UNITED STATES
                      SECURITIES AND EXCHANGE COMMISSION
                            WASHINGTON, D.C. 20549

                                   FORM 10-K

             [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934
                  For The Fiscal Year Ended December 31, 2001
                                       OR
             [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
                    OF THE SECURITIES EXCHANGE ACT OF 1934

                         Commission File Number 1-3610

                                  ALCOA INC.
            (Exact name of registrant as specified in its charter)

            Pennsylvania                              25-0317820
     (State of incorporation)            (I.R.S. Employer Identification No.)

           201 Isabella Street, Pittsburgh, Pennsylvania 15212-5858
              (Address of principal executive offices)    (Zip code)

                        Registrant's telephone numbers:

                 Investor Relations------------(212) 836-2674
                  Office of the Secretary------(412) 553-4707

Securities registered pursuant to Section 12(b) of the Act:

    Title of each class              Name of each exchange on which registered
    -------------------              -----------------------------------------

Common Stock, par value $1.00                   New York Stock Exchange

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  X   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. [_]

     As of January 22, 2002 there were 847,586,916 shares of common stock, par
value $1.00, of the registrant outstanding. The aggregate market value of such
shares, other than shares held by persons who may be deemed affiliates of the
registrant, was approximately $27 billion.

Documents incorporated by reference.

Parts I, II and IV of this Form 10-K incorporate by reference certain
information from the registrant's 2001 Annual Report to Shareholders (Annual
Report). Part III of this Form 10-K incorporates by reference certain
information from the registrant's definitive Proxy Statement dated February 15,
2002 (Proxy Statement).

                               TABLE OF CONTENTS

                                                                            Page(s)
                                                                            -------
                                                                         
Part I
- ------
     Item 1.   Business....................................................  3-14
     Item 2.   Properties.................................................. 14-17
     Item 3.   Legal Proceedings........................................... 17-20
     Item 4.   Submission of Matters to a Vote of Security Holders......... 20
     Item 4A.  Executive Officers of the Registrant........................ 20-21

Part II
- -------
     Item 5.   Market for Registrant's Common Equity and Related
                 Stockholder Matters....................................... 21
     Item 6.   Selected Financial Data..................................... 21
     Item 7.   Management's Discussion and Analysis of Financial Condition
                 and Results of Operations................................. 21
     Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.. 21
     Item 8.   Financial Statements and Supplementary Data................. 21
     Item 9.   Changes in and Disagreements with Accountants on Accounting
                 and Financial Disclosure.................................. 22

Part III
- --------
     Item 10.  Directors and Executive Officers of the Registrant.......... 22
     Item 11.  Executive Compensation...................................... 22
     Item 12.  Security Ownership of Certain Beneficial Owners
                 and Management and Related Stockholder Matters............ 22
     Item 13.  Certain Relationships and Related Transactions.............. 22

Part IV
- -------
     Item 14.  Exhibits, Financial Statement Schedules, and
                 Reports on Form 8-K....................................... 22-29

Signatures     ............................................................ 30

                      Note on Incorporation by Reference

In this Form 10-K, selected items of information and data are incorporated by
reference to portions of the Annual Report. Any reference in this report to
disclosures in the Annual Report shall constitute incorporation by reference of
that specific disclosure into this Form 10-K.

                                       2

                                  ALCOA INC.

Formed in 1888 under the laws of the Commonwealth of Pennsylvania, Alcoa Inc.
(formerly Aluminum Company of America) has its registered office in Pittsburgh,
Pennsylvania. In this report, unless the context otherwise requires, Alcoa or
the "company" means Alcoa Inc. and all subsidiaries consolidated for the
purposes of its financial statements.

                                    PART I

Item 1. Business.

Overview
- --------

Alcoa is the world's leading producer of primary aluminum, fabricated aluminum
and alumina, and is active in all major aspects of the industry: technology,
mining, refining, smelting, fabricating and recycling. Alcoa serves customers
worldwide in the packaging, consumer, automotive, aerospace and other
transportation, building and construction, industrial products and distribution
markets. Related businesses include packaging machinery, precision castings,
vinyl siding, plastic bottles and closures, fiber optic cables and electrical
distribution systems for cars and trucks.

Alcoa's operations consist of five worldwide segments: Alumina and Chemicals,
Primary Metals, Flat-Rolled Products, Engineered Products and Packaging and
Consumer. Other Alcoa businesses that are not included in one of these five
segments are reported as "Other."

Alcoa operates in 38 countries. While North America remains its largest market,
the company has doubled its revenues in Europe over the past four years. Asia
and Latin America present opportunities for substantial growth. Alcoa has been a
component of the Dow Jones Industrial Average since 1959.

Description of the Business
- ---------------------------

Information describing Alcoa's businesses can be found in the Annual Report at
the indicated pages:

Item                                                                       Page(s)
                                                                        
Discussion of Recent Business Developments:
    Letter to Shareholders.................................................   1-4*
    News Briefs 2001--Alliances, Acquisitions and Divestitures............. 18-20*
    Notes to Consolidated Financial Statements
        Note C. Acquisitions and Divestitures.............................. 51-52

Segment Reviews:
Business Descriptions, Principal Products, Principal Markets,
Methods of Distribution, Seasonality and Dependence Upon Customers:
    Alumina and Chemicals.................................................. 36-37*
    Primary Metals......................................................... 37*
    Flat-Rolled Products................................................... 37*
    Engineered Products.................................................... 38*
    Packaging and Consumer................................................. 38*
    Other.................................................................. 38-39*
Financial Information about Segments and Financial Information about
 Geographic Areas:
    Note L. Segment and Geographic Area Information........................ 54-55

*Excluding captions, charts, diagrams and related notes.

                                       3

Structure of Certain Operations
- -------------------------------

The company's Alumina and Chemicals segment primarily consists of a series of
affiliated operating entities referred to as Alcoa World Alumina and Chemicals
(AWAC). Generally, Alcoa owns 60% and WMC Limited (WMC), an Australian mining
and minerals processing company, owns 40% of these entities. The one exception
to that general structure is Alcoa of Australia Limited (AofA), where WMC owns
39.25% with QBE holding the remaining 0.75%. For more information on AWAC, see
Exhibit Nos. 10(a) through 10(e) to this report.

Alcoa owns 59.1% of Alcoa Aluminio S.A. (Aluminio), an integrated aluminum
producer in Brazil. Aluminio operates mining, refining, smelting and fabricated
products facilities at various locations in Brazil. The remaining 40.9% of
Aluminio is principally held through direct and indirect ownership by companies
controlled by the Camargo Correa Group, a leading contractor and industrial
conglomerate in Brazil.

Bauxite Interests
- -----------------

Aluminum is one of the most plentiful metals in the earth's crust. Aluminum is
produced primarily from bauxite, an ore containing aluminum in the form of
aluminum oxide, commonly referred to as alumina. Aluminum is made by extracting
alumina from bauxite and then removing oxygen from the alumina. Alcoa processes
most of the bauxite that it mines into alumina. The company obtains bauxite from
reserves held by AWAC, from the company's interests in Brazil, from related
third parties under long-term contracts and from unrelated third parties under
short-term contracts. In 2001, Alcoa consumed 30.8 million metric tons (mt) of
bauxite from its own reserves, 4.2 million mt from related third parties and 2.1
million mt from unrelated third parties. Alcoa's present sources of bauxite are
sufficient to meet the forecasted requirements of its alumina refining
operations for the foreseeable future. The following table provides information
regarding the company's bauxite interests:

Alcoa Active/1/ Bauxite Interests

                                                        Holder of Mining Rights                Expiration Date
   Country               Project                                (% Held)                       of Mining Rights
- ---------------------------------------------------------------------------------------------------------------
                                                                                      
Australia      Darling Range Mines            AofA (100%)                                          2044
- ---------------------------------------------------------------------------------------------------------------
Brazil         Pocos de Caldas                Aluminio (100%)                                      2017/2/
- ---------------------------------------------------------------------------------------------------------------
Guinea         Boke                           Compagnie des Bauxites de Guinea (CBG)/3/ (100%)     2038/4/
- ---------------------------------------------------------------------------------------------------------------
Jamaica        Clarendon/Manchester Plateau   Alcoa Minerals of Jamaica, L.L.C./5/ (50%)           2028
                                              Clarendon Alumina Production Ltd./6/ (50%)
- ---------------------------------------------------------------------------------------------------------------
Suriname       Lelydorp                       BHP Billiton (76%)                                   2032/7/
                                              Suralco/5/ (24%)
- ---------------------------------------------------------------------------------------------------------------
               Moengo                         Suralco (100%)                                       2032/7/
- ---------------------------------------------------------------------------------------------------------------

/1/ Alcoa also has interests at the following locations that are bauxite
reserves or do not currently produce bauxite: Cape Bougainville and Mitchell
Plateau (Australia), Juruti (Brazil), and Kaimangrasi, Klaverblad and Nassau
(Suriname). Aluminio holds an 8.6% interest, Abalco S.A. (Abalco) (part of AWAC)
holds a 4.6% interest and Alcoa holds a 5% interest in Mineracao Rio do Norte
S.A. (MRN), a mining company jointly owned with affiliates of Alcan, Companhia
Brasileira de Aluminio, Companhia Vale do Rio Doce, BHP Billiton and Norsk
Hydro. MRN owns the Trombetas bauxite-mining project in Brazil. Aluminio and
Abalco purchase bauxite from MRN under long-term supply contracts. Alcoa has
agreed to purchase bauxite from the Trombetas project through 2019. In 2001,
Alcoa sold its 50% interest in a bauxite-mining project called Aroaima Bauxite
Company Ltd. in the Berbice region of Guyana to the Guyanan government.

                                       4

/2/Brazilian mineral legislation does not establish the duration of mining
concessions. The concession remains in force until the complete exhaustion of
the deposit. Based on proven bauxite reserves and the anticipated needs of the
Pocos alumina refinery, Aluminio estimates that bauxite will last until 2017.

/3/Alcoa owns a 43% interest in Halco (Mining), Inc. Halco owns 51% and the
Guinean government owns 49% of CBG, which has the exclusive right through 2038
to develop and mine bauxite in a 10,000 square-mile area in northwestern Guinea.

/4/Alcoa has a bauxite purchase contract with CBG that will provide Alcoa with
bauxite through 2011.

/5/This Alcoa entity is part of AWAC and therefore is owned 60% by Alcoa and 40%
by WMC.

/6/Clarendon Alumina Production Ltd. is a wholly owned subsidiary of the
Government of Jamaica.

/7/Proven bauxite reserves are expected to last at least through 2023.

Alumina Refining Facilities and Capacity
- ----------------------------------------

Alcoa is the world's leading producer of alumina. Alcoa's alumina refining
facilities and its worldwide alumina capacity are shown in the following table:

                                                 Alumina Refining Capacity
                                                                                                                 Alcoa
                                                                                               Nameplate      Consolidated
                                                               Owners                         Capacity/1/     Capacity/2/
Country                 Facility                          (% of Ownership)                    (000 MTPY)      (000 MTPY)
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                                  
Australia        Kwinana                AofA (100%)                                               2,000            2,000
- -----------------------------------------------------------------------------------------------------------------------------
                 Pinjarra               AofA (100%)                                               3,400            3,400
- -----------------------------------------------------------------------------------------------------------------------------
                 Wagerup                AofA (100%)                                               2,300            2,300
- -----------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------
Brazil           Pocos de Caldas        Aluminio (100%)                                             300              300
- -----------------------------------------------------------------------------------------------------------------------------
                                        Abalco S.A./3/ (18.9%)
                                        Alcan/4/ (10%)
                                        Aluminio (35.1%)
                 Alumar                 BHP Billiton/4/ (36%)                                     1,330              718
- -----------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------
                                       Alcoa Minerals of Jamaica, L.L.C./3/ (50%)
Jamaica          Jamalco               Clarendon Alumina Production Ltd./5/ (50%)                 1,000              500
- -----------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------
Spain            San Ciprian            Alumina Espanola, S.A./3/ (100%)                          1,330            1,330
- -----------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------
                                        BHP Billiton/4/ (45%)
Suriname         Suralco                Suralco Aluminum Company, L.L.C./3/ (55%)                 1,900            1,045
- -----------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------
U.S.             Point Comfort, Tex.    Alcoa World Alumina, L.L.C/3/ (100%)                      2,305/6/         2,305/6/
- -----------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------
TOTAL                                                                                            15,865           13,898
- -----------------------------------------------------------------------------------------------------------------------------

/1/Nameplate capacity is an estimate based on design capacity and normal
operating efficiencies and does not necessarily represent maximum possible
production.

/2/The figures in this column reflect Alcoa's share of production from these
facilities. For sites owned by AWAC entities and Aluminio, Alcoa takes 100% of
the production from these facilities.

/3/This entity is part of AWAC and therefore is owned 60% by Alcoa and 40% by
WMC (or an affiliate).

/4/The named company or an affiliate holds this interest.

/5/Clarendon Alumina Production Ltd. is a wholly owned subsidiary of the
Government of Jamaica.

/6/In 2001, Alcoa announced that it was reducing the operating rate at Point
Comfort to between 1.6 -1.9 million mt per year (mtpy).

                                       5

Primary Aluminum Facilities and Capacity
- ----------------------------------------

The company's primary aluminum smelters and their respective capacities are
shown in the following table:

Alcoa Worldwide Smelting Capacity

                                                                                                                    Alcoa
                                                                                                Nameplate       Consolidated
                                                                  Owners                        Capacity/1/      Capacity/2/
Country                   Facility                           (% of Ownership)                   (000 MTPY)       (000 MTPY)
- -------------------------------------------------------------------------------------------------------------------------------
                                                                                                    
Australia       Point Henry                   AofA (100%)                                          185              185
- -------------------------------------------------------------------------------------------------------------------------------
                Portland                      AofA (55%)
                                              CITIC (22.5%)
                                              Marubeni (22.5%)                                     345              190
- -------------------------------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------------------------------------------------------
Brazil          Pocos de Caldas               Aluminio (100%)                                       93               93
- -------------------------------------------------------------------------------------------------------------------------------
                Sao Luis (Alumar)             Aluminio (53.66%)
                                              BHP Billiton (46.34%)                                370              199
- -------------------------------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------------------------------------------------------
Canada          Baie-Comeau, Que.             Alcoa (100%)                                         420              420
- -------------------------------------------------------------------------------------------------------------------------------
                Becancour, Que.               Alcoa (74.95%)
                                              Aluminium Pechiney (25.05%)                          390              292
- -------------------------------------------------------------------------------------------------------------------------------
                Deschambault, Que.            Alcoa (100%)                                         240              240
- -------------------------------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------------------------------------------------------
Italy           Fusina                        Alcoa (100%)                                          44               44
- -------------------------------------------------------------------------------------------------------------------------------
                Portovesme                    Alcoa (100%)                                         146              146
- -------------------------------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------------------------------------------------------
Spain           Aviles                        Alcoa (100%)                                          83               83
- -------------------------------------------------------------------------------------------------------------------------------
                La Coruna                     Alcoa (100%)                                          81               81
- -------------------------------------------------------------------------------------------------------------------------------
                San Ciprian                   Alcoa (100%)                                         196              196
- -------------------------------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------------------------------------------------------
U.S.            Evansville, Ind. (Warrick)/3/ Alcoa (100%)                                         309              309
- -------------------------------------------------------------------------------------------------------------------------------
                Frederick, Md. (Eastalco)     Alcoa (61%)
                                              Mitsui & Co. Ltd. (39%)                              192              117
- -------------------------------------------------------------------------------------------------------------------------------
                Badin, N.C.                   Alcoa (100%)                                         120              120
- -------------------------------------------------------------------------------------------------------------------------------
                Massena, N.Y.                 Alcoa (100%)                                         130              130
- -------------------------------------------------------------------------------------------------------------------------------
                St. Lawrence, N.Y.            Alcoa (100%)                                         125              125
- -------------------------------------------------------------------------------------------------------------------------------
                Troutdale, Ore./4/            Alcoa (100%)                                         121              121
- -------------------------------------------------------------------------------------------------------------------------------
                Mount Holly, S.C.             Alcoa (50.33%)
                                              Century Aluminum Company (49.67%)                    212              107
- -------------------------------------------------------------------------------------------------------------------------------
                Alcoa, Tenn.                  Alcoa (100%)                                         210              210
- -------------------------------------------------------------------------------------------------------------------------------
                Rockdale, Tex.                Alcoa (100%)                                         340              340
- -------------------------------------------------------------------------------------------------------------------------------
                Ferndale, Wash. (Intalco)     Alcoa (61%)
                                              Mitsui & Co. Ltd. (39%)                              278              170
- -------------------------------------------------------------------------------------------------------------------------------
                Wenatchee, Wash.              Alcoa (100%)                                         227              227
- -------------------------------------------------------------------------------------------------------------------------------

- -------------------------------------------------------------------------------------------------------------------------------
TOTAL                                                                                            4,857             4,145
- -------------------------------------------------------------------------------------------------------------------------------

/1/Nameplate capacity is an estimate based on design capacity and normal
operating efficiencies and does not necessarily represent maximum possible
production.

/2/The figures in this column include the minority interests in facilities owned
by AofA and Aluminio. Alcoa takes 100% of the production from these facilities.

/3/In December 2001, the Warrick smelter lost approximately two-thirds of its
capacity due to the failure of the on-site generating station. The company
expects that capacity will be fully restored by the end of the second quarter of
2002.

/4/In 2000, Alcoa curtailed all production at the Troutdale, Oregon smelter.

                                       6

Alcoa owns interests in the following primary aluminum facilities that are
accounted for on the equity or cost basis method. The capacity associated with
these facilities is not included in Alcoa's consolidated capacity.

                                                                                                                Nameplate
                                                                        Owners                                  Capacity+
 Country                  Facility                                 (% of Ownership)                            (000 MTPY)
- -----------------------------------------------------------------------------------------------------------------------------
                                                                                                      
Germany            Hamburg                  Alcoa (33.33%)
                                            Austria Metall AG (33.33%)
                                            VAW AG (33.33%)                                                        120
- -----------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------
Ghana              Tema                     Alcoa (10%)
                                            Kaiser (90%)                                                           200
- -----------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------
Nigeria            Alscon++                 Alcoa (10%)
                                            Federal Government of Nigeria (70%)
                                            Ferrostaal AG (20%)                                                     97
- -----------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------
Norway             Lista                    Alcoa (50%)
                                            Elkem A/S (50%)                                                         90
- -----------------------------------------------------------------------------------------------------------------------------
                   Mosjoen                  Alcoa (50%)
                                            Elkem A/S (50%)                                                        120
- -----------------------------------------------------------------------------------------------------------------------------

- -----------------------------------------------------------------------------------------------------------------------------
Venezuela          Alcasa                   Alcoa (7.31%)
                                            CVG and Japanese Interests (92.69%)                                    210
- -----------------------------------------------------------------------------------------------------------------------------

+Nameplate capacity is an estimate based on design capacity and normal operating
efficiencies and does not necessarily represent maximum possible production.

++Alcoa is entitled to purchase all but 40,000 mt of the production of the
Alscon smelter. Only about one-half of the smelter has been built and only about
one-half of the completed portions have been operated. The smelter has been
idled since mid-1999. Alcoa is negotiating with the shareholders of Alscon for
an amicable disengagement from the Alscon project.

Production at primary aluminum smelters in the Northwest U.S. and in Brazil was
curtailed in 2001 due to energy shortages or the unavailability of energy at
competitive prices. Recently, the smelters in Brazil have restarted some of the
previously curtailed production. Alcoa currently has approximately 634,500 mtpy
of idled smelting capacity out of a worldwide consolidated primary aluminum
capacity of 4,145,000 mtpy.

Energy
- ------

Alcoa produces aluminum from alumina by an electrolytic process requiring large
amounts of electric power. Electric power accounts for approximately 25% of the
company's primary aluminum costs. Alcoa generates approximately 25% of the power
used at its smelters worldwide, and generally purchases the remainder under
long-term arrangements. The paragraphs below summarize the sources of power and
material long-term power arrangements for Alcoa's smelters.

         North America - Electricity

For its 14 North American smelters, the company (largely through its wholly-
owned subsidiary, Alcoa Power Generating Inc. (APGI)) generates approximately
25% of the power requirements, and generally purchases the remainder under long-
term contracts. APGI owns and operates two hydroelectric projects consisting of
eight dams under Federal Energy Regulatory Commission licenses, which are up for
renewal in 2005 and 2008.

In the Pacific Northwest, Alcoa obtains approximately 10% of the self-generated
power from its entitlement through 2011 to a fixed percentage of the output from
Chelan County Public Utility District's

                                       7

Rocky Reach hydroelectric power facility located in the State of Washington for
use in Alcoa's Wenatchee smelter. In addition, Alcoa has a contract through 2006
with the Bonneville Power Administration (BPA) that serves part of the Wenatchee
smelter, as well as the Intalco and Troutdale smelters. Several contractual
provisions allow power supply restrictions when power is in short supply.

The company generates substantially all of the power used at its Warrick smelter
using nearby coal reserves. A 1996 coal supply contract satisfies 40% of the
smelter's fuel requirements through 2006. Short-term contracts of less than two
years satisfy the remainder of the fuel requirements. In April 2001, under the
terms of an operating agreement, the company assumed operation of the power
plants that supply the Warrick smelter from Southern Indiana Gas & Electric
Company until at least 2008.

The Rockdale smelter uses lignite supplied by the company's Sandow Mine to
generate power. The company has applied for permits to open a new lignite mine,
the Three Oaks Mine, on land it owns or controls adjacent to its existing Sandow
Mine. Company-owned generating units supply about one-half of the total
requirements of the smelter. Texas Utilities Company supplies the balance
through a long-term power contract expiring in 2013.

APGI facilities provide electric power for the aluminum smelters at Alcoa,
Tennessee and Badin, North Carolina. The Tennessee smelter also purchases firm
and interruptible power from the Tennessee Valley Authority under a contract
that extends to 2010. APGI entered into a long-term arrangement with Aquila
Energy Marketing Corporation (Aquila), which expires in mid-2005. Under the
terms of the agreement, APGI sells to Aquila all of the capacity and energy
produced at its hydroelectric units near Badin and Aquila supplies all of the
power requirements of the Badin smelter.

In the Northeast, the purchased power (primarily hydroelectric) contracts for
the Massena and St. Lawrence, New York smelters expire not earlier than 2003,
and will be extended for an additional 10 years upon the successful relicensing
by the New York Power Authority of one of its hydroelectric projects. The
company, however, may terminate either of these contracts with one year's
notice.

The Lauralco and Becancour smelters located in Quebec purchase electricity under
long-term contracts with Hydro-Quebec which expire in 2014, subject to certain
extension provisions. The smelter located in Baie Comeau, Quebec purchases
approximately 60% of its power needs under a long-term contract with Hydro-
Quebec which expires in 2014 and receives a portion of its power needs from a
40%-owned hydroelectric generating company, Manicouagan Power Company.

The Eastalco smelter located in Frederick, Maryland and the Mt. Holly smelter in
South Carolina purchase electricity under long-term contracts that expire in
2003 and 2005, respectively, subject to certain extension provisions.

     Australia - Electricity

Power is generated from extensive brown coal deposits covered by a long-term
mineral lease held by AofA, and that power currently provides approximately 40%
of the electricity for the company's smelter in Point Henry, Victoria. The State
Electricity Commission of Victoria, under contracts with AofA, provides the
remaining power for this smelter and all power for the Portland smelter.

     Brazil - Electricity

The Alumar smelter has an agreement through 2004 to purchase electric power from
Central Eletricas do Norte, the government controlled electric utility.

Aluminio has a purchase agreement with Central Eletricas de Minas Gerais S.A.
(CEMIG) through September 2002 to supply energy to the Pocos de Caldas smelter.
It will purchase power for the smelter from Brazilian sources after the
expiration of the CEMIG contract.

                                       8

Aluminio participates in a consortium that has recently completed the
construction of the Machadinho hydroelectric power plant in southern Brazil.
Aluminio will receive a share of the output of the plant, which has begun
operations in 2002. At full operation, Aluminio expects its share to be
sufficient to supply approximately one-half of the power requirements for the
Pocos de Caldas smelter.

In 2001, Aluminio entered into agreements to participate in four additional
hydroelectric construction projects in Brazil that are scheduled to be completed
at various dates ranging from 2005 to 2008. Aluminio's share of the output from
the hydroelectric facilities, when completed, ranges from 20% to 39.5%. Total
costs for all four projects are estimated at $1.4 billion, with Aluminio's share
of total project costs totaling approximately 30%. The plans for financing these
projects have not yet been finalized. Aluminio may be required to provide
guarantees of project financing or commit to additional investments as these
projects progress. At December 31, 2001, Aluminio had provided $13 million of
guarantees on two of the hydroelectric construction projects in the form of
performance bonds.

     Europe - Electricity

The company purchases electricity for its Portovesme, Italy and Fusina, Italy
smelters from ENEL, Italy's state-owned utility, under contracts expiring in
2005.

The company's smelters at San Ciprian, La Coruna and Aviles, Spain purchase
electricity from the government-controlled power grid at the lowest applicable
industrial tariff rate under contracts expiring in 2013.

     Minority Interests - Electricity

The smelters in Germany, Ghana, Nigeria, Norway and Venezuela, in which Alcoa
has only an equity stake and is not the operational manager, have made a variety
of long-term electricity purchase arrangements, under the managing partner or
entity. These contracts are up for renewal at various times, the majority of
them in the period from 2011 to 2020.

     Canada & U.S. - Natural Gas

The company generally procures natural gas on a competitively bid basis from a
variety of sources including producers in the gas production areas and
independent gas marketers. For Alcoa's larger consuming locations in Canada and
the U.S., the gas commodity as well as interstate pipeline transportation is
procured to provide increased flexibility and reliability. Contract pricing for
gas is typically based on a published industry index or NYMEX price.

Sources and Availability of Raw Materials
- -----------------------------------------

The major purchased raw materials in 2001 for each of the company's segments are
listed below.

Alumina & Chemicals                           Primary Metals
- -------------------                           --------------

bauxite                                       alumina
electricity                                   calcined petroleum coke
natural gas                                   liquid pitch
caustic soda                                  aluminum fluoride
silicon carbide                               electricity
calcined petroleum coke                       natural gas
                                              cathode blocks

                                       9

Flat-Rolled Products                          Engineered Products
- --------------------                          -------------------

primary aluminum (rolling ingot)              primary aluminum (billet)
commercial metals                             electricity
used beverage cans                            natural gas
aluminum scrap                                nickel
electricity                                   cobalt
natural gas                                   titanium
coatings
alloying materials

Packaging & Consumer                          Other
- --------------------                          -----

aluminum                                      copper
natural gas                                   polyvinyl chloride compound
polypropylene                                 fiber
polyvinyl chloride                            aluminum tape
polyethylene

Other materials generally are purchased from third party suppliers under
competitively priced supply contracts or bidding arrangements. The company
believes that the raw materials necessary to its business are and will continue
to be available.

Joint Ventures and Investments
- ------------------------------

The company's principal alliances and joint ventures are included in its
"upstream" operating segments (alumina and chemicals and primary metals) as
shown in the tables above relating to those segments.

Alcoa's other significant joint ventures and investments are as follows:

Alcoa Fujikura Ltd. Alcoa Fujikura Ltd. (AFL) is owned 51% by Alcoa and 49% by
Fujikura International. AFL produces and markets electronic and electrical
distribution systems for the automotive industry, as well as fiber optic
products and systems for selected electric utilities, telecommunications, cable
television and datacom markets. AFL subsidiaries provide EF&I (engineer, furnish
and install) services to the telecom and CATV industries.

Alcoa Kobe Transportation Products, Inc. and Kobe Alcoa Transportation Products
Ltd. These joint ventures are owned 50% by Alcoa and 50% by Kobe Steel, Ltd.
(Kobe). The focus of these ventures, consisting of one company in the U.S. and
one in Japan, is to expand the use of aluminum sheet products in passenger cars
and light trucks. As a result of a restructuring of the venture in January 2000,
the U.S. company will focus on research and development efforts, while the
Japanese company will continue to engage in commercial (manufacturing, marketing
and sales) as well as research and development efforts, to serve the
transportation industry.

Alcoa (Shanghai) Aluminum Products Company Limited. Alcoa (Shanghai) Aluminum
Products Company Limited is owned 60% by Alcoa and 40% by Shanghai Light
Industry Equipment (Group) Co., Ltd. It produces aluminum foil products in
Shanghai, China.

Bohai Aluminum Industries Ltd. This venture is owned 32.48% by Alcoa, 37.36% by
Shortridge Ltd. and 30.16% by China International Trust & Investment
Corporation. The venture produces aluminum foil and aluminum extrusions in
Qinghuangdao, China.

                                       10

Chalco. A joint venture to be formed by Alcoa and Aluminum Corporation of China
Limited (Chalco) will be owned 50% by Alcoa and 50% by Chalco. In November 2001,
Alcoa entered into a strategic alliance with Chalco. Under this alliance, the
parties will form the joint venture at Chalco's facility at Pingguo, which is
one of the most efficient alumina and aluminum production facilities in China.
Alcoa will transfer management, operational and technical expertise, and best
practices to Chalco. As part of the alliance, Alcoa has become a strategic
investor in Chalco's global offering and listing on the New York Stock Exchange
and The Stock Exchange of Hong Kong. Alcoa's investment is 8% of the outstanding
shares. In connection with its investment, Alcoa is entitled to one seat on
Chalco's board of directors. Aluminum Corporation of China, or Chinalco, the
parent company of Chalco, will remain the largest shareholder in Chalco.

Elkem Aluminium ANS. This Norwegian partnership is owned 50% by Alcoa and 50% by
Elkem ASA, with Elkem as managing partner. The partnership is the second largest
aluminum producer in Norway and operates two plants: Mosjoen and Lista. These
facilities supply extrusion billets, rolling ingots and foundry ingots to
leading rolling mills, extrusion plants and foundries in Europe.

Integris Metals, Inc. Integris Metals, Inc. is owned 50% by Alcoa and 50% by BHP
Billiton. In November 2001, Alcoa and BHP Billiton merged Alcoa's metals
distribution business, Reynolds Aluminum Supply Company (RASCO), and BHP
Billiton Group's North American metals distribution business, Vincent Metal
Goods in the U.S. and Atlas Ideal Metals in Canada. Integris Metals serves
markets such as transportation, general manufacturing, machinery and equipment
and building and construction. The company provides aluminum, stainless steel,
carbon steel, copper, brass and nickel in a variety of forms and it offers a
full range of processing services.

Kaal Australia Pty. Ltd. Kaal Australia Pty. Ltd. is owned 50% by Alcoa and 50%
by Kobe. It owns and operates rolling mills at Point Henry and Yennora,
Australia. These mills produce rigid container sheet (RCS) for the Australian
and Asian markets and general sheet and foil for the Australian market. AofA
supplies Kaal Australia's Point Henry rolling mill with molten aluminum.

KSL Alcoa Aluminum Company, Ltd. This joint venture is owned 50% by Alcoa and
50% by Kobe. It produces RCS for markets in Japan and other Asian countries. In
connection with this venture, Alcoa has a long-term contract to supply metal to
Kobe.

Latas de Aluminio, S. A. Latas de Aluminio, S.A. (Latasa) is owned 37% by Alcoa,
39% by Bradesco Seguros, S.A., 12% by J. P. Morgan International Capital
Corporation, and 12% by others. Latasa, which is managed by Alcoa, manufactures
and recycles aluminum beverage cans in Brazil and owns subsidiaries in other
South American countries that also manufacture and recycle aluminum beverage
cans.

Shibazaki Seisakusho Limited. Shibazaki Seisakusho Limited is owned 50.5% by
Alcoa, 20.3% by Furukawa Electric Co., Ltd. and the remainder by the public and
the Shibazaki family. Shibazaki manufactures and markets plastic and aluminum
closures and packaging equipment in Japan.

Yunnan Aluminum Processing Factory. This joint venture is owned 56% by Alcoa and
44% by Yunnan Aluminum Processing Factory. It produces aluminum foil products in
Kunming, China.

Patents and Trademarks
- ----------------------

The company believes that its domestic and international patent and trademark
assets provide it with a significant competitive advantage. The company's rights
under its patents, as well as the products made and sold under them, are
important to the company as a whole and, to varying degrees, important to each
business segment. The patents owned by Alcoa generally concern particular
products or

                                       11

manufacturing techniques. Alcoa's business is not, however, materially dependent
on patents, and no individual patent is of material importance to any segment.

The company has a number of domestic and international registered trademarks
that have significant recognition at the consumer level, and others that have
significant recognition within the markets that are served. Examples include
Alcoa and the Alcoa Symbol for aluminum products, Howmet metal castings, Huck
fasteners, Kawneer building panels, Presto storage bags, Cut-Rite wax paper,
Reynolds plastic wrap and Reynolds Wrap aluminum foil. The company's rights
under its trademarks are important to the company as a whole and, to varying
degrees, important to each business segment.

