable to such
Grandfathered Person in the event that such Grandfathered Person shall,
after the Record Time, become the Beneficial Owner of any additional
Voting Shares of the Corporation that increase its Beneficial Ownership
of Voting Shares by more than 1% of the number of Voting Shares
outstanding as at the Record Time, other than as a result of a
Permitted Bid, a Competing Permitted Bid, a Permitted Acquisition or
any Take-Over Bid in respect of which a waiver is, or is deemed to have
been, granted under Section 5.01(2);
(iii) for a period of ten calendar days after the Disqualification Date
(as defined below), where such Person becomes the Beneficial Owner of
20% or more of the outstanding Voting Shares as a result of such Person
becoming disqualified from relying on Section 1.01(e)(v) solely because
such Person or the Beneficial Owner of such Voting Shares is making or
has announced an intention to make a Take-Over Bid, either alone or by
acting jointly or in concert with any other Person. For the purposes of
this definition, "Disqualification Date" means the first date of public
announcement that any Person is making or has announced an intention to
make a Take-Over Bid;
(iv) being an underwriter or member of a banking or selling group that
becomes the Beneficial Owner of 20% or more of the Voting Shares in
connection with a distribution of securities of the Corporation.
(c) "Affiliate" when used to indicate a relationship with a specified Person,
shall mean a Person that controls, or is controlled by, or is under common
control with, such specified Person.
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(d) "Associate" means, when used to indicate a relationship with a specified
Person, a spouse of that Person or any Person with whom that Person is
living in a conjugal relationship outside marriage or a child of that
Person or a relative of that Person who has the same residence as that
Person.
(e) A Person shall be deemed to be the "Beneficial Owner" of and to have
"Beneficial Ownership" of and to "Beneficially Own" any securities which:
(i) such Person or any of such Person's Affiliates or Associates owns at
law or in equity;
(ii) such Person or any of such Person's Affiliates or Associates has the
right to become the owner of at law or in equity (whether such right is
exercisable immediately or within a period of 60 calendar days
thereafter and whether or not on condition or on the happening of any
contingency), (A) upon the exercise of any Convertible Securities or
(B) pursuant to any agreement, arrangement, pledge or understanding,
whether or not in writing, (other than (x) customary agreements with
and between underwriters and/or banking group members and/or selling
group members with respect to a public offering or private placement of
securities and (y) pledges of securities in the ordinary course of
business) or upon the exercise of any conversion right, exchange right,
share purchase right (other than the Rights), warrant or option; or
(iii) without limiting the generality of the foregoing, are beneficially
owned within the meaning of paragraphs (i) and (ii) of this definition
by any other Person with which such Person is acting jointly or in
concert;
provided, however, that a Person shall not be deemed to be the "Beneficial
Owner" of or to have "Beneficial Ownership" of or to "Beneficially Own"
any security:
(iv) where such security has been, or has agreed to be, deposited or
tendered pursuant to a Lock-up Agreement, or is otherwise deposited or
tendered, to any Take-Over Bid made by such Person or by any of such
Person's Affiliates or Associates or made by any Person acting jointly
or in concert with such Person until such deposited or tendered
security has been taken up and paid for, whichever shall first occur;
(v) where such Person, any of such Person's Affiliates or Associates or
any other Person acting jointly or in concert with such Person holds
such security provided that:
(A) the ordinary business of any such Person (the "Investment Manager")
includes the management of investment funds for others (which
others, for greater certainty, may include or be limited to one or
more employee benefit plans or pension plans) and such security is
held by the Investment Manager in the ordinary course of such
business in the performance of such Investment Manager's duties
for the account of any other Person (a "Client");
(B) such Person (the "Trust Company") is licensed to carry on the
business of a trust company under applicable laws and, as such,
acts as trustee or administrator or in a similar capacity in
relation to the estates of deceased or incompetent Persons (each
an "Estate Account") or in relation to other accounts (each an
"Other Account") and holds such security in the ordinary course of
such duties for the estate of any such deceased or incompetent
Person or for such other accounts;
(C) such Person is established by statute for purposes that include,
and the ordinary business or activity of such Person (the
"Statutory Body") includes, the management of investment funds for
employee benefit plans, pension plans, insurance plans or various
public bodies;
(D) such Person (the "Administrator") is the administrator or trustee
of one or more pension funds or plans (a "Plan"), or is a Plan,
registered under the laws of Canada or any Province thereof or the
laws of the United States of America or any State thereof;
provided, in any of the above cases, that the Investment Manager, the
Trust Company, the Statutory Body, the Administrator or the Plan, as
the case may be, is not then making a Take-Over Bid or has not then
announced an intention to make a Take-over Bid alone or
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<PAGE> 37
acting jointly or in concert with any other Person, other than an Offer
to Acquire Voting Shares or other securities (x) pursuant to a
distribution by the Corporation (y) by means of a Permitted Bid or (z)
by means of ordinary market transactions (including prearranged trades
entered into in the ordinary course of business of such Person)
executed through the facilities of a stock exchange or organized
over-the-counter market;
(vi) where such Person is:
(A) a Client of the same Investment Manager as another Person on whose
account the Investment Manager holds such security,
(B) an Estate Account or an Other Account of the same Trust Company as
another Person on whose account the Trust Company holds such
security, or
(C) a Plan with the same Administrator as another Plan on whose account
the Administrator holds such security;
(vii) where such Person is:
(A) a Client of an Investment Manager and such security is owned at law
or in equity by the Investment Manger,
(B) an Estate Account or an Other Account of a Trust Company and such
security is owned at law or in equity by the Trust Company, or
(C) a Plan and such security is owned at law or in equity by the
Administrator of the Plan; or
(viii) where such Person is a registered holder of such security as a
result of carrying on the business of, or acting as a nominee of, a
securities depositary.
For the purposes of this Agreement, in determining the percentage of the
outstanding Voting Shares with respect to which a Person is the Beneficial
Owner, all Voting Shares of which such Person is or is deemed to be the
Beneficial Owner shall be deemed to be outstanding.
(f) "Board" means the board of directors of the Corporation.
(g) "Business Day" means any day, other than a Saturday or Sunday, on which
banks are generally open for business in the City of Montreal.
(h) "Canadian-U.S. Exchange Rate" means, on any date, the inverse of the
U.S.-Canadian Exchange Rate in effect on such date.
(i) "Canadian Dollar Equivalent" of any amount which is expressed in United
States dollars means, on any date, the Canadian dollar equivalent of such
amount determined by multiplying such amount by the U.S.-Canadian Exchange
Rate in effect on such date.
(j) "close of business" means, with respect to any date, the time on such date
at which the offices of the Rights Agent in the City of Montreal are,
after having been open to the public for business, closed to the public.
(k) "Common Shares", when used with reference to the Corporation, means the
common shares in the capital of the Corporation and, when used with
reference to any Person other than the Corporation, means the class of
shares in the capital of such other Person with the greatest voting power
per share.
(l) "Competing Permitted Bid" has the meaning set out in Section 6.02.
(m) "controlled": a corporation is "controlled" by another Person if:
(i) securities entitled to vote in the election of directors carrying
more than 50% of the votes for the election of directors are held,
directly or indirectly, by or on behalf of the other person; and
(ii) the votes carried by such securities are entitled, if exercised, to
elect a majority of the board of directors of such corporation;
and "controls", "controlling" and "under common control with" shall be
interpreted accordingly.
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(n) "Convertible Securities" means at any time:
(i) any right (contractual or otherwise and regardless of whether such
right constitutes a security) to acquire Voting Shares from the
Corporation; and
(ii) any securities issued by the Corporation from time to time (other
than a Right) carrying any exercise, conversion or exchange right;
which is then exercisable or exercisable within a period of 60 calendar
days from that time, pursuant to which the holder thereof may acquire
Voting Shares or other securities which are convertible into, exercisable
or exchangeable for Voting Shares (in each case, whether such right is
then exercisable or exercisable within a period of 60 calendar days from
that time and whether or not on condition or the happening of any
contingency).
(o) "Convertible Security Acquisition" means the acquisition of Voting Shares
upon the exercise of a Convertible Security received by a Person pursuant
to a Permitted Acquisition.
(p) "Dividend Reinvestment Acquisition" shall mean an acquisition of Voting
Shares of any class pursuant to a Dividend Reinvestment Plan.
(q) "Dividend Reinvestment Plan" means a regular dividend reinvestment or
other plan of the Corporation made available by the Corporation to holders
of its securities where such plan permits the holder to direct that some
or all of:
(i) dividends paid in respect of shares of any class of the Corporation;
(ii) proceeds of redemption of shares of the Corporation;
(iii) interest paid on evidences of indebtedness of the Corporation; or
(iv) optional cash payments;
be applied to the purchase from the Corporation of Voting Shares.
(r) "Election to Exercise" has the meaning set out in Section 2.01(4).
(s) "Exempt Acquisition" means a share acquisition in respect of which the
Board has waived the application of Section 3.01 pursuant to the
provisions of Sections 5.01(2).
(t) "Exercise Price" means, as of any date, the price at which a holder may
purchase the securities issuable upon the exercise of one Right which,
until the adjustment thereof in accordance with the provisions hereof,
shall equal $200.
(u) "Expansion Factor" has the meaning set out in Section 2.03(2)(e).
(v) "Expiration Time" means the earlier of:
(i) the Termination Time, or
(ii) subject to Sections 5.15 and 5.16, the close of business on May 1,
2008 .
(w) "Flip-In Event" means a transaction or event in which any Person becomes an
Acquiring Person.
(x) "holder" has the meaning set out in Section 2.08.
(y) "Independent Shareholders" means holders of Voting Shares, but shall not
include any Acquiring Person or any Offeror (including an Offeror who is
making a Permitted Bid or Competing Permitted Bid) other than any Person
who by virtue of Section 1.01 (e) (v) is not deemed to Beneficially Own
the Voting Shares held by such Person, any Affiliate or Associate of any
such Acquiring Person or Offeror or any Person acting jointly or in
concert with such Acquiring Person or Offeror, or Persons with rights or
powers under any employee stock ownership plans, benefit plans, deferred
profit sharing and any other similar plan or trust for the benefit of
employees of the Corporation or a Subsidiary of the Corporation, unless
the beneficiaries of such plan or trust direct the manner in which such
Voting Shares are to be voted or direct whether the Voting Shares are to
be tendered to a Take-Over Bid.
(z) "Lock-up Agreement" means an agreement between an Offeror, any of its
Affiliates or Associates or any other Person acting jointly or in concert
with the Offeror and a Person (the "Locked-up
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Person") who is not an Affiliate or Associate of the Offeror or a Person
acting jointly or in concert with the Offeror whereby the Locked-up Person
agrees to deposit or tender the Voting Shares held by the Locked-up Person
to the Offeror's Take-Over Bid or to any Take-Over Bid made by any of the
Offeror's Affiliates or Associates or made by any other Person acting
jointly or in concert with the Offeror, where the agreement permits the
Locked-up Person to withdraw the Voting Shares from the agreement in order
to tender or deposit the Voting Shares to another Take-Over Bid that
contains an offering price for each Voting Share that is at least 5%
higher than the offering price contained in or proposed to be contained in
the Take-Over Bid that the Locked-up Person has agreed to deposit or
tender Voting Shares pursuant to the Lock-up Agreement.
(aa) "Market Price" per share of any securities on any date of determination
shall mean the average of the daily Closing Prices Per Share of such
securities (determined as described below) on each of the 20 consecutive
Trading Days through and including the Trading Day immediately preceding
such date; provided, however, that if an event of a type analogous to any
of the events described in Section 2.03 hereof shall have caused the
closing prices used to determine the Market Price on any Trading Day not
to be fully comparable with the closing price on such date of
determination or, if the date of determination is not a Trading Day, on
the immediately preceding Trading Day, each such closing price so used
shall be appropriately adjusted in a manner analogous to the applicable
adjustment provided for in Section 2.03 hereof in order to make it fully
comparable with the closing price on such date of determination or, if the
date of determination is not a Trading Day, on the immediately preceding
Trading Day. The "Closing Price Per Share" of any securities on any date
shall be:
(i) the closing board lot sale price or, if such price is not available,
the average of the closing bid and asked prices, for each share as
reported in the principal consolidated transaction reporting system
with respect to securities listed or admitted to trading on The Toronto
Stock Exchange, or if not so listed or admitted to trading, The
Montreal Exchange;
(ii) if the securities are not listed or admitted to trading on The
Toronto Stock Exchange or The Montreal Exchange, the last sale price,
regular way, or, in the case no such sale takes place on such date, the
average of the closing bid and asked prices, regular way, for each
share of such securities as reported in the principal consolidated
transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange;
(iii) if for any reason none of such prices is available on such day or
the securities are not listed or admitted to trading on any of The
Toronto Stock Exchange, The Montreal Exchange or the New York Stock
Exchange, the average of the high bid and low asked prices for each
share of such securities in the over-the-counter market if such high
bid and low asked prices are regularly published in a newspaper or
business or financial publication of regular or paid circulation; or
(iv) if on any such date the securities are not quoted by any such
organization, the average of the closing bid and asked prices as
furnished by a professional market maker making a market in the
securities;
provided, however, that if on any such date the securities are not traded
in the over-the-counter market, the closing price per share of such
securities on such date shall mean the fair value per share of securities
on such date as determined by a nationally or internationally recognized
Canadian investment dealer (or investment banker) with respect to the fair
value per share of such securities. The Market Price shall be expressed in
United States dollars and if initially determined in respect of any day
forming part of the 20 consecutive Trading Day period in question in
Canadian dollars, such amount shall be translated into United States
dollars at the U.S. Dollar Equivalent thereof on the relevant Trading Day.
(bb) "Offer to Acquire" includes:
(i) an offer to purchase, or a solicitation of an offer to sell, Voting
Shares, and
(ii) an acceptance of an offer to sell Voting Shares, whether or not such
offer to sell has been solicited,
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or any combination thereof, and the Person accepting an offer to sell
shall be deemed to be making an Offer to Acquire to the Person that made
the offer to sell.
(cc) "Offeror" means any Person who has announced an intention to make or who
is making, but has not completed, a Take-Over Bid (including a Permitted
Bid or a Competing Bid) but only so long as the Take-Over Bid so made or
announced has not been withdrawn or terminated or has not expired.
(dd) "Offeror's Securities" means Voting Shares Beneficially Owned on the date
of an Offer to Acquire by an Offeror.
(ee) "Permitted Acquisition" means an acquisition by a Person of Voting Shares
pursuant to:
(i) a Dividend Reinvestment Acquisition;
(ii) a stock dividend, stock split or other event in respect of
securities of the Corporation of one or more particular classes or
series pursuant to which such Person becomes the Beneficial Owner of
Voting Shares on the same pro rata basis as all other holders of
securities of the particular class, classes or series;
(iii) the acquisition or the exercise by the Person of only those rights
to purchase Voting Shares distributed to that Person in the course of a
distribution to all holders of securities of the Corporation of one or
more particular classes or series pursuant to a rights offering or
rights offering prospectus; or
(iv) a distribution by the Corporation of Voting Shares or Convertible
Securities (and the conversion or exchange of such), made pursuant to a
prospectus or by way of a private placement, provided that the Person
does not thereby acquire a greater percentage of such Voting Shares, or
securities convertible into or exchangeable for Voting Shares, so
offered than the Person's percentage of Voting Shares Beneficially
Owned immediately prior to such acquisition.
(ff) "Permitted Bid" has the meaning set out in Section 6.01.
(gg) "Person" includes any individual, partnership, association, body corporate,
unincorporated syndicate, unincorporated organization, trust, trustee,
executor, administrator or other legal representative or entity and any
successor thereto.
(hh) "Record Time" has the meaning ascribed to that term in the third recital
hereto.
(ii) "Regular Periodic Cash Dividend" means cash dividends declared payable on
the Common Shares of the Corporation and paid at regular intervals in any
fiscal year of the Corporation to the extent that such cash dividends do
not in any fiscal year exceed, in the aggregate, the greatest of:
(i) 200% of the aggregate amount of cash dividends declared payable by
the Corporation on its Common Shares in its immediately preceding
fiscal year,
(ii) 300% of the average of the aggregate amounts of cash dividends
declared payable by the Corporation on its Common Shares in its three
immediately preceding fiscal years, and
(iii) 100% of the aggregate consolidated net income of the Corporation,
before extraordinary items, for its immediately preceding fiscal year.
(jj) "Right" means the right of each holder of Common Shares to purchase
additional securities upon and subject to the terms and conditions hereof.
(kk) "Rights Agent" means CIBC Mellon Trust Company or any successor thereto
appointed pursuant to Section 4.04.
(ll) "Rights Certificate" has the meaning set out in Section 2.01(3)(c).
(mm) "Rights Plan" means the shareholder rights plan established hereby.
(nn) "Rights Register" has the meaning set out in Section 2.06(1).
(oo) "Rights Registrar" has the meaning set out in Section 2.06(1).
(pp) "Separation Time" means the close of business on the tenth Business Day
after the earliest of:
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(i) the Stock Acquisition Date;
(ii) the date of the commencement of, or the first public announcement of
the intent of any Person (other than a Person making a Permitted Bid or
Competing Permitted Bid or the Corporation or any Subsidiary of the
Corporation) to commence a Take-Over Bid (other than a Permitted Bid or
a Competing Permitted Bid, as the case may be); and
(iii) the date on which a Permitted Bid or Competing Bid ceases to qualify
as such or on such later day as the Board shall determine acting in
good faith; provided that, if any such Take-Over Bid expires, is
cancelled, terminated or otherwise withdrawn prior to the Separation
Time, such Take-Over Bid shall be deemed, for the purposes of this
definition, never to have been made.
(qq) "Stock Acquisition Date" means the first date of public announcement by the
Corporation or an Acquiring Person that an Acquiring Person has become
such.
(rr) "Subsidiary": a corporation shall be a Subsidiary of another corporation
if:
(i) it is controlled by:
(A) that other, or
(B) that other and one or more corporations each of which is controlled
by that other, or
(C) two or more corporations each of which is controlled by that other,
or
(ii) it is a Subsidiary of a corporation that is that other's Subsidiary.
(ss) "Take-Over Bid" means an Offer to Acquire Voting Shares where the Voting
Shares subject to the Offer to Acquire, together with the Offeror's
Securities, constitute in the aggregate 20% or more of the outstanding
Voting Shares at the date of the Offer to Acquire.
(tt) "Termination Time" means the time at which the right to exercise the
Rights shall terminate pursuant to Section 5.01 hereof.
(uu) "Trading Day", when used with respect to any securities, shall mean a day
on which the principal securities exchange in Canada or the United States
of America on which such securities are listed or admitted to trading is
open for the transaction of business or, if the securities are not listed
or admitted to trading on any securities exchange in Canada or the United
States of America, a Business Day.
(vv) "U.S.-Canadian Exchange Rate" means, on any date:
(i) if on such date the Bank of Canada sets a noon spot rate of exchange
for the conversion of United States dollars into Canadian dollars, such
rate, or
(ii) in any other case, the rate for the conversion of United States
dollars into Canadian dollars as determined by the Board acting in good
faith.
(ww) "U.S. Dollar Equivalent" of any amount which is expressed in Canadian
dollars means, on any date, the United States dollar equivalent of such
amount determined by multiplying such amount by the Canadian-U.S. Exchange
Rate in effect on such date.
(xx) "Voting Shares" means the Common Shares of the Corporation and any other
shares in the capital of the Corporation entitled to vote generally in the
election of directors.
1.02 HEADINGS
The division of this Agreement into Articles and Sections and the insertion of
headings and a table of contents are for convenience of reference only and shall
not affect the construction or interpretation of this Agreement. The terms "this
Agreement", "hereof", "hereunder" and similar expressions refer to this
Agreement and not to any particular Article, Section or other portion hereof and
include any agreement supplemental hereto. Unless something in the subject
matter or context is inconsistent therewith, references herein to Articles and
Sections are to Articles and Sections of this Agreement.
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1.03 EXTENDED MEANINGS
In this Agreement words importing the singular number only shall include the
plural and vice versa and words importing the masculine shall include the
feminine gender and vice versa.
1.04 CURRENCY
All references to currency herein are to lawful money of the United States of
America unless otherwise specified.
1.05 SCHEDULE
The form of the Rights Certificate is annexed hereto as Schedule 1 and
incorporated by reference and deemed to be a part hereof.
1.06 LANGUAGE CLAUSE
Les parties aux presentes ont exige que la presente convention ainsi que tous
les documents et avis qui s'y rattachent et/ou qui en decouleront soient rediges
en langue anglaise. The parties hereto have required that this Agreement and all
documents and notices related thereto or resulting therefrom be drawn up in
English.
1.07 ACTING JOINTLY OR IN CONCERT
For purposes of this Agreement, a Person is acting jointly or in concert with
every Person who is a party to any agreement, commitment or understanding,
whether formal or informal, with the first Person or any Associate or Affiliate
thereof for the purpose of acquiring or offering to acquire Voting Shares (other
than customary agreements with and between underwriters and/or banking group
members and/or selling group members with respect to a public offering or
private placement of securities or pledges of securities in the ordinary course
of business).
1.08 AS NOW ENACTED
For the purposes of this Agreement, references to statutes, as now enacted,
shall mean as in force and effect on April 22, 1999.
ARTICLE 2 -- THE RIGHTS
2.01 INITIAL EXERCISE PRICE, EXERCISE OF RIGHTS AND DETACHMENT OF RIGHTS
(1) Subject to the provisions hereof including, without limiting the
generality of the foregoing, Section 2.03, each Common Share now or, until
the earlier of the Separation Time and the Expiration Time, hereafter
issued shall have one Right associated therewith. Subject to the
provisions hereof and subject to adjustment as herein set forth, each
Right shall entitle the holder thereof, after the Separation Time, to
purchase one Common Share for the Exercise Price or its Canadian Dollar
Equivalent. Notwithstanding any other provision of this Agreement, any
Rights held by the Corporation or by any of its Subsidiaries or
Beneficially Owned by an Acquiring Person shall be void.
(2) Until the Separation Time:
(a) no Right shall be exercisable and no Right may be exercised,
(b) each Right shall be evidenced by the certificate for the associated
Common Share, and
(c) each Right shall be transferable only together with, and shall be
transferred by a transfer of, such associated Common Share.
(3) After the Separation Time but prior to the Expiration Time the Rights:
(a) may be exercised in accordance with the provisions hereof, and
(b) shall be transferable independently of the Common Shares.
Promptly following the Separation Time the Corporation will prepare and
the Rights Agent shall give to each holder of Common Shares of record as
of the Separation Time (other than an
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Acquiring Person and, in respect of any Rights Beneficially Owned by such
Acquiring Person which are not held of record by such Acquiring Person,
the holder of record of such Rights (a "Nominee")),
(c) a certificate (a "Rights Certificate") substantially in the form
annexed hereto as Schedule 1 appropriately completed, representing the
number of Rights held by such holder as at the Separation Time and
having such marks of identification or designation and such legends,
summaries or endorsements printed thereon as the Corporation may deem
appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any law or with any
rule or regulation made pursuant thereto or with any rule or regulation
of any stock exchange or quotation system on which the Rights may from
time to time be listed or traded, or to conform to usage, and
(d) a disclosure statement describing the Rights.