Competitive Conditions
- ----------------------

Alcoa is the world's leading producer of alumina, primary aluminum and
fabricated aluminum. Alcoa is subject to highly competitive conditions in all
aspects of its aluminum and non-aluminum businesses. Competitors include a
variety of both U.S. and non-U.S. companies in all major markets. Price, quality
and service are the principal competitive factors in Alcoa's markets. Where
aluminum products compete with other materials -- such as steel and plastics for
automotive and building applications; magnesium, titanium, composites and
plastics for aerospace and defense applications; steel, plastics and glass for
packaging applications; and wood and vinyl for building and construction
applications -- aluminum's diverse characteristics, particularly its light
weight, recyclability and flexibility, are also significant factors. For the
Packaging and Consumer Products segment, which markets products under Alcoa's
brand names, brand recognition and brand loyalty also play a role.

Research and Development
- ------------------------

Alcoa, a technology leader in the aluminum industry, engages in research and
development programs that include process and product development, and basic and
applied research. Alcoa conducts these activities within its businesses and at
the Alcoa Technical Center near Pittsburgh. Expenditures for R&D activities were
$203 million in 2001, $194 million in 2000 and $128 million in 1999.

Each of the major process and product areas within the company has a Technology
Management Review Board (TMRB) consisting of members from various worldwide
locations. Each TMRB is responsible for formulating and communicating a
technology strategy for the corresponding product and process area, developing
and managing the technology portfolio and ensuring the global transfer of
technology.

During 2001 the company continued work on new developments in inert anode
technology and the pursuit of patent protection in jurisdictions throughout the
world related to these advanced smelting technologies. The company completed a
test of the technology in a single pot, and plans to further test the technology
in a complete potline in an existing commercial facility. Also during 2001 the
company developed improved fabricating techniques for inert anode assemblies and
enhanced fabricating capacity consistent with the planned requirements for
testing during 2002. If the technology proves to be commercially feasible, the
company believes that it will be able to convert its existing potlines to this
new technology, resulting in significant operating cost savings. The new
technology would also generate environmental benefits by reducing and
eliminating certain emissions. No timetable has been established for commercial
use.

Environmental Matters
- ---------------------

Information relating to environmental matters is included in four areas of the
Annual Report: under Management's Discussion and Analysis of Financial Condition
and Results of Operations, under the heading "Environmental Matters" on pages 40
and 41 and under the heading "Liquidity and Capital Resources--Investing
Activities" on page 42, in Note A to the financial statements under the caption
"Environmental Expenditures" on page 49 and in Note T to the financial
statements on pages 60-61.

                                       12

Employees
- ---------

Total worldwide employment at year-end 2001 was 129,000 people.

On October 12, 2001, the United Steelworkers of America ratified a new five-year
labor agreement that covers 19 locations in the United States and about 12,000
employees. The contract is effective from June 1, 2001 through May 31, 2006.

During 2001, Alcoa announced work force reductions primarily in North America
and Europe of 10,400 employees. The company expects these reductions to be
completed by the end of 2002.

Cautionary Statements under the Private Securities Litigation Reform Act of 1995
- --------------------------------------------------------------------------------

Forward-Looking Statements

This report contains (and oral communications made by Alcoa may contain)
forward-looking statements which may be identified by their use of words like
"plans," "expects," "anticipates," "intends," "estimates," "forecasts," "will,"
"outlook" or other words of similar meaning. All statements that address Alcoa's
expectations or projections about the future, including statements about Alcoa's
strategy for growth, cost reduction goals, expenditures and financial results,
are forward-looking statements. Forward-looking statements are based on Alcoa's
estimates, assumptions and expectations of future events and are subject to a
number of risks and uncertainties. Alcoa cannot guarantee that these estimates,
assumptions and expectations are accurate or will be realized. Alcoa disclaims
any intention or obligation (other than as required by law) to update or revise
any forward-looking statements.

Risk Factors

In addition to the factors discussed elsewhere in this report and in
Management's Discussion and Analysis in the Annual Report, the following are
some of the important factors that could cause Alcoa's actual results to differ
materially from those projected in any forward-looking statements:

     .    Alcoa is a leading global producer of alumina, aluminum ingot and
          aluminum fabricated products. The aluminum industry is highly
          cyclical, with prices subject to worldwide market forces of supply and
          demand and other influences. Prices can be volatile. Although Alcoa
          uses contractual arrangements with customers, as well as forward,
          futures and options contracts, to manage its exposure to the
          volatility of London Metal Exchange-based prices, and is product and
          segment diversified, Alcoa's results of operations could be affected
          by material adverse changes in economic or aluminum industry
          conditions generally or in the markets served by Alcoa, including the
          transportation, building, construction, distribution and packaging
          markets.

     .    Alcoa consumes substantial amounts of energy in its operations.
          Although Alcoa generally expects to meet the energy requirements for
          its alumina refineries and primary aluminum smelters from internal
          sources or from long-term contracts, the following could affect
          Alcoa's results of operations:

          .    significant increases in electricity costs rendering smelter
               operations uneconomic;
          .    the unavailability of electrical power due to droughts; or
          .    interruptions in energy supply due to equipment failure or other
               causes.

     .    Alcoa's ability to grow earnings will be affected by increases in the
          cost of raw materials, including caustic soda, calcined petroleum coke
          and resins, in addition to energy. Alcoa may not

                                       13

          be able to offset fully the effects of higher raw material costs
          through price increases or productivity improvements.

     .    As part of its strategy for growth, Alcoa has made and may continue to
          make acquisitions and divestitures and form strategic alliances. There
          can be no assurance that these will be completed or beneficial to
          Alcoa.

     .    Alcoa has investments and activities in numerous countries outside the
          U.S. and in emerging markets, including China, Brazil, India, Korea
          and Mexico. Changes in the laws or governmental policies in the
          countries in which Alcoa operates could affect its business in such
          countries and Alcoa's results of operations. In addition, economic
          factors, including inflation and fluctuations in foreign currency
          exchange rates and interest rates, and competitive factors in the
          countries could affect Alcoa's revenues, expenses and results of
          operations.

     .    The markets for most aluminum products are highly competitive. In
          addition, aluminum competes with other materials, such as steel,
          plastics and glass, among others, for various applications in Alcoa's
          key markets. The willingness of customers to accept substitutions for
          the products sold by Alcoa, the ability of large customers to exert
          leverage in the marketplace to affect the pricing for certain
          fabricated aluminum products, such as can sheet, or other developments
          by or affecting Alcoa's competitors or customers could affect Alcoa's
          results of operations.

     .    A significant downturn in the business or financial condition of a key
          customer or customers supplied by Alcoa could affect Alcoa's results
          of operations in a particular period.

     .    Alcoa has undertaken and may continue to undertake productivity and
          cost-reduction initiatives to improve performance, including
          deployment of company wide business process models, such as the Alcoa
          Business System and the Alcoa Enterprise Business Solution, an
          initiative designed to build a common global infrastructure across
          Alcoa for data, processes and supporting software. There can be no
          assurance that these initiatives will be completed or beneficial to
          Alcoa or that any estimated cost savings from such activities will be
          realized.

     .    Alcoa is working on new developments in advanced smelting process
          technologies, including inert anode technology. There can be no
          assurance that such technologies will be commercially feasible or
          beneficial to Alcoa.

     .    Alcoa's operations worldwide are subject to numerous complex and
          increasingly stringent environmental laws and regulations. The costs
          of complying with such environmental laws and regulations, including
          participation in assessments and cleanups of sites, as well as
          internal voluntary programs, are significant and will continue to be
          so for the foreseeable future. Alcoa's results of operations or
          liquidity in a particular period could be affected by certain
          environmental matters, including remediation costs and damages related
          to several sites.

     .    Alcoa's results of operations or liquidity in a particular period
          could be affected by significant legal proceedings or investigations
          adverse to Alcoa, including product liability, safety and health and
          other claims.

The above list of important factors is not inclusive or necessarily in order of
importance.

Item 2.   Properties.

          Alcoa has facilities under the following segments and in the following
geographic areas:

                                       14

ALUMINA AND CHEMICALS

         Bauxite:  See the chart in the Bauxite Interests section on page 4.
         -------

         Alumina: See the chart in the Alumina Refining Facilities and Capacity
         -------
section on page 5.

         Alumina Chemicals:         United States:   7 locations in 6 states
         -----------------          Europe:          3 locations in 3 countries
                                    South America:   2 locations
                                    Asia:            3 locations in 2 countries
                                    Australia:       2 locations

PRIMARY METALS

         See the chart in the Primary Aluminum Facilities and Capacity section
on page 6.

FLAT-ROLLED PRODUCTS

         Sheet and Plate:           United States:   11 locations in 10 states
         ---------------            Europe:          10 locations in 7 countries
                                    South America:   1 location
                                    Asia:            1 location
                                    Australia:       2 locations

         Foil Products:             United States:   4 locations in 3 states
         -------------              Europe:          2 locations
                                    South America:   1 location
                                    Asia:            2 locations
                                    Australia:       1 location

         Can Reclamation:           United States:   1 location
         ---------------            Europe:          1 location
                                    South America:   1 location
                                    Australia:       1 location

ENGINEERED PRODUCTS

         Aerospace:                 United States:   21 locations in 14 states
         ---------                  Canada:          2 locations in 2 provinces
                                    Europe:          9 locations in 3 countries
                                    Asia:            1 location

         Auto Components:           United States:   6 locations in 5 states
         ---------------            Canada:          1 location
                                    Europe:          6 locations in 4 countries
                                    South America:   3 locations in 2 countries

         Architectural Extrusions:  United States:   12 locations in 10 states
         ------------------------   Canada:          2 locations in 2 provinces
                                    Europe:          11 locations in 6 countries
                                    South America:   8 locations in 3 countries

         Castings:                  United States:   17 locations in 12 states
         --------                   Canada:          3 locations in 2 provinces
                                    Europe:          10 locations in 6 countries
                                    South America:   1 location
                                    Asia:            1 location

                                       15

         Extrusion, Tube:           United States:   16 locations in 15 states
         ---------------            Europe:          18 locations in 6 countries
                                    South America:   9 locations in 4 countries

         Fasteners:                 United States:   14 locations in 10 states
         ---------                  Europe:          2 locations
                                    Australia:       1 location

PACKAGING AND CONSUMER

         Consumer Products:         United States:   7 locations in 5 states
         -----------------          Europe:          3 locations
                                    South America:   1 location

         Flexible Packaging:        United States:   8 locations in 4 states
         ------------------         Europe:          1 location

         Closures, Machinery:       United States:   8 locations in 7 states
         -------------------        Europe:          7 locations in 6 countries
                                    South America:   9 locations in 6 countries
                                    Mexico:          2 locations
                                    Asia:            6 locations in 6 countries

         Graphics:                  United States:   20 locations in 15 states
         --------                   Canada:          3 locations in 1 province
                                    Mexico:          1 location

         Foodservice Packaging:     United States:   7 locations in 6 states
         ---------------------      Canada:          1 location
                                    South America:   1 location

OTHER

         AFL
         ---
               Automotive:          United States:   6 locations in 4 states
               ----------           Canada:          1 location
                                    Europe:          9 locations in 7 countries
                                    Mexico:          6 locations
                                    South America:   2 locations in 2 countries

               Telecommunications:  United States:   14 locations in 13 states
               ------------------   Europe:          1 location
                                    Mexico:          1 location

         Auto Engineering:          United States:   8 locations in 5 states
         ----------------           Europe:          2 locations

         Building Products:         United States:   5 locations in 5 states
         -----------------

         Other:                     United States:   24 locations in 15 states
         -----                      Canada:          1 location
                                    Europe:          4 locations in 2 countries
                                    South America:   18 locations in 6 countries
                                    Australia:       1 location

                                       16

Alcoa's corporate center is located at 201 Isabella Street, Pittsburgh,
Pennsylvania 15212-5858. Alcoa's global office is located at 390 Park Avenue,
New York, New York 10022-4608.

Alcoa does lease some of its facilities; however, it is the opinion of
management that the leases do not affect the continued use of the properties nor
their values. AFL and Southern Graphic Systems, Inc. lease most of their
facilities.

Alcoa believes that its facilities are suitable and adequate for its operations.
Although no title examination of properties owned by Alcoa has been made for the
purpose of this report, the company knows of no material defects in title to any
such properties. See Notes A, E and Q to the financial statements for
information on properties, plants and equipment and lease expense.

Item 3.  Legal Proceedings.

In the ordinary course of its business, Alcoa is involved in a number of
lawsuits and claims, both actual and potential, including some that it has
asserted against others. While the amounts claimed may be substantial, the
ultimate liability cannot now be determined because of the considerable
uncertainties that exist. It is possible that results of operations or liquidity
in a particular period could be materially affected by certain contingencies.
Management believes, however, that the disposition of matters that are pending
or asserted will not have a material adverse effect on the financial position of
the company.

Environmental Matters
- ---------------------

Alcoa is involved in proceedings under the Superfund or analogous state
provisions regarding the usage, disposal, storage or treatment of hazardous
substances at a number of sites in the U.S. The company has committed to
participate, or is engaged in negotiations with federal or state authorities
relative to its alleged liability for participation, in clean-up efforts at
several such sites.

Since 1989, Alcoa has been conducting investigations and studies of the Grasse
River, adjacent to Alcoa's Massena, New York plant site, under order from the
U.S. Environmental Protection Agency (EPA) issued under Section 106 of the
Comprehensive Environmental Response, Compensation and Liability Act, also known
as Superfund. Sediments and fish in the river contain varying levels of
polychlorinated biphenyl (PCB). In the fourth quarter of 1999, Alcoa submitted
an Analysis of Alternatives Report to the EPA. This Report identified potential
courses of remedial action related to the PCB contamination of the river. The
EPA indicated to Alcoa that it believed additional remedial alternatives needed
to be included in the Analysis of Alternatives Report. During 2000 and 2001,
Alcoa completed certain studies and investigations on the river, including pilot
tests of sediment capping techniques and other remediation technologies. In
February 2002, Alcoa submitted a revised draft Analysis of Alternatives Report
based on these additional evaluations and included additional remedial
alternatives required by the EPA. The additional alternatives required by the
EPA involve removal of more sediment than was included in the 1999 Analysis of
Alternatives Report. The range of costs associated with the remedial
alternatives evaluated in the 2002 Report is between $2 million and $525
million. Alcoa believes that several of those alternatives, involving the
largest amounts of sediment removal, should not be selected for the Grasse River
remedy. Alcoa believes the alternatives that should be selected are those
ranging from monitored natural recovery ($2 million) to a combination of
moderate dredging and capping ($90 million). A reserve of $2 million has been
recorded for any potential losses, as no one of the alternatives is more likely
to be selected than any other.

Representatives of various U.S. federal and state agencies and a Native American
tribe, acting in their capacities as trustees for natural resources, have
asserted that Alcoa and Reynolds may be liable for loss or damage to such
resources under federal and state law based on Alcoa's and Reynolds' operations
at their Massena, New York and St. Lawrence, New York facilities. While formal
proceedings have not been instituted, the company continues to actively
investigate these claims.

                                       17

Since 1990 Alcoa has undertaken investigations and evaluations concerning
alleged releases of mercury from its Point Comfort, Texas facility into the
adjacent Lavaca Bay pursuant to a Superfund order from the EPA. In March 1994,
the EPA listed the "Alcoa (Point Comfort)/Lavaca Bay Site" on the National
Priorities List, and Alcoa and Region VI of the EPA entered into an
administrative order on consent, EPA docket no. 6-11-94, concerning the site.
The administrative order required the company to conduct a remedial
investigation and feasibility study under EPA oversight. Following submission by
the company of all required information, in December 2001, the EPA issued its
Record of Decision (ROD) for the site. That ROD selected the final remedial
approach for the site. The cost of such remedy is fully reserved. The company is
negotiating a Consent Decree with the United States under which it will
undertake to implement the remedy. The company and certain federal and state
natural resource trustees, who previously served Alcoa with notice of their
intent to file suit to recover damages for alleged loss or injury of natural
resources in Lavaca Bay, have cooperatively identified restoration alternatives
and approaches for Lavaca Bay. The cost of such restoration is reserved and
Alcoa anticipates negotiating a Consent Decree with the trustees under which it
will implement the restoration.

In October 1998, Region V of the EPA referred various alleged environmental
violations at Alcoa's Lafayette, Indiana operations to the civil division of the
U.S. Department of Justice (DOJ). The alleged violations relate to water permit
exceedances as reported on monthly discharge monitoring reports. Alcoa and the
DOJ entered into a tolling agreement to suspend the statute of limitations
related to the alleged violations in order to facilitate settlement discussions
with the DOJ and EPA. The parties have been able to reach settlement and a
consent decree concluding this matter was executed in January 2002.

In July 2001, the Louisiana Department of Environmental Quality (DEQ) filed an
administrative law proceeding, docket no. 2001-5918-EQ, against Discovery
Aluminas, Inc. (Discovery), an Alcoa subsidiary, and Waste Management, Inc.
(Waste Management) seeking civil penalties for alleged infractions of DEQ's
hazardous waste regulations. Both Discovery and Waste Management have denied the
allegations and formal discovery is proceeding.

In 1994, the EPA added Reynolds' Troutdale, Oregon primary aluminum production
plant to the National Priorities List of Superfund sites. Alcoa is cooperating
with the EPA and, pursuant to a September 1995 consent order, docket number
1094-01-19-106, between Reynolds and EPA Region 10, is working with the EPA to
identify cleanup solutions for the site. The EPA is expected to issue its ROD
during 2002. Following curtailment of active production operations and based on
a further evaluation of remedial options, the company has determined the most
probable cost of cleanup. This amount has been fully reserved.

On October 24, 2001, the Texas Natural Resource Conservation Commission (TNRCC)
approved an Agreed Order concerning Alcoa's Point Comfort Operations. The Agreed
Order required corrective actions and fines for various violations of the Clean
Air Act that were self-reported to the TNRCC by Alcoa. The Order required
payment of a fine of $145,000. In lieu of one-half of the fine, Alcoa agreed to
purchase a hazardous material response vehicle for the Calhoun County Local
Emergency Planning Committee. TNRCC deferred an additional $36,000 fine
contingent upon completion of the terms of the Order.

On December 26, 2001, three citizens groups filed an action in the U.S. District
Court for the Western District of Texas against Alcoa. The groups alleged that
activities conducted in the mid-1980s at the Alcoa power plant in Rockdale,
Texas triggered various requirements under the Clean Air Act and the Texas Clean
Air Act and that the plant did not comply with those requirements. The groups
also alleged that the plant violated opacity limits. On January 29, 2002, the
company filed its answer to the complaint denying the allegations. In addition,
on January 9, 2002, the TNRCC issued a Notice of Enforcement and EPA Region VI
issued a Notice of Violation against Alcoa. Neither constitutes final agency
action. Nevertheless, both notices asserted that activities conducted in the
mid-1980s at the Alcoa power plant

                                       18

in Rockdale, Texas triggered requirements under the Clean Air Act and/or the
Texas Clean Air Act and that the plant did not comply with those requirements.
The company is engaged in settlement negotiations with the TNRCC and EPA.

To meet the terms of a newly issued decision by the Western Australia Minister
for the Environment amending the license regulating emissions from the Wagerup
alumina refinery, AWAC is required to implement projects to reduce emissions of
odors and nitrogen oxides at the Wagerup facility by June 30, 2002. If the
Wagerup facility does not complete the projects by that date, Wagerup's alumina
production must be reduced by approximately 6% to the production limits of the
prior license until the projects are completed. AWAC is working diligently to
meet the new standards by the June 30 deadline.

Other Matters
- -------------

Alcoa initiated a lawsuit in King County, Washington in December 1992 against
nearly 100 insurance companies that provided insurance coverage for
environmental property damage at Alcoa plant sites between the years 1956 and
1985. The trial for the first three sites concluded in October 1996 with a jury
verdict partially in Alcoa's favor and an award of damages to Alcoa. In its
post-trial decisions, the trial court substantially reduced the amount that
Alcoa will be able to recover from its insurers on the three test sites. Alcoa
appealed these rulings to the Washington Court of Appeals, which certified the
appeal to the Washington Supreme Court. Alcoa prevailed on significant portions
of the appeal and the matter is currently set for trial in June 2003.

Along with various asbestos manufacturers, distributors and premises users,
Alcoa and/or its subsidiaries are defendants in several hundred active
individual lawsuits filed on behalf of persons alleging injury predominantly
(98%) as a result of occupational exposure to asbestos at various company
facilities. In addition to the above cases, an Alcoa subsidiary has been
routinely named, along with a large common group of industrial companies, in a
standardized complaint utilized by one particular law firm where the company's
involvement is not evident. Since 1999, about seven thousand such complaints
have been filed. To date, Alcoa's subsidiary has been dismissed from almost
every case (99.8%) that was actually placed in line for trial. Alcoa, its
subsidiaries and acquired companies, all have had numerous insurance policies
over the years that provide coverage for asbestos based claims. Many of these
policies provide layers of coverage for varying periods of time and for varying
locations. Alcoa believes that between its reserves and insurance it is
adequately covered for its known asbestos exposures. For the period from 1997
through the end of 2001, Alcoa's net out-of-pocket costs in payments on asbestos
claims has averaged a little over $1 million per year. The costs of defense and
settlement have not been and are not expected to be material to the financial
condition of the company.

In July 1999, Alcoa Aluminio S.A. received notice that an administrative
proceeding was commenced by Brazil's Secretary of Economic Law of the Ministry
of Justice against Brazilian producers of primary aluminum, including Alcoa
Aluminio. The suit alleges collusive action in the pricing of primary aluminum
in violation of Brazilian antitrust law. Alcoa Aluminio has presented its
defense and is awaiting the decision of the Secretary of Economic Law. If the
Secretary of Economic Law determines that the antitrust law was violated, then
the action may be further prosecuted by the Administrative Council of Economic
Defense. Brazilian law provides for civil and criminal sanctions for violations
of antitrust law, including fines ranging from 1% to 30% of a company's revenue
during the last fiscal year.

On October 15, 1999, Victoria Shaev, who represents that she is an Alcoa
shareholder, filed a purported derivative action on behalf of the company in the
U.S. District Court for the Southern District of New York, naming as defendants
the company, each member of Alcoa's Board of Directors, certain officers of the
company and PricewaterhouseCoopers LLP, Alcoa's independent accountants. The
shareholder did not make a demand on the company prior to filing this lawsuit.
Under relevant law, this demand is required. The lawsuit alleges, among other
things, that Alcoa's proxy statement dated March 8, 1999 contained materially
false and misleading representations and omissions concerning the company's
proposed Alcoa Stock Incentive Plan and that the shareholder approval of the
plan, based upon these alleged representations and omissions, was defective. The
plaintiff sought to invalidate the shareholder approval of the plan and enjoin
its implementation. She also requested that Alcoa pay the costs and
disbursements of the action, including the fees of her accountants, counsel and
experts. On March 19, 2001, the court granted without prejudice the defendants'
motion to dismiss the plaintiff's claims. On May 31, 2001, Ms. Shaev served an
amended complaint making the same allegations as in the previous complaint but
styling the complaint as a class action on behalf of the shareholders. The

                                      19

company served a motion to dismiss on June 25, 2001. The issues have been
briefed and argued. The parties are awaiting the court's decision.

A purported class action was filed on February 14, 2002 in the U.S. District
Court for the Northern District of Ohio against the company and the
International UAW, on behalf of 400 African-American employees of Cleveland
Works, alleging discrimination in Cleveland's apprenticeship program. Plaintiffs
seek certification of the class, declaratory and injunctive relief, lost wages,
entry into apprenticeship programs, compensatory and punitive damages and costs
and expenses of litigation. The complaint has not yet been served on the
company.

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

No matters were submitted to a vote of the company's security holders during the
fourth quarter of 2001.

Item 4A. Executive Officers of the Registrant.

The names, ages, positions and areas of responsibility of the executive officers
of the company as of February 15, 2002 are listed below.

Alain J. P. Belda, 58, Director, Chairman of the Board and Chief Executive
Officer. Mr. Belda was elected to Alcoa's Board of Directors in September 1998
and became Chairman in January 2001. He has been Chief Executive Officer since
May 1999. He was President and Chief Executive Officer from May 1999 to January
2001, and President and Chief Operating Officer from January 1997 to May 1999.
He served as Vice Chairman from 1995 to 1997. Mr. Belda and Ricardo E. Belda,
Executive Vice President - Alcoa and Group President, Alcoa Europe, are
brothers.

Ricardo E. Belda, 57, Executive Vice President - Alcoa and Group President,
Alcoa Europe. He was elected to his current position in November 2001. Mr. Belda
was named President - Alcoa Europe in March 2000 and elected a Vice President of
Alcoa in May 2000. He was named President of Alcoa Nederland B.V. in 1995 and
took on responsibility for Extrusions and End Products for all of Europe in
1997.

L. Patrick Hassey, 56, Executive Vice President and Group President, Alcoa
Industrial Components. Alcoa Industrial Components includes Howmet, Huck, Alcoa
Automotive, Alcoa Wheels and Forged Products. Mr. Hassey was elected to his
current position in May 2000. He was appointed President - Alcoa Europe in
November 1997. He was elected a Vice President of Alcoa and was named
President -Aerospace/Commercial Rolled Products Division in November 1991.

Robert S. Hughes, II, 57, Executive Vice President - Alcoa and Group President,
Alcoa Allied Products. He was elected to his current position in July 2001. He
also continues to lead Alcoa Fujikura Ltd. where he has been Chairman, Chief
Executive Officer and President since 1996. He was elected a Vice President of
Alcoa in 1997.

Richard B. Kelson, 55, Executive Vice President and Chief Financial Officer;
Chief Compliance Officer. He was elected to his current position in July 2001.
Mr. Kelson has been Executive Vice President and Chief Financial Officer since
May 1997. He was Executive Vice President and General Counsel from May 1994 to
1997.

William E. Leahey, Jr., 52, Executive Vice President - Alcoa and Group
President, Packaging, Consumer, Construction & Distribution. He was elected to
his current position in September 2001. Mr. Leahey joined Alcoa in May 2000 as
Vice President - Alcoa and Group President, Packaging, Consumer, Construction &
Distribution following Alcoa's merger with Reynolds Metals Company. He was
Executive Vice President and Chief Financial Officer of Reynolds since 1998;
Senior Vice President of Reynolds' global can business in 1997 and Vice
President and General Manager of Reynolds' Can Division from 1993 to 1997.

Timothy S. Mock, 59, Vice President, Alcoa Business Support Services and
Controller. He was elected to his current position in November 2001. He was
elected Vice President, Controller in September 1999;

                                       20

was President of Alcoa Automotive Structures from 1998 to 1999 and was Managing
Director of Alcoa Italia S.p.A. following Alcoa's acquisition of Alumix, S.p.A.
from 1996 to 1998.

G. John Pizzey, 56, Executive Vice President and Group President, Alcoa Primary
Products. Alcoa Primary Products includes the Alumina and Chemicals segment and
the Primary Metals segment. Mr. Pizzey was elected to his current position in
July 2001. Mr. Pizzey was named Group President, Alcoa Primary Products in June
2000; was President of Primary Metals in 1997, President, Alcoa World Alumina in
1998 and took on additional responsibility for chemicals in August 1999. He has
been a Vice President of Alcoa since 1996.

Lawrence R. Purtell, 54, Executive Vice President and General Counsel. Mr.
Purtell joined Alcoa and was elected to his current position in November 1997.
Prior to joining Alcoa, Mr. Purtell was Senior Vice President, General Counsel
and Corporate Secretary of Koch Industries, Inc.

The company's executive officers are elected or appointed to serve until the
next annual meeting of the Board of Directors (held in conjunction with the
annual meeting of shareholders) except in the case of earlier death, resignation
or removal.

                                    PART II

Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.

Dividend per share data, high and low prices per share, the principal exchanges
on which the company's common stock is traded, and the estimated number of
holders of common stock are set forth on page 66 of the Annual Report and are
incorporated by reference.

Item 6. Selected Financial Data.

The comparative table showing selected financial data for the company is on page
33 of the Annual Report and is incorporated by reference.

Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operation.

Management's review and comments on the consolidated financial statements are on
pages 34 through 43 of the Annual Report and are incorporated by reference.

Item 7A.  Quantitative and Qualitative Disclosures About Market Risk.

The information regarding quantitative and qualitative disclosures about market
risk is on pages 39 through 40 of the Annual Report and is incorporated by
reference.

Item 8. Financial Statements and Supplementary Data.

The company's consolidated financial statements, the notes thereto, selected
quarterly financial data and the report of the independent accountants are on
pages 44 through 61 of the Annual Report and are incorporated by reference.

                                       21

Item 9.  Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.

None.

                                   PART III

Item 10. Directors and Executive Officers of the Registrant.

The information regarding directors is contained under the captions "Board of
Directors" and "Item 1-Election of Directors" on pages 6 through 12 of the Proxy
Statement and is incorporated by reference.

The information regarding executive officers is set forth in Part I, Item 4A of
this report under "Executive Officers of the Registrant."

The information required by Item 405 of Regulation S-K is contained under the
caption "Section 16(a) Beneficial Ownership Reporting Compliance" on page 15 of
the Proxy Statement and is incorporated by reference.

Item 11. Executive Compensation.

This information is contained under the captions "Directors' Compensation" on
page 6, "Stock Performance Graph" on page 15, "Executive Compensation" on pages
18 through 27, and "Change in Control" on page 28 of the Proxy Statement. Such
information (other than the Stock Performance Graph and Report of the
Compensation Committee, which shall not be deemed to be "filed") is incorporated
by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and
Related Stockholder Matters.

The information required by Item 403 of Regulation S-K is contained under the
captions "Stock Ownership of Certain Beneficial Owners" and "Stock Ownership of
Directors and Executive Officers" on pages 13 through 14 of the Proxy Statement
and is incorporated by reference.

Item 13. Certain Relationships and Related Transactions.

This information is contained under the caption "Transactions with Directors'
Companies" on page 6 of the Proxy Statement and is incorporated by reference.

                                    PART IV

Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

   (a) The consolidated financial statements, financial statement schedule and
exhibits listed below are filed as part of this report.

                                       22

     (1)  The company's consolidated financial statements, the notes thereto and
the report of the independent accountants are on pages 44 through 61 of the
Annual Report and are incorporated by reference.

     (2)  The following report and schedule should be read with the company's
consolidated financial statements in the Annual Report:

   Report of PricewaterhouseCoopers LLP dated January 9, 2002 on the company's
   financial statement schedule filed as a part hereof for the fiscal years
   ended December 31, 2001, 2000 and 1999.

   Schedule II - Valuation and Qualifying Accounts For the Years Ended
   December 31, 2001, 2000 and 1999.

     (3)  Exhibits

Exhibit
Number                                   Description *
- ------                                   -----------

2(a).          Agreement and Plan of Merger among the company, Omega Acquisition
               Corp. and Cordant Technologies Inc. dated as of March 14, 2000,
               incorporated by reference to exhibit 12(d)(1) to the Tender Offer
               Statement on Schedule TO filed by the company and Omega
               Acquisition Corp. on March 20, 2000.

2(b).          Agreement and Plan of Merger among the company, HMI Acquisition
               Corp. and Howmet International Inc. dated as of June 2, 2000,
               incorporated by reference to exhibit 12(d)(5) to Amendment No. 5
               to the Tender Offer Statement on Schedule TO filed by the company
               and HMI Acquisition Corp. on June 5, 2000.

3(a).          Articles of the Registrant as amended, incorporated by reference
               to exhibit 3(a) to the company's Quarterly Report on Form 10-Q
               for the quarter ended June 30, 2000.

3(b).          By-Laws of the Registrant as amended, incorporated by reference
               to exhibit 3(b) to the company's Annual Report on Form 10-K for
               the year ended December 31, 1998.

4(a).          Articles. See Exhibit 3(a) above.

4(b).          By-Laws. See Exhibit 3(b) above.

4(c).          Form of Indenture, dated as of September 30, 1993, between Alcoa
               and J. P. Morgan Trust Company, N.A. (formerly Chase Manhattan
               Trust Company, N.A.), as successor Trustee (undated form of
               Indenture incorporated by reference to exhibit 4(a) to
               Registration Statement No. 33-49997 on Form S-3).

10(a).         Alcoa's Summary of the Key Terms of the AWAC Agreements,
               incorporated by reference to exhibit 99.2 to the company's
               Current Report on Form 8-K, dated November 28, 2001.

10(b).         Charter of the Strategic Council executed December 21, 1994,
               incorporated by reference to exhibit 99.3 to the company's
               Current Report on Form 8-K, dated November 28, 2001.

                                       23

10(c).         Amended and Restated Limited Liability Company Agreement of Alcoa
               Alumina & Chemicals, L.L.C. dated as of December 31, 1994,
               incorporated by reference to exhibit 99.4 to the company's
               Current Report on Form 8-K, dated November 28, 2001.

10(d).         Shareholders Agreement dated May 10, 1996 between Alcoa
               International Holdings Company and WMC Limited, incorporated by
               reference to exhibit 99.5 to the company's Current Report on Form
               8-K, dated November 28, 2001.