(4) Rights may be exercised on any Business Day after the Separation Time and
prior to the Expiration Time by submitting to the Rights Agent the Rights
Certificate evidencing such Rights with an election to exercise such
Rights (an "Election to Exercise") substantially in the form attached to
the Rights Certificate duly completed and accompanied by payment by
certified cheque or money order payable to the order of the Corporation of
a sum equal to the Exercise Price multiplied by the number of Rights being
exercised and a sum sufficient to cover any transfer tax or charge which
may be payable in respect of any transfer involved in the transfer or
delivery of Rights Certificates or the issuance or delivery of
certificates for Common Shares in a name other than that of the holder of
the Rights being exercised.
(5) Upon receipt of a Rights Certificate together with a duly completed
Election to Exercise and the payments provided for in Section 2.01(4), the
Rights Agent (unless otherwise instructed by the Corporation in the event
that the Corporation is of the opinion that the Rights cannot be exercised
in accordance with this Agreement) shall thereupon promptly:
(a) requisition from the Corporation or its transfer agent for Common
Shares, certificates for the number of Common Shares to be purchased;
(b) after receipt of such Common Share certificates, remit the payments
provided for in Section 2.01(4) to the Corporation and deliver the
share certificates to or to the order of the registered holder of such
Rights Certificate, registered in such name or names as may be
designated by such holder;
(c) when appropriate, requisition from the Corporation the amount of cash
to be paid in lieu of issuing fractional Common Shares; and
(d) tender to the Corporation all payments received on exercise of the
Rights.
(6) If the holder of any Rights exercises less than all the Rights evidenced
by such holder's Rights Certificate, a new Rights Certificate evidencing
the remaining unexercised Rights shall be issued by the Rights Agent to
such holder or to such holder's duly authorized assigns.
(7) The Corporation shall:
(a) promptly deliver the share certificates requisitioned by the Rights
Agent pursuant to Section 2.01(5)(a) to the Rights Agent;
(b) take all such action as may be necessary and reasonably within its
power to ensure that all Common Shares delivered upon the exercise of
the Rights shall, at the time of delivery of the certificates for such
shares (subject to payment of the Exercise Price), be duly and validly
authorized, executed, issued and delivered as fully paid and
non-assessable shares;
(c) take all such action as may be necessary and reasonably within its
power to comply with the applicable requirements of securities laws in
Canada and the United States of America in connection with the issuance
and delivery of the Rights Certificates and the issuance of Common
Shares upon the exercise of the Rights;
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(d) use reasonable efforts to cause all Common Shares issued upon the
exercise of the Rights to be listed upon issuance on The Montreal
Exchange, The Toronto Stock Exchange, the New York Stock Exchange and
such other exchanges, if any, that the Corporation determines are
appropriate;
(e) cause to be reserved and kept available out of the authorized and
unissued Common Shares, the number of Common Shares that, as provided
in this Agreement, will from time to time be sufficient to permit the
exercise in full of all outstanding Rights;
(f) pay when due and payable any and all federal, provincial and state
transfer taxes of Canada and the United States of America (except, for
greater certainty, any income taxes of the holder or exercising holder
or any liability of the Corporation to withhold tax) and charges which
may be payable in respect of the original issuance or delivery of the
Rights Certificates, provided that the Corporation shall not be
required to pay any transfer tax or charge which may be payable in
respect of any transfer involved in the transfer or delivery of Rights
Certificates or the issuance or delivery of certificates for Common
Shares in a name other than that of the holder of the Rights being
transferred or exercised; and
(g) after the Separation Time, except as permitted by Section 5.01, not
take (or permit any Subsidiary to take) any action if at the time such
action is taken it is reasonably foreseeable that such action will
diminish substantially or otherwise eliminate the benefits intended to
be afforded by the Rights.
2.02 LEGEND ON COMMON SHARE CERTIFICATES
(1) Certificates issued for Common Shares after the Record Time but prior to
the earlier of the Separation Time and the Expiration Time shall have
printed on or affixed to them the following legend in, if appropriate,
both the English and French languages:
"Until the Separation Time (as defined in the Shareholder
Rights Agreement referred to below), this certificate also
evidences and entitles the holder hereof to certain Rights
as set forth in a Shareholder Rights Agreement made as of
December 14, 1989, (the "Rights Agreement") between Alcan
Aluminium Limited (the "Corporation") and The Royal Trust
Company, as Rights Agent, the terms of which are
incorporated herein by reference and a copy of which is on
file at the principal executive offices of the Corporation.
Under certain circumstances, as set forth in the Rights
Agreement, such Rights may be amended, redeemed, may expire,
may become void if, in certain cases, they are "Beneficially
Owned" by an "Acquiring Person" (as such terms are defined
in the Rights Agreement) or a transferee thereof, or may be
evidenced by separate certificates and may no longer be
evidenced by this certificate. The Corporation will mail or
arrange for the mailing of a copy of the Rights Agreement to
the holder of this certificate without charge within five
days after the receipt of a written request therefor."
(2) Notwithstanding Section 2.02(1) any certificate for Common Shares issued
after April 24, 1995 shall contain the following legend in, if
appropriate, both the English and French languages:
"Until the Separation Time (as defined in the Shareholder
Rights Agreement referred to below), this certificate also
evidences and entitles the holder hereof to certain Rights
as set forth in a Shareholder Rights Agreement made as of
December 14, 1989, as amended and restated from time to time
(the "Rights Agreement") between Alcan Aluminium Limited
(the "Corporation") and The R-M Trust Company (successor to
The Royal Trust Company), as Rights Agent (the "Rights
Agent"), the terms of which are incorporated herein by
reference and a copy of which is on file at the principal
executive offices of the Corporation. Under certain
circumstances, as set forth in the Rights Agreement, such
Rights may be amended, redeemed, may expire, may become void
if, in certain circumstances, they are "Beneficially Owned"
by an "Acquiring Person"
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(as such terms are defined in the Rights Agreement) or a
transferee thereof, or may be evidenced by separate
certificates and may no longer be evidenced by this
certificate. The Corporation will mail or arrange for the
mailing of a copy of the Rights Agreement to the holder of
this certificate without charge within five days after the
receipt of a written request therefor."
(3) Notwithstanding Section 2.02(1) any certificate for Common Shares issued
after April 22, 1999 shall contain the following legend in, if
appropriate, both the English and French languages:
"Until the Separation Time (as defined in the Shareholder
Rights Agreement referred to below), this certificate also
evidences and entitles the holder hereof to certain Rights
as set forth in a Shareholder Rights Agreement made as of
December 14, 1989, as amended and restated from time to time
(the "Rights Agreement") between Alcan Aluminium Limited
(the "Corporation") and CIBC Mellon Trust Company (successor
to The Royal Trust Company), as Rights Agent (the "Rights
Agent"), the terms of which are incorporated herein by
reference and a copy of which is on file at the principal
executive offices of the Corporation. Under certain
circumstances, as set forth in the Rights Agreement, such
Rights may be amended, redeemed, may expire, may become void
if, in certain circumstances, they are "Beneficially Owned"
by an "Acquiring Person" (as such terms are defined in the
Rights Agreement) or a transferee thereof, or may be
evidenced by separate certificates and may no longer be
evidenced by this certificate. The Corporation will mail or
arrange for the mailing of a copy of the Rights Agreement to
the holder of this certificate without charge within five
days after the receipt of a written request therefor."
(4) With respect to any share certificate for Common Shares which contains the
legend referred to in Sections 2.02(1) or (2), from and after April 22,
1999, such legend shall be deemed to be a reference to the Shareholder
Rights Agreement made as of December 14, 1989, as amended and restated
from time to time thereafter.
(5) Certificates representing Common Shares that are issued and outstanding at
any time shall evidence one Right for each Common Share evidenced thereby
notwithstanding the absence of a legend in accordance with Sections
2.02(1), (2) or (3).
2.03 ADJUSTMENTS
(1) The Exercise Price, the number and kind of securities subject to purchase
upon exercise of each Right and the number of Rights outstanding are
subject to adjustment from time to time as provided in this Section 2.03.
(2) If the Corporation shall at any time after the Record Time but prior to
the Expiration Time:
(a) declare or pay a dividend on the Common Shares payable in Common
Shares or Convertible Securities other than pursuant to any optional
stock dividend programme,
(b) subdivide or change the then outstanding Common Shares into a greater
number of Common Shares,
(c) combine or change the then outstanding Common Shares into a smaller
number of Common Shares, or
(d) issue any Common Shares or Convertible Securities in respect of, in
lieu of or in exchange for existing Common Shares in a
reclassification, amalgamation, arrangement or consolidation,
the Exercise Price and the number of Rights outstanding or, if the payment
or effective date thereof shall occur after the Separation Time, the
securities purchasable upon exercise of the Rights shall be adjusted in
the following manner.
If the Exercise Price and the number of Rights outstanding are to be
adjusted:
(e) the Exercise Price in effect after such adjustment shall be equal to
the Exercise Price in effect immediately prior to such adjustment
divided by the number of Common Shares that a holder
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of one Common Share immediately prior to such dividend, subdivision,
change, combination or issuance would hold thereafter as a result
thereof (such denominator being the "Expansion Factor"), and
(f) each Right held prior to such adjustment shall become that number of
Rights equal to the Expansion Factor and, if such adjustment is to be
made prior to the Separation Time, the adjusted number of Rights shall
be deemed to be distributed among the Common Shares with respect to
which the original Rights were associated (if they remain outstanding)
and the shares issued in respect of such dividend, subdivision, change,
combination or issuance, so that each such Common Share shall have
exactly one Right associated with it.
If the securities purchasable upon the exercise of the Rights are to be
adjusted, the securities purchasable upon the exercise of each Right after
such adjustment shall be the securities that a holder of the securities
purchasable upon the exercise of one Right immediately prior to such
dividend, subdivision, change, combination or issuance would hold
thereafter as a result thereof.
If, after the Record Time but prior to the Expiration Time, the
Corporation issues any securities in a transaction of a type described in
the first sentence of this Section 2.03(2) which are exchangeable for or
convertible into or give a right to acquire Common Shares, such securities
shall be treated herein as nearly equivalent to Common Shares as may be
practicable and appropriate under the circumstances and the Corporation
and the Rights Agent shall amend this Agreement in order to effect such
treatment; provided that no such amendment may materially adversely affect
the interests of the holders of the Rights generally.
In the event the Corporation shall at any time after the Record Time and
prior to the Separation Time issue any Common Share otherwise than in a
transaction referred to in this Section 2.03(2), each Common Share so
issued shall automatically have one new Right associated with it which
Right shall be evidenced by the certificate representing such Common
Share.
(3) If the Corporation at any time after the Record Time but prior to the
Expiration Time fixes a record date for the making of a distribution to
all holders of Common Shares of rights or warrants entitling them (for a
period expiring within 45 calendar days after such record date) to
subscribe for or purchase Common Shares (or securities convertible into or
exchangeable for or carrying a right to purchase or subscribe for Common
Shares) at a price per Common Share (or, if a security convertible into or
exchangeable for or carrying a right to purchase or subscribe for Common
Shares, having a conversion, exchange or exercise price (including the
price required to be paid to purchase such convertible or exchangeable
security or right per share)) less than 95% of the Market Price per Common
Share on such record date, the Exercise Price shall be adjusted by
multiplying the Exercise Price in effect immediately prior to such record
date by a fraction, the numerator of which shall be the number of Common
Shares outstanding on such record date plus the number of Common Shares
which the aggregate offering price of the total number of Common Shares so
to be offered (and/or the aggregate initial conversion, exchange or
exercise price of the convertible or exchangeable securities or rights so
to be offered (including the price required to be paid to purchase such
convertible or exchangeable securities or rights)) would purchase at such
Market Price and the denominator of which shall be the number of Common
Shares outstanding on such record date plus the number of additional
Common Shares to be offered for subscription or purchase (or into which
the convertible or exchangeable securities or rights so to be offered are
initially convertible, exchangeable or exercisable). In case such
subscription price may be paid in a consideration all or part of which is
in a form other than cash, the value of such consideration shall be as
determined in good faith by the Board. To the extent that such rights or
warrants are not exercised prior to the expiration thereof, the Exercise
Price shall be readjusted to the Exercise Price that would then be in
effect based on the number of Common Shares (or securities convertible
into or exchangeable for Common Shares) actually issued upon the exercise
of such rights.
For the purposes of this Agreement, the granting of the right to purchase
Common Shares (whether from treasury or otherwise) pursuant to any (i)
Dividend Reinvestment Plan and/or (ii) Common Share purchase plan
providing for the investment of periodic optional payments
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and/or (iii) employee or executive or director benefit or similar plans
(so long as such right to purchase is in no case evidenced by the delivery
of rights or warrants) shall not be deemed to constitute an issue of
rights or warrants by the Corporation; provided, however, that, in the
case of any Dividend Reinvestment Plan or Common Share purchase plan, the
right to purchase Common Shares is at a price per share not less than 90%
of the then Market Price of the Common Shares.
(4) If the Corporation at any time after the Record Time but prior to the
Expiration Time fixes a record date for the making of a distribution to
all holders of Common Shares of evidences of indebtedness or assets (other
than a Regular Periodic Cash Dividend or a dividend paid in Common Shares)
or rights or warrants (excluding those referred to in Section 2.03(3)),
the Exercise Price shall be adjusted by multiplying the Exercise Price in
effect immediately prior to such record date by a fraction, the numerator
of which shall be the Market Price per Common Share on such record date
less the fair market value per Common Share (as determined in good faith
by the Board) of the evidences of indebtedness, assets, rights or warrants
to be so distributed and the denominator of which shall be the Market
Price per Common Share on such record date. Such adjustments shall be made
successively whenever such a record date is fixed, and in the event that
such a distribution is not so made, the Exercise Price shall be adjusted
to be the Exercise Price that would have been in effect if such record
date had not been fixed.
(5) Each adjustment made pursuant to this Section 2.03 shall be made as of:
(a) the payment or effective date for the applicable dividend,
subdivision, change, combination or issuance, in the case of an
adjustment made pursuant to Section 2.03(2), or
(b) the record date for the applicable dividend or distribution, in the
case of an adjustment made pursuant to Sections 2.03(3) or (4).
(6) Subject to a prior consent of the holders of Voting Shares or Rights
obtained as set forth in Sections 5.04(3) or (4) as applicable, if the
Corporation at any time after the Record Time but prior to the Expiration
Time issues any shares in the capital of the Corporation (other than
Common Shares), any rights or warrants to subscribe for or purchase any
such shares, or any securities convertible into or exchangeable for any
such shares and the Board, acting in good faith, determines that the
adjustments contemplated by Sections 2.03(2), (3) or (4) are not
applicable and the interests of the holders of the Rights will, as a
result thereof, be adversely affected or, if applicable, such adjustments
will not appropriately protect the interests of the holders of the Rights,
the Board may determine what adjustments to the Exercise Price, number of
Rights and/or securities purchasable upon exercise of the Rights would be
appropriate to protect the interests of the holders of the Rights and,
notwithstanding Sections 2.03(2), (3) or (4), such adjustments, rather
than, if applicable, the adjustments contemplated by Sections 2.03(2), (3)
or (4), shall be made and the Corporation and the Rights Agent shall amend
this Agreement as appropriate to provide for such adjustments.
(7) Notwithstanding anything herein to the contrary, no adjustment to the
Exercise Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Exercise Price, provided that
any adjustment which is not made as a result of the provisions of this
Section 2.03(7) shall be carried forward and taken into account in any
subsequent adjustment. Each adjustment to the Exercise Price made pursuant
to this Section 2.03 shall be rounded upward or downward to the nearest
cent. Whenever an adjustment to the Exercise Price is made pursuant to
this Section 2.03, the Corporation shall promptly:
(a) prepare a certificate setting forth such adjustment and a brief
statement of the facts accounting for such adjustment,
(b) file a copy of such certificate with the Rights Agent and each
transfer agent for the Common Shares, and
(c) mail a brief summary thereof to each holder of a Right.
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(8) Irrespective of any adjustment or change in the securities purchasable
upon exercise of the Rights, the Rights Certificates theretofore and
thereafter issued shall continue to express the securities so purchasable
which were expressed in the initial Rights Certificates issued hereunder.
(9) Notwithstanding anything contained in this Section 2.03 to the contrary,
the Corporation shall be entitled to make such reductions in the Exercise
Price, in addition to those adjustments expressly required by this Section
2.03, as and to the extent that in their good faith judgment the Board
shall determine to be advisable, in order that any:
(a) stock dividend;
(b) consolidation or subdivision of Common Shares;
(c) issuance (wholly or in part for cash) of Common Shares or securities
that by their terms are convertible into or exchangeable for Common
Shares; or
(d) issuance of rights, options or warrants referred to in this Section
2.03,
hereafter made by the Corporation to holders of its Common Shares, shall
not be taxable to such shareholders.
2.04 DATE ON WHICH EXERCISE IS EFFECTIVE
Each person in whose name any certificate for Common Shares is issued upon the
exercise of the Rights shall for all purposes be deemed to have become the
holder of record of the Common Shares represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and the payment of the Exercise
Price for such Rights (and any applicable transfer tax and other governmental
charge payable by the exercising holder hereunder) was made; provided, however,
that if the date of such surrender and payment is a date upon which the Common
Share transfer books of the Corporation are closed, such person shall be deemed
to have become the record holder of such shares on, and such certificates shall
be dated, the next succeeding Business Day on which the Common Share transfer
books of the Corporation are open.
2.05 EXECUTION, AUTHENTICATION, DELIVERY AND DATING OF RIGHTS CERTIFICATES
(1) The Rights Certificates shall be executed (either manually or by facsimile
signature) on behalf of the Corporation by any two officers of the
Corporation under its corporate seal or a facsimile thereof. Rights
Certificates bearing the manual or facsimile signatures of individuals who
were at any time the proper officers of the Corporation shall bind the
Corporation, notwithstanding that such individuals or any of them have
ceased to hold such offices prior to the countersignature and delivery of
such Rights Certificates as herein provided for.
(2) Promptly after the Corporation learns of the Separation Time, the
Corporation shall notify the Rights Agent of such Separation Time and,
subject to compliance with Section 2.01(7), shall deliver Rights
Certificates executed by the Corporation to the Rights Agent for
countersignature, and the Rights Agent shall countersign (manually or by
facsimile signature in a manner satisfactory to the Corporation) and give
such Rights Certificates to the holders of the Rights pursuant to Section
2.01(3) hereof. No Rights Certificates shall be valid for any purpose
unless countersigned by the Rights Agent as aforesaid.
(3) Each Rights Certificate shall be dated the date of countersignature
thereof.
2.06 REGISTRATION OF RIGHTS
(1) The Corporation shall cause a register (the "Rights Register") to be kept
after the Separation Time in which, subject to such reasonable regulations
as it may prescribe, the Corporation shall provide for the registration of
the Rights. The Rights Agent is hereby appointed "Rights Registrar" for
the purpose of maintaining the Rights Register for the Corporation and
registering the Rights and the transfers and exchanges of the Rights as
herein provided. If the Rights Agent ceases to be the Rights Registrar,
the Rights Agent shall have the right to examine the Rights Register at
all reasonable times.
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(2) After the Separation Time and prior to the Expiration Time, upon surrender
of any Rights Certificate and subject to the provisions of Sections
2.06(4) and (5), the Corporation shall execute, and the Rights Agent shall
countersign and deliver in the name of the holder or the designated
transferee or transferees, as required pursuant to the holder's
instructions, one or more new Rights Certificates evidencing the same
aggregate number of Rights as did the Rights Certificates so surrendered.
(3) All Rights issued upon any registration of transfer or exchange of Rights
Certificates shall be valid obligations of the Corporation and shall be
entitled to the same benefits under this Agreement as the Rights
surrendered upon such registration of transfer or exchange.
(4) Every Rights Certificate surrendered for transfer or exchange shall be
duly endorsed, or be accompanied by a written instrument of transfer in a
form satisfactory to the Corporation or the Rights Agent, as the case may
be, duly executed by the holder thereof or such holder's attorney duly
authorized in writing.
(5) As a condition to the issuance of any new Rights Certificate under this
Section 2.06, the Corporation may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in
relation thereto.
2.07 MUTILATED, DESTROYED, LOST AND STOLEN RIGHTS CERTIFICATES
(1) If any mutilated Rights Certificate is surrendered to the Rights Agent
prior to the Expiration Time, the Corporation shall execute and the Rights
Agent shall countersign and deliver in the name of the holder in exchange
therefor a new Rights Certificate evidencing the same number of Rights as
did the Rights Certificate so surrendered.
(2) If prior to the Expiration Time there is delivered to the Corporation and
the Rights Agent:
(a) evidence to their satisfaction of the destruction, loss or theft of
any Rights Certificate, and
(b) such security or indemnity as may be required by them to save each of
them and any of their agents harmless,
then, in the absence of notice to the Corporation or the Rights Agent that
such Rights Certificate has been acquired by a bona fide purchaser, the
Corporation shall execute and the Rights Agent shall countersign and
deliver in the name of the holder, in lieu of any such destroyed, lost or
stolen Rights Certificate, a new Rights Certificate evidencing the same
number of Rights as did the Rights Certificate so destroyed, lost or
stolen.
(3) As a condition to the issuance of any new Rights Certificate under this
Section 2.07, the Corporation may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in
relation thereto and any other expense (including the fees and expenses of
the Rights Agent) connected therewith.
(4) Every new Rights Certificate issued pursuant to this Section 2.07 in lieu
of any destroyed, lost or stolen Rights Certificate shall evidence an
original additional contractual obligation of the Corporation, whether or
not the destroyed, lost or stolen Rights Certificate shall be at any time
enforceable by anyone, and shall be entitled to all the benefits of this
Agreement equally and proportionally with any and all other Rights duly
issued hereunder.
2.08 PERSONS DEEMED OWNERS
Prior to due presentment of a Rights Certificate (or, prior to the Separation
Time, the associated Common Share certificate) for registration of transfer, the
Corporation, the Rights Agent and any agent of the Corporation or the Rights
Agent may deem and treat the person in whose name such Rights Certificate (or,
prior to the Separation Time, such Common Share certificate) is registered as
the absolute owner thereof and of the Rights evidenced thereby for all purposes
whatsoever. As used in this Agreement, unless the context otherwise requires,
the term "holder" of Rights shall mean the registered holder of such Rights (or,
prior to the Separation Time, the associated Common Shares).
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2.09 DELIVERY AND CANCELLATION OF CERTIFICATES
All Rights Certificates surrendered upon exercise or for registration of
transfer or exchange shall, if surrendered to any person other than the Rights
Agent, be delivered to the Rights Agent and, in any case, shall be promptly
cancelled by the Rights Agent. The Corporation may at any time deliver to the
Rights Agent for cancellation any Rights Certificates previously countersigned
and delivered hereunder which the Corporation may have acquired in any manner
whatsoever, and all Rights Certificates so delivered shall be promptly cancelled
by the Rights Agent. No Rights Certificate shall be countersigned in lieu of or
in exchange for any Rights Certificates cancelled as provided in this Section
2.09, except as expressly permitted by this Agreement. The Rights Agent shall
destroy all cancelled Rights Certificates and promptly thereafter deliver a
certificate of destruction to the Corporation.