10(e).         Side Letter of May 16, 1995 clarifying transfer restrictions,
               incorporated by reference to exhibit 99.6 to the company's
               Current Report on Form 8-K, dated November 28, 2001.

10(f).         Amended and Extended Revolving Credit Agreement (364-Day), dated
               as of April 27, 2001, incorporated by reference to exhibit 10(n)
               to the company's Quarterly Report on Form 10-Q for the quarter
               ended June 30, 2001.

10(g).         Amended and Restated Revolving Credit Agreement (Five-Year),
               dated as of April 27, 2001, incorporated by reference to exhibit
               10(o) to the company's Quarterly Report on Form 10-Q for the
               quarter ended June 30, 2001.

10(h).         Revolving Credit Agreement (Five-Year), dated as of August 14,
               1998, incorporated by reference to exhibit 10(o) to the company's
               Quarterly Report on Form 10-Q for the quarter ended September 30,
               1998.

10(i).         Alcoa Stock Acquisition Plan, effective January 1, 1999,
               incorporated by reference to exhibit 10(a) to the company's
               Annual Report on Form 10-K for the year ended December 31, 1999.

10(i)(1).      Amendments to Alcoa Stock Acquisition Plan, effective September
               1, 2000, incorporated by reference to exhibit 10(a)(1) to the
               company's Annual Report on Form 10-K for the year ended December
               31, 2000.

10(j).         Employees' Excess Benefit Plan, Plan A, incorporated by reference
               to exhibit 10(b) to the company's Annual Report on Form 10-K
               (Commission file number 1-3610) for the year ended December 31,
               1980.

10(j)(1).      Amendments to Employees' Excess Benefit Plan, Plan A, effective
               January 1, 2000, incorporated by reference to exhibit 10(b)(1) to
               the company's Annual Report on Form 10-K for the year ended
               December 31, 2000.

10(k).         Incentive Compensation Plan, as amended effective January 1,
               1993, incorporated by reference to exhibit 10(c) to the company's
               Annual Report on Form 10-K (Commission file number 1-3610) for
               the year ended December 31, 1992.

10(l).         Employees' Excess Benefit Plan, Plan C, as amended and restated
               in 1994, effective January 1, 1989, incorporated by reference to
               exhibit 10(d) to the company's Annual Report on Form 10-K
               (Commission file number 1-3610) for the year ended December 31,
               1994.

                                       24

10(l)(1).   Amendments to Employees' Excess Benefit Plan, Plan C, effective
            January 1, 2000, incorporated by reference to exhibit 10(d)(1) to
            the company's Annual Report on Form 10-K for the year ended December
            31, 2000.

10(m).      Employees' Excess Benefit Plan, Plan D, as amended effective October
            30, 1992, incorporated by reference to exhibit 10(e) to the
            company's Annual Report on Form 10-K (Commission file number 1-3610)
            for the year ended December 31, 1992 and exhibit 10(e)(1) to the
            company's Annual Report on Form 10-K (Commission file number 1-3610)
            for the year ended December 31, 1994.

10(n).      Deferred Fee Plan for Directors, as amended effective July 9, 1999,
            incorporated by reference to exhibit 10(g)(1) to the company's
            Quarterly Report on Form 10-Q for the quarter ended June 30, 1999.

10(o).      Restricted Stock Plan for Non-Employee Directors, as amended
            effective March 10, 1995, incorporated by reference to exhibit 10(h)
            to the company's Annual Report on Form 10-K (Commission file number
            1-3610) for the year ended December 31, 1994.

10(o)(1).   Amendment to Restricted Stock Plan for Non-Employee Directors,
            effective November 10, 1995, incorporated by reference to exhibit
            10(h)(1) to the company's Annual Report on Form 10-K (Commission
            file number 1-3610) for the year ended December 31, 1995.

10(p).      Fee Continuation Plan for Non-Employee Directors, incorporated by
            reference to exhibit 10(k) to the company's Annual Report on Form
            10-K (Commission file number 1-3610) for the year ended December 31,
            1989.

10(p)(1).   Amendment to Fee Continuation Plan for Non-Employee Directors,
            effective November 10, 1995, incorporated by reference to exhibit
            10(i)(1) to the company's Annual Report on Form 10-K (Commission
            file number 1-3610) for the year ended December 31, 1995.

10(q).      Deferred Compensation Plan, as amended effective October 30, 1992,
            incorporated by reference to exhibit 10(k) to the company's Annual
            Report on Form 10-K (Commission file number 1-3610) for the year
            ended December 31, 1992.

10(q)(1).   Amendments to Deferred Compensation Plan, effective January 1, 1993,
            February 1, 1994 and January 1, 1995, incorporated by reference to
            exhibit 10(j)(1) to the company's Annual Report on Form 10-K
            (Commission file number 1-3610) for the year ended December 31,
            1994.

10(q)(2).   Amendment to Deferred Compensation Plan, effective June 1, 1995,
            incorporated by reference to exhibit 10(j)(2) to the company's
            Annual Report on Form 10-K (Commission file number 1-3610) for the
            year ended December 31, 1995.

10(q)(3).   Amendment to Deferred Compensation Plan, effective November 1, 1998,
            incorporated by reference to exhibit 10(j)(3) to the company's
            Annual Report on Form 10-K for the year ended December 31, 1999.

                                       25

10(q)(4).   Amendments to Deferred Compensation Plan, effective January 1, 1999,
            incorporated by reference to exhibit 10(j)(4) to the company's
            Annual Report on Form 10-K for the year ended December 31, 1999.

10(q)(5).   Amendments to Deferred Compensation Plan, effective January 1, 2000,
            incorporated by reference to exhibit 10(j)(5) to the company's
            Annual Report on Form 10-K for the year ended December 31, 2000.

10(r).      Summary of the Executive Split Dollar Life Insurance Plan, dated
            November 1990, incorporated by reference to exhibit 10(m) to the
            company's Annual Report on Form 10-K (Commission file number 1-3610)
            for the year ended December 31, 1990.

10(s).      Dividend Equivalent Compensation Plan, effective February 3, 1997,
            incorporated by reference to exhibit 10(l) to the company's Annual
            Report on Form 10-K (Commission file number 1-3610) for the year
            ended December 31, 1996.

10(t).      Form of Indemnity Agreement between the company and individual
            directors or officers, incorporated by reference to exhibit 10(j) to
            the company's Annual Report on Form 10-K (Commission file number 1-
            3610) for the year ended December 31, 1987.

10(u).      Alcoa Stock Incentive Plan, effective June 1, 1999, incorporated by
            reference to exhibit 10(p)(1) to the company's Quarterly Report on
            Form 10-Q for the quarter ended June 30, 1999.

10(v).      Alcoa Supplemental Pension Plan for Senior Executives, effective
            January 1, 1999, incorporated by reference to exhibit 10(q) to the
            company's Annual Report on Form 10-K for the year ended December 31,
            1998.

10(v)(1).   Amendments to Alcoa Supplemental Pension Plan for Senior Executives,
            effective January 1, 2000, incorporated by reference to exhibit
            10(q)(1) to the company's Annual Report on Form 10-K for the year
            ended December 31, 2000.

10(w).      Deferred Fee Estate Enhancement Plan for Directors, effective July
            10, 1998, incorporated by reference to exhibit 10(r) to the
            company's Annual Report on Form 10-K for the year ended December 31,
            1998.

10(x).      Alcoa Deferred Compensation Estate Enhancement Plan, effective July
            10, 1998, incorporated by reference to exhibit 10(s) to the
            company's Annual Report on Form 10-K for the year ended December 31,
            1998.

10(x)(1).   Amendments to Alcoa Deferred Compensation Estate Enhancement Plan,
            effective January 1, 2000, incorporated by reference to exhibit
            10(s)(1) to the company's Annual Report on Form 10-K for the year
            ended December 31, 1999.

10(x)(2).   Amendments to Alcoa Deferred Compensation Estate Enhancement Plan,
            effective January 1, 2000, incorporated by reference to exhibit
            10(s)(2) to the company's Annual Report on Form 10-K for the year
            ended December 31, 2000.

10(y).      2001 PLUS Performance Plan, effective 2001.

10(z).      Alcoa Inc. Change in Control Severance Plan.

                                       26

 12.        Computation of Ratio of Earnings to Fixed Charges.

 13.        Portions of Alcoa's 2001 Annual Report to Shareholders.

 21.        Subsidiaries and Equity Entities of the Registrant.

 23.        Consent of Independent Accountants.

 24.        Power of Attorney for certain directors.

  *Exhibit Nos. 10(i) through 10(z) are management contracts or compensatory
plans required to be filed as Exhibits to this Form 10-K.

  Amendments and modifications to other Exhibits previously filed have been
omitted when in the opinion of the Registrant such Exhibits as amended or
modified are no longer material or, in certain instances, are no longer required
to be filed as Exhibits.

  No other instruments defining the rights of holders of long-term debt of the
Registrant or its subsidiaries have been filed as Exhibits because no such
instruments met the threshold materiality requirements under Regulation S-K. The
Registrant agrees, however, to furnish a copy of any such instruments to the
Commission upon request.

  (b) Reports on Form 8-K. During the fourth quarter of 2001, Alcoa filed three
reports on Form 8-K with the Securities and Exchange Commission, all of which
reported matters under Item 5:

          (1)  a Form 8-K dated November 19, 2001, reporting Alcoa's
               announcement of restructuring charges;

          (2)  a Form 8-K dated November 28, 2001, reporting on certain matters
               between Alcoa and WMC Limited and their existing alliance known
               as Alcoa World Alumina and Chemicals; and

          (3)  a Form 8-K dated December 6, 2001, reporting that Alcoa had
               completed the offering and sale of $1,500,000,000 principal
               amount of notes in an underwritten public offering.

                                       27

                     Report of Independent Accountants on
                         Financial Statement Schedule

To the Shareholders and Board of Directors
of Alcoa Inc. (Alcoa)

Our audits of the consolidated financial statements referred to in our report
dated January 9, 2002 appearing in the 2001 Annual Report to Shareholders of
Alcoa (which report and consolidated financial statements are incorporated by
reference in this Annual Report on Form 10-K) also included an audit of the
financial statement schedule listed in Item 14(a)(2) of this Form 10-K. In our
opinion, this financial statement schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.

                                                  /s/ PricewaterhouseCoopers LLP
                                                  PricewaterhouseCoopers LLP

600 Grant Street
Pittsburgh, Pennsylvania
January 9, 2002

                                       28

                SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
                        FOR THE YEARS ENDED DECEMBER 31
                                 (in millions)

Col. A                                           Col. B                    Col. C                      Col. D              Col. E
- ------                                           ------                    ------                      ------              ------
                                                                          Additions
                                                                          ---------
                                            Balance at        Charged to      Charged to
                                            beginning of      costs and       other                                   Balance at
               Description                  Period            expenses        accounts (A)       Deductions (B)       end of period
               -----------                  ------            --------        ------------       --------------       -------------
                                                                                                       
Allowance for doubtful accounts:

     2001                                        $  69          $   58         $     7(A)           $   5(B)             $     129

     2000                                        $  58          $    9         $    11(A)           $   9(B)             $      69

     1999                                        $  61          $   10         $    (5)(A)          $   8(B)             $      58

Income tax valuation allowance:

     2001                                        $ 165          $   50         $    (7)(A)          $   7(C)             $     201

     2000                                        $ 134          $   27         $    30(A)           $  26(C)             $     165

     1999                                        $ 135          $   12         $     6(A)           $  19(C)             $     134

 Notes:  (A)   Collections on accounts previously written off,
               acquisition/divestiture of subsidiaries and foreign currency
               translation adjustments.

         (B)   Uncollectible accounts written off.

         (C)   Related primarily to utilization of tax loss carryforwards.

                                       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.

                                  ALCOA INC.

March 4, 2002                     By  /s/  Timothy S. Mock
                                      --------------------------
                                      Timothy S. Mock
                                      Vice President, Alcoa Business
                                      Support Services and Controller
                                      (Also signing as Principal
                                      Accounting Officer)

    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 and on the dates indicated.

           Signature                             Title                 Date

/s/ Alain J.P. Belda         Chairman of the Board            March 4, 2002
- --------------------------
    Alain J. P. Belda        and Chief Executive Officer
                             (Principal Executive Officer
                             and Director)

/s/ Richard B. Kelson        Executive Vice President and     March 4, 2002
- --------------------------
    Richard B. Kelson        Chief Financial Officer; Chief
                             Compliance Officer
                             (Principal Financial Officer)

Kathryn S. Fuller, Joseph T. Gorman, Judith M. Gueron, Sir Ronald Hampel, John
P. Mulroney, Henry B. Schacht, Franklin A. Thomas and Marina v.N. Whitman, each
as a Director, on March 4, 2002, by Donna C. Dabney, their Attorney-in-Fact.*

*By /s/ Donna C. Dabney
    ----------------------
        Donna C. Dabney
        Attorney-in-Fact

                                       30

                                                                   EXHIBIT 10(Y)

                                  ALCOA INC.
                                  ----------
                                 ("PLUS")PLAN
                                 ------------

                            ARTICLE I - DEFINITIONS

For the purposes of this PLUS Plan ("Plan"), unless a different meaning is
clearly required by the context:

       "Award" means the benefit provided to Participants under Article III
herein.

       "Award Date" means March 31, 2004, or such other date during the first
quarter of 2004, as determined by the Company.

       "Business Unit Participants" means those employees who are eligible
salaried employees of a business unit.

       "Committee" means the Compensation Committee of the Board of Directors of
the Company, or its designee, the VP, People and Communications, as set forth in
the Plan.

       "Company" means Alcoa Inc. and any successor thereto.

       "Corporate Participants" means those employees who are eligible salaried
employees of the Company, but not employees of a particular business unit.

       "Deferred Compensation Plan" means the Company's Deferred Compensation
Plan, or Deferred Compensation Estate Enhancement Plan, as

applicable, as they may be amended from time to time or any deferred
compensation plan which may be established during the Effective Period.

       "Disability" means a mental or physical condition preventing the employee
from performing his or her position satisfactorily, where a qualified physician
designated by the Committee certifies that, in his or her opinion, the
employee's state of health is such that he or she should not be burdened with
the responsibilities of his or her position even though he or she is not totally
or permanently disabled.

       "Effective Period" means January 1, 2001 through December 31, 2003.

       "Participants" means Business Unit Participants and Corporate
Participants who satisfy all of the requirements of Section 2 of Article II.

       "Retirement" means (a) termination of employment with rights to an
immediate pension (other than a deferred vested pension) under the provisions of
any retirement plan of the Company, a Subsidiary or government sponsored
retirement plan or (b) termination of employment upon or after attaining age 65
regardless of pension eligibility.

       "Subsidiary" means any corporation in which the Company owns, directly or
indirectly, stock possessing a majority of the total combined voting power of
all classes of stock in such corporation, and any corporation, partnership,
joint venture, limited liability company or other business entity as to which
the Company possesses a significant ownership interest, directly or indirectly,
as determined by the Committee.

                                       2

                          ARTICLE II - PARTICIPATION

       SECTION 1. Purpose. The Purpose of the Plan is to provide compensation
                  -------
for officers and other key employees of the Company and its Subsidiaries as a
reward for achieving three year stretch performance and cost reduction goals.

       SECTION 2. Eligibility. Those employees who, for at least 12 months
                  -----------
during the Effective Period, are both eligible to participate in the Alcoa Stock
Incentive Plan, and are at least job grade 21 and above, are eligible to
participate in the Plan. The Company, in its sole discretion, may include other
key employees of the Company and its Subsidiaries who do not meet the foregoing
requirements as Participants and exclude any employees who otherwise would meet
the foregoing requirements.

                             ARTICLE III - AWARDS

       SECTION 1. Determination. Only upon the Company meeting or exceeding its
                  -------------
Return on Capital ("ROC") threshold goal are Awards granted to Participants. In
addition, Business Unit Participants will receive Awards only upon the
Participant's business unit meeting or exceeding its threshold ROC goal. Awards
shall be determined in accordance with the PLUS award guidelines, which may be
amended from time to time by the Company.

       SECTION 2. Cash Awards. Each Award is paid in cash to the Participants on
                  -----------
the Award Date. Cash payment of Awards are made from the general funds of the
Company.

       SECTION 3. Deferred Awards. Awards may be deferred under applicable
                  ---------------
deferred compensation plans. For purposes of the U.S. Deferred Compensation
Plan, 100% of the Award may be deferred.

                                       3

       SECTION 4. Not Benefit Compensation. Awards are not treated as
                  ------------------------
compensation for any purpose under any other compensation or benefit plan of the
Company.

                       ARTICLE IV - EMPLOYEE OBLIGATIONS

       SECTION 1. Contingent Awards. In the event a Participant's employment is
                  -----------------
terminated for any reason other than death, Disability, or Retirement, all
rights to an Award are forfeited. In the event a Participant's employment is
terminated by reason of death, Disability or Retirement, then the granting of an
Award is at the sole discretion of the Committee.

       SECTION 2. Participant Rights. No Participant or other person, by virtue
                  ------------------
of any Award, has any interest whatever, either vested or contingent, in any
property of the Company or its Subsidiaries or in any share of Company Stock
held in the treasury of the Company. The interest of any Participant in the Plan
is not assignable, transferable or subject to any lien, in whole or in part,
either directly or by operation of law or otherwise, including, but not by way
of limitation, execution, levy, garnishment, attachment, pledge, bankruptcy or
in any other manner. Participation in the Plan does not give any employee the
right to continued employment by the Company or its Subsidiaries.

       SECTION 3. Beneficiary. Upon the death of a Participant, any unpaid
                  -----------
Awards will be paid to a Participant's spouse, if the Participant is married, or
to a Participant's estate, if the Participant is not married.

                                       4

                          ARTICLE V - ADMINISTRATION

       SECTION 1. Committee. The Committee has the exclusive power and
                  ---------
discretionary authority to grant Awards to Participants who are officers of the
Company. The Vice President - People and Communication has the exclusive power
and discretionary authority to grant Awards to all other Participants. The
Committee may take all action, including the adoption of rules and regulations,
as it deems appropriate for the administration of the Plan. All determinations
by the Committee are final and binding upon the Company, its Subsidiaries,
Participants, employees and beneficiaries.

       SECTION 2. Indemnification. No member of the Committee or employee of the
                  ---------------
Company is personally liable for any decision made or action taken in reliance
upon any report or information furnished by the Company's independent certified
public accountants and upon any other information furnished in connection with
the Plan by any person or persons other than such member; nor for any mistake of
judgment made by such member or any other member of the Committee; nor for any
loss, unless resulting from his or her own gross negligence or willful
misconduct; and no member of the Committee is liable for the neglect, omissions
or wrongdoing of any other member or agent of the Committee; and each member of
the Committee is indemnified and held harmless by the Company against and from
any cost or liability that may be reasonably incurred by or imposed upon such
member in connection with any claim or proceeding to which such member may be a
party or in which such member may be involved by reason of any action taken or
failure to act under the Plan.

       SECTION 3. Amendments. The Committee may from time to time amend, modify,
                  ----------
suspend or terminate the Plan, rules or guidelines at any time and for any
reason.

                                       5

       SECTION 4. Expenses. All expenses of administering the Plan are paid by
                  --------
the Company, which in turn may seek reimbursement from Subsidiaries. The cost of
all Awards incurred by the Company with respect to employees of any Subsidiary
will be reimbursed by the Subsidiary.

                          ARTICLE VI - MISCELLANEOUS

       SECTION 1. Construction. The Plan is construed in accordance with and
                  ------------
governed by the laws of the Commonwealth of Pennsylvania, excluding any choice
of law provisions, which may indicate the application of the laws of another
jurisdiction.

       SECTION 2. No Modifications. This Plan encompasses all of the rights of a
                  ----------------
Participant and supersedes all agreements, understandings, negotiations,
discussions and commitments with respect to the matters herein.

                                       6

                                                                   Exhibit 10(z)

                                  ALCOA INC.
                               CHANGE IN CONTROL
                                SEVERANCE PLAN

          The Company hereby adopts, as of January 11, 2002, the Alcoa Inc.
Change in Control Severance Plan for the benefit of certain employees of the
Company and its subsidiaries, on the terms and conditions hereinafter stated.
All capitalized terms used herein are defined in Section 1 hereof.

Section 1. DEFINITIONS. As hereinafter used:
           -----------

          1.1  "Affiliate" shall have the meaning set forth in Rule 12b-2 under
                ---------
Section 12 of the Exchange Act.

          1.2  "Applicable Multiplier" shall mean three (3); provided, however,
                ---------------------
that, with respect to an Eligible Employee who incurs a Severance during the
three year period immediately preceding such individual's Mandatory Retirement
Age, such multiplier shall be equal to (x) the number of full and partial months
remaining until such Eligible Employee attains Mandatory Retirement Age, (y)
divided by twelve.

          1.3  "Applicable Period" shall mean the thirty-six (36) month period
                -----------------
immediately following an Eligible Employee's Severance Date; provided, however,
that, with respect to an Eligible Employee who incurs a Severance during the
three year period immediately preceding such individual's Mandatory Retirement
Age, the Applicable Period shall mean the period remaining until such Eligible
Employee attains Mandatory Retirement Age.

          1.4  "Beneficial Owner" shall have the meaning set forth in Rule 13d-3
                ----------------
under the Exchange Act.

          1.5  "Board" means the Board of Directors of the Company.
                -----

          1.6  "Cause" means: (i) the willful and continued failure by the
                -----
Eligible Employee to substantially perform the Eligible Employee's duties with
the Employer that has not been cured within thirty (30) days after a written
demand for substantial performance is delivered to the Eligible Employee by the
Board, which demand specifically identifies the manner in which the Board
believes that the Eligible Employee has not substantially performed the Eligible
Employee's duties, or (ii) the willful engaging by the Eligible Employee in
conduct which is demonstrably and materially injurious to the Company,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, (x) no act, or failure to act, on the Eligible Employee's part shall
be deemed "willful" unless done, or omitted to be done, by the

Eligible Employee not in good faith and without reasonable belief that the
Eligible Employee's act, or failure to act, was in the best interest of the
Company and (y) in the event of a dispute concerning the application of this
provision, no claim by the Company that Cause exists shall be given effect
unless the Company establishes to the Board by clear and convincing evidence
that Cause exists and the Board finding to that effect is adopted by the
affirmative vote of not less than three quarters (3/4) of the entire membership
of the Board (after reasonable notice to the Eligible Employee and an
opportunity for the Eligible Employee, together with the Eligible Employee's
counsel, to be heard by the Board).

          1.7  "Change in Control" shall be deemed to have occurred if the event
                -----------------
set forth in any one of the following paragraphs shall have occurred:

          (a)  the following individuals cease for any reason to constitute a
majority of the number of directors then serving: individuals who, as of the
date hereof, constitute the Board and any new director (other than a director
whose initial assumption of office is in connection with an actual or threatened
election contest, including but not limited to a consent solicitation, relating
to the election of directors of the Company) whose appointment or election by
the Board or nomination for election by the Company's shareholders was approved
or recommended by a vote of at least two-thirds (2/3) of the directors then
still in office who either were directors on the date hereof or whose
appointment, election or nomination for election was previously so approved or
recommended;

          (b)  there is consummated a merger or consolidation of the Company or
any direct or indirect subsidiary of the Company with any other corporation or
other Entity where one of the following is true (i) such merger or
consolidation, as applicable, results in the voting securities of the Company
outstanding immediately prior to such merger or consolidation no longer
representing (either by remaining outstanding or by being converted into voting
securities of the surviving Entity or any parent thereof) at least 55% of the
combined voting power of the stock and securities of the Company or such
surviving Entity or any parent thereof outstanding immediately after such merger
or consolidation, or (ii) immediately following such merger or consolidation, as
applicable, the individuals who comprise the board of directors of the Company
immediately prior to such merger or consolidation no longer constitute at least
a majority of the board of directors of the Company, the surviving Entity or any
parent thereof;

          (c)  the sale or disposition by the Company of all or substantially
all of the Company's assets other than a sale or disposition by the Company of
all or substantially all of the assets to an Entity at least 55% of the combined
voting power

                                       2

of the stock and securities of which is owned by the shareholders of the Company
in substantially the same proportions as their ownership of the Company's voting
stock immediately prior to such sale; or

          (d)  the shareholders of the Company approve a plan of complete
liquidation or dissolution of the Company.

          1.8  "Code" means the Internal Revenue Code of 1986, as it may be
                ----
amended from time to time.

          1.9  "Committee" means the Compensation Committee of the Board.
                ---------

          1.10 "Company" means Alcoa Inc., or any successors thereto.
                -------

          1.11 "DB Pension Plan" means any tax-qualified, supplemental or excess
                ---------------
defined benefit pension plan maintained by the Company or any of its Affiliates
and any other defined benefit plan or agreement entered into between the
Eligible Employee and the Company or any of its Affiliates which is designed to
provide the Eligible Employee with supplemental defined benefit retirement
benefits.

          1.12 "DC Pension Plan" means any tax-qualified, supplemental or excess
                ---------------
defined contribution plan maintained by the Company or any of its Affiliates and
any other defined contribution plan or agreement entered into between the
Eligible Employee and the Company or any of its Affiliates which is designed to
provide the Eligible Employee with supplemental defined contribution retirement
benefits.

          1.13 "Eligible Employee" means any Tier I, Tier II or Tier III
                -----------------
Employee. An Eligible Employee becomes a "Severed Employee" once he or she
                                          ----------------
incurs a Severance.

          1.14 "Employer" means the Company or any of its subsidiaries which is
                --------
an employer of the Eligible Employee.

          1.15 "Entity" means any individual, entity, person (within the meaning
                ------
of Section 3(a)(9) of the Exchange Act or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act), other than (i) an employee plan of
the Company or any of its Affiliates, (ii) any Affiliate of the Company, (iii)
an underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by shareholders
of the Company in substantially the same proportions as their ownership of the
Company.

                                       3

          1.16 "Exchange Act" shall mean the Securities Exchange Act of 1934,
                ------------
as amended from time to time.

          1.17 "Excise Tax" shall mean any excise tax imposed under section 4999
                ----------
of the Code.

          1.18 "Good Reason" in respect of an Eligible Employee means the
                -----------
occurrence, after a Change in Control (or prior to a Change in Control, under
the circumstances described in the second sentence of Section 1.24 hereof,
treating all references below to a "Change in Control" as references to a
"Potential Change in Control"), of:

               (i)    the assignment to the Eligible Employee of any duties
inconsistent with the Eligible Employee's employment status with the Employer
immediately prior to the Change in Control or a substantial adverse alteration
in the nature or status of the Eligible Employee's responsibilities from those
in effect immediately prior to the Change in Control, including, but not limited
to, (x) with respect to a Tier I Employee, the Eligible Employee's ceasing to
hold the office as the sole chief executive officer of the Company (or its
parent or successor) and to function in that capacity, reporting directly to the
board of directors of a public company, and (y) with respect to a Tier II
Employee, the Eligible Employee's ceasing to report directly to the chief
executive officer of a public company;

               (ii)   a reduction by the Company in the Eligible Employee's
total compensation and benefits in the aggregate from that in effect immediately
prior to the Change in Control. Total compensation and benefits includes, but is
not limited to (1) annual base salary, annual variable compensation opportunity
(taking into account applicable performance criteria and the target bonus amount
of annual variable compensation); (2) long term stock-based and cash incentive
opportunity (taking into account applicable performance criteria and the target
stock option amount); and (3) benefits and perquisites under pension, savings,
life insurance, medical, health, disability, accident and material fringe
benefit plans of the Company or its subsidiaries or Affiliates in which the
Eligible Employee was participating immediately before the Change in Control;

               (iii)  the relocation of the Eligible Employee's principal place
of employment to a location more than fifty (50) miles from the Eligible
Employee's principal place of employment immediately prior to the Change in
Control; or

               (iv)   the failure by the Employer to pay to the Eligible
Employee any portion of the Eligible Employee's compensation, within fourteen
(14) days of the date such compensation is due.

                                       4

     The Eligible Employee's right to terminate the Eligible Employee's
employment for Good Reason shall not be affected by the Eligible Employee's
incapacity due to physical or mental illness. The Eligible Employee's continued
employment shall not constitute consent to, or a waiver of rights with respect
to, any act or failure to act constituting Good Reason hereunder. For purposes
of any determination regarding the existence of Good Reason, any good faith
determination by the Eligible Employee that Good Reason exists shall be
conclusive. Notwithstanding anything in this Section 1.18 to the contrary, any
termination of employment by a Tier I Employee or a Tier II Employee, whether
voluntary or involuntary, for any reason or no reason, within a thirty (30) day
period commencing on a date six months immediately following a Change in Control
shall be deemed to constitute a termination for Good Reason hereunder.

          1.19 "Gross-Up Payment" shall have the meaning set forth in Section
                ----------------
2.2 hereof.

          1.20 "Mandatory Retirement Age" shall have the meaning set forth in
                ------------------------
the Company's Mandatory Retirement Policy or its successor policy.

          1.21 "Notice of Termination" shall have the meaning set forth in
                ---------------------
Section 3.6.

          1.22 "Plan" means the Alcoa Inc. Change in Control Severance Plan, as
                ----
set forth herein, as it may be amended from time to time.

          1.23 A "Potential Change in Control" shall be deemed to have occurred
                  ---------------------------
if the event set forth in any one of the following paragraphs shall have
occurred:

          (a)  the Company enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control; or

          (b)  any Entity becomes the Beneficial Owner, directly or indirectly,
of securities of the Company representing 20% or more of either the then
outstanding shares of common stock of the Company or the combined voting power
of the Company's then outstanding securities and the Board determines the Entity
intends to effect a Change in Control.

          1.24 "Severance" means the termination of an Eligible Employee's
                ---------
employment with the Employer on or within three years immediately following the
date of the Change in Control, (x) by the Employer other than for Cause, or (y)
by the Eligible Employee for Good Reason. In addition, for purposes of this
Plan, the

                                       5

Eligible Employee shall be deemed to have incurred a Severance, if (i) the
Eligible Employee's employment is terminated by the Employer without Cause prior
to a Change in Control (whether or not a Change in Control ever occurs) and such
termination was at the request or direction of an Entity who has entered into an
agreement with the Company the consummation of which would constitute a Change
in Control or (ii) the Eligible Employee terminates his employment for Good
Reason prior to a Change in Control (whether or not a Change in Control ever
occurs) and the circumstance or event which constitutes Good Reason occurs at
the request or direction of such Entity. For purposes of any determination
regarding the applicability of the immediately preceding sentence, any position
taken by the Eligible Employee shall be presumed to be correct unless the
Company establishes to the Board by clear and convincing evidence that such
position is not correct. An Eligible Employee will not be considered to have
incurred a Severance if his or her employment is discontinued by reason of the
Eligible Employee's death or a physical or mental condition causing such
Eligible Employee's inability to substantially perform his or her duties with
the Company, including, without limitation, such condition entitling him or her
to benefits under any sick pay or disability income policy or program of the
Company.

          1.25 "Severance Date" means the date specified in the Notice of
                --------------
Termination, as provided in Section 3.6 (which, in the case of a termination by
the Company, shall not be less than thirty (30) days and, in the case of a
termination by the Eligible Employee, shall not be less than fifteen (15) days
nor more than sixty (60) days, respectively, from the date such Notice of
Termination is given).

          1.26 "Severance Pay" means the payment determined pursuant to Section
                -------------
2.1(a) hereof.

          1.27 "Tier I Employee" means the Chief Executive Officer of the
                ---------------
Company.

          1.28 "Tier II Employee" means the Chief Financial Officer, the General
                ----------------
Counsel and the Vice President-Corporate Development of the Company, or such
other officer (other than an assistant officer) of the Company as the Committee
determines.

          1.29 "Tier III Employee" means (i) any officer (other than an
                -----------------
assistant officer) of the Company and (ii) any such other key executive of the
Company or any of its subsidiaries or Affiliates as the Committee determines,
which employee, in each case, is not a Tier I Employee or Tier II Employee.

                                       6

Section 2. BENEFITS.
           --------

               2.1 Severance Payments and Benefits. Each Eligible Employee who
                   -------------------------------
incurs a Severance shall be entitled, subject to Section 2.4, to receive the
following payments and benefits from the Company.

               (a) Severance Pay equal to the product of (i) the sum of (x) the
Severed Employee's annual base salary, and (y) his or her target annual variable
compensation with respect to the year in which the Change in Control occurs, and
(ii) the Applicable Multiplier. For purposes of this Section 2.1(a), annual base
salary shall be the higher of (i) base monthly salary in the calendar month
immediately preceding a Change in Control or (ii) base monthly salary in the
calendar month immediately preceding the Severed Employee's Severance Date (in
either case without regard to any reductions therein which constitute Good
Reason) multiplied by twelve.