2.10 AGREEMENT OF RIGHTS HOLDERS
Every holder of Rights, by accepting the same, consents and agrees with the
Corporation and the Rights Agent and with every other holder of Rights that:
(a) such holder shall be bound by and subject to the provisions of this
Agreement, as amended from time to time in accordance with the terms
hereof in respect of all Rights held;
(b) prior to the Separation Time, each Right will be transferable only
together with, and will be transferred by a transfer of, the associated
Common Shares and after the Separation Time, the Rights shall be
transferable only on the Rights Register as provided herein;
(c) prior to due presentment of a Rights Certificate (or, prior to the
Separation Time, the associated Common Share certificate) for transfer,
the Corporation, the Rights Agent and any agent of the Corporation or
the Rights Agent may deem and treat the person in whose name the Rights
Certificate (or, prior to the Separation Time, the associated Common
Share certificate) is registered as the absolute owner thereof and of
the Rights evidenced thereby (notwithstanding any notations of
ownership or writing on such Rights Certificate or the associated
Common Share certificate made by anyone other than the Corporation or
the Rights Agent) for all purposes whatsoever, and neither the
Corporation nor the Rights Agent shall be affected by any notice to the
contrary;
(d) without the approval of any holder of Rights and upon the sole
authority of the Board acting in good faith this Agreement may be
supplemented or amended from time to time pursuant and subject to
Section 2.03 or Section 5.04;
(e) if such holder at any time becomes an Acquiring Person or otherwise
becomes subject to the provisions of Section 3.01(2), the Rights held
by such holder shall immediately become void pursuant to the provisions
of Section 3.01(2);
(f) such holder of Rights has waived his right to receive any fractional
Right or any fractional Share or other security upon exercise of a
Right (except as specifically provided herein); and
(g) notwithstanding anything in this Agreement to the contrary, neither
the Corporation nor the Rights Agent shall have any liability to any
holder of a Right or any other Person as a result of its inability to
perform any of its obligations under this Agreement by reason of any
preliminary or permanent injunction or other order, decree or ruling
issued by a court of competent jurisdiction or by a governmental,
regulatory or administrative agency or commission, or any statute,
rule, regulation or executive order promulgated or enacted by any
governmental authority, prohibiting or otherwise restraining
performance of such obligation.
ARTICLE 3 -- EFFECT OF CERTAIN TRANSACTIONS
3.01 FLIP-IN EVENT
(1) Subject to Section 3.01(2) and Section 5.01, if a Flip-In Event occurs
prior to the Expiration Time, the Corporation shall take such action as is
necessary to ensure and provide that, except as provided below, each Right
shall thereafter constitute the right to purchase from the Corporation,
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upon the exercise thereof in accordance with the terms hereof, that number
of Common Shares of the Corporation having an aggregate Market Price on
the date of consummation or occurrence of such Flip-In Event equal to
twice the Exercise Price for an amount in cash equal to the Exercise Price
(such right to be appropriately adjusted in a manner analogous to the
applicable adjustment provided for in Section 2.03 in the event that after
such date of consummation or occurrence an event of a type analogous to
any of the events described in Section 2.03 shall have occurred with
respect to such Common Shares).
(2) Notwithstanding the foregoing, upon the occurrence of any Flip-In Event,
any Rights that are or were Beneficially Owned on or after the Stock
Acquisition Date by:
(i) an Acquiring Person (or any Affiliate or Associate of an Acquiring
Person or any Person acting jointly or in concert with an Acquiring
Person or any Affiliate or Associate of an Acquiring Person), or
(ii) a transferee, direct or indirect, from an Acquiring Person (or any
Affiliate or Associate of an Acquiring Person or any Person acting
jointly or in concert with an Acquiring Person or any Affiliate or
Associate of an Acquiring Person) in a transfer, whether or not for
consideration, that the Board, acting in good faith has determined is
part of a plan, arrangement or scheme of an Acquiring Person (or any
Affiliate or Associate of an Acquiring Person) that has the purpose or
effect of avoiding clause (i) of this Section 3.01(2),
shall become void and any holder of such Rights (including transferees)
shall thereafter have no right to exercise such Rights under any provision
of this Agreement or otherwise.
From and after the Separation Time, the Corporation shall do all such acts
and things as shall be necessary and within its power to ensure compliance
with the provisions of this Section 3.01, including without limitation,
all such acts and things as may be required to satisfy the requirements of
the Canada Business Corporations Act, the Securities Act (Ontario) and the
securities laws or comparable legislation of each of the provinces of
Canada, the United States of America and each of the states thereof in
respect of the issue of Common Shares upon the exercise of Rights in
accordance with this Agreement.
(3) Any Rights Certificate issued pursuant to Section 2.01 that represents
Rights Beneficially Owned by a Person described in either clauses (i) or
(ii) of Section 3.01(2) or transferred to any nominee of any such Person
and any Rights Certificates issued upon transfer, exchange, replacement or
adjustment of any other Rights Certificates referred to in this sentence
shall contain or will be deemed to contain the following additional
legend:
"The Rights represented by this Rights Certificate represent
Rights Beneficially Owned by an Acquiring Person (as such
terms are defined in the Rights Agreement). This Rights
Certificate and the Rights represented hereby shall become
void in the circumstances specified in Section 3.01(2) of the
Shareholder Rights Agreement.";
provided that the Rights Agent shall not be under any responsibility to
ascertain the existence of facts that would require the imposition of such
legend but shall be required to impose such legend only if instructed to
do so by the Corporation or if a holder fails to certify upon transfer or
exchange in the space provided on the Rights Certificate that the Rights
represented thereby are not, and, to the best of such holder's knowledge,
never have been, Beneficially Owned by an Acquiring Person after such
person became an Acquiring Person.
ARTICLE 4 -- THE RIGHTS AGENT
4.01 GENERAL
(1) The Corporation hereby appoints the Rights Agent to act as agent for the
Corporation and the holders of Rights in accordance with the terms and
conditions hereof, and the Rights Agent hereby accepts such appointments.
The Corporation may upon such terms as it considers appropriate from time
to time appoint such Co-Rights Agents as it may deem necessary or
desirable. If the
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Corporation appoints one or more Co-Rights Agents, the respective duties
of the Rights Agent and Co-Rights Agents shall be as the Corporation may
determine. The Corporation agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to
time, on demand by the Rights Agent, its reasonable expenses and counsel
fees and other disbursements incurred in the administration and execution
of this Agreement and the exercise and performance of its duties
hereunder. The Corporation also agrees to indemnify the Rights Agent for,
its officers, directors, employees and agents for, and to hold it harmless
against, any loss, liability or expense, if incurred without negligence,
bad faith or wilful misconduct on the part of the Rights Agent for
anything done or omitted to be done by the Rights Agent in connection with
the exercise and performance of its duties hereunder, including the costs
and expenses of defending against any claim of liability, which right to
indemnification shall survive the termination of this Agreement or the
removal or resignation of the Rights Agent.
(2) The Rights Agent shall be protected and shall incur no liability for or in
respect of any action taken, suffered or omitted to be taken by it in
connection with the exercise and performance of its duties hereunder in
reliance upon any certificate for Common Shares, Rights Certificate,
certificate for other securities of the Corporation, instrument of
assignment or transfer, power of attorney, endorsement, affidavit, letter,
notice, direction, consent, certificate, statement or other paper or
document believed by it to be genuine and to be signed, executed and,
where necessary, verified or acknowledged, by the proper Person or
Persons.
4.02 MERGER OR CONSOLIDATION OR CHANGE OF NAME OF THE RIGHTS AGENT
(1) Any corporation into which the Rights Agent or any successor Rights Agent
may be merged or amalgamated or with which it may be consolidated, or any
corporation resulting from any merger, amalgamation or consolidation to
which the Rights Agent or any successor Rights Agent is a party, or any
corporation succeeding to the shareholder or stockholder services business
of the Rights Agent or any successor Rights Agent, will be the successor
to the Rights Agent under this Agreement without the execution or filing
of any paper or any further act on the part of any of the parties hereto,
provided that such corporation would be eligible for appointment as a
successor Rights Agent under the provisions of Section 4.04. In case at
the time such successor Rights Agent succeeds to the agency created by
this Agreement any of the Rights Certificates have been countersigned but
not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates have not been countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such
cases such Rights Certificates shall have the full force provided for in
the Rights Certificates and in this Agreement.
(2) In case at any time the name of the Rights Agent is changed and at such
time any of the Rights Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior
name and deliver Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior
name or in its changed name; and in all such cases such Rights
Certificates shall have the full force provided for in the Rights
Certificates and in this Agreement.
4.03 ENTITLEMENTS OF THE RIGHTS AGENT
The Rights Agent undertakes the duties and obligations imposed by this Agreement
upon the following terms and conditions, by which the Corporation and every
holder of Rights, by accepting the same, shall be bound:
(a) the Rights Agent may retain and consult with legal counsel (who may
be legal counsel for the Corporation), or such other experts or
advisors as the Rights Agent deems necessary to carry out its duties
under this Agreement, and the opinion of such counsel or other expert
or advisor shall be full and complete authorization and protection to
the Rights Agent with respect to any action taken or omitted by it in
good faith and in accordance with such opinion;
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(b) whenever in the performance of its duties under this Agreement the
Rights Agent deems it necessary or desirable that any fact or matter be
proved or established by the Corporation prior to taking or suffering
any action hereunder, such fact or matter (unless other evidence in
respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed by persons
believed by the Rights Agent to be Chairman of the Board, President,
Chief Executive Officer, any Vice President, Chief Financial Officer,
the Secretary, or any Assistant Secretary of the Corporation and
delivered to the Rights Agent; and such certificate shall be full
authorization to the Rights Agent for any action taken or suffered in
good faith by it under the provisions of this Agreement in reliance
upon such certificate;
(c) the Rights Agent shall be liable hereunder for its own negligence,
bad faith or wilful misconduct;
(d) the Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the
certificates for Common Shares or the Rights Certificates (except its
countersignature thereof) or be required to verify the same, and all
such statements and recitals are and shall be deemed to have been made
by the Corporation only;
(e) the Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof
(except the due authorization, execution and delivery hereof by the
Rights Agent) or in respect of the validity or execution of any Common
Share certificate or Rights Certificate (except its countersignature
thereof); nor shall it be responsible for any breach by the Corporation
of any covenant or condition contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any change in the
exercisability of the Rights (including the Rights becoming void
pursuant to Section 3.01(2)) or any adjustment required under the
provisions of Section 2.03 or for the manner, method or amount of any
such adjustment or the ascertaining of the existence of facts that
would require any such adjustment (except with respect to the exercise
of Rights after receipt of the certificate contemplated by Section 2.03
describing any such adjustment); nor shall it by any act hereunder be
deemed to make any representation or warranty as to the authorization
of any Common Shares to be issued pursuant to this Agreement or any
Rights or as to whether any Common Shares will, when issued, be duly
and validly authorized, executed, issued and delivered as fully paid
and non-assessable;
(f) the Corporation shall perform, execute, acknowledge and deliver or
cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be
required by the Rights Agent for the carrying out or performing by the
Rights Agent of the provisions of this Agreement;
(g) the Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its agency duties
hereunder from any person believed by the Rights Agent to be the Chief
Executive Officer or the Chief Legal Officer or the Chief Financial
Officer of the Corporation, and to apply to such persons for advice or
instructions in connection with its duties, and it shall not be liable
for any action taken or suffered by it in good faith in accordance with
instructions of any such person;
(h) the Rights Agent and any shareholder, director, officer or employee
of the Rights Agent may buy, sell or deal in Common Shares, Rights or
other securities of the Corporation or become pecuniarily interested in
any transaction in which the Corporation may be interested, or contract
with or lend money to the Corporation or otherwise act as fully and
freely as though it were not Rights Agent under this Agreement. Nothing
herein shall preclude the Rights Agent from acting in any other
capacity for the Corporation or for any other legal entity; and
(i) the Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys or agents, and the Rights Agent shall not be
answerable or accountable for any act, default, neglect or
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misconduct of any such attorneys or agents or for any loss to the
Corporation resulting from any such act, default, neglect or
misconduct, provided reasonable care was exercised in the selection and
continued employment thereof.