               (b) During the Applicable Period, the Company shall arrange to
provide the Severed Employee and anyone entitled to claim through the Severed
Employee life, accident and health (including medical, behavioral, prescription
drug, dental and vision) benefits substantially similar to those provided to the
Severed Employee and anyone entitled to claim through the Severed Employee
immediately prior to Employee's Severance Date or, if more favorable to the
Severed Employee, those provided to the Severed Employee and those entitled to
claim through the Severed Employee immediately prior to the first occurrence of
an event or circumstance constituting Good Reason, at no greater after tax cost
to the Severed Employee than the after tax cost to the Severed Employee
immediately prior to such Severance Date or occurrence. Benefits otherwise
receivable by the Severed Employee pursuant to this Section 2.1(b) shall be
reduced to the extent benefits of the same type are received by or made
available to the Severed Employee during the Applicable Period (and any such
benefits received by or made available to the Severed Employee shall be reported
to the Company by the Severed Employee); provided, however, that the Company
shall reimburse the Severed Employee for the excess, if any, of the after-tax
cost of such benefits to the Severed Employee over such cost immediately prior
to the Severed Employee's Severance Date or, if more favorable to the Severed
Employee, the first occurrence of an event or circumstance constituting Good
Reason.

               (c) In addition to the retirement benefits to which the Severed
Employee is entitled under each DC Pension Plan or any successor plan thereto,
the Company shall pay the Severed Employee a lump sum amount, in cash, equal to
the product of (i) the value of contributions or allocations actually made by
the Company

                                       7

to all DC Pension Plans, on behalf of the employee, with respect to the calendar
year immediately preceding the year in which the Change in Control occurs (but
assuming such contributions and allocations had been based on the annualized
base salary plus target annual variable compensation as determined in Section
2.1(a)) and (ii) the Applicable Multiplier. Such contributions or allocations
shall specifically not include any employee deferrals or contributions, or any
earnings.

               (d) In addition to the retirement benefits to which the Severed
Employee is entitled under each DB Pension Plan or any successor plan thereto,
the Company shall pay the Severed Employee a lump sum amount, in cash, equal to
the excess of the actuarial equivalent of the aggregate retirement pension
(taking into account any early retirement subsidies associated therewith and
determined in accordance with each of the DB Pension Plan's normal form of
payment, commencing at the date (but in no event earlier than the end of the
Applicable Period) as of which the actuarial equivalent of such form of payment
is greatest) which the Severed Employee would have accrued under the terms of
all DB Pension Plans determined:

                    (i)   without regard to any amendment to any DB Pension Plan
               made subsequent to a Change in Control and on or prior to the
               date of the Severed Employee's Severance Date, which amendment
               adversely affects in any manner the computation of retirement
               benefits thereunder, and

                    (ii)  as if the Severed Employee were fully vested
                   thereunder, and

                    (iii) as if the Severed Employee had accumulated (after the
         Severed Employee's Severance Date) a number of additional months of age
         and service credit thereunder as if the Severed Employee had remained
         employed by the Company during the Applicable Period (for all such
         purposes of determining pension benefits and eligibility for such
         benefits including all applicable retirement subsidies), and

                    (iv)  as if the Severed Employee had been credited under
         each DB Pension Plan compensation for each full calendar month during
         the Applicable Period following the calendar month of the Severed
         Employee's Severance Date equal to the Severed Employee's annualized
         base salary plus target annual variable compensation as determined in
         Section 2.1(a) divided by twelve

over

                                       8

the actuarial equivalent of the aggregate retirement pension (taking into
account any early retirement subsidies associated therewith and determined in
accordance with each of the DB Pension Plan's normal form of payment commencing
at the date (but in no event earlier than the Severed Employee's Severance Date)
as of which the actuarial equivalent of such form of payment is greatest) which
the Severed Employee had accrued pursuant to the provisions of the DB Pension
Plans as of the Severed Employee's Severance Date.

For purposes of this Section 2.1(d), "actuarial equivalent" shall be determined
based upon the Severed Employee's age as of the Severed Employee's Severance
Date using the same assumptions utilized under the Alcoa Retirement Plan I,
Section 8.3(d)(ii) or the successor to such provision (without regard to
applicable dollar limitations ($5,000 as of January 1, 2002)) immediately prior
to the Severed Employee's Severance Date or, if more favorable to the Severed
Employee, immediately prior to the first occurrence of an event or circumstance
constituting Good Reason.

                  (e)   If the Severed Employee would have become entitled to
benefits under the Company's post-retirement health care or life insurance
plans, as in effect immediately prior to the Severed Employee's Severance Date
or, if more favorable to the Severed Employee, as in effect immediately prior to
the first occurrence of an event or circumstance constituting Good Reason, had
the Severed Employee's employment terminated at any time during the Applicable
Period, the Company shall provide such post-retirement health care or life
insurance benefits to the Severed Employee and the Severed Employee's dependents
commencing on the later of (i) the date on which such coverage would have first
become available and (ii) the date on which benefits described in 2.1(b)
terminate. Any such benefit, which is dependent on service or compensation shall
be determined as if the Severed Employee had accumulated (after the Severed
Employee's Severance Date) a number of additional months of age and service
credit thereunder as if the Severed Employee had remained employed by the
Company up to the foregoing commencement date, and as if the Severed Employee
had been credited with compensation for each full calendar month following the
calendar month of the Severed Employee's Severance Date up to the foregoing
commencement date equal to the Severed Employee's annualized based salary as
determined in Section 2.1(a) divided by twelve plus the Severed Employee's
target annual variable compensation as determined in Section 2.1(a) divided by
twelve. Except for the additional service and compensation during the Applicable
Period, nothing herein is intended to provide the Severed Employee with
benefits, which exceed the benefits provided to other participants in said post-
retirement health care or life insurance plans.

                                       9

               (f)  The Company shall provide the Severed Employee with
outplacement services suitable to the Severed Employee's position for a period
of six (6) months or, if earlier, until the first acceptance by the Severed
Employee of an offer of employment.

         The amounts described in Sections 2.1(a), (c) and (d) shall be paid to
the Severed Employee in a cash lump sum, as soon as practicable following the
Severance Date, but in no event later than twenty (20) business days immediately
following the later of (x) the Severance Date or (y) the expiration of the
revocation period, if any, applicable to such Severed Employee's release,
described in Section 2.4.

               2.2  Gross-Up Payment.
                    ----------------

               (a)  Whether or not an Eligible Employee incurs a Severance, if
any of the payments or benefits received or to be received by the Eligible
Employee in connection with a Change in Control or the Eligible Employee's
termination of employment (whether pursuant to the terms of this Plan or any
other plan, arrangement or agreement) (all such payments and benefits, excluding
the Gross-Up Payment, being hereinafter referred to as the "Total Payments")
will be subject to the Excise Tax, the Company shall pay to the Eligible
Employee an additional amount (the "Gross-Up Payment") such that the net amount
retained by the Eligible Employee, after deduction of any Excise Tax on the
Total Payments and any federal, state and local income and employment taxes and
Excise Tax upon the Gross-Up Payment, and after taking into account the phase
out of itemized deductions and personal exemptions attributable to the Gross-Up
Payment, shall be equal to the Total Payments.

               (b)  For purposes of determining whether any of the Total
Payments will be subject to the Excise Tax and the amount of such Excise Tax,
(i) all of the Total Payments shall be treated as "parachute payments" (within
the meaning of section 280G(b)(2) of the Code) unless, in the opinion of tax
counsel, a compensation consultant or accountant of recognized standing (the
"Expert") reasonably acceptable to the Eligible Employee and selected by the
accounting firm which was, immediately prior to the Change in Control, the
Company's independent auditor (the "Auditor"), such payments or benefits (in
whole or in part) do not constitute parachute payments, including by reason of
section 280G(b)(4)(A) of the Code, (ii) all "excess parachute payments" within
the meaning of section 280G(b)(l) of the Code shall be treated as subject to the
Excise Tax unless, in the opinion of the Expert, such excess parachute payments
(in whole or in part) represent reasonable compensation for services actually
rendered (within the meaning of section

                                       10

280G(b)(4)(B) of the Code) in excess of the Base Amount allocable to such
reasonable compensation, or are otherwise not subject to the Excise Tax, and
(iii) the value of any noncash benefits or any deferred payment or benefit shall
be determined by the Auditor in accordance with the principles of sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Eligible Employee shall be deemed to pay federal income
tax at the highest marginal rate of federal income taxation in the calendar year
in which the Gross-Up Payment is to be made and state and local income taxes at
the highest marginal rate of taxation in the state and locality of the Eligible
Employee's residence on the Eligible Employee's Severance Date (or if there is
no Severance Date, then the date on which the Gross-Up Payment is calculated for
purposes of this Section 2.2) net of the maximum reduction in federal income
taxes which could be obtained from deduction of such state and local taxes.

               (c) In the event that the Excise Tax is finally determined to be
less than the amount taken into account hereunder in calculating the Gross-Up
Payment, the Eligible Employee shall repay to the Company, within five (5)
business days following the time that the amount of such reduction in the Excise
Tax is finally determined, the portion of the Gross-Up Payment attributable to
such reduction (plus that portion of the Gross-Up Payment attributable to the
Excise Tax and federal, state and local income and employment taxes imposed on
the Gross-Up Payment being repaid by the Eligible Employee), to the extent that
such repayment results in a reduction in the Excise Tax and a dollar-for-dollar
reduction in the Eligible Employee's taxable income and wages for purposes of
federal, state and local income and employment taxes, plus interest on the
amount of such repayment at 120% of the rate provided in section 1274(b)(2)(B)
of the Code. In the event that the Excise Tax is determined to exceed the amount
taken into account hereunder in calculating the Gross-Up Payment (including by
reason of any payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess (plus any interest, penalties or additions
payable by the Eligible Employee with respect to such excess) within five (5)
business days following the time that the amount of such excess is finally
determined. The Eligible Employee and the Company shall each reasonably
cooperate with the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for Excise Tax with
respect to the Total Payments.

               (d) The Gross-Up Payment shall be paid on the thirtieth (30) day
(or such earlier date as the Excise Tax becomes due and payable to the taxing
authorities) after it has been determined that the Total Payments are subject to
the Excise Tax; provided however, that if the amount of the Gross-Up Payment or
any

                                       11

portion thereof cannot be finally determined on or before that day, the Company
shall pay to the Eligible Employee on such date an estimate as determined by the
Auditor until such point in time that the final determination of the Gross-Up
Payment can occur. Notwithstanding the foregoing, payments may be delayed until
the expiration of the revocation period, if any, applicable to such Eligible
Employee's release described in Section 2.4.

               (e) The Eligible Employee shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of any additional Gross-Up Payment pursuant to Section
2.2(c). Such notification shall be given as soon as practicable but no later
than ten (10) business days after the Eligible Employee is informed in writing
of such claim and shall apprise the Company of the nature of such claim and date
on which the Company must respond to contest the claim. If the Company provides
timely notice to the Eligible Employee in writing that it desires to contest
such claim, the Eligible Employee shall (i) give the Company any information
reasonably requested by the Company relating to such claim; (ii) take such
action in connection with contesting such claim, as the Company shall reasonably
request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably
selected by the Company; (iii) cooperate with the Company in good faith in order
effectively to contest such claim; and (iv) permit the Company to participate in
any proceeding relating to such claim. The Company shall bear and pay directly
all costs and expenses (including additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold the Eligible Employee
harmless on an after-tax basis, for any Excise tax or income tax including
interest and penalties with respect hereto) imposed as a result of such
representation and payment of cost and expenses. Without limiting the foregoing,
the Company shall control all proceedings taken in connection with such contest
and at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of
such claim and may at its sole option either direct the Eligible Employee to pay
the tax claimed and sue for a refund or contest the claim in any permissible
manner, and the Eligible Employee agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts as the Company shall determine.
Provided however if the Company directs the Eligible Employee to pay such claim
and sue for a refund, the Company shall advance the amount of the payment to the
Eligible Employee on an interest-free basis and shall indemnify and hold the
Eligible Employee harmless on an after-tax basis from any Excise Tax or income
tax imposed with respect to such advance or with respect to such imputed income
with respect to such advance and further provided that any extension of the
statute of limitation relating to such payment of taxes for the taxable

                                       12

year of the Eligible Employee with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, the
Company's control of the contest and reimbursement for the expenses shall be
limited to issues with respect to which an additional Gross-Up Payment would be
payable hereunder and the Eligible Employee shall be entitled to settle or
contest as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority. If after the receipt by the Eligible
Employee of an amount advanced by the Company, the Eligible Employee becomes
entitled to receive any refund with respect to such claims, the Eligible
Employee shall promptly pay to the Company the amount of such refund (together
with any interest paid or credited thereon after taxes applicable thereto). If,
after the receipt by the Eligible Employee of an amount advanced by the Company
pursuant to the above section, a determination is made that the Eligible
Employee shall not be entitled to any refund with respect to such claim and the
Company does not notify the Eligible Employee in writing of its intent to
contest such denial of refund prior to the expiration of thirty (30) days after
such determination, then such advance shall be forgiven and shall not be
required to be repaid and the amount of such advance shall off-set to the extent
thereof the amount of Gross-Up Payment required to be paid.

          2.3  Legal Fees. The Company shall pay to the Eligible Employee all
               ----------
legal fees and expenses incurred by the Eligible Employee in disputing in good
faith any issue hereunder or in seeking in good faith to obtain or enforce any
benefit or right provided by this Plan; provided, that the payment of legal fees
                                        --------
hereunder by the Company shall not be required if the Eligible Employee pursues
such dispute in a manner inconsistent with the provisions of Sections 3.4 and
3.5 hereof; and provided further, that, the Eligible Employee shall be required
                -------- -------
to repay any such amounts to the Company to the extent that an arbitrator issues
a final, unappealable order setting forth a determination that the position
taken by the Eligible Employee was frivolous or advanced in bad faith. Subject
to Section 2.2(e) hereof, the Company shall pay to the Eligible Employee all
legal fees and expenses incurred in connection with any tax audit or proceeding
to the extent attributable to the application of section 4999 of the Code to any
payment or benefit provided hereunder. Such payments shall be made within
fourteen (14) business days after delivery of the Eligible Employee's written
requests for payment accompanied with such evidence of fees and expenses
incurred as the Company reasonably may require.

          2.4  Release. No Severed Employee shall be eligible to receive
               -------
Severance Pay or other benefits under the Plan unless and until he or she first
executes a written release substantially in the form attached hereto as Schedule
A (the "Release") (or, if the Severed Employee is not a United States employee,
a

                                       13

similar release which is in accordance with the applicable laws of the relevant
jurisdiction), and such release becomes effective by its terms.

          2.5  Withholding. The Company shall be entitled to withhold from
               -----------
amounts to be paid to the Severed Employee hereunder any federal, state or local
withholding or other taxes or charges (or foreign equivalents of such taxes or
charges) which it is from time to time required to withhold.

          2.6  Status of Plan Payments. Neither Severance Pay nor any payment
               -----------------------
made pursuant to Section 2.1(c) or (d) hereof shall constitute "compensation"
(or similar term) under the Company's and its Affiliates' employee benefit
plans, including any DB Pension Plan or DC Pension Plan.

          2.7  Mitigation; Setoff. The Severed Employee is not required to seek
               ------------------
other employment or attempt in any way to reduce any amounts payable to him or
her under the Plan. Further, except as specifically provided in Section 2.1(b),
no payment or benefit provided for in this Plan shall be reduced by any
compensation earned by the Severed Employee as a result of employment by another
employer, by retirement benefits, by offset against any amount claimed to be
owed by the Severed Employee to the Company or its Affiliates, or otherwise.

Section 3. PLAN ADMINISTRATION; CLAIMS PROCEDURES.
           --------------------------------------

          3.1  The Committee shall administer the Plan and may interpret and
construe the terms of the Plan, prescribe, amend and rescind rules and
regulations under the Plan and make all other determinations necessary or
advisable for the administration of the Plan, subject to all of the provisions
of the Plan, including, without limitation, Section 3.4. Any determination by
the Committee shall be final and binding with respect to the subject matter
thereof on all Eligible Employees.

          3.2  The Committee may delegate any of its duties hereunder to such
person or persons from time to time as it may designate.

          3.3  The Committee is empowered, on behalf of the Plan, to engage
accountants, legal counsel and such other personnel as it deems necessary or
advisable to assist it in the performance of its duties under the Plan. The
functions of any such persons engaged by the Committee shall be limited to the
specified services and duties for which they are engaged, and such persons shall
have no other duties, obligations or responsibilities under the Plan. Such
persons shall exercise no discretionary authority or discretionary control
respecting the management of the Plan. All reasonable expenses thereof shall be
borne by the Company.

                                       14

          3.4  In the event of a claim by an Severed Employee, such Severed
Employee shall present the reason for his or her claim, dispute or controversy
in writing to the Committee. The Committee shall, within sixty (60) days after
receipt of such written claim, dispute or controversy, send a written
notification to the Severed Employee as to its disposition. In the event the
claim, dispute or controversy is wholly or partially denied, such written
notification shall (i) state the specific reason or reasons for the denial, (ii)
make specific reference to pertinent Plan provisions on which the denial is
based, (iii) provide a description of any additional material or information
necessary for the Severed Employee to perfect the claim, dispute or controversy
and an explanation of why such material or information is necessary, and (iv)
set forth the procedure by which the Severed Employee may appeal the denial of
his or her claim, dispute or controversy. In the event a Severed Employee wishes
to appeal the denial of his or her claim, dispute or controversy he or she may
request a review of such denial by making application in writing to the
Committee within sixty (60) days after receipt of such denial. Such Severed
Employee (or his or her duly authorized legal representative) may, upon written
request to the Committee, review any documents pertinent to his or her claim,
dispute or controversy and submit in writing, issues and comments in support of
his or her position. Within sixty (60) days after receipt of a written appeal
(unless special circumstances require an extension of time, but in no event more
than one hundred twenty (120) days after such receipt), the Committee shall
notify the Severed Employee of the final decision. The final decision shall be
in writing and shall include specific reasons for the decision, written in a
manner calculated to be understood by the claimant, and specific references to
the pertinent Plan provisions on which the decision is based. Notwithstanding
the foregoing, any claim, dispute or controversy regarding whether an Eligible
Employee was terminated for Cause shall be submitted to the Board in accordance
with Section 1.6, and upon the mutual agreement of the Severed Employee and the
Committee, any claim, dispute or controversy that has been submitted by the
Severed Employee in writing to the Committee may be submitted directly to
arbitration in accordance with Section 3.5.

          3.5  Except with respect to any dispute or controversy arising under
the Release, any unresolved claim, dispute or controversy arising under or in
connection with the Plan, and which is not resolved in accordance with Section
3.4, shall be settled exclusively by arbitration in New York City or at any
other mutually agreed upon location. All claims, disputes and controversies
shall be submitted to the CPR Institute for Dispute Resolution ("CPR") in
accordance with the CPR's rules then in effect; provided, however, that the
evidentiary standards set forth in this Agreement shall apply. The claim,
dispute or controversy shall be heard and decided by three arbitrators selected
from CPR's employment panel. The arbitrator's

                                       15

decision shall be final and binding on all parties. Judgment may be entered on
the arbitrator's award in any court having jurisdiction.

               3.6  Any purported termination of an Eligible Employee's
employment shall be communicated by written Notice of Termination from one party
hereto to the other party in accordance with Section 5.8. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Plan relied upon and shall set forth
in reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Eligible Employee's employment under the provision so
indicated.

Section 4. PLAN MODIFICATION OR TERMINATION.
           --------------------------------

               The Plan may be amended or terminated by the Board at any time;
provided, however, that the Committee may make amendments to the Plan (i) that
are required by law, (ii) that will have minimal effect upon the Company's cost
of providing benefits, or (iii) that do not change or alter the character and
intent of the Plan; and further provided that the Plan may not be terminated or
amended within three years immediately following a Change in Control.

Section 5. GENERAL PROVISIONS.
           ------------------

               5.1  Except as otherwise provided herein or by law, no right or
interest of any Eligible Employee under the Plan shall be assignable or
transferable, in whole or in part, either directly or by operation of law or
otherwise, including without limitation by execution, levy, garnishment,
attachment, pledge or in any manner; no attempted assignment or transfer thereof
shall be effective; and no right or interest of any Eligible Employee under the
Plan shall be liable for, or subject to, any obligation or liability of such
Eligible Employee. When a payment is due under this Plan to an Eligible Employee
who is unable to care for his or her affairs, payment may be made directly to
his or her legal guardian or personal representative.

               5.2  If the Company is obligated by law or by contract to pay
severance pay, a termination indemnity, notice pay, or the like, or if the
Company is obligated by law to provide advance notice of separation ("Notice
Period"), then any Severance Pay hereunder shall be reduced by the amount of any
such severance pay, termination indemnity, notice pay or the like, as
applicable, and by the amount of any compensation received during any Notice
Period (but not below zero). Except as set forth in the immediately preceding
sentence, nothing herein is intended to

                                       16

affect an employee's rights under any unemployment law or severance contract or
plan.

          5.3  Neither the establishment of the Plan, nor any modification
thereof, nor the creation of any fund, trust or account, nor the payment of any
benefits shall be construed as giving any Eligible Employee, or any person
whomsoever, the right to be retained in the service of the Company, and all
Eligible Employees shall remain subject to discharge to the same extent as if
the Plan had never been adopted.

          5.4  If any provision of this Plan shall be held invalid or
unenforceable, such invalidity or unenforceability shall not affect any other
provisions hereof, and this Plan shall be construed and enforced as if such
provisions had not been included.

          5.5  This Plan shall inure to the benefit of and be binding upon the
heirs, executors, administrators, successors and assigns of the parties,
including each Eligible Employee, present and future, and any successor to the
Company. If an Eligible Employee shall die while any amount would still be
payable to such Eligible Employee hereunder if the Eligible Employee had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Plan to the executor, personal
representative or administrators of the Eligible Employee's estate.

          5.6  The headings and captions herein are provided for reference and
convenience only, shall not be considered part of the Plan, and shall not be
employed in the construction of the Plan.

          5.7  The Plan shall not be funded. No Eligible Employee shall have any
right to, or interest in, any assets of the Company which may be applied by the
Company to the payment of benefits or other rights under this Plan.

          5.8  Any notice or other communication required or permitted pursuant
to the terms hereof shall have been duly given when delivered or mailed by
United States Mail, first class, postage prepaid, addressed to the intended
recipient at his, her or its last known address.

          5.9  This Plan shall be construed and enforced according to the laws
of the State of New York to the extent not preempted by federal law, which shall
otherwise control.

                                       17

                                                                      SCHEDULE A

                    WAIVER AND RELEASE OF CLAIMS AGREEMENT
                    --------------------------------------

         In consideration of, and subject to, the payments and benefits provided
to me pursuant to the Alcoa Inc. Change in Control Severance Plan (the "Plan"),
I agree to this Waiver and Release of Claims Agreement (the "Release Agreement")
as follows:

         I hereby waive, release and completely discharge Alcoa Inc. (the
"Company"), its parents, subsidiaries and affiliates, and all of their
respective past and present directors, officers, managers, employees,
shareholders, partners, representatives, agents, attorneys, servants,
predecessors, successors and assigns (collectively, the "Releasees") from any
and all claims, charges, complaints, promises, agreements, controversies, liens,
demands, causes of action, obligations, damages and liabilities of any nature
whatsoever, known or unknown, suspected or unsuspected, arising out of or in any
way relating to my employment with the Company, or the termination thereof,
which against the Company or any of the Releasees, I or my executors,
administrators, successors or assigns ever had, now have, or may hereafter claim
to have against any of the Releasees by reason of any matter, cause or thing
whatsoever arising on or before the date this Release Agreement is executed by
me, and whether or not previously asserted before any state or federal court or
before any state or federal agency or governmental entity (the "Release"). This
Release includes, without limitation, any rights or claims arising under any
statute or regulation, including, in each case as amended, the federal Age
Discrimination in Employment Act of 1967, the Older Workers Benefit Protection
Act, Title VII of the Civil Rights Act of 1964, the Civil Rights Act of 1991,
the Americans with Disabilities Act of 1990, the Employee Retirement Income
Security Act of 1974, the Family and Medical Leave Act of 1993 and the National
Labor Relations Act of 1947, each as amended, the [insert specific state and/or
local anti-discrimination law], or any other federal, state or local law,
regulation, ordinance, or common law, or under any policy, agreement,
understanding or promise, written or oral, formal or informal, between me and
the Company and/or any of the Releasees. I further discharge, indemnify and hold
harmless the Company and the Releasees from any and all liability from such
claims, or claims under any company sponsored internal dispute resolution
process.

         I represent that I have not commenced, filed or joined in, and am not a
participant in, any claim, charge, action or proceeding whatsoever against the
Company or any of the Releasees arising out of or relating to any of the matters
set forth in the above Release. By signing this Release Agreement, I further
covenant and agree that I shall not seek or be entitled to any personal recovery
in any claim,

                                       18

charge, action or proceeding that may be commenced on my behalf arising out of
the matters released hereby. Notwithstanding the foregoing or any other
provision hereof, nothing in this Release Agreement shall adversely affect: (i)
my rights under the Plan; (ii) my rights to benefits other than severance
benefits under plans, programs and arrangements of the Company or any subsidiary
or parent of the Company; (iii) my rights to indemnification under any
indemnification agreement, applicable law and the articles of incorporation
and bylaws of the Company and any subsidiary or parent of the Company, and my
rights under any director's and officer's liability insurance policy covering
me; (iv) any claims that may arise after this Release Agreement is executed, or
(v) any claims related to worker's compensation or unemployment compensation. I
agree that neither the Company nor any Releasee has any obligation to reinstate
me or to employ me in the future.

         I acknowledge and represent that the Company has advised me to consult
with an attorney of my choosing prior to signing this Release Agreement and that
I have been given forty-five (45) days during which to review and consider the
provisions of this Release Agreement, although I may sign and return it sooner
if I so desire. I further acknowledge and represent that I have been advised by
the Company that I have the right to revoke this Release Agreement for a period
of seven (7) days after signing it. I acknowledge and agree that, if I wish to
revoke this Release Agreement, I must do so in a writing, signed by me and
received by the General Counsel of the Company at the address listed above, no
later than 5:00 p.m. Eastern Standard Time on the seventh (7th) day of the
revocation period. If no such revocation occurs, this Release Agreement shall
become effective on the eighth (8th) day following my execution of this Release
Agreement (the "Effective Date"). I further acknowledge and agree that, in the
event that I revoke this Release Agreement, it shall have no force or effect,
and I shall have no right to receive any payment hereunder. I understand and
agree that the Company is under no obligation to offer the payments set forth in
the Plan, and that I am under no obligation to consent to this Release
Agreement. I acknowledge that the payments made under the Plan are more than
that which I am entitled to receive if I did not enter into this Release
Agreement. I further represent that I have read this Release Agreement, and
understand its terms and that I enter into this Release Agreement freely,
voluntarily, and without coercion.

                                       19

         The offer to me of this Release Agreement and the payments and benefits
set forth in the Plan is not intended to, and shall not be construed as, any
admission of liability to me or of any improper conduct on the part of the
Company or the Releasees.

         This Release Agreement constitutes the entire agreement among the
parties with respect to the subject matter hereof, and it supersedes any and all
other prior or contemporaneous agreements, discussions, or negotiations with
respect to said subject matter. I represent and acknowledge that in executing
this Release Agreement, I have not relied upon any representation or statement
made by the Company not set forth herein. This Release Agreement may be
modified, amended, or supplemented only in a writing duly signed by all parties
hereto.

         This Release Agreement shall be governed by and construed and enforced
in accordance with the laws of the State of New York.

         The provisions of this Release Agreement shall be enforced to the
fullest extent permissible under the laws and public policies applied in each
jurisdiction in which enforcement is sought. In the event that any one or more
of the provisions of this Release Agreement shall be held to be invalid, illegal
or unenforceable, the validity, legality and enforceability of the remainder of
this Release Agreement shall not in any way be affected or impaired thereby.
Moreover, if any one or more of the provisions contained in this Release
Agreement is held to be excessively broad as to duration, scope, activity or
subject, such provisions shall be construed by limiting and reducing them so as
to be enforceable to the maximum extent allowed by applicable law.

I ACKNOWLEDGE THAT I HAVE FULLY READ AND UNDERSTAND THIS RELEASE AGREEMENT,
INCLUDING MY RELEASE AND WAIVER OF CLAIMS AGAINST THE COMPANY AND THE RELEASEES,
THAT GOOD AND SUFFICIENT CONSIDERATION HAS BEEN GIVEN TO ME FOR SIGNING THIS
RELEASE AGREEMENT, THAT THE EXECUTION OF THIS RELEASE AGREEMENT IS VOLUNTARY AND
DONE OF MY OWN FREE WILL, ACT, AND DEED, AND THAT I HAVE HAD AN OPPORTUNITY TO
SEEK COUNSEL WITH AN ATTORNEY AND HAVE HAD SUFFICIENT TIME TO READ THE AGREEMENT
AND MAKE A DECISION REGARDING ACCEPTANCE OF ITS TERMS.

                                       20

Date:                  , 200__

________________________________            _______________________
Witness                                     Employee

Received and acknowledged this ____ day of ____________,  200 __

By: __________________.

For the Company

                                       21

                                                                      Exhibit 12

               COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
                        FOR THE YEAR ENDED DECEMBER 31
                         (in millions, except ratios)

                                                       2001            2000            1999            1998            1997
                                                     --------        --------         ------          ------          ------
                                                                                                       
Earnings:

  Income before taxes on income and
    before accounting change                           1,641           2,812           1,849           1,605           1,602
  Minority interests' share of earnings of
    majority-owned subsidiaries
    without fixed charges                                  -               1               -              (2)              3
  Less equity earnings                                  (118)           (115)            (55)            (50)            (42)
  Fixed charges added to net income                      423             470             232             245             182
  Distributed income of less than 50%
    owned persons                                         23               9               9               -               -
  Amortization of capitalized interest:
    Consolidated                                          13              15              15              20              20
    Proportionate share of 50% owned persons               -               -               -               -               1
                                                      ------          ------          ------          ------          ------

      Total earnings                                   1,982           3,192           2,050           1,818           1,766
                                                      ======          ======          ======          ======          ======

Fixed Charges:
  Interest expense:
    Consolidated                                         371             427             195             198             141
    Proportionate share of 50% owned persons               6               6               4               3               3
                                                      ------          ------          ------          ------          ------
                                                         377             433             199             201             144
                                                      ------          ------          ------          ------          ------

  Amount representative of the interest factor
    in rents:
    Consolidated                                          44              35              32              43              37
    Proportionate share of 50% owned persons               2               2               1               1               1
                                                      ------          ------          ------          ------          ------
                                                          46              37              33              44              38

    Fixed charges added to earnings                      423             470             232             245             182
                                                      ------          ------          ------          ------          ------

  Interest capitalized:
    Consolidated                                          22              20              21              13               9
    Proportionate share of 50% owned persons               -               -               -               -               -
                                                      ------          ------          ------          ------          ------
                                                          22              20              21              13               9
                                                      ------          ------          ------          ------          ------

      Total fixed charges                                445             490             253             258             191
                                                      ======          ======          ======          ======          ======

Ratio of earnings to fixed charges                       4.5             6.5             8.1             7.0             9.2
                                                      ======          ======          ======          ======          ======

                                                                      EXHIBIT 13

To Alcoa Shareholders

Despite an extremely challenging business environment, 2001 proved to be the
second best year in the company's history in terms of earnings before special
charges, and the fourth best year after such charges. As compared with the Dow
Jones 30 Industrials, which had a total shareholder return of minus 5.4%,
Alcoa's total shareholder return was 7.8%.

Net income for the year was $908 million, or $1.05 per share, including special
after-tax charges of $355 million, or 41 cents per share, compared with $1.484
billion, or $1.80 per share, in 2000. Excluding the special charges, earnings
for 2001 were $1.263 billion, or $1.46 per share. This was a drop of 42% on a
post-special items basis and 19% on a pre-special items basis. We operated in a
deteriorating environment. Demand in our markets weakened as a consequence of
the U.S. recession, the European slowdown, and the continued recession in Japan.
London Metal Exchange prices for aluminum decreased by 13%, from a closing price
of $1,550 a metric ton (mt) on January 2, 2001, to $1,355/mt at closing on
December 28, 2001. The price decrease occurred despite a 4% reduction in global
output, as reported by the International Aluminium Institute, between December
2000 and December 2001. Power shortages in the U.S. and Brazil reduced Alcoa's
own output by 316,000 mtpy, or 7.6% of our total consolidated annual capacity.
All of Alcoa's major markets were affected by the economy - aerospace,
automotive, housing and construction, packaging, and industrial.

We did what you have to do in circumstances like these. We contained capital
expenditures, paid down debt, controlled expenses, and closed high cost
facilities. Several of these actions were started in the second half of year
2000. As a consequence, we will have reduced our workforce by some 10,000, or
8%; permanently closed 18 locations, mostly in Europe and the U.S.; and reduced
our costs by $348 million. Our actions blunted the impact of greatly reduced
market activity but could not eliminate it.

In addition to our ongoing cost controls, in 2001 we completed strategic reviews
of our global market positions in primary and fabricated aluminum and addressed
the results. Though our restructuring activities had a negative impact on
earnings in the second and fourth quarters, they now are contributing to cost
savings.

We believe Alcoa is better positioned to do business in the currently depressed
economy and to benefit when it rebounds.

Meanwhile, we continued to work for long-term shareholder value by investing in
research and development, pursuing appropriate energy self-sufficiency,
evaluating and making acquisitions, and strengthening our balance sheet. We
continued to safeguard our people and to invest in our communities and
protection of the environment.

The Growth Challenge

Striving to grow - top line and bottom line - is a requirement and an ingrained
attitude at Alcoa, challenging everyone to do more, better and faster. In a
business environment where change is the only certainty, we are guided by proven
strategies and competencies to nurture organic growth, preserve shareholder
value in difficult times, and grow value when the times are right. In 2001, we
walked away from several opportunities because they did not, after analysis,
meet our criteria for profitable growth. We have consistently demonstrated the
ability to choose strategic partners and buy wisely, and to integrate
acquisitions to the mutual benefit of Alcoa and the businesses we acquire. We
will continue to do so.

In addition to a number of relatively small alliances, acquisitions, and
divestitures reported in the News section of this report, Alcoa undertook a
major growth initiative in 2001. We began a long-term strategic relationship
with Chalco (Aluminum Corporation of China) that establishes us strongly in the
fastest-growing aluminum market in the world. Our future participation as a 50%
partner in Chalco's Pingguo primary aluminum and alumina facility will support
our plans for further growth in fabricated products in China. We anticipate
future mutually beneficial joint ventures with Chalco.

Customers First

Recognizing that our customers' world is changing as much as Alcoa's, as many
consolidate and some become global enterprises, we have begun to implement a
major shift in the way we manage our relationships with our customers and among
our business units. This customer-focused change grows from the Alcoa Business
System (ABS) and our recently developed Market Sector Lead Teams (MSLTs).
Connecting with our customers through ABS is enabling us to selectively deliver
to them just in time and better manage the supply chain. MSLTs provide a
simplified, powerful means to coordinate the sale and delivery of various
products and services from our geographically and market-diverse businesses to
the same customer, anywhere that customer does business, bringing to bear the
full advantage of our global capabilities.

Maintaining Our Strengths

The events of 2001, whether tragic, uplifting, or simply part of everyday
business, brought me increased appreciation of Alcoa's strength and flexibility
as an organization, and of its people in responding to whatever an occasion
demands of them. In 2001, the company adopted a new Vision - "Alcoa aspires to
be the best company in the world." We reaffirmed our commitment to our Values
that have guided the company for many years, revising them only to place
appropriate emphasis on what we owe to our customers and people.

The safety of our people and communities always is our highest priority.
Excluding recent acquisitions, Alcoa locations achieved a 2001 Lost Workday
(LWD) rate of 0.16, which translates to only one Lost Workday injury per 1.25
million work hours. We are proud of our record of continuous improvement, but
our goal is to become completely accident-free. In 2001, we intensified our
efforts to raise safety performance at locations

acquired in 2000 to the levels expected at other Alcoa operations, and undertook
a company-wide effort to eliminate workplace fatalities.

Wherever we operate, Alcoa will strive to reward its shareholders by remaining
true to its stated goals - profitability, integrity in how we operate,
leadership in technology and manufacturing practices, and respect and honesty in
all of our relationships.

Looking Ahead

Are we satisfied with our performance for you? No. While our 2001 financial
results were better than those of most of our competitors in our diverse
markets, they did not advance in closing the gap between our performance and our
stated objective: standing among the industrial companies in the first quintile
of return on capital among Standard and Poor's Industrials in 2003. We still
intend to meet that objective.

Overall, the near-term business climate will be difficult. Nevertheless, we
believe that Alcoans have the will, the resources, and the competencies to
control our destiny and meet the key financial goals we have set. In this
regard, I invite your attention to the special section in this report entitled
Alcoa's Way: Five Defining Strategies.

Recently, the Board welcomed three new directors whose outstanding
qualifications and experience strengthen Alcoa now, and will contribute greatly
in the future. Kathryn S. Fuller, president of the World Wildlife Fund, brings
extensive knowledge and international experience in conservation and
environmental law to support Alcoa's commitment to sustainable development. Dr.
Ernesto Zedillo, former president of Mexico and an expert on international trade
and economics, will help us to move confidently in setting our agenda for global
growth. Carlos Ghosn, president and CEO of Nissan Motor Co., Ltd. and former
head of Michelin North America, brings to our Board a keen understanding of the
automotive market and an impressive track record in cost-cutting and
restructuring to improve corporate performance.

On behalf of Alcoa and the Board of Directors, thank you for the confidence you
demonstrate with your continued trust and investment.

/s/ Alain J. P. Belda

Alain J. P. Belda
Chairman and Chief Executive Officer

February 15, 2002

Alliances
A Big Step in China

In 2001, Alcoa completed agreements for a strategic alliance with Aluminum
Corporation of China Ltd. (Chalco), marking the beginning of a long-term
strategic partnership. The companies are forming a 50/50 joint venture at
Chalco's facility at Pingguo, one of the most efficient alumina and aluminum
plants in China. Alcoa will gain a strong position in China's aluminum market,
the fastest growing in the world, while Chalco will benefit from Alcoa's
management skills, operational and technical expertise, and best practices.
Alcoa's participation in the primary sector will also support Alcoa's further
growth in fabricated products in China.

     Venture plans include a significant increase in refining and smelting
capacities at Pingguo, doubling the 450,000-mtpy alumina refining capacity by
2003 and expanding the 135,000-mtpy smelter to 355,000 mtpy by 2006. Alcoa is
the strategic investor in Chalco's global offering and listing on the New York
Stock Exchange and The Stock Exchange of Hong Kong. The alliance is expected to
lead to additional joint ventures in China.

New Business for Howmet

Alcoa's Howmet Castings business strengthened its ties with two major customers.
In 2001, Howmet and Siemens AG began a multiyear, several hundred million dollar
agreement for the supply of Howmet turbine airfoil castings. In January 2002,
Boeing awarded Howmet Castings $8 million in new contracts for its F-22
aircraft.

Hydropower in Brazil

Alcoa Aluminio is engaged in several hydropower projects with other Brazilian
companies that will increase its energy self-sufficiency and cost-stability
while also meeting Alcoa and Brazilian standards for socially and
environmentally sound development.

 . In 2002, Aluminio began receiving its own energy from the Machadinho plant, in
which Aluminio has a 27.23% stake. The plant has a total installed capacity of
1,140 megawatts (MW) and is expected to supply 55% of the energy requirements of
Aluminio's Pocos de Caldas smelter.

 . A consortium including Aluminio won an auction for construction of the Santa
Isabel plant. The facility will have a total installed capacity of 1,087 MW, and
will supply 30% of the Alumar smelter's needs. Aluminio owns a 20% share,
corresponding to 106.5 MW of firm power. Start-up is expected in 2008.

     Aluminio also participates in the Barra Grande and Serra do Facao
hydropower projects.

 . Barra Grande construction has begun and is expected to be completed in 2005,
with total installed capacity of 690 MW. The facility will provide 45% of the
energy for Pocos de Caldas and a smaller percentage of Alumar's needs. Aluminio
has a 35.30% stake.

 . Construction of the Serra do Facao facility, in which Aluminio has a 39.46%
stake, will begin in 2002 and is scheduled for completion by 2005. It will have
total installed capacity of 210 MW, and supply 26% of Alumar's needs.

Closures for India and Nepal

Alcoa Closure Systems International (CSI) and Nilkamal Plastics Group of Mumbai,
India, the leading supplier of plastic beverage crates to bottlers in Asia,
formed a joint venture to produce plastic closures for beverage markets in India
and Nepal. The venture was granted foreign investment approval from the Nepal
government to build a plant in Hetauda, a border town between Nepal and India.

New Metals Distributor

Alcoa and BHP Billiton formed a North American metals-distribution joint
venture, with each of the partners owning 50%. Named Integris Metals, it is a
Minneapolis-based, independently managed company with projected annual revenues
of more than $2 billion. The venture combines Reynolds Aluminum Supply Co. with
BHP Billiton's Vincent

Metal Goods in the U.S. and Atlas Ideal Metals in Canada.

Bigger Stake in Korea

Korea Packaging System was renamed Alcoa CSI Korea, reflecting Alcoa's purchase
of an additional 26% interest in the company from Maro Corp. Alcoa now holds 51%
of this leading producer of plastic beverage closures.

Acquisitions

 . Alcoa increased its equity in Elkem ASA to more than 40% and made a cash
tender offer for the remaining shares, as required by Norwegian securities law.
Elkem, through its partnership with Alcoa, is Norway's second largest aluminum
producer and the world's largest supplier of silicon metal.

 . Alcoa and Dooray Air Metal Co. signed a definitive agreement for Alcoa to
acquire Dooray's aluminum extrusion assets in Changwon, marking Alcoa's entrance
into the aluminum market in Korea.

 . AFL acquired four wire harness plants from Siemens VDO Automotive AG of
Germany. The facilities, located in Europe and Mexico, have helped AFL expand
its customer base and made it a significant supplier to Volkswagen AG.

 . Alcoa Wheel Products purchased the remaining 25% ownership of Reynolds-Lemmerz
Industries, a producer of cast aluminum wheels.

 . AFL Telecommunications acquired Laser Armor Tech Corp. and ISAC, enhancing
AFL's position in optical ground wire and extending its family of engineer,
furnish and install companies. AFL also acquired majority ownership in Pacific
17, which designs and operates wireless communications sites.

 . Alcoa Engineered Products acquired REDD Team Mfg., Inc., a privately held
maker of extruded aluminum products.

 . Alcoa Packaging Machinery, Inc. (APMI) acquired some assets of Didde Web Press
Corp., a producer of narrow web offset printing presses, and the assets of
Preferred Machinery Corp., a manufacturer of food and beverage handling
equipment.

Divestitures

 . Alcoa sold its Thiokol Propulsion business to Alliant Techsystems Inc. (ATK).

 . Alcoa Aluminio sold its 40% share of Alcoa Fios e Cabos Eletricos S.A. to the
co-owner, Phelps Dodge.

 . Alcoa sold the assets of Hanover Manufacturing Corp. to
Rea Magnet Wire Co.

 . Alcoa's Malakoff Industries, Inc. was sold to Baikowski International Corp.

 . Alcoa divested its 50% stake in Aroaima Bauxite Co. to the Guyanan government.

Selected Financial Data
(dollars in millions, except per-share amounts and ingot prices)

                                                        2001        2000        1999        1998        1997
- ------------------------------------------------------------------------------------------------------------
                                                                                   
  Sales                                            $  22,859   $  22,936   $  16,323   $  15,340   $  13,319
  Net income                                             908       1,484       1,054         853         805
    Earnings per common share
      Basic (before cumulative effect)                  1.06        1.83        1.43        1.22        1.17
      Basic (after cumulative effect)                   1.06        1.82        1.43        1.22        1.17
      Diluted (before cumulative effect)                1.05        1.81        1.41        1.21        1.15
      Diluted (after cumulative effect)                 1.05        1.80        1.41        1.21        1.15
- ------------------------------------------------------------------------------------------------------------
  Alcoa's average realized price per pound for
    aluminum ingot                                       .72         .77         .67         .67         .75
  LME average 3-month price per pound for
    aluminum ingot                                       .66         .71         .63         .63         .73
- ------------------------------------------------------------------------------------------------------------
  Cash dividends paid per common share                  .600        .500        .403        .375        .244
  Total assets                                        28,355      31,691      17,066      17,463      13,071
  Short-term borrowings                                  142       2,719         343         431         348
  Long-term debt                                       6,491       5,414       2,724       3,058       1,604
- ------------------------------------------------------------------------------------------------------------

See Management's Discussion and Analysis of Financial Condition and Results of
Operations for a discussion of special items, gains on asset sales and various
charges to cost of goods sold and selling and general administrative expenses
that impacted net income in 2001. In 2000, net income included the cumulative
effect of accounting change for revenue recognition of $(5).

Net Income                                      Dividends Paid per
million of dollars                              Common share
                                                dollars

[GRAPH APPEARS HERE]                            [GRAPH APPEARS HERE]

                                                                              33

Management's Discussion and Analysis of Financial Condition and Results of
Operations
(dollars in millions, except per-share amounts and ingot prices; shipments in
thousands of metric tons [mt])

Certain statements in this report under this caption and elsewhere relate to
future events and expectations and, as such, constitute forward-looking
statements. Forward- looking statements also include those containing such words
as "anticipates," "believes," "estimates," "expects," "hopes," "targets,"
"should," "will," "will likely result," "forecast," "outlook," "projects" or
similar expressions. Such forward-looking statements involve known and unknown
risks, uncertainties and other factors that may cause actual results,
performance or achievements of Alcoa to be different from those expressed or
implied in the forward- looking statements. For discussion of some of the
specific factors that may cause such a difference, see Notes J and T to the
financial statements and the disclosures included below under Segment
Information and Market Risks.

     Alcoa is the world's leading producer of primary aluminum, fabricated
aluminum and alumina, and is active in all major aspects of the industry:
technology, mining, refining, smelting, fabricating and recycling. Aluminum is a
commodity that is traded on the London Metal Exchange (LME) and priced daily
based on market supply and demand. Aluminum and alumina represent approximately
two-thirds of Alcoa's revenues, and the price of aluminum influences the
operating results of Alcoa. Nonaluminum products include precision castings,
industrial fasteners, vinyl siding, food service and flexible packaging
products, plastic bottles and closures, fiber-optic cables, electrical
distribution systems for cars and trucks, and packaging machinery.

     Alcoa is a global company operating in 38 countries. North America,
including Canada and the United States, is the largest market with 68% of
Alcoa's revenues. Europe is also a significant market with 20% of the company's
revenues. Alcoa also has investments and activities in Asia and Latin America
that present opportunities for substantial growth, including Brazil, China,
India, Korea and Mexico. Governmental policies and other economic factors,
including inflation and fluctuations in foreign currency exchange rates and
interest rates, affect the results of operations in these emerging markets.

Earnings Summary
- ----------------

     Alcoa's net income for 2001 was $908, or $1.05 per diluted share, compared
with $1,484, or $1.80 per share, in 2000. Net income in 2001 included special
after-tax charges of $355 related to the strategic restructuring of Alcoa's
primary and fabricating businesses to optimize assets and lower costs. Excluding
these special after-tax charges, net income was $1,263, or $1.46 per share, a
decrease of 15% from 2000 results. Revenues in 2001 of $22,859 were essentially
flat compared with revenues of $22,936 in 2000. Overall, 2001 results were
negatively affected by lower realized prices and lower volumes due to weak
market conditions in the transportation, building and construction and
distribution markets. Also impacting earnings in 2001 were costs incurred for
contract losses, customer claims and bad debts. These negative factors were
partially offset by cost savings and gains on the sales of businesses. In 2001,
Alcoa announced a goal to reduce costs by $1,000 by December 2003.

     Alcoa had a record year in 2000, with net income the highest in the
company's 112-year history. The acquisitions of Reynolds and Cordant were
completed in 2000. Net income of $1,484, or $1.80 per share, in 2000 was up 41%
compared with 1999 net income of $1,054, or $1.41 per share. Revenues of $22,936
in 2000 also increased 41% from 1999 revenues of $16,323. Improved financial
results for 2000 relative to 1999 were the result of higher volumes, aided by
the Reynolds and Cordant acquisitions, an increase in aluminum prices and
continued operating improvements. Additionally, in 2000, Alcoa achieved the cost
reduction target initiated in 1998 to eliminate $1,100 in costs through the
continued implementation of the Alcoa Business System. Partially offsetting
these positive factors in 2000 were higher energy costs, a higher effective tax
rate and softening in the transportation, building and construction and
distribution markets.

     Return on average shareholders' equity for 2001 was 8.3% (11.4% excluding
special items) compared with 16.8% in 2000 and 17.2% in 1999. The decrease in
2001 was due to the earnings decline mentioned above, special items recorded in
2001 and a larger average number of shares outstanding during the period
primarily resulting from the Reynolds acquisition.

Percent Return on Average
Shareholders' Equity

[GRAPH APPEARS HERE]

COST OF GOODS SOLD--COGS as a percentage of sales was 78.1% in 2001, an increase
of 2.5 percentage points from 2000. The increase was primarily due to lower
realized prices, lower volumes and a full year's impact of the higher cost of
sales ratios of the acquired Reynolds and Cordant businesses. Additionally, COGS
was impacted by a pretax charge of $56 for contract losses, customer claims and
the power failure at the company's Warrick (Ind.) smelter. Partially offsetting
these negative factors were cost savings and operating improvements.

34

Cost of Goods Sold
as a percent of sales

[GRAPH APPEARS HERE]

     COGS as a percentage of sales was 75.6% in 2000, down 1.2 percentage points
from 1999, due primarily to higher sales prices resulting from a stronger LME
and cost-cutting efforts, somewhat offset by higher cost of sales at acquired
entities and higher energy costs.

Selling And General Administrative Expenses--S&GA expenses were $1,276, or 5.6%
of sales, in 2001 compared with S&GA expenses of $1,108, or 4.8% of sales, in
2000. The increase in 2001 was primarily due to customer bad debt write-offs of
$78 and the full-year impact of the acquisitions of Reynolds and Cordant, as
well as lower sales volumes in 2001.

     S&GA expenses increased from $851 in 1999 to $1,108 in 2000. The increase
in 2000 was due primarily to acquisitions and higher personnel costs related to
pay for performance, partially offset by cost-cutting improvements. S&GA as a
percentage of sales decreased from 5.2% in 1999 to 4.8% in 2000, primarily due
to higher sales prices.

Research And Development Expenses--in 2001, R&D expenses increased $9 to $203
from 2000 primarily due to the full- year impact of acquisitions made in 2000
and an increase in spending in the Primary Metals segment related to inert anode
technology.

     In 2000, R&D expenses increased $66 to $194 from 1999 with acquisitions
accounting for half of the increase. The remaining increase was due to corporate
spending and increases in the Primary Metals and Flat-Rolled Products segments
as well as at Alcoa Fujikura Ltd. (AFL).

Special Items--During 2001, Alcoa recorded charges of $566 ($355 after tax and
minority interests) as a result of a restructuring plan. The company completed a
strategic review of its primary products and fabricating businesses aimed at
optimizing and aligning its manufacturing systems with customer needs, while
positioning the company for stronger profitability. The charge of $566 consisted
of a charge of $212 ($114 after tax and minority interests) in the second
quarter of 2001 and a charge of $354 ($241 after tax and minority interests) in
the fourth quarter of 2001. These charges consisted of asset write-downs ($372
pretax), employee termination and severance costs ($178 pretax) related to
workforce reductions of approximately 10,400 employees, and exit costs ($16
pretax). The second quarter charge was primarily due to actions taken in Alcoa's
primary products businesses because of economic and competitive conditions.
These actions included the shutdown of three facilities in the U.S. Alcoa
expects to complete these actions by mid-2002. The fourth quarter charge was
primarily due to actions taken in Alcoa's fabricating businesses. These actions
included the shutdown of 15 facilities in the U.S. and Europe. Alcoa expects to
complete these actions by the end of 2002. These charges were not recorded in
the segment results. The impact to the segments would have been a pretax charge
of $94 in Alumina and Chemicals, $157 in Primary Metals, $105 in Flat-Rolled
Products, $126 in Engineered Products and $63 in the Other group. Additional
unaccruable employee termination costs of approximately $30 related to the
restructuring plan are expected to be recognized in 2002. As a result of the
restructuring, management anticipates stronger profitability through lower
depreciation, employee and other costs.

Interest Expense--Interest expense decreased $56 from 2000 to $371 in 2001, due
to lower interest rates as well as the pay down of debt, primarily short-term
borrowings.

     Interest expense rose $232 from 1999 to $427 in 2000, primarily as a result
of the Reynolds and Cordant acquisitions.

Other Income/Foreign Currency--Other income increased $154 to $308 in 2001. The
increase was primarily due to $114 ($93 after tax) of gains on asset sales
related primarily to the sales of Thiokol Propulsion (Thiokol), Alcoa Proppants,
Inc. and Alcoa's interest in a Latin American cable business, as well as the
impact of foreign currency exchange adjustments.

     In 2000, other income increased $30 to $154. The increase was due to a $59
increase in equity income and higher interest and dividend income, offset by the
negative impact of foreign currency exchange adjustments.

Selling and General
Administrative Expenses
as a pecent of sales

[GRAPH APPEARS HERE]

                                                                              35

     Foreign exchange losses included in other income were $11 in 2001, $82 in
2000 and $19 in 1999.

     Effective July 1, 1999, the Brazilian real became the functional currency
for translating the financial statements of Alcoa's 59%-owned Brazilian
subsidiary, Alcoa Aluminio S.A. (Aluminio). As a result of the change, Alcoa's
accumulated other comprehensive loss (unrealized translation adjustments) and
minority interests accounts were reduced by $156 and $108, respectively. These
amounts were driven principally by a reduction in fixed assets and resulted in
decreases in Aluminio's depreciation expense of $30 in 2001 and 2000 and $15 in
1999.

Income Taxes--Alcoa's effective tax rate was 32% in 2001 and 33.5% in 2000,
which differed from the statutory rate of 35%, primarily due to lower taxes on
foreign income. Alcoa's effective tax rate in 1999 was 29.9%, primarily driven
by lower taxes on foreign income including a reduction in the Australian
corporate income tax rate. In the 1999 fourth quarter, Australia reduced its
corporate income tax rate from 36% to 34% for 2000 and to 30% for 2001.

Minority Interests--Minority interests' share of income from operations
decreased $173 to $208 in 2001. The decrease was primarily due to lower earnings
at AFL, Alcoa World Alumina and Chemicals (AWAC) and Aluminio, as well as the
impact of special charges of $42. In 2000, minority interests' share of income
from operations increased $139 from 1999 to $381. The increase was due to higher
earnings at Alcoa of Australia, AFL and Aluminio.

Segment Information
- -------------------

Alcoa's operations consist of five worldwide segments: Alumina and Chemicals,
Primary Metals, Flat-Rolled Products, Engineered Products and Packaging and
Consumer. Alcoa businesses that are not reported to management as part of one of
these five segments are aggregated and reported as "Other." Alcoa's management
reporting system measures the after-tax operating income (ATOI) of each segment.
Nonoperating items, such as interest income, interest expense, foreign exchange
gains/losses, the effects of last-in, first-out (LIFO) inventory accounting,
minority interests and special items are excluded from segment ATOI. In
addition, certain expenses, such as corporate general administrative expenses,
and depreciation and amortization on corporate assets, are not included in
segment ATOI. Segment assets exclude cash, cash equivalents, short-term
investments and all deferred taxes. Segment assets also exclude items such as
corporate fixed assets, LIFO reserves, goodwill allocated to corporate and other
amounts.

     ATOI for all segments totaled $2,043 in 2001, compared with $2,389 in 2000
and $1,489 in 1999. See Note L to the financial statements for additional
information. The following discussion provides shipment, revenue and ATOI data
for each segment for the years 1999 through 2001.

Alumina Production
thousands of metric tons

[GRAPH APPEARS HERE]

Alumina and Chemicals

                                          2001      2000      1999
- ------------------------------------------------------------------
  Alumina production (mt)               12,527    13,968    13,273
  Third-party alumina shipments (mt)     7,217     7,472     7,054
  Third-party sales                    $ 1,908   $ 2,108   $ 1,842
  Intersegment sales                     1,021     1,104       925
- ------------------------------------------------------------------
  Total sales                          $ 2,929   $ 3,212   $ 2,767
- ------------------------------------------------------------------
  After-tax operating income           $   471   $   585   $   307
- ------------------------------------------------------------------

This segment consists of Alcoa's worldwide alumina and chemicals system, that
includes the mining of bauxite, which is then refined into alumina. Alumina is
sold directly to internal and external smelter customers worldwide or is
processed into industrial chemical products. The industrial chemical products
are sold to a broad spectrum of markets including refractories, ceramics,
abrasives, chemicals processing and other specialty applications. Slightly more
than half of Alcoa's alumina production is sold under supply contracts to third
parties worldwide, while the remainder is used internally. Alumina comprises
approximately two-thirds of total third-party sales.

     In 2001, third-party sales of alumina decreased 13% compared with 2000,
primarily due to a decrease in shipments of 3% and a decrease in realized prices
of 10%. In 2000, third-party sales of alumina increased 19% compared with 1999
as a result of a 6% increase in shipments along with a 13% increase in prices.
The increased shipments were driven by increased production with the completion
of the 440,000-mt expansion of Alcoa's Wagerup, Australia alumina refinery as
well as increased production levels at Kwinana and Pinjarra, also in Australia,
and San Ciprian, Spain.

     Third-party sales of alumina-based chemical products were down 31% in 2001
compared with 2000, primarily due to lower volumes. In 2000, third-party sales
of alumina-based chemical products were up 2% compared with 1999, primarily
attributable to increased volume in Alcoa's Latin American chemical operations.

     Segment ATOI in 2001 fell 20% from 2000 to $471 due to lower volumes,
resulting from production curtailments at Point Comfort

36

(Tex.) and Brazil and the shutdown of the alumina refinery in St. Croix, as well
as lower prices. Segment ATOI in 2000 rose 91% over 1999 due to higher alumina
prices, higher shipment volumes and continued cost reductions, partially offset
by higher energy costs.

Primary Metals

                                                   2001     2000     1999
- -------------------------------------------------------------------------
Aluminum production (mt)                          3,488    3,539    2,851
Third-party aluminum shipments (mt)               1,873    2,071    1,442

Third-party sales                                $3,432   $3,756   $2,241
Intersegment sales                                3,300    3,504    2,793
- -------------------------------------------------------------------------
Total sales                                      $6,732   $7,260   $5,034
- -------------------------------------------------------------------------
After-tax operating income                       $  905   $1,000   $  535
- -------------------------------------------------------------------------

This segment consists of Alcoa's worldwide smelter system. Primary Metals
receives alumina primarily from the Alumina and Chemicals segment and produces
aluminum ingot to be used by Alcoa's fabricating businesses, as well as sold to
external customers, aluminum traders and commodity markets. Results from the
sale of aluminum powder, scrap and excess power are also included in this
segment, as well as the results of aluminum derivative contracts. Aluminum ingot
produced by Alcoa and used internally is transferred to other segments at
prevailing market prices. The sale of ingot represents approximately 80% of this
segment's third-party sales.

     Third-party sales in 2001 decreased $324, or 9%, from 2000. The decrease
was primarily due to a 10% decrease in shipments and lower realized prices,
partially offset by power sales and the full-year results of the Reynolds
acquisition. In 2000, third-party sales rose $1,515, or 68%. Approximately
two-thirds of this increase was the result of the Reynolds acquisition. The
remaining increase was due to a 7% increase in shipments and higher realized
prices for ingot in 2000. Alcoa's average third-party realized price for ingot
in 2001 was 72 cents per pound, a decrease of 7% from the average realized price
of 77 cents per pound in 2000. In 1999, the average realized price

Aluminum Production
thousands of metric tons

[GRAPH APPEARS HERE]

was 67 cents. This compares with average 3-month prices on the LME of 66 cents
per pound in 2001, 71 cents per pound in 2000 and 63 cents per pound in 1999.

     Primary Metals ATOI decreased by $95, or 10%, in 2001 from 2000. The
decrease is primarily attributed to lower volumes and lower prices, partially
offset by power sales. The year-over-year impact of power sales, net of volume-
related decreases, was approximately $50. ATOI increased by $465, or 87%, in
2000 from 1999. Higher metal prices in 2000 were responsible for approximately
two-thirds of the increase, while the Reynolds acquisition accounted for
approximately one-fourth of the increase. The remainder of the increase was due
to increased volumes and cost reductions, offset somewhat by higher energy
prices.

     Alcoa announced various capacity curtailments and restarts. After the
curtailment and restart of capacity, Alcoa will have approximately 635,000 mt
per year of idle capacity. Additionally, in December 2001, approximately
two-thirds of the capacity at the company's Warrick (Ind.) smelter was impacted
by power failures. The total financial impact of approximately $45 (pretax)
associated with the power failures and related restart of capacity at Warrick is
expected to be incurred primarily in the first quarter of 2002.

Flat-Rolled Products

                                        2001     2000     1999
- --------------------------------------------------------------
Third-party aluminum shipments (mt)    1,818    1,960    1,982

Third-party sales                     $4,999   $5,446   $5,113
Intersegment sales                        64       97       51
- --------------------------------------------------------------
Total sales                           $5,063   $5,543   $5,164
- --------------------------------------------------------------
After-tax operating income            $  262   $  299   $  281
- --------------------------------------------------------------

This segment's principal business is the production and sale of aluminum plate,
sheet and foil. This segment includes rigid container sheet (RCS), which is sold
directly to customers in the packaging and consumer market and is used to
produce aluminum beverage cans. Seasonal increases in RCS sales are generally
experienced in the second and third quarters of the year. This segment also
includes sheet and plate used in transportation and distributor markets, of
which approximately two-thirds is sold directly to customers while the remainder
is sold through distributors. Approximately 60% of the third-party sales in this
segment are derived from sheet and plate, and foil used in industrial markets,
while the remaining 40% of third-party sales consists of RCS. Sales of RCS,
sheet and plate are dependent on a relatively small number of customers.

     In 2001, third-party sales from this segment decreased by $447, or 8%, from
2000. This decrease was driven primarily by 7% lower shipments due to weakness
in the transportation and distribution markets in North America and Europe,
partially offset by sales increases resulting from the acquisition of British
Aluminium and improved mix on sheet and plate sales. In 2000, third-party sales
from this segment increased $333 from 1999, with rising prices offsetting a
slight decrease in shipments.

     ATOI for Flat-Rolled Products decreased in 2001 by 12% due to lower volumes
in North America and Europe, which were partly offset by a more profitable
product mix for sheet and plate in the U.S. ATOI increased in 2000 by 6% from
1999 as higher prices and equity earnings offset lower shipments and higher
energy costs.

                                                                              37

Engineered Products

                                        2001     2000     1999
- --------------------------------------------------------------
Third-party aluminum shipments (mt)      932    1,061      989

Third-party sales                     $6,098   $5,471   $3,728
Intersegment sales                        35       62       26
- --------------------------------------------------------------
Total sales                           $6,133   $5,533   $3,754
- --------------------------------------------------------------
After-tax operating income            $  173   $  210   $  180
- --------------------------------------------------------------

This segment includes hard- and soft-alloy extrusions, including architectural
extrusions, super-alloy castings, steel and aluminum fasteners, aluminum
forgings and wheels. These products serve the transportation, building and
construction and distributor markets and are sold directly to customers and
through distributors.

     In 2001, third-party sales increased 11% primarily due to a full-year's
results of the 2000 acquisitions of Reynolds, Cordant and British Aluminium,
partially offset by a decrease in volume, mainly in North America, due to
weakness in the transportation and distributor markets. In 2000, third- party
sales increased 47% primarily due to the acquisitions of Reynolds and Cordant,
as well as price increases in other businesses. The aluminum shipment data for
this segment was not impacted in 2001 and 2000 by the additions of Huck and
Howmet, which produce revenues but do not have third-party aluminum shipments.

     ATOI for Engineered Products decreased 18% from 2000 to $173 in 2001. This
decrease is primarily due to decreased volumes as a result of weak market
conditions and the impact of exchange rate fluctuations in Brazil, partially
offset by the positive impact of acquisitions and cost- reduction efforts. ATOI
in 2000 increased by 17% from 1999 to $210 due to the impact of acquisitions,
primarily Huck and Howmet, offset by a decline in other U.S. and European
businesses as a result of the overall decline in the transportation market.

Revenues by Segment
billion of dollars

[GRAPH APPEARS HERE]

Packaging and Consumer

                                          2001     2000     1999
  --------------------------------------------------------------
  Third-party aluminum shipments (mt)      143      119        9

  Third-party sales                     $2,720   $2,084   $  801
  --------------------------------------------------------------
  After-tax operating income            $  185   $  131   $   68
  --------------------------------------------------------------

This segment includes foodservice, flexible packaging, consumer products and
packaging graphics design, as well as closures, PET (polyethylene terephthalate)
bottles and packaging machinery. The principal products in this segment include
aluminum foil; plastic wraps and bags; metal and plastic beverage and food
closures; pre-press services; and plastic shrink film and wraps. Consumer
products are marketed under brands including Reynolds Wrap, Diamond(R), Baco and
Cut-Rite(R) wax paper. Products are sold directly to customers, consisting of
various retail chains and commercial foodservice distributors. Sales in this
segment are dependent on a relatively small number of customers.

     Third-party sales were $2,720 in 2001, an increase of $636 over 2000. The
increase is primarily due to the full- year results of the Reynolds acquisition,
as well as several smaller acquisitions in 2000. Third-party sales were $2,084
in 2000, up $1,283 from 1999 due to the acquisition of Reynolds packaging and
consumer businesses in 2000.