4.04 CHANGE OF THE RIGHTS AGENT
The Rights Agent may resign and be discharged from its duties under this
Agreement upon 60 calendar days' notice (or such lesser notice as is acceptable
to the Corporation) to the Corporation, to each transfer agent of Common Shares
by registered or certified mail and to the holders of Rights. The Corporation
may remove the Rights Agent upon 60 calendar days' notice to the Rights Agent,
to each transfer agent of the Common Shares by registered or certified mail and
to the holders of Rights. If the Rights Agent resigns or is removed or otherwise
becomes incapable of acting, the Corporation shall appoint a successor to the
Rights Agent. If the Corporation fails to make such appointment within a period
of 30 calendar days after such removal or after it has been notified in writing
of such resignation or incapacity by the resigning or incapacitated Rights Agent
or by the holder of any Rights (which holder shall, with such notice, submit
such holder's Rights Certificate for inspection by the Corporation), then the
holder of any Rights may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Corporation or by such a court, shall be a corporation incorporated under
the laws of Canada or a province thereof authorized to carry on the business of
a trust company in the Province of Ontario. After appointment, the successor
Rights Agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Rights Agent without
further act or deed; but the predecessor Rights Agent shall deliver and transfer
to the successor Rights Agent any property at the time held by it hereunder, and
execute and deliver any further assurance, conveyance, act or deed necessary for
the purpose. Not later than the effective date of any such appointment, the
Corporation shall file notice thereof in writing with the predecessor Rights
Agent and each transfer agent of the Common Shares, and give a notice thereof to
the holders of the Rights. Failure to give any notice provided for in this
Section 4.04 or any defect therein shall not affect the legality or validity of
the resignation or removal of the Rights Agent or the appointment of the
successor Rights Agent, as the case may be.
ARTICLE 5 -- MISCELLANEOUS
5.01 REDEMPTION, WAIVER AND TERMINATION
(1) Subject to the prior consent of the holders of Voting Shares or Rights
obtained as set forth in Sections 5.04(3) or (4), as applicable, the Board
acting in good faith may, at its option, at any time prior to the
provisions of Sections 3.01 becoming applicable as a result of the
occurrence of a Flip-In Event, elect to redeem all but not less than all
of the then outstanding Rights at a redemption price of $0.01 per Right
appropriately adjusted in a manner analogous to the applicable adjustment
provided for in Section 2.03 in the event that an event of the type
analogous to any of the events described in Section 2.03 shall have
occurred (such redemption price being herein referred to as the
"Redemption Price").
(2) The Board may, until a Flip-In Event shall occur, upon written notice
delivered to the Rights Agent, determine to waive the application of
Section 3.01 to such particular Flip-In Event but only if such Flip-In
Event would occur as a result of a Take-Over Bid made by way of a
Take-Over Bid circular to all holders of Voting Shares of record; provided
that if the Board waives the application of Section 3.01 to a particular
Flip-In Event, the Board shall be deemed to have waived the application of
Section 3.01 to any other Flip-In Event, that would occur as a result of a
Take-Over Bid which is made by means of a Take-Over Bid circular to all
holders of Voting Shares of record prior to the expiry of any Take-Over
Bid in respect of which a waiver is, or is deemed to have been, granted
under this Section 5.01(2).
(3) Notwithstanding Section 5.01(2), the Board may also, with respect to any
Flip-In Event, waive the application of Section 3.01 to that Flip-In
Event, provided that both of the following conditions are satisfied:
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(i) the Board has determined that the Acquiring Person became an
Acquiring Person by inadvertence and without any intent that he would
become an Acquiring Person; and
(ii) such Acquiring Person has reduced his Beneficial Ownership of Voting
Shares such that at the time of waiver pursuant to this Section 5.01(3)
he is no longer an Acquiring Person.
(4) If the Board elects or is deemed to have elected to redeem the Rights, the
right to exercise the Rights will thereupon, without further action and
without notice, terminate and each Right will after redemption be null and
void and the only right thereafter of the holders of Rights will be to
receive the Redemption Price and no further Rights shall thereafter be
issued.
(5) Within 10 calendar days after the Board electing or having been deemed to
have elected to redeem the Rights, the Corporation shall give notice of
redemption to the holders of the then outstanding Rights by mailing such
notice to each such holder at its last address as it appears upon the
registry books of the Rights Agent or, prior to the Separation Time, on
the registry books of the Corporation for the Common Shares. Any notice
which is mailed in the manner herein provided will be deemed given,
whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption
Price will be made. The failure to give or any defect in such notice shall
not affect the validity of such redemption.
(6) Where a Take-Over Bid that is not a Permitted Bid or Competing Permitted
Bid is withdrawn or otherwise terminated after the Separation Time has
occurred and prior to the occurrence of a Flip-In Event, the Board may
elect to redeem all the outstanding Rights at the Redemption Price.
(7) Upon the Rights being redeemed pursuant to Section 5.01(6), all the
provisions of this Agreement shall continue to apply as if the Separation
Time had not occurred and Rights Certificates representing the number of
Rights held by each holder of record of Common Shares, as of the
Separation Time had not been mailed to each such holder and for all
purposes of this Agreement the Separation Time shall be deemed not to have
occurred.
(8) In the event that prior to the occurrence of a Flip-In Event a Person
acquires, pursuant to a Permitted Bid, a Competing Permitted Bid or an
Exempt Acquisition, outstanding Voting Shares, then the Board shall
immediately upon the consummation of such acquisition without further
formality be deemed to have elected to redeem the Rights at the Redemption
Price.
5.02 EXPIRATION
No Person shall have any rights pursuant to this Agreement or in respect of any
Right after the Expiration Time, except the Rights Agent as specified in Section
4.01(1).
5.03 ISSUANCE OF NEW RIGHTS CERTIFICATES
Notwithstanding any of the provisions of this Agreement or of the Rights to the
contrary, the Corporation may, at its option, issue new Rights Certificates
evidencing Rights in such form as may be approved by the Board to reflect any
adjustment or change in the number or kind or class of shares purchasable upon
exercise of Rights made in accordance with the provisions of this Agreement.
5.04 SUPPLEMENTS AND AMENDMENTS
(1) The Corporation may from time to time amend this Agreement with the
approval of the Rights Agent but without the consent of any holder of
Rights or the holders of Voting Shares in order to correct a clerical or
typographical error or to maintain the validity and effectiveness of this
Agreement as a result of any change in any applicable laws, rules or
regulatory requirements.
(2) The Corporation may, prior to the date of the shareholders' meeting
referred to in Section 5.15, supplement or amend this Agreement without
the approval of any of the holders of Rights or Voting Shares (whether or
not such action would materially adversely affect the interest of the
holders of Rights generally) where the Board acting in good faith deems
such action necessary or desirable. Notwithstanding anything in this
Section 5.04 to the contrary, no such supplement or amendment shall be
made to the provisions of Article 4 except with the written concurrence of
the Rights Agent to such supplement or amendment.
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<PAGE> 56
(3) Subject to Section 5.04(1), the Corporation may, with the prior consent of
the holders of Voting Shares obtained as set forth below, at any time
prior to the Separation Time, amend, vary or rescind any of the provisions
of this Agreement and the Rights (whether or not such action would
materially adversely affect the interests of the holders of Rights
generally). Such consent shall be deemed to have been given if the action
requiring such approval is authorized by the affirmative vote of a
majority of the votes cast by Independent Shareholders present or
represented at and entitled to be voted at a meeting of the holders of
Voting Shares duly called and held in compliance with applicable laws and
the articles and by-laws of the Corporation.
(4) The Corporation may, with the prior consent of the holders of Rights, at
any time on or after the Separation Time and before the Expiration Time,
amend, vary or delete any of the provisions of this Agreement and the
Rights (whether or not such action would materially adversely affect the
interests of the holders of Rights generally), provided that no such
amendment, variation or deletion shall be made to the provisions of
Article 4 except with the written concurrence of the Rights Agent thereto.
Such consent shall be deemed to have been given if such amendment,
variation or deletion is authorized in the manner specified in Section
5.04(5).
(5) Any approval of the holders of Rights shall be deemed to have been given
if the action requiring such approval is authorized by the affirmative
votes of the holders of Rights present or represented at and entitled to
be voted at a meeting of the holders of Rights and representing a majority
of the votes cast in respect thereof. For the purposes hereof, each
outstanding Right (other than Rights which are void pursuant to the
provisions hereof) shall be entitled to one vote, and the procedures for
the calling, holding and conduct of the meeting shall be those, as nearly
as may be, which are provided in the Corporation's by-laws and the Canada
Business Corporations Act with respect to meetings of shareholders of the
Corporation.
(6) Any amendment to this Agreement pursuant to Subsection 5.04(1) which is
required to maintain the validity of this Agreement as a result of any
change in any applicable laws, rules or regulatory requirements shall:
(i) if made before the Separation Time, any such amendment shall be
submitted to the shareholders of the Corporation at the next meeting of
shareholders and the shareholders may, by the majority referred to in
Section 5.04(3) confirm or reject such amendment;
(ii) if made after the Separation Time, any such amendment shall be
submitted to the holders of Rights at a meeting to be called for on a
date not later than immediately following the next meeting of
shareholders of the Corporation and the holders of Rights may, by
resolution passed by the majority referred to in Section 5.04(5)
confirm or reject such amendment.
Any such amendment shall be effective from the date of the resolution of
the Board adopting such amendment, until it is confirmed or rejected or
until it ceases to be effective (as described in the next sentence) and,
where such amendment is confirmed, it continues in effect in the form so
confirmed. If such amendment is rejected by the shareholders or the
holders of Rights or is not submitted to the shareholders or holders of
Rights as required, then such amendment shall cease to be effective from
and after the termination of the meeting at which it was rejected or to
which it should have been but was not submitted or from and after the date
of the meeting of holders of Rights that should have been but was not
held, and no subsequent resolution of the Board to amend this Agreement to
substantially the same effect shall be effective until confirmed by the
shareholders or holders of Rights as the case may be.
5.05 FRACTIONAL RIGHTS AND FRACTIONAL SHARES
(1) The Corporation shall not be required to issue fractions of Rights or to
distribute Rights Certificates which evidence fractional Rights. After the
Separation Time, in lieu of issuing fractional Rights, the Corporation
shall pay to the holders of record of the Rights Certificates (provided
the Rights represented by such Rights Certificates are not void pursuant
to the provisions of Section 3.01(2), at the time such fractional Rights
would otherwise be issuable), an amount in cash equal to the fraction of
the Market Price of one whole Right that the fraction of a Right that
would otherwise be issuable is of one whole Right.
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<PAGE> 57
(2) The Corporation shall not be required to issue fractions of Common Shares
upon exercise of Rights or to distribute certificates which evidence
fractional Common Shares. In lieu of issuing fractional Common Shares, the
Corporation shall pay to the registered holders of Rights Certificates, at
the time such Rights are exercised as herein provided, an amount in cash
equal to the fraction of the Market Price of one Common Share that the
fraction of a Common Share that would otherwise be issuable upon the
exercise of such Right is of one whole Common Share at the date of such
exercise.
5.06 RIGHTS OF ACTION
Subject to the terms of this Agreement, all rights of action in respect of this
Agreement, other than rights of action vested solely in the Corporation or the
Rights Agent, are vested in the respective holders of Rights; and any holder of
Rights, without the consent of the Rights Agent or of any other holder of
Rights, may, on such holder's own behalf and for such holder's own benefit and
the benefit of other holders of Rights, enforce, and may institute and maintain
any suit, action or proceeding against the Corporation to enforce or otherwise
act in respect of, such holder's right to exercise such holder's Rights in the
manner provided in such holder's Rights Certificate and in this Agreement.