     ATOI increased 41% in 2001 from 2000 due primarily to acquisitions as well
as improved volumes in closures sales. ATOI increased by 93% in 2000 from 1999
due to the acquisition of the Reynolds packaging and consumer businesses.

     Seasonal increases generally occur in the third and fourth quarters of the
year for such products as consumer foil and plastic wraps and bags, while
seasonal slowdowns for closures generally occur in the fourth quarter of the
year.

Other

                                        2001     2000     1999
- --------------------------------------------------------------
Third-party aluminum shipments (mt)      228      187       56

Third-party sales                     $3,702   $4,071   $2,592
- --------------------------------------------------------------
After-tax operating income            $   47   $  164   $  118
- --------------------------------------------------------------

This group includes other Alcoa businesses that are not included in the segments
previously mentioned. This group includes AFL, which produces fiber-optic cable
and provides services to the telecommunications industry and produces electrical
components for the automotive industry; residential building products
operations, Alcoa Building Products (ABP); automotive parts businesses; Thiokol,
a producer of solid rocket propulsion systems (Thiokol was sold in April 2001);
and Reynolds' metal distribution business, RASCO (in November 2001, the net
assets of RASCO were contributed to a joint venture, Integris Metals, Inc., in
which Alcoa retains a 50% equity interest). Products in this segment are
generally sold directly to customers or through distributors. AFL sales are
dependent on a relatively small number of customers. Seasonal increases in the
building products business generally occur in the second and third quarters of
the year.

     In 2001, third-party sales were down 9% due primarily to the sale of
Thiokol in 2001, as well as lower volumes and prices in the AFL automotive and
telecommunications businesses. These decreases

38

were somewhat offset by improved demand for residential building products. In
2000, third-party sales were up 57% due primarily to the RASCO, Thiokol and AFL
telecommunications acquisitions, partially offset by a sales decrease at ABP.
The decline in ABP sales in 2000 was due to softness in the overall housing and
construction market.

     In 2001, ATOI for this group decreased $117 primarily as a result of volume
and price declines at AFL, partially offset by improved sales of building
products and gains totaling $87 from the sales of Thiokol, Alcoa Proppants, Inc.
and Alcoa's interest in a Latin American cable business. In 2000, ATOI for this
group increased by 39% from 1999 primarily due to the RASCO, Thiokol and AFL
telecommunications acquisitions, offset by a decrease at ABP, due to lower
volumes and higher resin costs.

Reconciliation of ATOI to Consolidated Net Income
- -------------------------------------------------

The following reconciles segment ATOI to Alcoa's consolidated net income and
explains each line item in the reconciliation:

                                                2001       2000       1999
- --------------------------------------------------------------------------
Total after-tax operating income             $ 2,043    $ 2,389    $ 1,489
Impact of intersegment profit eliminations       (20)        24        (24)
Unallocated amounts (net of tax):
    Interest income                               40         40         26
    Interest expense                            (242)      (278)      (126)
    Minority interests                          (208)      (381)      (242)
    Special items                               (397)        --         --
    Corporate expense                           (261)      (227)      (171)
    Other                                        (47)       (83)       102
- --------------------------------------------------------------------------
Consolidated net income                      $   908    $ 1,484    $ 1,054
- --------------------------------------------------------------------------

Items required to reconcile ATOI to consolidated net income include:

> Corporate adjustments to eliminate any remaining profit or loss between
  segments;

> The after-tax impact of interest income and expense at the statutory rate;

> Minority interests;

> Special items (excluding minority interests) related to the strategic
  restructuring in 2001;

Revenues by
Geographic Area
billion of dollars

[GRAPH APPEARS HERE]

> Corporate expense, comprised of general administrative and selling expenses of
  operating the corporate headquarters and other global administrative
  facilities along with depreciation on corporate owned assets; and

> Other, which includes the impact of LIFO, differences between estimated tax
  rates used in the segments and the corporate effective tax rate and other
  nonoperating items such as foreign exchange.

     The variance in Other between 1999 and 2000 was due to LIFO adjustments in
1999 and adjustments to deferred taxes in 1999 that resulted from a change in
the Australian corporate income tax rate.

Market Risks
- ------------

In addition to the risks inherent in its operations, Alcoa is exposed to
financial, market, political and economic risks. The following discussion
provides additional detail regarding Alcoa's exposure to the risks of changing
commodity prices, foreign exchange rates and interest rates.

Derivatives

Alcoa's commodity and derivative activities are subject to the management,
direction and control of the Strategic Risk Management Committee (SRMC). SRMC is
composed of the chief executive officer, the chief financial officer and other
officers and employees that the chief executive officer selects. SRMC reports to
the Board of Directors on the scope of its derivative activities.

     All of the aluminum and other commodity contracts, as well as various types
of derivatives, are held for purposes other than trading. They are used
primarily to mitigate uncertainty and volatility, and cover underlying
exposures. The company is not involved in energy-trading activities or weather
derivatives or to any material extent in other nonexchange commodity trading
activities.

     The following discussion includes sensitivity analyses for hypothetical
changes in the commodity price, exchange rate or interest rate contained in the
various derivatives used for hedging certain exposures. In all cases, the
hypothetical change was calculated based on a parallel shift in the forward
price curve existing at December 31, 2001. The forward curve takes into account
the time value of money and the future expectations regarding the value of the
underlying commodity, currency and interest rate.

Commodity Price Risks--Alcoa is a leading global producer of aluminum ingot and
aluminum fabricated products. As a condition of sale, customers often require
Alcoa to enter into long-term fixed-price commitments. These commitments expose
Alcoa to the risk of fluctuating aluminum prices between the time the order is
committed and the time that the order is shipped.

     Alcoa's aluminum commodity risk management policy is to manage, through the
use of futures and options contracts, the aluminum price risk associated with a
portion of its fixed price firm commitments. At December 31, 2001, these
contracts totaled approximately 802,000 mt with a fair value loss of
approximately $65 ($42 after tax). A hypothetical 10% increase (or decrease) in
aluminum ingot prices from the year-end 2001 level of $1,355 per mt would result
in a pretax gain (or loss) of $108 related to these positions.

                                                                              39

     Past accounting convention required that certain long positions be marked
to market. As a result of the change in accounting under Statement of Financial
Accounting Standards (SFAS) No. 133, "Accounting for Derivative Instruments and
Hedging Activities," these contracts were re-designated and qualified as hedges
on January 1, 2001.

     Alcoa sells products to various third parties at prices that are influenced
by changes in LME aluminum prices. From time to time, the company may elect to
sell forward a portion of its anticipated primary aluminum and alumina
production to reduce the risk of fluctuating market prices on these sales.
Toward this end, Alcoa may enter into short positions using futures and options
contracts. At December 31, 2001, these contracts totaled 28,000 mt. The fair
value of these contracts at December 31, 2001 was not material. These contracts
act to fix a portion of the sales price related to these sales contracts. A
hypothetical 10% increase (or decrease) in aluminum ingot prices from the
year-end 2001 level of $1,355 per mt would result in a pretax loss (or gain) of
$4 related to these positions.

     Alcoa is required to purchase natural gas to meet its production
requirements. These purchases expose the company to the risk of higher natural
gas prices. To hedge this risk, Alcoa enters into long positions, principally
using futures and options. Alcoa follows a stable pattern of purchasing natural
gas; therefore, it is highly likely that anticipated natural gas purchases will
occur. The fair value of the contracts for natural gas was a loss of
approximately $30 ($18 after tax and minority interests) at December 31, 2001. A
hypothetical 50% increase (or decrease) in the market price of natural gas from
the year-end 2001 level would result in a pretax gain (or loss) to future
earnings of $26.

     Alcoa also purchases certain other commodities, such as fuel oil and
electricity, for its operations and may enter into futures and options contracts
to eliminate volatility in the prices of such products. None of these contracts
were material.

Financial Risk

Currencies--alcoa is subject to significant exposure from fluctuations in
foreign currencies. Foreign currency exchange contracts are used to hedge the
variability in cash flows from the forecasted payment or receipt of currencies
other than the functional currency. These contracts cover periods commensurate
with known or expected exposures, generally within three years. The fair value
of these contracts was a loss of approximately $132 ($51 after tax and minority
interests) at December 31, 2001.

     A hypothetical 10% strengthening (or weakening) of the U.S. dollar at
December 31, 2001, would result in a pretax loss (or gain) of approximately $114
related to these positions.

Interest Rates--alcoa uses interest rate swaps to help maintain a reasonable
balance between fixed- and floating- rate debt and to keep financing costs as
low as possible. The company has entered into pay floating, receive fixed
interest rate swaps to change the interest rate risk exposure of its outstanding
debt. The fair value of these swaps was a gain of $34 ($23 after tax) at
December 31, 2001.

     At December 31, 2001 and 2000, Alcoa had $6,633 and $8,133 of debt
outstanding at effective interest rates of 5.0% for 2001 and 7.6% for 2000,
after the impact of interest rate swaps is taken into account. A hypothetical
change of 10% in Alcoa's effective interest rate from year-end 2001 levels would
increase or decrease interest expense by $33.

Material Limitations--The disclosures with respect to commodity prices and
foreign exchange risk do not take into account the underlying anticipated
purchase obligations and the underlying transactional foreign exchange
exposures. If the underlying items were included in the analysis, the gains or
losses on the futures and options contracts may be offset. Actual results will
be determined by a number of factors that are not under Alcoa's control and
could vary significantly from those factors disclosed.

     Alcoa is exposed to credit loss in the event of nonperformance by
counterparties on the above instruments, as well as credit or performance risk
with respect to its hedged customers' commitments. Although nonperformance is
possible, Alcoa does not anticipate nonperformance by any of these parties.
Futures and options contracts are with creditworthy counterparties and are
further supported by cash, treasury bills or irrevocable letters of credit
issued by carefully chosen banks. In addition, various master netting
arrangements are in place with counterparties to facilitate settlement of gains
and losses on these contracts.

     For additional information on derivative instruments, see Notes A and S to
the financial statements.

Environmental Matters
- ---------------------

Alcoa continues to participate in environmental assessments and cleanups at a
number of locations. These include approximately 31 owned or operating
facilities and adjoining properties, approximately 28 previously owned or
operated facilities and adjoining properties, and approximately 91 Superfund and
other waste sites. A liability is recorded for environmental remediation costs
or damages when a cleanup program becomes probable and the costs or damages can
be reasonably estimated. For additional information, see Notes A and T to the
financial statements.

     As assessments and cleanups proceed, the liability is adjusted based on
progress in determining the extent of remedial actions and related costs and
damages. The liability can change substantially due to factors such as the
nature and extent of contamination, changes in remedial requirements and
technological changes. Therefore, it is not possible to determine the outcomes
or to estimate with any degree of accuracy the potential costs for certain of
these matters. For example, there are issues related to Alcoa's Massena, New
York and Point Comfort, Texas sites where investigations have been ongoing and
where natural resource damage or off-site contaminated sediments have been
alleged. In the case of Massena, the company submitted a revised draft Analysis
of Alternatives Report to the EPA in February 2002 which included remedial
alternatives required by the EPA related to PCB contamination of the Grasse
River, adjacent to Alcoa's Massena, New York plant site. The range of costs
associated with the remedial alternatives evaluated in the 2002 report is
between $2 and $525. Alcoa believes that several of those alternatives,
involving the largest amounts of sediment removal, should not be selected for
the Grasse River remedy. Alcoa believes the alternatives that should be selected
are those ranging from monitored natural recovery ($2) to a combination of
moderate dredging and capping

40

($90). A reserve of $2 has been recorded for any probable losses, as no one of
the alternatives is more likely to be selected than any other.

     Based on these facts, it is possible that Alcoa's results of operations, in
a particular period, could be materially affected by matters relating to these
sites. However, based on facts currently available, management believes that the
disposition of these matters will not have a materially adverse effect on the
financial position or liquidity of the company.

     Alcoa's remediation reserve balance at the end of 2001 was $431, of which
$74 was classified as a current liability, and reflects the most probable costs
to remediate identified environmental conditions for which costs can be
reasonably estimated. Of the 2001 reserve balance, approximately 8% relates to
the Massena, New York plant sites, 6% relates to the Troutdale, Oregon plant
site, and 23% relates to the Sherwin, Texas site. Remediation expenses charged
to the reserve were $72 in 2001, $77 in 2000, and $47 in 1999. These include
expenditures currently mandated, as well as those not required by any regulatory
authority or third party. In 2001, the reserve balance was increased by $56,
primarily as a result of acquisitions and the shutdown of the company's
magnesium plant in Addy, Washington.

     Included in annual operating expenses are the recurring costs of managing
hazardous substances and environmental programs. These costs are estimated to be
about 2% of cost of goods sold.

Liquidity and Capital Resources

Cash from Operations
- --------------------

Cash from operations decreased 15% to $2,411, following an increase of 20% to
$2,851 in 2000 from $2,381 in 1999. The decrease in 2001 is primarily the result
of lower earnings. The increase in cash from operations in 2000 relative to 1999
was primarily due to the impact of acquisitions, higher aluminum prices
resulting in increased earnings, and an increase in depreciation and
amortization, partially offset by changes in noncurrent assets and liabilities.

Cash from Operations
millions of dollars

[GRAPH APPEARS HERE]

Financing Activities
- --------------------

Cash used for financing activities was $3,127 in 2001 compared with cash
provided from financing activities of $1,552 in 2000. The increase in cash used
was primarily due to debt repayments that were funded by the proceeds from the
sales of operations required to be divested from the Reynolds merger, the sale
of Thiokol and issuing additional debt. In 2000, cash provided from financing
activities was $1,552, versus cash used for financing activities of $1,311 in
1999. The increase in cash in 2000 was due to increases in short-term
borrowings, commercial paper and long-term debt. This was partially offset by a
decrease in common stock issued for employee stock compensation plans.

     In 2001 and 2000, additions to long-term debt exceeded payments on
long-term debt by $1,112 and $571, respectively. In May 2001, Alcoa issued
$1,500 of notes. Of these notes, $1,000 mature in 2011 and carry a coupon rate
of 6.50%, and $500 mature in 2006 and carry a coupon rate of 5.875%. In December
2001, Alcoa issued an additional $1,500 of notes. This issue consisted of $1,000
of notes that mature in 2012 and carry a coupon rate of 6% and $500 of floating-
rate notes that mature in 2004. In 2000, Alcoa issued $1,500 of notes. Of these
notes, $1,000 mature in 2010 and carry a coupon rate of 7.375%, and $500 mature
in 2005 and carry a coupon rate of 7.25%.

Free Cash Flow to Debt Coverage
times covered

[GRAPH APPEARS HERE]

     In April 2001, Alcoa refinanced the $2,490 revolving-credit facility that
was to expire in April 2001 and the $510 revolving-credit facility that expires
in April 2005. These facilities were refinanced into a $2,000 revolving- credit
agreement that expires in April 2002 and a $1,000 revolving-credit agreement
that expires in April 2005. The revolving-credit facilities are used to support
Alcoa's commercial paper program.

     The increase in cash used for financing activities in 2001 was also
attributed to the repurchase of 39,348,136 shares of the company's common stock
for $1,452 at an average price of $36.87 per share.

                                                                              41

In 2000, Alcoa used $763 to repurchase 21,742,600 shares of the company's common
stock at an average price of $35.08 per share. Stock repurchases in 2001 and
2000 were partially offset by stock issued for employee stock compensation plans
of 21,412,772 shares for $552 in 2001 and 16,579,158 shares for $251 in 2000.

     Debt as a percentage of invested capital was 35.7% at the end of 2001,
compared with 38.6% for 2000 and 28.3% for 1999.

     In 2001, dividends paid to shareholders increased by $100 to $518. The
increase was primarily due to an increase in the total common stock dividend
paid from 50 cents per share in 2000 to 60 cents per share in 2001, due to the
payout of a variable dividend in addition to Alcoa's base dividend in 2001.
Alcoa had a variable dividend program that provided for the distribution, in the
following year, of 30% of Alcoa's annual earnings in excess of $1.50 per basic
share. In January 2002, the Board of Directors approved eliminating the variable
dividend and declared a quarterly dividend of 15 cents per common share, which
represents a 20% increase in the quarterly dividend from the prior 12.5 cents
per common share. In 2000, dividends paid to shareholders increased by $120 to
$418. The increase was due to a higher number of shares outstanding as well as
an increase in the dividend per share in 2000, with a total payout of 50 cents
per share versus 40.3 cents per share in 1999.

Debt as a Percent of Invested Capital

[GRAPH APPEARS HERE]

Investing Activities
- --------------------

Cash provided from investing activities in 2001 totaled $939, compared with cash
used for investing activities of $4,309 in 2000. The increase of $5,248 was
partly due to $2,507 of proceeds from asset sales in 2001 due to dispositions of
assets required to be divested from the Reynolds merger, as well as proceeds
from the sale of Thiokol. Additionally, cash paid for acquisitions in 2001 was
$159, while in 2000, cash paid for acquisitions was $3,121, primarily
attributable to the acquisition of Cordant.

Capital Expenditures and Depreciation
millions of dollars

[GRAPH APPEARS HERE]

     Capital expenditures totaled $1,177 in 2001, compared with $1,121 and $920
in 2000 and 1999, respectively. Of the total capital expenditures in 2001, 37%
related to capacity expansion, primarily in the Engineered Products segment.
Also included are costs of new and expanded facilities for environmental control
in ongoing operations totaling $80 in 2001, $96 in 2000, and $91 in 1999.
Capital expenditures related to environmental control are anticipated to be
approximately $123 in 2002.

     Alcoa added $270, $94 and $96 to its investments in 2001, 2000 and 1999,
respectively. The increase of $176 in 2001 was primarily due to Alcoa's purchase
of an 8% interest in Aluminum Corporation of China (Chalco) for approximately
$150, as part of a strategic alliance to form a 50/50 joint venture at Chalco's
facility in Pingguo, China. The increase in investments is also due to Alcoa's
increased investment in the Norwegian metals producer, Elkem ASA. On January 9,
2002, Alcoa raised its equity stake in Elkem above 40% which, under Norwegian
law, required Alcoa to initiate an unconditional cash tender offer for the
remaining outstanding shares of Elkem. Under the tender offer, which will expire
on February 22, 2002, Alcoa will pay approximately $17.40 for each outstanding
share of Elkem. Alcoa's potential cash commitment if all outstanding shares are
tendered is approximately $515. Additions to investments in 2000 and 1999 were
primarily related to Elkem.

42

Contractual Obligations and Commercial Commitments
- --------------------------------------------------

The company is obligated to make future payments under various contracts such as
debt agreements, lease agreements and unconditional purchase obligations and has
certain contingent commitments such as debt guarantees. The following tables
represent the significant contractual cash obligations and other commercial
commitments of Alcoa as of December 31, 2001.

Contractual Cash Obligations            Total    Due in 2002   Due in 2003   Due in 2004   Due in 2005   Due in 2006  Thereafter
- --------------------------------------------------------------------------------------------------------------------------------
                                                                                                 
Long-term debt (including $44
  of capital lease obligations)         $ 6,491      $   103      $    91      $   563      $   979      $   586      $ 4,169
Operating leases                            650          128           98           77           64           60          223
Unconditional purchase obligations        3,116          176          180          185          178          154        2,243
- --------------------------------------------------------------------------------------------------------------------------------
Total contractual cash obligations      $10,257      $   407      $   369      $   825      $ 1,221      $   800      $ 6,635
================================================================================================================================

See Notes H, J, and Q to the Consolidated Financial Statements for additional
information regarding these obligations.

                                                                          Amount of commitment expiration per period
                                             Total Amounts   -------------------------------------------------------------------
Other Commercial Commitments                     Committed     Less than 1 year      1-3 years      4-5 years     Over 5 years
- --------------------------------------------------------------------------------------------------------------------------------
                                                                                                   
Standby letters of credit                            $181                  $181           $ --           $ --             $ --
Guarantees                                            136                   --              --             --              136
- --------------------------------------------------------------------------------------------------------------------------------
Total commercial commitments                         $317                  $181           $ --           $ --             $136
================================================================================================================================

The standby letters of credit are related to environmental, insurance and other
activities. See Note J to the Consolidated Financial Statements for additional
information regarding guarantees.

Critical Accounting Policies
- ----------------------------

Alcoa's significant accounting policies are described in Note A to the
Consolidated Financial Statements. The application of these policies may require
management to make judgments and estimates about the amounts reflected in the
financial statements. Management uses historical experience and all available
information to make these estimates and judgments, and different amounts could
be reported using different assumptions and estimates. In addition to the
information described in Note A to the Consolidated Financial Statements, a
discussion of the judgments and uncertainties associated with accounting for
derivatives and environmental matters can be found in the Market Risks and
Environmental Matters sections.

Related Party Transactions
- --------------------------

Alcoa buys products from and sells products to various related companies,
consisting of entities in which Alcoa retains a 50% or less equity interest, at
negotiated prices between the two parties. These transactions were not material
to the financial position or results of operations of Alcoa at December 31,
2001.

Recently Adopted and Recently Issued Accounting Standards
- ---------------------------------------------------------

The Financial Accounting Standards Board has recently issued various new
accounting standards, including SFAS No. 141, "Business Combinations," SFAS No.
142, "Goodwill and Other Intangible Assets," SFAS No. 143, "Accounting for Asset
Retirement Obligations," and SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets." See Note A to the Consolidated Financial
Statements for additional information on these standards, including a
description of the new standards and the timing of adoption.

                                                                              43

Management's Report to Alcoa Shareholders

The accompanying financial statements of Alcoa and consolidated subsidiaries
were prepared by management, which is responsible for their integrity and
objectivity. The statements were prepared in accordance with generally accepted
accounting principles and include amounts that are based on management's best
judgments and estimates. The other financial information included in this annual
report is consistent with that in the financial statements.

     The company maintains a system of internal controls, including accounting
controls, and a strong program of internal auditing. The system of controls
provides for appropriate procedures that are consistent with high standards of
accounting and administration. The company believes that its system of internal
controls provides reasonable assurance that assets are safeguarded against
losses from unauthorized use or disposition and that financial records are
reliable for use in preparing financial statements.

     Management also recognizes its responsibility for conducting the company's
affairs according to the highest standards of personal and corporate conduct.
This responsibility is characterized and reflected in key policy statements
issued from time to time regarding, among other things, conduct of its business
activities within the laws of the host countries in which the company operates
and potentially conflicting outside business interests of its employees. The
company maintains a systematic program to assess compliance with these policies.

/s/ Alain J. P. Belda
    Alain J. P. Belda
    Chairman and Chief Executive Officer

/s/ Richard B. Kelson
    Richard B. Kelson
    Executive Vice President and
    Chief Financial Officer/
    Chief Compliance Officer

Report of Independent Accountants

To the Shareholders and Board of Directors Alcoa Inc. (Alcoa)

In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income and shareholders' equity and of cash flows
present fairly, in all material respects, the financial position of Alcoa at
December 31, 2001 and 2000, and the results of its operations and its cash flows
for each of the three years in the period ended December 31, 2001, in conformity
with accounting principles generally accepted in the United States of America.
These financial statements are the responsibility of Alcoa's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
auditing standards generally accepted in the United States of America, which
require that we plan and perform the audit to obtain reasonable assurance about
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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

     As discussed in Notes A and S to the consolidated financial statements,
Alcoa changed its method of accounting for derivatives in 2001.

/s/ PricewaterhouseCoopers LLP

    600 Grant St., Pittsburgh, Pa.
    January 9, 2002

44

Statement Of Consolidated Income                          Alcoa and subsidiaries
(in millions, except per-share amounts)

For the year ended December 31                                                 2001        2000        1999
- -----------------------------------------------------------------------------------------------------------
                                                                                         
Sales (A and L)                                                            $ 22,859    $ 22,936    $ 16,323
- -----------------------------------------------------------------------------------------------------------
Cost of goods sold                                                           17,857      17,342      12,536
Selling, general administrative and other expenses                            1,276       1,108         851
Research and development expenses                                               203         194         128
Provision for depreciation, depletion and amortization                        1,253       1,207         888
Special items (B)                                                               566          --          --
Interest expense (R)                                                            371         427         195
Other income, net                                                              (308)       (154)       (124)
- -----------------------------------------------------------------------------------------------------------
                                                                             21,218      20,124      14,474
- -----------------------------------------------------------------------------------------------------------
Income before taxes on income                                                 1,641       2,812       1,849
Provision for taxes on income (O)                                               525         942         553
- -----------------------------------------------------------------------------------------------------------
    Income from operations                                                    1,116       1,870       1,296
Less: Minority interests' share                                                 208         381         242
    Income before accounting change                                             908       1,489       1,054
Cumulative effect of accounting change (A)                                       --          (5)         --
- -----------------------------------------------------------------------------------------------------------
Net Income                                                                 $    908    $  1,484    $  1,054
- -----------------------------------------------------------------------------------------------------------
Earnings Per Share (N)
    Basic (before cumulative effect)                                       $   1.06    $   1.83    $   1.43
    Basic (after cumulative effect)                                            1.06        1.82        1.43
    Diluted (before cumulative effect)                                         1.05        1.81        1.41
    Diluted (after cumulative effect)                                          1.05        1.80        1.41
- -----------------------------------------------------------------------------------------------------------

The accompanying notes are an integral part of the financial statements

                                                                              45

Consolidated Balance Sheet                                Alcoa and subsidiaries
(in millions)

December 31                                                                          2001        2000
- -----------------------------------------------------------------------------------------------------
                                                                                      
Assets
Current assets:
  Cash and cash equivalents (S)                                                  $    512    $    315
  Short-term investments (S)                                                           15          56
  Receivables from customers, less allowances: 2001- $129; 2000-$69                 2,577       3,461
  Other receivables                                                                   288         354
  Inventories (D)                                                                   2,531       2,703
  Deferred income taxes (O)                                                           410         385
  Prepaid expenses and other current assets                                           459         304
- -----------------------------------------------------------------------------------------------------
    Total current assets                                                            6,792       7,578
Properties, plants and equipment (E)                                               11,982      12,850
Goodwill, net of accumulated amortization of $524 in 2001 and $344 in 2000 (C)      5,733       6,003
Other assets (F)                                                                    3,848       5,260
- -----------------------------------------------------------------------------------------------------
    Total Assets                                                                 $ 28,355    $ 31,691
- -----------------------------------------------------------------------------------------------------

Liabilities
Current liabilities:
  Short-term borrowings (H and S)                                                $    142    $  2,719
  Accounts payable, trade                                                           1,630       1,876
  Accrued compensation and retirement costs                                           889         928
  Taxes, including taxes on income                                                    903         702
  Other current liabilities                                                         1,336       1,302
  Long-term debt due within one year (H and S)                                        103         427
- -----------------------------------------------------------------------------------------------------
    Total current liabilities                                                       5,003       7,954
Long-term debt, less amount due within one year (H and S)                           6,388       4,987
Accrued postretirement benefits (P)                                                 2,513       2,719
Other noncurrent liabilities and deferred credits (G)                               1,968       2,126
Deferred income taxes (O)                                                             556         969
- -----------------------------------------------------------------------------------------------------
    Total liabilities                                                              16,428      18,755
- -----------------------------------------------------------------------------------------------------
    Minority Interests (I)                                                          1,313       1,514
- -----------------------------------------------------------------------------------------------------
Commitments and Contingencies (J)

Shareholders' Equity
Preferred stock (M)                                                                    56          56
Common stock (M)                                                                      925         925
Additional capital                                                                  6,114       5,927
Retained earnings                                                                   7,517       7,127
Treasury stock, at cost                                                            (2,706)     (1,717)
Accumulated other comprehensive loss                                               (1,292)       (896)
- -----------------------------------------------------------------------------------------------------
    Total shareholders' equity                                                     10,614      11,422
- -----------------------------------------------------------------------------------------------------
    Total Liabilities And Equity                                                 $ 28,355    $ 31,691
- -----------------------------------------------------------------------------------------------------

The accompanying notes are an integral part of the financial statements.

46

Statement of Consolidated Cash Flows                      Alcoa and subsidiaries
(in millions)

For the year ended December 31                                                                2001       2000       1999
- ------------------------------------------------------------------------------------------------------------------------
                                                                                                       
Cash from Operations
Net income                                                                                 $   908    $ 1,484    $ 1,054
Adjustments to reconcile net income to cash from operations:
  Depreciation, depletion and amortization                                                   1,265      1,219        901
  Change in deferred income taxes                                                              (24)       135         54
  Equity income, net of dividends                                                              (56)       (66)       (10)
  Noncash special items (B)                                                                    526         --         --
  Gains from investing activities--sale of assets                                             (114)        (7)       (12)
  Provision for doubtful accounts                                                               78         10         11
  Accounting change                                                                             --          5         --
  Minority interests                                                                           208        381        242
  Other                                                                                          9         32         31
  Changes in assets and liabilities, excluding effects of acquisitions and divestitures:
    Reduction (increase) in receivables                                                        605       (456)       (67)
    (Increase) reduction in inventories                                                        (13)       117        253
    (Increase) reduction in prepaid expenses and other current assets                          (69)         6        (36)
    Reduction in accounts payable and accrued expenses                                        (419)       (88)       (79)
    (Reduction) increase in taxes, including taxes on income                                   (60)       407        171
    Change in deferred hedging gains/losses                                                     --          7        (63)
    Net change in noncurrent assets and liabilities                                           (433)      (335)       (69)
- ------------------------------------------------------------------------------------------------------------------------
        Cash provided from operations                                                        2,411      2,851      2,381
- ------------------------------------------------------------------------------------------------------------------------
Financing Activities
Net changes to short-term borrowings                                                        (2,570)     2,123        (89)
Common stock issued for stock compensation plans                                               552        251        464
Repurchase of common stock                                                                  (1,452)      (763)      (838)
Dividends paid to shareholders                                                                (518)      (418)      (298)
Dividends paid to minority interests                                                          (251)      (212)      (122)
Net change in commercial paper                                                              (1,290)       530         --
Additions to long-term debt                                                                  3,343      1,918        572
Payments on long-term debt                                                                    (941)    (1,877)    (1,000)
- ------------------------------------------------------------------------------------------------------------------------
        Cash (used for) provided from financing activities                                  (3,127)     1,552     (1,311)
- ------------------------------------------------------------------------------------------------------------------------
Investing Activities
Capital expenditures                                                                        (1,177)    (1,121)      (920)
Acquisitions, net of cash acquired (K)                                                        (159)    (3,121)      (122)
Proceeds from the sale of assets                                                             2,507         22         45
Additions to investments                                                                      (270)       (94)       (96)
Changes in short-term investments                                                               41         21        (37)
Other                                                                                           (3)       (16)       (37)
- ------------------------------------------------------------------------------------------------------------------------
        Cash provided from (used for) investing activities                                     939     (4,309)    (1,167)
- ------------------------------------------------------------------------------------------------------------------------
        Effect of exchange rate changes on cash                                                (26)       (16)        (8)
- ------------------------------------------------------------------------------------------------------------------------
Net change in cash and cash equivalents                                                        197         78       (105)
Cash and cash equivalents at beginning of year                                                 315        237        342
- ------------------------------------------------------------------------------------------------------------------------
        Cash and cash equivalents at end of year                                           $   512    $   315    $   237
- ------------------------------------------------------------------------------------------------------------------------

The accompanying notes are an integral part of the financial statements.