Without limiting the generality of the foregoing or any remedies available to
the holders of Rights, it is specifically acknowledged that the holders of
Rights would not have an adequate remedy at law for any breach of this Agreement
and will be entitled to specific performance of the obligations of, and
injunctive relief against actual or threatened violations of the obligations of,
any Person subject to this Agreement.
5.07 HOLDER OF RIGHTS NOT DEEMED TO BE A SHAREHOLDER
No holder of Rights, as such, shall be entitled to vote, to receive dividends,
to receive the remaining property of the Corporation on dissolution or to be
deemed for any purpose the holder of Common Shares or any other securities which
may at any time be issuable on the exercise of such Rights, nor shall anything
contained herein or in any Rights Certificate be construed to confer upon any
holder of Rights, as such, any of the rights of a shareholder of the Corporation
or any right to vote for the election of directors or upon any matter submitted
to shareholders at any meeting thereof, to give or withhold consent to any
corporate action, to receive notice of meetings or other actions affecting
shareholders (except as provided in Section 5.08) or to receive dividends or
subscription rights or otherwise, until such Rights shall have been exercised in
accordance with the provisions hereof.
5.08 NOTICES
Any document or other communication to be given in connection with this
Agreement to the Corporation shall be given in writing and shall be given by (i)
personal delivery, (ii) telegraph, facsimile or other form of recorded
electronic communication (charges prepaid and confirmed in writing) or (iii) by
first-class postage prepaid mail (except during any general interruption of
postal services due to strike, lockout or other cause) addressed to the
Corporation as follows:
Alcan Aluminium Limited
Maison Alcan
1188 Sherbrooke Street West
Montreal, Quebec
Canada
H3A 3G2
Attention: Secretary
Any document or other communication to be given in connection with this
Agreement to the Rights Agent shall be given in writing and shall be given by
(i) personal delivery, (ii) telegraph, facsimile or other form of recorded
electronic communication (charges prepaid and confirmed in writing) or (iii) by
first-class postage prepaid mail (except during any general interruption of
postal services due to strike, lockout or other cause) addressed to the Rights
Agent as follows:
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<PAGE> 58
CIBC Mellon Trust Company
2001 University Street
16th Floor
Montreal, Quebec
Canada
H3A 2A6
Attention: President
Any document or other communication to be given in connection with this
Agreement to any holder of Rights shall be given in writing and shall be given
by (i) personal delivery, (ii) telegraph, facsimile or other form of recorded
electronic communication (charges prepaid and confirmed in writing) or (iii) by
first-class postage prepaid mail (except during any general interruption of
postal services due to strike, lockout or other cause) addressed to such holder
at the address of such holder as it appears upon the registry books of the
Rights Agent or, prior to the Separation Time, on the registry books of the
Corporation for the Common Shares (the Corporation hereby agreeing to furnish
copies of such records to the Rights Agent). The Corporation and the Rights
Agent may by notice to the other designate with respect to itself any other
address or individual. Any document or other communication given by personal
delivery shall be conclusively deemed to have been given on the day of actual
delivery thereof and, if given by first class postage prepaid mail, on the fifth
Business Day following the deposit thereof in the mail (it being acknowledged,
for greater certainty, that any such communication mailed to a holder of a Right
as herein provided shall be deemed to have been given whether or not the holder
receives such communication).
5.09 COSTS OF ENFORCEMENT
If the Corporation or any other Person, the securities of which are purchasable
upon exercise of the Rights, fails to fulfil any of its obligations pursuant to
this Agreement, then the Corporation or such Person shall reimburse any holder
of Rights for the costs and expenses (including reasonable legal fees) incurred
by such holder in any action to enforce his rights pursuant to any Rights or
this Agreement.
5.10 BENEFIT OF THE AGREEMENT
This Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the Corporation and the Rights Agent and upon the
heirs, executors, administrators, successors and assigns of the holders of
Rights. This Agreement shall be for the sole and exclusive benefit of the
Corporation, the Rights Agent and the holders of Rights and nothing in this
Agreement shall be construed to give any Person other than the Corporation, the
Rights Agent and the holders of Rights any legal or equitable right, remedy or
claim under this Agreement.
5.11 GOVERNING LAW
This Agreement and each Right issued hereunder shall be deemed to be a contract
made under the laws of the Province of Ontario and for all purposes shall be
governed by and construed in accordance with the laws of the Province of Ontario
and the laws of Canada applicable therein.
5.12 COUNTERPARTS
This Agreement may be executed in counterparts, each of which shall be
considered an original and both of which taken together shall constitute a
single agreement.
5.13 SEVERABILITY
If any term or provision hereof or the application thereof to any circumstance
shall, in any jurisdiction and to any extent, be invalid or unenforceable, such
provision shall be ineffective as to such jurisdiction to the extent of such
invalidity or unenforceability without invalidating or rendering unenforceable
the remaining provisions hereof or the application of such provision to
circumstances other than those to which it is held invalid or unenforceable.
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<PAGE> 59
5.14 DETERMINATIONS AND ACTIONS BY THE BOARD
(1) All actions, calculations, interpretations and determinations (including
all omissions with respect to the foregoing) which are done or made by the
Board, in good faith, shall not subject the Board to any liability to the
holders of Rights.
(2) Nothing contained in this Agreement shall be deemed to be in derogation of
the obligation of the Board to exercise its fiduciary duties. Without
limiting the generality of the foregoing, nothing contained herein shall
be construed to suggest or imply that the Board shall not be entitled to
recommend that the holders of the Voting Shares reject any Permitted Bid
or any Competing Permitted Bid or any Take-Over Bid, or to take any other
action (including, without limiting the generality of the foregoing, the
commencement, prosecution, defence or settlement of any litigation and the
submission of additional or alternative Permitted Bids or Competing
Permitted Bids or Take-Over Bids) with respect to any Permitted Bid or any
Competing Permitted Bid or any Take-Over Bid or otherwise that the Board
believes is necessary or appropriate in the exercise of its fiduciary
duties.
5.15 EFFECTIVE DATE
This Agreement is effective from the date hereof, provided that if the
amendments and restatements set forth herein are not confirmed by a resolution
passed by a majority of greater than 50% of the votes cast by holders of Voting
Shares who vote in respect of such amendments and restatements at the 1999
Annual Meeting of the Corporation then this Agreement, the Rights Plan and any
outstanding Rights shall continue in effect as set forth in the Shareholder
Rights Agreement made as of December 14, 1989 as amended and restated on April
24, 1995. There shall be excluded from the calculation of shares eligible to
vote at such meeting shares held by an Acquiring Person or by any Person who has
made or announced an intention to make a tender or exchange offer or Take-Over
Bid which, if consummated, would result in such Person holding in the aggregate
20% or more of the outstanding Voting Shares at the date of such bid.
5.16 RE-CONFIRMATION AFTER THREE YEARS
At every third Annual Meeting of Shareholders of the Corporation following the
1999 Annual Meeting, provided that a Flip-In Event has not occurred prior to
such time, the Board shall submit a resolution to the holders of Voting Shares
of the Corporation for their consideration and, if thought advisable, approval
ratifying the continued existence of the Rights. If a majority of greater than
50% of the votes cast by holders of Voting Shares who vote in respect of such
reconfirmation and approval is voted against the continued existence of the
Rights, then this Agreement, the Rights Plan and any outstanding Rights shall be
of no further force and effect. There shall be excluded from the calculation of
shares eligible to vote at such meeting shares held by an Acquiring Person or by
any Person who has made or announced an intention to make a tender or exchange
offer or Take-Over Bid which, if consummated, would result in such Person
holding in the aggregate 20% or more of the outstanding Voting Shares at the
date of such bid.
5.17 REGULATORY APPROVALS
Any obligation of the Corporation or action or event contemplated by this
Agreement, or any amendment or supplement to this Agreement, shall be subject to
the receipt of any requisite approval or consent from any governmental or
regulatory authority. Without limiting the generality of the foregoing, any
issuance or delivery of debt or equity securities (other than non-convertible
debt securities) of the Corporation upon the exercise of Rights and any
amendment or supplement to this Agreement shall be subject to the prior consent
of The Toronto Stock Exchange.
5.18 DECLARATION AS TO NON-CANADIAN HOLDERS
If in the opinion of the Board (who may rely upon the advice of counsel) any
action or event contemplated by this Agreement would require compliance by the
Corporation with the securities laws or comparable legislation of a jurisdiction
outside Canada, the Board acting in good faith shall take such actions as it may
deem appropriate to ensure such compliance. In no event shall the Corporation or
the
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Rights Agent be required to issue or deliver Rights or securities issuable on
exercise of Rights to persons who are citizens, residents or nationals of any
jurisdiction other than Canada or the United States of America, in which such
issue or delivery would be unlawful without registration of the relevant Persons
or securities for such purposes.
ARTICLE 6 -- PERMITTED BIDS
6.01 PERMITTED BIDS
The expression "Permitted Bid" referred to in Section 1.01(ff) means a Take-Over
Bid made by an Offeror that is made by means of a Take-Over Bid circular sent to
holders of Voting Shares and which complies with the following additional
provisions:
(i) the Take-Over Bid is made to all holders of Voting Shares as
registered on the books of the Corporation, other than the Offeror;
(ii) the Take-Over Bid contains, and the take-up and payment for
securities tendered or deposited is subject to, the following
irrevocable and unqualified provision that no Voting Shares will be
taken up or paid for pursuant to the Take-Over Bid (A) prior to the
close of business on the date which is not less than 60 calendar days
following the date of the Take-Over Bid and (B) only if at such date
more than 50% of the Voting Shares held by Independent Shareholders
shall have been tendered or deposited pursuant to the Take-Over Bid and
not withdrawn;
(iii) unless the Take-Over Bid is withdrawn, the Take-Over Bid contains an
irrevocable and unqualified provision that Voting Shares may be
deposited pursuant to such Take-Over Bid at any time during the period
of time described in Section 6.01(ii) and that any Voting Shares
deposited pursuant to the Take-Over Bid may be withdrawn until taken up
and paid for; and
(iv) the Take-Over Bid also contains an irrevocable and unqualified
condition that in the event that the deposit condition set forth in
Section 6.01(ii)(B) is satisfied, the Offeror will make a public
announcement of that fact and the Take-Over Bid will remain open for
deposits and tenders of Voting Shares for not less than 10 Business
Days from the date of such public announcement.
6.02 COMPETING PERMITTED BIDS
The expression "Competing Permitted Bid" referred to in Section 1.01(l) means a
Take-Over Bid that:
(i) is made for Voting Shares after a Permitted Bid or Competing
Permitted Bid for Voting Shares has been made but prior to the expiry
of such Permitted Bid or Competing Permitted Bid;
(ii) satisfies all of the conditions of the definition of Permitted Bid
other than the requirements set out in Section 6.01(ii) (A); and
(iii) contains, and the take-up and payment for securities tendered or
deposited is subject to, an irrevocable and unqualified condition that
no Voting Shares will be taken up and paid for pursuant to the
Take-Over Bid prior to the close of business on a date which is not
earlier than the later of (A) the 60th calendar day following the date
on which the earliest Permitted Bid which preceded the Competing
Permitted Bid was made and (B) 21 calendar days after the date of the
Take-Over Bid constituting the Competing Permitted Bid.
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<PAGE> 61
IN WITNESS WHEREOF the parties have executed this Agreement on the date and year
above written.