                                                                              47

 Statement of Shareholders' Equity                        Alcoa and subsidiaries
(in millions, except per-share amounts)

                                                                                                          Accumulated
                                                                                                                other          Total
                                    Comprehensive  Preferred  Common  Additional   Retained  Treasury   comprehensive  shareholders'
December 31                                income      stock   stock     capital   earnings     stock            loss         equity
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                   
Balance at end of 1998                                  $ 56   $ 395     $ 1,676    $ 5,305  $ (1,029)      $   (347)      $  6,056
Comprehensive income--1999:
   Net income--1999                          $1,054                                   1,054                                   1,054
   Other comprehensive loss:
     Unrealized translation
     adjustments (A)                           (291)                                                            (291)          (291)
                                             ------
Comprehensive income                         $  763
                                             ------
Cash dividends: Preferred @ $3.75 per share                                              (2)                                     (2)
                Common @ $.403 per share                                               (296)                                   (296)
Treasury shares purchased                                                                        (838)                         (838)
Stock issued: compensation plans                                              28                  607                           635
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of 1999                                    56     395       1,704      6,061    (1,260)          (638)         6,318
Comprehensive income--2000:
   Net income--2000                          $1,484                                   1,484                                   1,484
   Other comprehensive income (loss):
     Change in minimum pension liability,
          net of $(3) tax expense                 5
     Unrealized translation adjustments        (263)                                                            (258)          (258)
                                             ------
Comprehensive income                         $1,226
                                             ------
Cash dividends: Preferred @ $3.75 per share                                              (2)                                     (2)
                Common @ $.500 per share                                               (416)                                   (416)
Treasury shares purchased                                                                        (763)                         (763)
Stock issued: Reynolds acquisition                               135       4,367                                              4,502
Stock issued: compensation plans                                             251                  306                           557
Stock issued: two-for-one split                                  395        (395)                                                --
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of 2000                                    56     925       5,927+     7,127    (1,717)          (896)        11,422
Comprehensive income--2001:
   Net income--2001                          $  908                                     908                                     908
   Other comprehensive income (loss):
     Change in minimum pension liability,
          net of $27 tax benefit                (51)
     Unrealized translation adjustments        (241)
     Unrecognized gains/(losses) on
     derivatives, net of tax and minority
     interests of $124 (S):
        Cumulative effect of accounting
        change                                   (4)
        Net change from periodic
        revaluations                           (175)
        Net amount reclassified to income        75
     Total unrecognized gains/(losses)
                                             ------
     on derivatives                            (104)                                                            (396)          (396)
                                             ------
Comprehensive income                         $  512
                                             ------
Cash dividends: Preferred @ $3.75 per share                                              (2)                                     (2)
                Common @ $.600 per share                                               (516)                                   (516)
Treasury shares purchased                                                                      (1,452)                       (1,452)
Stock issued: compensation plans                                             187                  463                           650
- ------------------------------------------------------------------------------------------------------------------------------------
Balance at end of 2001                                  $ 56   $ 925     $ 6,114+   $ 7,517  $ (2,706)      $ (1,292)  *   $ 10,614
- ------------------------------------------------------------------------------------------------------------------------------------

*Comprised of unrealized translation adjustments of $(1,127), minimum pension
liability of $(61) and unrecognized gains/(losses) on derivatives of $(104)
+Includes stock to be issued under options of $138 and $182 in 2001 and 2000,
respectively

Share Activity
(number of shares)                                                                Common stock
                                                            ---------------------------------------------------------------
                                    Preferred stock               Issued              Treasury              Net outstanding
- ---------------------------------------------------------------------------------------------------------------------------
                                                                                                   
Balance at end of 1998                      557,649          789,391,852           (55,773,696)                 733,618,156
Treasury shares purchased                                                          (31,211,044)                 (31,211,044)
Stock issued: compensation plans                                                    33,090,884                   33,090,884
- ---------------------------------------------------------------------------------------------------------------------------
Balance at end of 1999                      557,649          789,391,852           (53,893,856)                 735,497,996
Treasury shares purchased                                                          (21,742,600)                 (21,742,600)
Stock issued: Reynolds acquisition                           135,182,686                                        135,182,686
Stock issued: compensation plans                                                    16,579,158                   16,579,158
- ---------------------------------------------------------------------------------------------------------------------------
Balance at end of 2000                      557,649          924,574,538           (59,057,298)                 865,517,240
Treasury shares purchased                                                          (39,348,136)                 (39,348,136)
Stock issued: compensation plans                                                    21,412,772                   21,412,772
- ---------------------------------------------------------------------------------------------------------------------------
Balance at end of 2001                      557,649          924,574,538           (76,992,662)                 847,581,876
- ---------------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of the financial statements.

48

Notes To Consolidated Financial Statements
(dollars in millions, except per-share amounts)

A. Summary Of Significant Accounting Policies
- ---------------------------------------------

Principles Of Consolidation. The consolidated financial statements include the
accounts of Alcoa and companies more than 50% owned. Investments in other
entities are accounted for principally on the equity basis.

     The consolidated financial statements are prepared in conformity with
accounting principles generally accepted in the United States of America and
require management to make certain estimates and assumptions. These may affect
the reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements. They may also
affect the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates upon subsequent
resolution of identified matters.

     Cash Equivalents. Cash equivalents are highly liquid investments purchased
with an original maturity of three months or less.

     Inventory Valuation. Inventories are carried at the lower of cost or
market, with cost for a substantial portion of U.S. and Canadian inventories
determined under the last-in, first-out (LIFO) method. The cost of other
inventories is principally determined under the average-cost method. See Note D
for additional detail.

     Properties, Plants And Equipment. Properties, plants and equipment are
recorded at cost. Depreciation is recorded principally on the straight-line
method at rates based on the estimated useful lives of the assets, averaging 33
years for structures and between 5 and 25 years for machinery and equipment.
Profits or losses from the sale of assets are included in other income. Repairs
and maintenance are charged to expense as incurred. Interest related to the
construction of qualifying assets is capitalized as part of the construction
costs. Depletion is taken over the periods during which the estimated mineral
reserves are extracted. See Notes E and R for additional detail.

     Amortization Of Intangibles. The excess purchase price over the net
tangible assets of businesses acquired is reported as goodwill in the
Consolidated Balance Sheet. Goodwill and other intangibles have been amortized
on a straight-line basis over not more than 40 years. The carrying value of
goodwill and other intangibles is evaluated periodically in relation to the
operating performance and future undiscounted cash flows of the underlying
businesses. Adjustments are made if the sum of expected future net cash flows is
less than book value. See Note F for additional information. See Recently
Adopted Accounting Standards regarding the accounting for goodwill and
intangibles amortization effective January 1, 2002.

     Revenue Recognition. Alcoa recognizes revenue when title, ownership and
risk of loss pass to the customer. In 2000, Alcoa changed its method of
accounting for revenue recognition in accordance with the provisions of Staff
Accounting Bulletin 101, "Revenue Recognition in Financial Statements." The
application of this method of accounting for revenue recognition resulted in a
cumulative effect charge to income of $5 (net of taxes and minority interests of
$3) in 2000. The change did not have a significant effect on revenues or results
of operations for the year ended December 31, 2000. The pro forma amounts,
assuming that the new revenue recognition method was applied retroactively to
prior periods, were not materially different from the amounts shown in the
Statement of Consolidated Income for the year ended December 31, 1999.

     Environmental Expenditures. Expenditures for current operations are
expensed or capitalized, as appropriate. Expenditures relating to existing
conditions caused by past operations, and which do not contribute to future
revenues, are expensed. Liabilities are recorded when remedial efforts are
probable and the costs can be reasonably estimated. The liability may include
costs such as site investigations, consultant fees, feasibility studies, outside
contractor and monitoring expenses. Estimates are not discounted or reduced by
potential claims for recovery. Claims for recovery are recognized when received.
The estimates also include costs related to other potentially responsible
parties to the extent that Alcoa has reason to believe such parties will not
fully pay their proportionate share. The liability is periodically reviewed and
adjusted to reflect current remediation progress, prospective estimates of
required activity and other factors that may be relevant, including changes in
technology or regulations. See Note T for additional information.

     Stock-based Compensation. Alcoa accounts for stock-based compensation in
accordance with the provisions of Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," and related interpretations.
Accordingly, compensation cost is not recognized on options granted. Disclosures
required with respect to alternative fair value measurement and recognition
methods prescribed by Statement of Financial Accounting Standards (SFAS) No.
123, "Accounting for Stock-Based Compensation," are presented in Note M.

     Derivatives And Hedging. Effective January 1, 2001, Alcoa adopted SFAS No.
133 "Accounting for Derivative Instruments and Hedging Activities," as amended.
The fair values of all outstanding derivative instruments are recorded on the
balance sheet in other current and noncurrent assets and liabilities at December
31, 2001. The transition adjustment on January 1, 2001 resulted in a net charge
of $4 (after tax and minority interests), which was recorded in other
comprehensive income.

     Derivatives are held as part of a formally documented risk management
(hedging) program. Alcoa's hedging activities are subject to the management,
direction and control of the Strategic Risk Management Committee (SRMC). SRMC is
composed of the chief executive officer, the chief financial officer and other
officers and employees that the chief executive officer may select from time to
time. SRMC reports to the Board of Directors on the scope of its derivative
activities. All derivatives are straightforward and are held for purposes other
than trading. Alcoa measures hedge effectiveness by formally assessing, at least
quarterly, the historical and probable future high correlation of changes in the
fair value or expected future cash flows of the hedged item. The ineffective
portions are recorded in other income or expense in the current period. To the
extent that Alcoa uses options contracts as hedging instruments, effectiveness
is assessed based on changes in the intrinsic value of the option. If the
hedging relationship ceases to be highly effective or it becomes probable that
an expected transaction will no longer occur, gains or losses on the derivative
are recorded in other income or expense.

                                                                              49

     Changes in the fair value of derivatives are recorded in current earnings
along with the change in the fair value of the underlying hedged item if the
derivative is designated as a fair value hedge or in other comprehensive income
if the derivative is designated as a cash flow hedge. If no hedging relationship
is designated, the derivative is marked to market through earnings.

     Cash flows from financial instruments are recognized in the statement of
cash flows in a manner consistent with the underlying transactions.

     Prior to the adoption of SFAS No. 133, gains and losses related to
transactions that qualified for hedge accounting, including closed futures
contracts, were deferred and reflected in earnings when the underlying physical
transactions took place. The deferred gains or losses were reflected on the
balance sheet in other current and noncurrent assets and liabilities.

     Past accounting convention also required that certain positions be marked
to market. Mark-to-market gains and losses were recorded in other income. As a
result of the change in accounting under SFAS No. 133, these contracts were
re-designated and qualified as hedges on January 1, 2001. See Note S for
additional information.

     Foreign Currency. The local currency is the functional currency for Alcoa's
significant operations outside the U.S., except in Canada, where the U.S. dollar
is used as the functional currency. The determination of the functional currency
for Alcoa's operations is made based on the appropriate economic and management
indicators.

     Effective July 1, 1999, the Brazilian real became the functional currency
for translating the financial statements of Alcoa's 59%-owned Brazilian
subsidiary, Alcoa Aluminio S.A. (Aluminio). Economic factors and circumstances
related to Aluminio's operations had changed significantly due to the
devaluation of the real in the 1999 first quarter. Under SFAS No. 52, "Foreign
Currency Translation," the change in these facts and circumstances required a
change in Aluminio's functional currency. As a result of the change, Alcoa's
accumulated other comprehensive loss (unrealized translation adjustments) and
minority interests accounts were reduced by $156 and $108, respectively. These
amounts were driven principally by a reduction in fixed assets and resulted in
decreases in Aluminio's depreciation expense of $30 in 2001 and 2000 and $15 in
1999.

     Recently Adopted Accounting Standards. Alcoa adopted SFAS No. 141,
"Business Combinations" for all business combinations after June 30, 2001. This
standard requires that all business combinations be accounted for using the
purchase method, and it further clarifies the criteria for recognition of
intangible assets separately from goodwill. Since June 30, 2001, there have been
no material business combinations.

     Effective January 1, 2002, Alcoa will adopt SFAS No. 142, "Goodwill and
Other Intangible Assets" for existing goodwill and other intangible assets. This
standard eliminates the amortization of goodwill and intangible assets with
indefinite useful lives and requires annual testing for impairment. This
standard requires the assignment of assets acquired and liabilities assumed,
including goodwill, to reporting units for purposes of goodwill impairment
testing. Under the provisions of this standard, any impairment of goodwill as
well as the unamortized balance of negative goodwill will be written off and
recognized as a cumulative effect of a change in accounting principle effective
January 1, 2002. Alcoa had unamortized goodwill of $5,733 at December 31, 2001,
and had recorded net goodwill amortization expense of $170, $122 and $39 for the
years ended December 31, 2001, 2000 and 1999, respectively. The company is
currently evaluating the cumulative effect and ongoing impact of the application
of SFAS No. 142 on the consolidated financial statements.

     Effective January 1, 2002, Alcoa will adopt SFAS No. 144, "Accounting for
the Impairment or Disposal of Long-Lived Assets." This statement supersedes or
amends existing accounting literature related to the impairment and disposal of
long-lived assets. Management is currently developing a plan to apply the
provisions of this standard to its operations on an ongoing basis.

     Recently Issued Accounting Standards. In June 2001, the Financial
Accounting Standards Board issued SFAS No. 143, "Accounting for Asset Retirement
Obligations." This statement establishes standards for accounting for
obligations associated with the retirement of tangible long-lived assets. The
standard is required to be adopted by Alcoa beginning on January 1, 2003.
Management is currently assessing the details of the standard and is preparing a
plan of implementation.

     Reclassification. Certain amounts in previously issued financial statements
were reclassified to conform to 2001 presentations.

B. Special Items
- ----------------

During 2001, Alcoa recorded charges of $566 ($355 after tax and minority
interests) as a result of a restructuring plan. The company completed a
strategic review of its primary products and fabricating businesses aimed at
optimizing and aligning its manufacturing systems with customer needs, while
positioning the company for stronger profitability. The total charge of $566
consisted of a charge of $212 ($114 after tax and minority interests) in the
second quarter of 2001 and a charge of $354 ($241 after tax and minority
interests) in the fourth quarter of 2001. These charges consisted of asset
write-downs ($372 pretax), employee termination and severance costs ($178
pretax) related to workforce reductions of approximately 10,400 employees, and
exit costs ($16 pretax). The second quarter charge was primarily due to actions
taken in Alcoa's primary products businesses because of economic and competitive
conditions. These actions included the shutdown of three facilities in the U.S.
Alcoa expects to complete these actions by mid-2002. The fourth quarter charge
was primarily due to actions taken in Alcoa's fabricating businesses. These
actions included the shutdown of 15 facilities in the U.S. and Europe. Alcoa
expects to complete these actions by the end of 2002.

Pretax restructuring charges consisted of:

                                           Employee
                                            Termina-
                                 Asset     tion and
                                 Write-   Severance
                                 Downs        Costs      Other        Total
- ---------------------------------------------------------------------------
2001:
Total restructuring charges   $    372   $     178   $     16     $     566
Cash payments                       (3)        (32)        (5)          (40)
Noncash charges                   (314)         --         --          (314)
- ---------------------------------------------------------------------------
Reserve balance at
   December 31, 2001          $     55   $     146   $     11     $     212
- ---------------------------------------------------------------------------

50

Asset write-downs of $372 were primarily recorded as a direct result of the
company's decision to close certain facilities. The asset write-downs consisted
primarily of structures and machinery and equipment, as well as related selling
or disposal costs, and were comprised of $145 related to assets that will be
phased out and $227 of assets that could be disposed of immediately. Assets to
be phased out consisted of $46 of assets in the Flat-Rolled Products segment,
$78 of assets in the Engineered Products segment and $21 at corporate. Assets to
be disposed of consisted of $110 of assets in the Alumina and Chemicals segment,
$84 of assets in the Primary Metals segment, $23 of assets in the Engineered
Products segment, $4 in the Other group and $6 at corporate.

     Assets to be phased out will be removed from service by mid-2002. Fair
values of assets were determined based on expected future cash flows or
appraised values. Expected operating cash flows during the phaseout period were
not significant and did not have a material impact on the determination of the
amount of the write-down.

     Assets that could be disposed of immediately will be sold or vacated by the
end of 2002. The remaining carrying amount of these assets was approximately $80
at December 31, 2001. The results of operations related to these assets were not
material.

     Employee termination and severance costs of $178 were recorded as
management implemented workforce reductions of 10,400 hourly and salaried
employees at various manufacturing facilities--primarily located outside of the
U.S.-due to weak market conditions and the shutdowns of several manufacturing
facilities. These workforce reductions primarily consisted of a combination of
early retirement incentives and involuntary severance programs. As of December
31, 2001, approximately 4,000 employees had been terminated.

     The $16 of exit costs were recorded for activities associated with the
shutdowns above, which will be substantially complete by the end of 2002.

C. Acquisitions And Divestitures
- --------------------------------

In May of 2000, Alcoa completed a merger with Reynolds Metals Company (Reynolds)
by issuing approximately 135 million shares of Alcoa common stock at a value of
$33.30 per share to Reynolds stockholders. The transaction was valued at
approximately $5,900, including debt assumed of $1,297. The purchase price
included the conversion of outstanding Reynolds options to Alcoa options as well
as other direct costs of the acquisition. The goodwill of approximately $2,100
resulting from the purchase price allocation was being amortized over a 40-year
period.

     As part of the merger with Reynolds, Alcoa agreed to divest Reynolds'
interests in the alumina refineries in Worsley, Australia; Stade, Germany; and
Sherwin, Texas as well as 25% of Reynolds' interest in the aluminum smelter
located in Longview, Washington.

     The consolidated financial statements have been prepared in accordance with
Emerging Issues Task Force (EITF) 87- 11, "Allocation of Purchase Price to
Assets to be Sold." Under EITF 87-11, at December 31, 2000, the fair value of
net assets to be divested were reported as assets held for sale in the balance
sheet, and the results of operations from these assets of $19 (after tax) were
not included in the Statement of Consolidated Income. In 2001, the results of
operations from these assets were not material, and there were no significant
adjustments to the purchase price allocation as a result of these divestitures.

     The sale of Sherwin was completed in December 2000; the sales of Worsley
and 100% of Longview were completed in the first quarter of 2001; and the sale
of Stade was completed in the second quarter of 2001. There were no gains or
losses on the sales of these assets.

     In November of 2001, Alcoa contributed net assets of approximately $200 of
Reynolds Aluminum Supply Company (RASCO), the metals distribution business
acquired in the Reynolds acquisition, to a joint venture in which Alcoa retains
a 50% equity interest.

     In May and June of 2000, Alcoa completed the acquisitions of Cordant
Technologies Inc. (Cordant) and Howmet International Inc. (Howmet), a
majority-owned company of Cordant. Under the agreement and tender offer, Alcoa
paid $57 for each outstanding share of Cordant common stock and $21 for each
outstanding share of Howmet common stock. The total value of the transactions
was approximately $3,300, including the assumption of debt of $826. The purchase
price includes the conversion of outstanding Cordant and Howmet options to Alcoa
options as well as other direct costs of the acquisition. In April of 2001,
Alcoa completed the sale of Thiokol, a business acquired in the Cordant
transaction, to Alliant Techsystems Inc. for net proceeds of $698 in cash, which
included a working capital adjustment, and recognized a $55 pretax gain that is
included in other income. The goodwill of approximately $2,200 resulting from
the purchase price allocation, after considering the impact of the Thiokol sale,
was being amortized over a 40-year period.

     The following unaudited pro forma information for the years ended December
31, 2000 and 1999 assumes that the acquisitions of Reynolds and Cordant had
occurred at the beginning of 2000 and 1999. Adjustments that have been made to
arrive at the pro forma totals include those related to acquisition financing;
the amortization of goodwill; the elimination of transactions among Alcoa,
Reynolds and Cordant; and additional depreciation related to the increase in
basis that resulted from the transactions. Tax effects from the pro forma
adjustments previously noted have been included at the 35% U.S. statutory rate.

(Unaudited)                                2000        1999
- -----------------------------------------------------------
Sales                                  $ 25,636    $ 23,369
Net income                                1,514       1,148
- -----------------------------------------------------------
Earnings per share:
   Basic                               $   1.86*   $   1.32
   Diluted                                 1.84*       1.30
- -----------------------------------------------------------

*Includes the cumulative effect adjustment of the accounting change for revenue
 recognition

The pro forma results are not necessarily indicative of what actually would have
occurred if the transactions had been in effect for the periods presented, are
not intended to be a projection of future results and do not reflect any cost
savings that might be achieved from the combined operations.

     In October of 2000, Alcoa completed the acquisition of Luxfer Holdings
plc's aluminum plate, sheet and soft-alloy extrusion manufacturing operations
and distribution businesses of British Aluminium

                                                                              51

Limited, a wholly owned subsidiary of Luxfer. Alcoa paid approximately $271 in
cash. The allocation of the purchase price resulted in goodwill of approximately
$121, which was being amortized over a 40-year period. Had the British Aluminium
acquisition occurred at the beginning of 2000 or 1999, net income for those
years would not have been materially different.

     Alcoa completed a number of other acquisitions in 2001, 2000 and 1999. Net
cash paid for other acquisitions was $159, $488 and $122 in 2001, 2000 and 1999,
respectively. None of these transactions had a material impact on Alcoa's
financial statements.

     Alcoa's acquisitions have been accounted for using the purchase method. The
purchase price has been allocated to the assets acquired and liabilities assumed
based on their estimated fair market values. Any excess purchase price over the
fair market value of the net assets acquired has been recorded as goodwill. For
all of Alcoa's acquisitions, operating results have been included in the
Statement of Consolidated Income since the dates of the acquisitions.

D. Inventories
- --------------

December 31                                        2001     2000
- ----------------------------------------------------------------
Finished goods                                $     691 $    814
Work in process                                     734      806
Bauxite and alumina                                 410      311
Purchased raw materials                             531      562
Operating supplies                                  165      210
- ----------------------------------------------------------------
                                              $   2,531 $  2,703
- ----------------------------------------------------------------

 Approximately 47% of total inventories at December 31, 2001
were valued on a LIFO basis. If valued on an average-cost
basis, total inventories would have been $605 and $658
higher at the end of 2001 and 2000, respectively. During
2000, LIFO inventory quantities were reduced, which resulted
in a partial liquidation of the LIFO bases. The impact of
this liquidation increased net income by $31, or four cents
per share, in 2000.

E. Properties, Plants and Equipment, at Cost
- --------------------------------------------

December 31                                          2001       2000
- --------------------------------------------------------------------
Land and land rights, including mines            $    390   $    384
Structures                                          5,318      5,329
Machinery and equipment                            15,779     16,063
- --------------------------------------------------------------------
                                                   21,487     21,776
Less: accumulated depreciation and depletion       10,554      9,750
- --------------------------------------------------------------------
                                                   10,933     12,026
Construction work in progress                       1,049        824
- --------------------------------------------------------------------
                                                 $ 11,982   $ 12,850
- --------------------------------------------------------------------

F. Other Assets
- ---------------

December 31                                       2001       2000
- -----------------------------------------------------------------
Investments, principally equity               $  1,384   $    954
investments
Assets held for sale                                --      1,473
Intangibles, net of accumulated amortization
   of $323 in 2001 and $238 in 2000                674        821
Noncurrent receivables                              44        118
Deferred income taxes                              445        360
Deferred charges and other                       1,301      1,534
- -----------------------------------------------------------------
                                              $  3,848   $  5,260
- -----------------------------------------------------------------

G. Other Noncurrent Liabilities and Deferred Credits
- ----------------------------------------------------

December 31                            2001        2000
- -------------------------------------------------------
Deferred alumina sales revenue     $    204    $    212
Environmental remediation               357         369
Deferred credits                        278         317
Other noncurrent liabilities          1,129       1,228
- -------------------------------------------------------
                                   $  1,968    $  2,126
- -------------------------------------------------------

H. Debt
- -------

December 31                                          2001       2000
- --------------------------------------------------------------------
Commercial paper, variable rate,
   (1.9% and 6.6% average rates)                  $   220   $  1,510
5.75% Notes                                            --        250
6.625% Notes, due 2002                                 57        114
9% Bonds, due 2003                                     21         21
Floating-rate notes, due 2004
   (2.2% average rate)                                500         --
6.125% Bonds, due 2005                                200        200
7.25% Notes, due 2005                                 500        500
5.875% Notes, due 2006                                500         --
6.625% Notes, due 2008                                150        150
7.375% Notes, due 2010                              1,000      1,000
6.50% Notes, due 2011                               1,000         --
6% Notes, due 2012                                  1,000         --
6.50% Bonds, due 2018                                 250        250
6.75% Bonds, due 2028                                 300        300
Tax-exempt revenue bonds ranging from
   1.6% to 7.3%, due 2002-2033                        341        347
Medium-term notes, due 2002-2013
   (8.0% and 8.3% average rates)                      224        334
Alcoa Fujikura Ltd.
   Variable-rate term loan (6.3% average rate)         --        190
Alcoa Aluminio
   7.5% Export notes, due 2008                        165        184
   Variable-rate notes (8.2% average rate)             --          3
Other                                                  63         61
- --------------------------------------------------------------------
                                                    6,491      5,414
  Less: amount due within one year                    103        427
- --------------------------------------------------------------------
                                                  $ 6,388   $  4,987
- --------------------------------------------------------------------

The amount of long-term debt maturing in each of the next five years is $103 in
2002, $91 in 2003, $563 in 2004, $979 in 2005 and $586 in 2006.

     In May 2001, Alcoa issued $1,500 of notes. Of these notes, $1,000 mature in
2011 and carry a coupon rate of 6.50%, and $500 mature in 2006 and carry a
coupon rate of 5.875%. In December 2001, Alcoa issued $1,500 of notes. This
issue consisted of $1,000 of notes that mature in 2012 and carry a coupon rate
of 6%, and $500 of floating-rate notes that mature in 2004. The proceeds from
these borrowings were used to refinance debt, primarily commercial paper, and
for general corporate purposes.

     In 2000, Alcoa issued $1,500 of notes. Of these notes, $1,000 mature in
2010 and carry a coupon rate of 7.375%, and $500 mature in 2005 and carry a
coupon rate of 7.25%.

     In April 2001, Alcoa refinanced the $2,490 revolving-credit facility that
was to expire in April 2001 and the $510 revolving-credit facility that expires
in April 2005. These facilities were refinanced into a $2,000 revolving-credit
agreement that expires in April 2002 and a $1,000 revolving-credit agreement
that expires in April 2005. Alcoa

52

also has a $1,000 revolving-credit facility that expires in August 2003. Under
these agreements, a certain ratio of indebtedness to consolidated net worth must
be maintained. Commercial paper of $220 and $1,510 at December 31, 2001 and
2000, respectively, was classified as long-term debt because it is backed by the
revolving-credit facilities. There were no amounts outstanding under these
facilities at December 31, 2001. The interest rate on these facilities, if drawn
upon, is Libor plus 19 basis points, which is subject to adjustment if Alcoa's
credit rating changes, to a maximum interest rate of Libor plus 40 basis points.

     Aluminio's export notes are collateralized by receivables due under an
export contract. Certain financial ratios must be maintained, including the
maintenance of a minimum debt service ratio as well as a certain level of
tangible net worth of Aluminio and its subsidiaries.

     Short-term borrowings of $142 at December 31, 2001 consisted of bank and
other borrowings. Short-term borrowings of $2,719 at December 31, 2000 consisted
of commercial paper of $2,201, extendible commercial notes of $280 and bank and
other borrowings of $238. The weighted average interest rate on short-term
borrowings was 2.5% in 2001 and 6.6% in 2000.

I. Minority Interests
- ---------------------

The following table summarizes the minority shareholders' interests in the
equity of consolidated subsidiaries.

December 31                                              2001          2000
- ---------------------------------------------------------------------------
Alcoa of Australia                                   $    431      $    462
Alcoa Aluminio                                            222           256
Alcoa World Alumina and Chemicals                         175           260
Alcoa Fujikura Ltd.                                       277           309
Other majority-owned companies                            208           227
- ---------------------------------------------------------------------------
                                                     $  1,313      $  1,514
- ---------------------------------------------------------------------------

J. Commitments and Contingencies
- --------------------------------

Various lawsuits, claims and proceedings have been or may be instituted or
asserted against Alcoa, including those pertaining to environmental, product
liability, and safety and health matters. While the amounts claimed may be
substantial, the ultimate liability cannot now be determined because of the
considerable uncertainties that exist. Therefore, it is possible that results of
operations or liquidity in a particular period could be materially affected by
certain contingencies. However, based on facts currently available, management
believes that the disposition of matters that are pending or asserted will not
have a materially adverse effect on the financial position of the company.

     Aluminio is a 27.23% participant in Machadinho, a hydroelectric
construction project in Brazil. Aluminio has guaranteed up to 39% of the
project's total debt of approximately $315. Beginning in February 2002, Aluminio
is committed to taking a share of the output of the completed project for 30
years at cost, including cost of financing the project. In the event that other
participants in this project fail to fulfill their financial responsibilities,
Aluminio may be required to fund a portion of the deficiency. In accordance with
the agreement, if Aluminio funds any such deficiency, its participation and
share of the output from the project will increase proportionately.

     Aluminio also entered into agreements to participate in four additional
hydroelectric construction projects in Brazil that are scheduled to be completed
at various dates ranging from 2005 to 2008. Aluminio's share of the output from
the hydroelectric facilities, when completed, ranges from 20% to 39.5%. Total
costs for all four projects are estimated at $1,400, with Aluminio's share of
total project costs totaling approximately 30%. The plans for financing these
projects have not yet been finalized. Aluminio may be required to provide
guarantees of project financing or commit to additional investments as these
projects progress. At December 31, 2001, Aluminio had provided $13 of guarantees
on two of the hydroelectric construction projects in the form of performance
bonds.

     Aluminio accounts for its investments in these hydroelectric projects on
the equity method. Aluminio's investment in these projects was $108 and $48 at
December 31, 2001 and 2000, respectively.

     Alcoa of Australia (AofA) is party to a number of natural gas and
electricity contracts that expire between 2002 and 2020. Under these take-or-pay
contracts, AofA is obligated to pay for a minimum amount of natural gas or
electricity even if these commodities are not required for operations.
Commitments related to these contracts total $176 in 2002, $180 in 2003, $185 in
2004, $178 in 2005, $154 in 2006 and $2,243 thereafter. Expenditures under these
contracts totaled $179 in 2001, $188 in 2000 and $179 in 1999.

     On January 9, 2002, Alcoa raised its equity stake in Elkem ASA, a Norwegian
metals producer, above 40% which, under Norwegian law, required Alcoa to
initiate an unconditional cash tender offer for the remaining outstanding shares
of Elkem. Under the tender offer, which expires on February 22, 2002, Alcoa will
pay approximately $17.40 for each outstanding share of Elkem. Alcoa's potential
cash commitment if all outstanding shares are tendered is approximately $515.

     Alcoa has standby letters of credit related to environmental, insurance and
other activities. The total amount committed under these letters of credit,
which expire at various dates in 2002, was $181 at December 31, 2001.

K. Cash Flow Information
- ------------------------

Cash payments for interest and income taxes follow.

                                              2001        2000         1999
- ---------------------------------------------------------------------------
Interest                                   $   418   $     388     $    225
Income taxes                                   548         419          394
- ---------------------------------------------------------------------------

The details of cash payments related to acquisitions follow.

                                              2001        2000         1999
- ---------------------------------------------------------------------------
Fair value of assets acquired              $   184   $  14,991     $    282
Liabilities assumed                            (24)     (7,075)        (159)
Stock options issued                            --        (182)          --
Stock issued                                    --      (4,502)          --
- ---------------------------------------------------------------------------
Cash paid                                      160       3,232          123
Less: cash acquired                              1         111            1
- ---------------------------------------------------------------------------
Net cash paid for acquisitions             $   159   $   3,121     $    122
- ---------------------------------------------------------------------------

                                                                              53

L. Segment and Geographic Area Information
- ------------------------------------------
Alcoa is primarily a producer of aluminum products. Its segments are organized
by product on a worldwide basis. Alcoa's management reporting system evaluates
performance based on a number of factors; however, the primary measure of
performance is the after-tax operating income (ATOI) of each segment.
Nonoperating items such as interest income, interest expense, foreign exchange
gains/losses, the effects of LIFO inventory accounting, minority interests and
special items are excluded from segment ATOI. In addition, certain expenses,
such as corporate general administrative expenses, and depreciation and
amortization on corporate assets, are not included in segment ATOI. Segment
assets exclude cash, cash equivalents, short-term investments and all deferred
taxes. Segment assets also exclude items such as corporate fixed assets, LIFO
reserves, goodwill allocated to corporate and other amounts.

     The accounting policies of the segments are the same as those described in
the Summary of Significant Accounting Policies (Note A). Transactions among
segments are established based on negotiation among the parties. Differences
between segment totals and Alcoa's consolidated totals for line items not
reconciled are primarily due to corporate allocations.

     Alcoa's products are used primarily by packaging, consumer products,
transportation (including aerospace, automotive, truck trailer, rail and
shipping), building and construction and industrial customers worldwide. Total
exports from the U.S. were $2,066 in 2001, compared with $1,687 in 2000 and
$1,309 in 1999. Alcoa's reportable segments follow.