<TABLE>
<S> <C>
ALCAN ALUMINIUM LIMITED CORPORATE
PER: SEAL
PER: OF
ALCAN
ALUMINIUM
LIMITED
CIBC MELLON TRUST COMPANY CORPORATE
PER: SEAL
PER: OF THE
CIBC MELLON TRUST
COMPANY
</TABLE>
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<PAGE> 62
SCHEDULE 1
FORM OF RIGHTS CERTIFICATE
Certificate No. _______ _______ Rights
THE RIGHTS ARE SUBJECT TO REDEMPTION AT THE OPTION OF THE CORPORATION, ON THE
TERMS SET FORTH IN THE SHAREHOLDER RIGHTS AGREEMENT. UNDER CERTAIN CIRCUMSTANCES
(SPECIFIED IN SECTION 3.01(2) OF THE SHAREHOLDER RIGHTS AGREEMENT), RIGHTS
BENEFICIALLY OWNED BY AN ACQUIRING PERSON (AS SUCH TERMS ARE DEFINED IN THE
SHAREHOLDER RIGHTS AGREEMENT) OR TRANSFEREES OF AN ACQUIRING PERSON MAY BECOME
VOID.
RIGHTS CERTIFICATE
This certifies that _____________________ , or registered assigns, is the
registered holder of the number of Rights set forth above, each of which
entitles the registered holder thereof, subject to the terms, provisions and
conditions of the Shareholder Rights Agreement made as of December 14, 1989, as
amended and restated from time to time (the "Rights Agreement") between Alcan
Aluminium Limited, a corporation incorporated under the laws of Canada (the
"Corporation") and CIBC Mellon Trust Company (successor to The Royal Trust
Company), a trust company incorporated under the laws of Canada, as Rights Agent
(the "Rights Agent") (which term shall include any successor Rights Agent under
the Rights Agreement) to purchase from the Corporation at any time after the
Separation Time (as such term is defined in the Rights Agreement) and prior to
the close of business on May 1, 2008 one fully paid Common Share in the capital
of the Corporation (a "Common Share") at the Exercise Price referred to below,
upon presentation and surrender of this Rights Certificate with the Form of
Election to Exercise duly executed and submitted to the Rights Agent or
Co-Rights Agent at its principal office in any one of the Cities of Montreal,
Toronto, Winnipeg, Regina, Calgary, Vancouver or London, England. The Exercise
Price shall initially be $200 (U.S.) per Right and shall be subject to
adjustment in certain events as provided in the Rights Agreement.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Rights Agent, the Corporation and the holders of the Rights Certificates. Copies
of the Rights Agreement are on file at the registered office of the Corporation
and are available upon written request.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at any of the offices of the Rights Agent designated for such purpose,
may be exchanged for another Rights Certificate or Rights Certificates of like
tenor and date evidencing an aggregate number of Rights equal to the aggregate
number of Rights evidenced by the Rights Certificate or Rights Certificates
surrendered. If this Rights Certificate shall be exercised in part, the
registered holder shall be entitled to receive, upon surrender hereof, another
Rights Certificate or Rights Certificates for the number of whole Rights not
exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by this
Certificate may be, and under certain circumstances are required to be, redeemed
by the Corporation at a redemption price of $0.01 per Right. No holder of this
Rights Certificate, as such, shall be entitled to vote or receive dividends or
be deemed for any purpose the holder of Common Shares or of any other securities
which may at any time be issuable upon the exercise hereof, nor shall anything
contained in the Rights Agreement or herein be construed to confer upon the
holder hereof, as such, any of the rights of a shareholder of the Corporation or
any right to vote for the election of directors or upon any matter submitted to
shareholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
shareholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Rights evidenced by
this Rights Certificate shall have been exercised as provided in the Rights
Agreement.
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This Rights Certificate shall not be valid or obligatory for any purpose until
it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Corporation and
its corporate seal.
Date:
ATTEST:
ALCAN ALUMINIUM LIMITED
By:
Secretary
Countersigned:
CIBC MELLON TRUST COMPANY
By:
Authorized Signature
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FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires to transfer the
Rights Certificate)
FOR VALUE RECEIVED
hereby sells, assigns and transfers unto
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and
appoint ____________________________ , Attorney, to transfer the within Rights
Certificate on the books of the within-named Corporation, with full power of
substitution.
<TABLE>
<S> <C>
Dated:
Signature
Signature Guaranteed: (Signature must correspond to the name as
written upon the face of this Rights
Certificate in every particular, without
alteration or enlargement or any change
whatsoever)
</TABLE>
Signature must be guaranteed by a member firm of a recognized stock exchange in
Canada, a registered national securities exchange in the United States of
America, a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in Canada or
the United States of America.
(To be completed if true)
The undersigned hereby represents, for the benefit of all holders of Rights and
Common Shares, that the Rights evidenced by this Rights Certificate are not,
and, to the best of the knowledge of the undersigned, never have been,
Beneficially Owned by an Acquiring Person (as defined in the Rights Agreement)
after such person became an Acquiring Person.
<TABLE>
<S> <C>
Signature
</TABLE>
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FORM OF ELECTION TO EXERCISE
(To be attached to each Rights Certificate)
TO:
The undersigned hereby irrevocably elects to exercise ___________________ whole
Rights represented by the attached Rights Certificate to purchase the Common
Shares issuable upon the exercise of such Rights and requests that certificates
for such shares be issued in the name of:
Name:
Street:
City, Province & Postal Code:
Social Insurance, Social Security or
Other Taxpayer Identification Number:
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance of such Rights shall be
registered in the name of and delivered to:
Name:
Street:
City, Province & Postal Code:
Social Insurance, Social Security or
Other Taxpayer Identification Number:
<TABLE>
<S> <C>
Dated:
Signature
Signature Guaranteed: (Signature must correspond to the name as
written upon the face of this Rights
Certificate in every particular, without
alteration or enlargement or any change
whatsoever)
</TABLE>
Signature must be guaranteed by a member firm of a recognized stock exchange in
Canada, a registered national securities exchange in the United States of
America, a member of the National Association of Securities Dealers, Inc., or a
commercial bank or trust company having an office or correspondent in Canada or
the United States of America.
(To be completed if true)
The undersigned hereby represents, for the benefit of all holders of Rights and
Common Shares, that the Rights evidenced by this Rights Certificate are not,
and, to the best of the knowledge of the undersigned, never have been,
Beneficially Owned by an Acquiring Person (as defined in the Rights Agreement)
after such person became an Acquiring Person.
<TABLE>
<S> <C>
Signature
</TABLE>
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NOTICE
In the event the certification set forth above in the Forms of Assignment and
Election is not completed, the Corporation will deem the Beneficial Owner of the
Rights evidenced by this Rights Certificate to be an Acquiring Person or an
Affiliate or Associate thereof (as defined in the Shareholder Rights Agreement)
and, in the case of an Assignment, will affix a legend to that effect on any
Rights Certificate issued in exchange for this Rights Certificate.
------------------------------------
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(LOGO)
<TABLE>
<S> <C>
M - Official mark of Environment Canada.
M - Marque officielle d'Environnement Canada.
</TABLE>
(LOGO) PRINTED IN CANADA
<PAGE> 68
ALCAN ALUMINIUM LIMITED
PROXY
SOLICITED BY THE BOARD OF DIRECTORS AND MANAGEMENT
FOR THE ANNUAL MEETING OF SHAREHOLDERS ON 22 APRIL 1999
The undersigned hereby appoints Jean Trudel, Joel Goldberg or Neil Wiener
or instead of them _________________________________________ (see Notes below)
as proxyholder(s), with full power of substitution, to attend and to vote all
the Common Shares ("Shares") of Alcan Aluminium Limited held of record by the
undersigned on 3 March 1999 at the Annual Meeting of the holders of the Shares
to be held on 22 April 1999 and at any adjournment thereof.
Notes:
(1) If you appoint the persons whose names are printed above to act as your
proxyholders, the Shares represented by this Proxywill be voted or not
voted, on any ballot that may be called, in accordance with the
instructions, if any, you indicate in the spaces provided below. FAILING
INSTRUCTIONS ON ANY MATTER, THE SHARES WILL BE VOTED FOR EACH OF THE
MATTERS LISTED BELOW TO BE ACTED UPON AT THE MEETING.
(2) YOU HAVE THE RIGHT TO APPOINT PERSON(S), OTHER THAN THOSE WHOSE NAMES ARE
PRINTED ABOVE, AS YOUR PROXYHOLDER(S), TO ATTEND AND ACT ON YOUR BEHALF AT
THE MEETING. YOU MAY USE THE SPACE PROVIDED ABOVE (OR ANOTHER APPROPRIATE
FORM OF PROXY) FOR THAT PURPOSE. YOU ARE ADVISED IN YOUR OWN INTEREST TO
SPECIFY A CHOICE FOR VOTING IN RESPECT OF EACH OF THE MATTERS TO BE ACTED
UPON AT THE MEETING.
(3) Please sign this Proxy and return it promptly whether or not you plan to
attend the Meeting. Your right to attend and vote in person will not be
affected.
(4) If this Proxy is not dated, it will be deemed to bear the date on which it
was mailed by Alcan Aluminium Limited.
<TABLE>
<S> <C> <C> <C>
1. ELECTION OF [ ] VOTE FOR all nominees listed below
DIRECTORS: (except as indicated to the contrary
below)
[ ] WITHHOLD VOTE
from all nominees listed below
</TABLE>
<TABLE>
<S> <C> <C> <C>
J. Bougie J.R. Evans G. Russell
W. Chippindale A.E. Gotlieb G. Saint-Pierre
E.R. Clitheroe J.E. Newall G. Schulmeyer
T. Engen P.H. Pearse P.M. Tellier
</TABLE>
To withhold authority to vote for any individual nominee, please write that
nominee's name on the line below:
2. APPOINTMENT OF PRICEWATERHOUSECOOPERS AS AUDITORS:
[ ] VOTE FOR [ ] WITHHOLD VOTE
3. APPROVAL OF AMENDMENTS TO AND RESTATEMENT OF SHAREHOLDER RIGHTS PLAN
[ ] VOTE FOR [ ] VOTE AGAINST
Proxyholders are authorized to vote, at their discretion, on matters
concerning the conduct of the Meeting.
Signature(s) ___________________________________
Date ___________________________________________
(logo of Recycled Paper) Printed in Canada
<PAGE> 69
ALCAN ALUMINIUM LIMITED
Shareholder Number_______________
ANNUAL MEETING IDENTIFICATION TICKET
If you attend the Annual Meeting in person, please present this
personalized ticket at the entrance; it will facilitate verification of your
status as a Shareholder.
The Annual Meeting will be held at 10:00 a.m. on 22 April 1999, in the
Assembly Hall, International Civil Aviation Organization, Atrium entrance, 999
University Street, Montreal, Quebec, Canada.
- ------------------------------------------------------------------------------
DETACH HERE
Shareholder Number_______________
CHANGE OF ADDRESS
If the address shown has changed, please PRINT the correct addressbelow and
return this part with the Proxy.
Address _______________________________________________________________________
_______________________________________________________________________________
Postal code _________________ Telephone ( __________ )_________________________
Area.
Date ________________________ Signature _______________________________________
QUARTERLY REPORTS
Alcan provides complete information to the press the day its quarterly
results are announced. Because of this, some of our Shareholders may not wish to
receive copies of Alcan's quarterly reports. By mailing these reports only to
those Shareholders who want them, we can achieve savings in both paper usage and
expense.
IF YOU WISH TO RECEIVE ALCAN'S QUARTERLY REPORTS, PLEASE CHECK HERE AND
RETURN THIS PART WITH THE PROXY. PLEASE NOTE THAT YOU MUST RENEW THIS REQUEST
ANNUALLY. [ ]
If this part is not returned, we will assume you do not wish to receive the
quarterly reports. You will, however, continue to receive Alcan's Annual Report
and associated proxy material.
You may change your instructions in this regard at any time by calling
Alcan Shareholder Services at 1-888-252-5226 (toll-free).