                                                                                          Packaging
                                    Alumina and     Primary   Flat-Rolled   Engineered          and
Segment information                   Chemicals      Metals      Products     Products     Consumer       Other        Total
- ----------------------------------------------------------------------------------------------------------------------------
                                                                                              
2001
Sales:
   Third-party sales                   $  1,908    $  3,432      $  4,999     $  6,098     $  2,720    $  3,702    $  22,859
   Intersegment sales                     1,021       3,300            64           35           --          --        4,420
- ----------------------------------------------------------------------------------------------------------------------------
   Total sales                         $  2,929    $  6,732      $  5,063     $  6,133     $  2,720    $  3,702    $  27,279
- ----------------------------------------------------------------------------------------------------------------------------
Profit and loss:
   Equity income (loss)                $      1    $     52      $     (2)    $     --     $     28    $     16    $      95
   Depreciation, depletion and
    amortization                            144         327           191          268          137         113        1,180
   Income taxes                             184         434            94          111           79          --          902
   After-tax operating income               471         905           262          173          185          47        2,043
- ----------------------------------------------------------------------------------------------------------------------------
Assets:
   Capital expenditures                $    129    $    209      $    221     $    259     $     94    $     84    $     996
   Equity investments                       170         319            47           --          128         317          981
   Total assets                           2,797       7,122         3,453        6,231        2,498       1,883       23,984
- ----------------------------------------------------------------------------------------------------------------------------

2000
Sales:
   Third-party sales                   $  2,108    $  3,756      $  5,446     $  5,471     $  2,084    $  4,071    $  22,936
   Intersegment sales                     1,104       3,504            97           62           --          --        4,767
- ----------------------------------------------------------------------------------------------------------------------------
   Total sales                         $  3,212    $  7,260      $  5,543     $  5,533     $  2,084    $  4,071    $  27,703
- ----------------------------------------------------------------------------------------------------------------------------
Profit and loss:
   Equity income                       $      3    $     50      $      6     $      1     $     --    $     32    $      92
   Depreciation, depletion and
    amortization                            163         311           188          221          105         127        1,115
   Income taxes                             279         505           126          124           70          93        1,197
   After-tax operating income               585       1,000           299          210          131         164        2,389
- ----------------------------------------------------------------------------------------------------------------------------
Assets:
   Capital expenditures                $    154    $    232      $    185     $    234     $    112    $    100    $   1,017
   Equity investments                       176         274            90            6            1         139          686
   Total assets                           2,924       7,700         3,657        6,455        2,457       3,376       26,569
- ----------------------------------------------------------------------------------------------------------------------------

1999
Sales:
   Third-party sales                   $  1,842    $  2,241      $  5,113     $  3,728     $    801    $  2,592    $  16,317
   Intersegment sales                       925       2,793            51           26           --          --        3,795
- ----------------------------------------------------------------------------------------------------------------------------
   Total sales                         $  2,767    $  5,034      $  5,164     $  3,754     $    801    $  2,592    $  20,112
- ----------------------------------------------------------------------------------------------------------------------------
Profit and loss:
   Equity income (loss)                $     --    $     42      $     (9)    $     --     $     --    $     10    $      43
   Depreciation, depletion and
    amortization                            161         216           184          116           60          89          826
   Income taxes                             159         214           131           88           32          71          695
   After-tax operating income               307         535           281          180           68         118        1,489
- ----------------------------------------------------------------------------------------------------------------------------
Assets:
   Capital expenditures                $    183    $    207      $    166     $    144     $     96    $     62    $     858
   Equity investments                        54         153            66           --            1         138          412
   Total assets                           3,046       4,532         3,385        2,320          646       1,647       15,576
- ----------------------------------------------------------------------------------------------------------------------------

54

Alumina And Chemicals. This segment consists of Alcoa's worldwide alumina and
chemicals system, that includes the mining of bauxite, which is then refined
into alumina. Alumina is sold directly to internal and external smelter
customers worldwide or is processed into industrial chemical products. Alcoa's
alumina operations in Australia are a significant component of this segment.
Approximately two-thirds of the third-party sales from this segment are derived
from alumina.

Primary Metals. This segment consists of Alcoa's worldwide smelter system.
Primary Metals receives alumina primarily from the Alumina and Chemicals segment
and produces aluminum ingot to be used by Alcoa's fabricating businesses, as
well as sold to external customers, aluminum traders and commodity markets.
Results from the sale of aluminum powder, scrap and excess power are also
included in this segment, as well as the results from aluminum derivative
contracts. The sale of ingot represents approximately 80% of this segment's
third-party sales.

Flat-Rolled Products. This segment's principal business is the production and
sale of aluminum plate, sheet and foil. This segment includes rigid container
sheet (RCS), which is used to produce aluminum beverage cans, and sheet and
plate used in the transportation and distributor markets. Approximately 60% of
the third-party sales in this segment are derived from sheet and plate, and foil
used in industrial markets, while the remaining 40% of third-party sales
consists of RCS.

Engineered Products. This segment includes hard- and soft- alloy extrusions,
including architectural extrusions, super-alloy castings, steel and aluminum
fasteners, aluminum forgings and wheels. These products serve the
transportation, building and construction and distributor markets.

Packaging and Consumer. This segment includes foodservice, flexible packaging,
consumer products and packaging graphics design, as well as closures, PET
bottles and packaging machinery. The principal products in this segment include
aluminum foil; plastic wraps and bags; metal and plastic beverage and food
closures; pre-press services and plastic shrink film and wraps. Consumer
products are marketed under brands including Reynolds Wrap, Diamond, Baco and
Cut-Rite wax paper.

Other. This group includes other Alcoa businesses that are not included in the
segments previously mentioned. This group includes Alcoa Fujikura Ltd., which
produces electrical components for the automotive industry along with
fiber-optic cable and provides services to the telecommunications industry;
residential building products operations, Alcoa Building Products (ABP);
automotive parts businesses; Thiokol, a producer of solid rocket propulsion
systems (Thiokol was sold in April 2001); and Reynolds' metal distribution
business, RASCO (in November 2001, the net assets of RASCO were contributed to a
joint venture, in which Alcoa retains a 50% equity interest).

The following reconciles segment information to consolidated totals.

                                              2001       2000         1999
- -------------------------------------------------------------------------------
Sales:
   Total sales                         $    27,279 $   27,703 $     20,112
   Elimination of intersegment sales        (4,420)    (4,767)      (3,795)
   Other revenues                               --         --            6
- -------------------------------------------------------------------------------
        Consolidated sales             $    22,859 $   22,936 $     16,323
- -------------------------------------------------------------------------------
Net income:
   Total after-tax operating income    $     2,043 $    2,389 $      1,489
   Impact of intersegment profit
     eliminations                              (20)        24          (24)
   Unallocated amounts (net of tax):
     Interest income                            40         40           26
     Interest expense                         (242)      (278)        (126)
     Minority interests                       (208)      (381)        (242)
     Special items                            (397)        --           --
     Corporate expense                        (261)      (227)        (171)
     Other                                     (47)       (83)         102
- -------------------------------------------------------------------------------
        Consolidated net income        $       908 $    1,484 $      1,054
- -------------------------------------------------------------------------------
Assets:
   Total assets                        $    23,984 $   26,569 $     15,576
   Elimination of intersegment
     receivables                              (309)      (530)        (362)
Unallocated amounts:
   Cash, cash equivalents and
     short-term investments                    527        371          314
   Deferred tax assets                         855        745          657
   Corporate goodwill                        1,710      1,570          558
   Corporate fixed assets                      513        414          278
   LIFO reserve                               (605)      (658)        (645)
   Operations to be divested                    --      1,473           --
   Other                                     1,680      1,737          690
- -------------------------------------------------------------------------------
        Consolidated assets            $    28,355 $   31,691 $     17,066
- -------------------------------------------------------------------------------

Geographic information for revenues, based on country of origin, and long-lived
assets follows.
                                              2001       2000         1999
- -------------------------------------------------------------------------------
Revenues:
   U.S.                                $    15,000   $ 15,487   $   10,392
   Australia                                 1,350      1,690        1,398
   Spain                                     1,011      1,146        1,059
   United Kingdom                              899        379          253
   Brazil                                      736        885          730
   Germany                                     720        713          521
   Other                                     3,143      2,636        1,970
- -------------------------------------------------------------------------------
                                       $    22,859   $ 22,936   $   16,323
- -------------------------------------------------------------------------------
Long-lived assets:
   U.S.                                $    12,495   $ 14,276   $    6,650
   Canada                                    2,787      2,844          948
   Australia                                 1,345      1,458        1,585
   United Kingdom                              682        378           72
   Brazil                                      600        698          712
   Germany                                     194        213          165
   Other                                     1,164      1,322        1,050
- -------------------------------------------------------------------------------
                                       $    19,267   $ 21,189   $   11,182
- -------------------------------------------------------------------------------

                                                                              55

M. Preferred And Common Stock
- -----------------------------

Preferred Stock. Alcoa has two classes of preferred stock. Serial preferred
stock has 557,740 shares authorized and outstanding, with a par value of $100
per share and an annual $3.75 cumulative dividend preference per share. Class B
serial preferred stock has 10 million shares authorized (none issued) and a par
value of $1 per share.

Common Stock. There are 1.8 billion shares authorized at a par value of $1 per
share. As of December 31, 2001, 94.5 million shares of common stock were
reserved for issuance under the long-term stock incentive plans.

     In July 2001, the Alcoa Board of Directors authorized the repurchase of 50
million shares of Alcoa common stock. As of December 31, 2001, there were 37.5
million shares remaining on the stock repurchase authorization.

Stock options under the company's stock incentive plans have been and may be
granted, generally at not less than market prices on the dates of grant. The
stock option program includes a reload or stock continuation ownership feature.
Stock options granted have a maximum term of 10 years. Vesting periods are one
year from the date of grant and six months for options granted under the reload
feature.

     Alcoa's net income and earnings per share would have been reduced to the
pro forma amounts shown below if compensation cost had been determined based on
the fair value at the grant dates.

                               2001       2000       1999
- -------------------------------------------------------------------------------
Net income:
   As reported               $  908   $  1,484   $  1,054
   Pro forma                    730      1,277        912
- -------------------------------------------------------------------------------
Basic earnings per share:
   As reported                 1.06       1.82       1.43
   Pro forma                   0.85       1.57       1.24
- -------------------------------------------------------------------------------
Diluted earnings per share:
   As reported                 1.05       1.80       1.41
   Pro forma                   0.84       1.55       1.22
- -------------------------------------------------------------------------------

The weighted average granted was $9.54 fair value per option in 2001, $10.13 in
2000 and $5.35 in 1999.

     The fair each value of option is estimated on the date of grant or
subsequent reload Black-Scholes using the pricing model with the following
assumptions:

                                         2001        2000       1999
- -------------------------------------------------------------------------------
Average risk-free interest rate          3.8%        6.1%       5.0%
Expected dividend yield                  1.6         1.6        1.4
Expected volatility                     43.0        40.0       37.0
Expected life (years):
   New option grants                     2.5         2.5        2.5
   Reload option grants                  2.0         2.0        1.5
- -------------------------------------------------------------------------------

The transactions for shares under options were: (shares in millions)

                                            2001        2000        1999
- ------------------------------------------------------------------------------
Outstanding, beginning of year:
   Number of options                        74.8        53.0        53.2
   Weighted average exercise price      $  29.29    $  22.15    $  16.50
Options assumed from acquisitions:
   Number of options                          --        15.2          --
   Weighted average exercise price            --    $  25.09          --
Granted:
   Number of options                        28.9        31.3        43.6
   Weighted average exercise price      $  36.19    $  37.87    $  24.47
Exercised:
   Number of options                       (29.0)      (24.3)      (43.2)
   Weighted average exercise price      $  29.03    $  22.03    $  17.22
Expired or forfeited:
   Number of options                        (1.2)        (.4)        (.6)
   Weighted average exercise price      $  32.50    $  34.90    $  18.59
- -------------------------------------------------------------------------------
Outstanding, end of year:
   Number of options                        73.5        74.8        53.0
   Weighted average exercise price      $  32.02    $  29.29    $  22.15
- -------------------------------------------------------------------------------
Exercisable, end of year:
   Number of options                        58.6        44.6        26.4
   Weighted average exercise price      $  31.88    $  23.42    $  19.21
- -------------------------------------------------------------------------------
Shares reserved for future options          21.0        15.8        28.6
- -------------------------------------------------------------------------------

         The following tables summarize certain stock option information
at December 31, 2001: (shares in millions)

Options Outstanding

Range of                      Weighted average      Weighted average
exercise price    Number        remaining life        exercise price
- -------------------------------------------------------------------------------
$ 0.125              0.2     employment career              $  0.125
$ 4.38-$12.15        2.0                  3.24                 10.11
$12.16-$19.93        5.8                  3.85                 17.08
$19.94-$27.71       12.0                  5.39                 23.16
$27.72-$35.49       27.0                  7.14                 32.56
$35.50-$43.25       26.5                  6.67                 40.63
- -------------------------------------------------------------------------------
      Total         73.5                  6.31              $  32.02
- -------------------------------------------------------------------------------

Options Exercisable

Range of                                       Weighted average
exercise price            Number              exercisable price
- -------------------------------------------------------------------------------
$ 0.125                      0.2                    $     0.125
$ 4.38-$12.15                2.0                          10.11
$12.16-$19.93                5.8                          17.08
$19.94-$27.71               12.1                          23.16
$27.72-$35.49               14.0                          33.52
$35.50-$43.25               24.5                          40.74
- -------------------------------------------------------------------------------
      Total                 58.6                    $     31.88
- -------------------------------------------------------------------------------

N. Earnings Per Share
- ---------------------
Basic earnings per common share (EPS) amounts are computed by dividing earnings
after the deduction of preferred stock dividends by the average number of common
shares outstanding. Diluted EPS amounts assume the issuance of common stock for
all potentially dilutive equivalents outstanding.

The details of basic and diluted EPS follow. (shares in millions)

                                           2001        2000        1999
- -----------------------------------------------------------------------
Income before cumulative effect         $   908    $  1,489    $  1,054
Less: preferred stock dividends               2           2           2
- -----------------------------------------------------------------------
Income available to common stock-
   holders before cumulative effect     $   906    $  1,487    $  1,052
Cumulative effect of accounting
   change                                    --          (5)         --
- -----------------------------------------------------------------------
Income available to common stock-
   holders after cumulative effect      $   906    $  1,482    $  1,052
- -----------------------------------------------------------------------
Average shares outstanding--basic         858.0       814.2       733.8
Effect of dilutive securities:
   Shares issuable upon exercise
     of dilutive stock options              8.6         9.0        13.4
- -----------------------------------------------------------------------
   Average shares outstanding--diluted    866.6       823.2       747.2

Basic EPS (before cumulative effect)    $  1.06    $   1.83    $   1.43
Basic EPS (after cumulative effect)        1.06        1.82        1.43
Diluted EPS (before cumulative effect)     1.05        1.81        1.41
Diluted EPS (after cumulative effect)      1.05        1.80        1.41
- -----------------------------------------------------------------------

Options to purchase 32 million shares of common stock at an average exercise
price of $40 per share were outstanding as of December 31, 2001 but were not
included in the computation of diluted EPS because the option exercise price was
greater than the average market price of the common shares.

     In April 2000, Alcoa entered into a forward share repurchase agreement to
partially hedge the equity exposure related to its stock option program. As of
June 30, 2001, Alcoa had repurchased all 10 million shares under the agreement.

O. Income Taxes
- ---------------

The components of income before taxes on income were:

                                           2001        2000        1999
- -----------------------------------------------------------------------
U.S.                                    $   (84)   $    756    $    631
Foreign                                   1,725       2,056       1,218
- -----------------------------------------------------------------------
                                        $ 1,641    $  2,812    $  1,849
- -----------------------------------------------------------------------

The provision for taxes on income consisted of:

                                           2001        2000        1999
- -----------------------------------------------------------------------
Current:
   U.S. federal*                        $   (17)   $    217    $    175
   Foreign                                  521         568         306
   State and local                           45          22          18
- -----------------------------------------------------------------------
                                            549         807         499
- -----------------------------------------------------------------------
Deferred:
   U.S. federal*                            (32)         90          74
   Foreign                                    3          42         (25)
   State and local                            5           3           5
- -----------------------------------------------------------------------
                                            (24)        135          54
- -----------------------------------------------------------------------
Total                                   $   525    $    942    $    553
- -----------------------------------------------------------------------

*Includes U.S. taxes related to foreign income

In the 1999 fourth quarter, Australia reduced its corporate income tax rate from
36% to 34% for 2000 and 30% for 2001.

     The exercise of employee stock options generated a tax benefit of $90 in
2001, $108 in 2000 and $145 in 1999. This amount was credited to additional
capital and reduced current taxes payable.

Reconciliation of the U.S. federal statutory rate to Alcoa's effective tax rate
follows.

                                           2001        2000        1999
- -----------------------------------------------------------------------
U.S. federal statutory rate               35.0%       35.0%       35.0%
Taxes on foreign income                   (8.4)       (3.5)       (2.4)
State taxes net of federal benefit         1.1          .5          .5
Tax rate changes                            --          --        (2.4)
Minority interests                         1.8          .1          .3
Permanent differences on sold and
   disposed assets                        (1.4)         --          --
Goodwill amortization                      2.4         1.2         0.5
Other                                      1.5          .2        (1.6)
- -----------------------------------------------------------------------
Effective tax rate                        32.0%       33.5%       29.9%
- -----------------------------------------------------------------------

The components of net deferred tax assets and liabilities follow.

                                     2001                      2000
                            ----------------------    ----------------------
                            Deferred      Deferred    Deferred      Deferred
                                 tax           tax         tax           tax
December 31                    asset   liabilities      assets   liabilities
- ----------------------------------------------------------------------------
Depreciation                 $    --     $   1,744    $     --      $  2,263
Employee benefits              1,071            --       1,127            --
Loss provisions                  406            --         588            --
Deferred income/expense          279           132         237           166
Tax loss carryforwards           329            --         272            --
Tax credit carryforwards         219            --         144            --
Other                            293           252         262           304
- ----------------------------------------------------------------------------
                               2,597         2,128       2,630         2,733
Valuation allowance             (201)           --        (165)           --
- ----------------------------------------------------------------------------
                             $ 2,396     $   2,128    $  2,465      $  2,733
- ----------------------------------------------------------------------------

Of the total deferred tax assets associated with the tax loss carryforwards, $65
expires over the next 10 years, $104 over the next 20 years and $160 is
unlimited. Of the tax credit carryforwards, $142 is unlimited with the balance
expiring over the next 10 years. A substantial portion of the valuation
allowance relates to the loss carryforwards because the ability to generate
sufficient foreign taxable income in future years is uncertain. Approximately
$52 of the valuation allowance relates to acquired companies for which
subsequently recognized benefits will reduce goodwill.

     The cumulative amount of Alcoa's share of undistributed earnings for which
no deferred taxes have been provided was $4,399 at December 31, 2001. Management
has no plans to distribute such earnings in the foreseeable future. It is not
practical to determine the deferred tax liability on these earnings.

P. Pension Plans and Other Postretirement Benefits
- --------------------------------------------------

Alcoa maintains pension plans covering most U.S. employees and certain other
employees. Pension benefits generally depend on length of service, job grade and
remuneration. Substantially all benefits are paid through pension trusts that
are sufficiently funded to ensure that all plans can pay benefits to retirees as
they become due.

     Alcoa maintains health care and life insurance benefit plans covering most
eligible U.S. retired employees and certain other retirees. Generally, the
medical plans pay a stated percentage of medical expenses, reduced by
deductibles and other coverages. These plans are generally unfunded, except for
certain benefits funded through a trust. Life benefits are generally provided by
insurance contracts. Alcoa retains the right, subject to existing agreements, to
change or eliminate these benefits. All U.S. salaried and certain hourly
employees hired after January 1, 2002 will not have postretirement health care
benefits.

                                                                              57

The table below reflects the status of Alcoa's pension and postretirement
benefit plans.

                                                                          Pension benefits              Postretirement benefits
                                                                     ---------------------------     -------------------------------
December 31                                                             2001            2000             2001             2000
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                          
Change in benefit obligation
   Benefit obligation at beginning of year                           $    8,270      $    5,366       $      2,924     $   1,687
   Service cost                                                             162             162                 25            25
   Interest cost                                                            578             502                220           177
   Amendments                                                               136               9                 76           (17)
   Actuarial losses (gains)                                                 634            (309)               369            85
   Acquisitions (principally Reynolds and  Cordant)                          --           3,124                 --         1,182
   Divestitures (principally Thiokol)                                      (664)             --               (159)           --
   Benefits paid                                                           (585)           (514)              (278)         (215)
   Exchange rate                                                            (43)            (70)                --            --
- ------------------------------------------------------------------------------------------------------------------------------------
   Benefit obligation at end of year                                 $    8,488      $    8,270       $      3,177     $   2,924
- ------------------------------------------------------------------------------------------------------------------------------------

Change in plan assets
   Fair value of plan assets at beginning of year                    $    9,790      $    6,103       $        155     $     112
   Actual return on plan assets                                              65             586                  1            12
   Acquisitions (principally Reynolds and Cordant)                           --           3,597                 --            31
   Employer contributions                                                    37              61                 --             5
   Participants' contributions                                               11              13                 --            --
   Divestitures (principally Thiokol)                                      (783)             --                (33)           --
   Transfer to defined contribution pension plan                            (49)             --                 --            --
   Benefits paid                                                           (574)           (487)                --            (5)
   Administrative expenses                                                  (17)            (12)                --            --
   Exchange rate                                                            (46)            (71)                --            --
- ------------------------------------------------------------------------------------------------------------------------------------
   Fair value of plan assets at end of year                          $    8,434      $    9,790       $        123     $     155
- ------------------------------------------------------------------------------------------------------------------------------------

Funded status                                                        $      (54)     $    1,520       $     (3,054)    $  (2,769)
   Unrecognized net actuarial (gain) loss                                    (8)         (1,385)               221          (137)
   Unrecognized net prior service cost (credit)                             138              40                 11           (97)
- ------------------------------------------------------------------------------------------------------------------------------------
   Net amount recognized                                             $       76      $      175       $     (2,822)    $  (3,003)
- ------------------------------------------------------------------------------------------------------------------------------------

Amount recognized in the balance sheet consists of:
   Prepaid benefit                                                   $      502      $      661       $         --     $      --
   Accrued benefit liability                                               (568)           (509)            (2,822)       (3,003)
   Intangible asset                                                          50               9                 --            --
   Accumulated other comprehensive loss                                      92              14                 --            --
- ------------------------------------------------------------------------------------------------------------------------------------
   Net amount recognized                                             $       76      $      175       $     (2,822)    $  (3,003)
- ------------------------------------------------------------------------------------------------------------------------------------

The components of net periodic benefit costs are reflected below.

                                                     Pension benefits                              Postretirement benefits
                                             ------------------------------------      ---------------------------------------------
December 31                                      2001        2000        1999               2001           2000          1999
- ------------------------------------------------------------------------------------------------------------------------------------
                                                                                                    
Components of net periodic
benefit (income) costs
   Service cost                              $     162    $    162    $    141           $      25      $       25     $     19
   Interest cost                                   578         502         342                 220             177          109
   Expected return on plan assets                 (781)       (666)       (427)                (11)            (11)          (9)
   Amortization of prior service
     cost (benefit)                                 34          35          39                 (33)            (34)         (34)
   Recognized actuarial gain                       (26)        (18)         (4)                 (2)             (2)          (4)
   Amortization of transition obligation            --           2           2                  --              --           --
- ------------------------------------------------------------------------------------------------------------------------------------
   Net periodic benefit (income) costs       $     (33)    $    17    $     93           $     199      $      155     $     81
- ------------------------------------------------------------------------------------------------------------------------------------

The aggregate benefit obligation and fair value of plan assets for the pension
plans with benefit obligations in excess of plan assets were $1,921 and $1,362,
respectively, as of December 31, 2001, and $804 and $508, respectively, as of
December 31, 2000. The aggregate pension accumulated benefit obligation and fair
value of plan assets with accumulated benefit obligations in excess of plan
assets were $1,708 and $1,284, respectively, as of December 31, 2001, and $594
and $338, respectively, at December 31, 2000.

  Weighted average assumptions used in the accounting for Alcoa's plans follow.

December 31                         2001          2000        1999
- --------------------------------------------------------------------------------
Discount rate                       7.25%         7.75%       7.00%
Expected long-term return on
   plan assets                      9.50          9.00        9.00
Rate of compensation increase       5.00          5.00        5.00
- --------------------------------------------------------------------------------

58

For measurement purposes, a 9.5% annual rate of increase in the per capita cost
of covered health care benefits was assumed for 2002. The rate was assumed to
decrease gradually to 5% in 2006 and remain at that level thereafter.

   Assumed health care cost trend rates have a significant effect on the amounts
reported for the health care plan. A one-percentage-point change in these
assumed rates would have the following effects:

                                                                   1%       1%
                                                             increase decrease
- ------------------------------------------------------------------------------
Effect on total of service and interest cost
  components                                                    $ 16    $ (14)
Effect on postretirement benefit obligations                     196     (172)
- ------------------------------------------------------------------------------

Alcoa also sponsors a number of defined contribution pension plans. Expenses
were $103 in 2001, $80 in 2000 and $64 in 1999.

Q. Lease Expense
- ----------------

Certain equipment, warehousing and office space and oceangoing vessels are under
operating lease agreements. Total expense for all leases was $199 in 2001, $152
in 2000 and $145 in 1999. Under long-term operating leases, minimum annual
rentals are $128 in 2002, $98 in 2003, $77 in 2004, $64 in 2005, $60 in 2006 and
a total of $223 for 2007 and thereafter.

R. Interest Cost Components
- ---------------------------

                                 2001        2000    1999
- -----------------------------------------------------------
Amount charged to expense       $ 371       $ 427    $ 195
Amount capitalized                 22          20       21
- -----------------------------------------------------------
                                $ 393       $ 447    $ 216
- -----------------------------------------------------------

S. Other Financial Instruments and Derivatives
- ----------------------------------------------

Other Financial Instruments. The carrying values and fair values of Alcoa's
financial instruments at December 31 follow.

                                     2001                       2000
                              -------------------      --------------------
                                Carrying    Fair        Carrying      Fair
                                   value    value          value     value
- ---------------------------------------------------------------------------
Cash and cash equivalents        $   512  $   512        $   315   $   315
Short-term investments                15       15             56        56
Noncurrent receivables                44       44            118       118
Short-term debt                      245      245          3,146     3,146
Long-term debt                     6,388    6,535          4,987     5,053
- ---------------------------------------------------------------------------

The methods used to estimate the fair values of certain financial instruments
follow.

Cash and Cash Equivalents, Short-term Investments and Short-Term Debt. The
carrying amounts approximate fair value because of the short maturity of the
instruments.

Noncurrent Receivables. The fair value of noncurrent receivables is based on
anticipated cash flows and approximates carrying value.

Long-term Debt. The fair value is based on interest rates that are currently
available to Alcoa for issuance of debt with similar terms and remaining
maturities.

Derivatives. Alcoa holds or purchases derivative financial instruments for
purposes other than trading. Details of the fair values of the significant
instruments follow.

                          2001            2000
- ------------------------------------------------
Aluminum                 $ (65)           $ 29
Interest rates              34              (1)
Foreign currency          (132)           (166)
Other commodities          (30)             74
- ------------------------------------------------

Fair Value Hedges

Aluminum. Customers often require Alcoa to enter into long-term fixed-price
commitments. These commitments expose Alcoa to the risk of fluctuating aluminum
prices between the time the order is committed and the time that the order is
shipped. Alcoa's commodity risk management policy is to hedge, through the use
of futures and option contracts, the aluminum price risk for a portion of its
firm commitments. These contracts cover known exposures, generally within three
years.

Interest Rates. Alcoa attempts to maintain a reasonable balance between fixed-
and floating-rate debt and uses interest rate swaps to help manage this balance.
The company has entered into pay floating, receive fixed interest rate swaps to
effectively convert the interest rate from fixed to floating on $2,250 of debt,
through 2011.

Hedges of these existing assets, liabilities and firm commitments qualify as
"fair value" hedges. As a result, the fair values of derivatives and changes in
the fair values of the underlying hedged items are reported in the balance
sheet. Changes in the fair values of these derivatives and underlying hedged
items generally offset and are recorded each period in sales, cost of goods sold
or interest expense, consistent with the underlying hedged item. There were no
transactions that ceased to qualify as a fair value hedge in 2001.

Cash Flow Hedges

Currencies. Alcoa is subject to exposure from fluctuations in foreign
currencies. Foreign currency exchange contracts are used to hedge the
variability in cash flows from the forecasted payment or receipt of currencies
other than the functional currency. Alcoa's foreign currency contracts were
principally used to purchase Australian dollars and Canadian dollars. The U.S.
dollar notional amount of all foreign currency contracts was $1,409 and $2,342
as of December 31, 2001 and 2000, respectively.

Commodities. Alcoa may elect to sell forward a portion of its anticipated
primary aluminum and alumina production. In addition, Alcoa anticipates the
continued requirement to purchase aluminum and other commodities such as natural
gas, fuel oil and electricity for its operations. Alcoa enters into futures and
options contracts to reduce volatility in the price of these commodities.

Interest Rates. From time to time, Alcoa enters into pay floating, receive fixed
interest rate swaps to hedge the interest rate risk exposure of forecasted
interest payments on a portion of its outstanding variable rate debt. As of
December 31, 2001, there were no outstanding contracts of this nature.

For these cash flow hedge transactions, the fair values of the derivatives are
recorded on the balance sheet. The effective portions of the changes in the fair
values of these derivatives are recorded in other comprehensive income and are
reclassified to sales, cost of

                                                                              59

goods sold or interest expense in the period in which earnings are impacted by
the hedged items or in the period that the transaction no longer qualifies as a
cash flow hedge. There were no material transactions that ceased to qualify as a
cash flow hedge in 2001. These contracts cover periods commensurate with known
or expected exposures, generally within three years. Assuming market rates
remain constant with the rates at December 31, 2001, $71 of the $104 loss
included in other comprehensive income is expected to be recognized in earnings
over the next 12 months.

Other

Alcoa also enters into foreign currency contracts that do not qualify as a fair
value, cash flow or net investment hedge. These contracts hedge the variability
in cash flows from the payment or receipt of currencies other than the
functional currency for certain foreign currency denominated assets and
liabilities or for certain forecasted transactions that do not qualify as hedged
items. These contracts were not material at December 31, 2001 or 2000.

Alcoa is exposed to credit loss in the event of nonperformance by counterparties
on the above instruments, as well as credit or performance risk with respect to
its hedged customers' commitments. Although nonperformance is possible, Alcoa
does not anticipate nonperformance by any of these parties. Futures and options
contracts are with creditworthy counterparties and are further supported by
cash, treasury bills or irrevocable letters of credit issued by carefully chosen
banks. In addition, various master netting arrangements are in place with
counterparties to facilitate settlement of gains and losses on these contracts.

     For further information on Alcoa's hedging and derivatives activities, see
Note A.

T. Environmental Matters
- ------------------------

Alcoa participates in environmental assessments and cleanups at a number of
locations. These include approximately 31 owned or operating facilities and
adjoining properties, approximately 28 previously owned or operated facilities
and adjoining properties and approximately 91 Superfund and other waste sites. A
liability is recorded for environmental remediation costs or damages when a
cleanup program becomes probable and the costs or damages can be reasonably
estimated. See Note A for additional information.

     As assessments and cleanups proceed, the liability is adjusted based on
progress in determining the extent of remedial actions and related costs and
damages. The liability can change substantially due to factors such as the
nature and extent of contamination, changes in remedial requirements and
technological changes. Therefore, it is not possible to determine the outcomes
or to estimate with any degree of accuracy the potential costs for certain of
these matters. For example, there are issues related to the Massena, New York
and Point Comfort, Texas sites where investigations are ongoing and where
natural resource damage or off-site contaminated sediments have been alleged.
The following discussion provides additional details regarding the current
status of certain sites.

     Massena. Since 1989, Alcoa has been conducting investigations and studies
of the Grasse River, adjacent to Alcoa's Massena, New York plant site, under
order from the U.S. Environmental Protection Agency (EPA) issued under the
Comprehensive Environmental Response, Compensation and Liability Act, also known
as Superfund. Sediments and fish in the river contain varying levels of
polychlorinated biphenyl (PCB).

     In the fourth quarter of 1999, Alcoa submitted an Analysis of Alternatives
Report to the EPA. This report identified potential courses of remedial action
related to the PCB contamination of the river. The EPA indicated to Alcoa that
it believed additional remedial alternatives needed to be included in the
Analysis of Alternatives Report. During 2000 and 2001, Alcoa completed certain
studies and investigations on the river, including pilot tests of sediment-
capping techniques and other remediation technologies. In February 2002, Alcoa
submitted a revised draft Analysis of Alternatives Report based on these
additional evaluations and included additional remedial alternatives required by
the EPA. The additional alternatives required by the EPA involve removal of more
sediment than was included in the 1999 Analysis of Alternatives Report. The
range of costs associated with the remedial alternatives evaluated in the 2002
report is between $2 and $525. Alcoa believes that several of those
alternatives, involving the largest amounts of sediment removal, should not be
selected for the Grasse River remedy. Alcoa believes the alternatives that
should be selected are those ranging from monitored natural recovery ($2) to a
combination of moderate dredging and capping ($90). A reserve of $2 has been
recorded for any probable losses, as no one of the alternatives is more likely
to be selected than any other.

     Portions of the St. Lawrence River system adjacent to the former Reynolds
plant were also contaminated with PCB, and during 2001, Alcoa substantially
completed a dredging remedy for the St. Lawrence River. Further analysis of the
condition of the sediments is being performed. Any required additional dredging
or capping of residual contamination is likely to be completed during the 2003
construction season. The most probable cost of any such additional remediation
is fully reserved.

     Alcoa is aware of natural resource damage claims that may be asserted by
certain federal, state and tribal natural resource trustees at these locations.

     Point Comfort/Lavaca Bay. Since 1990, Alcoa has undertaken investigations
and evaluations concerning alleged releases of mercury from its Point Comfort,
Texas facility into the adjacent Lavaca Bay pursuant to a Superfund order from
the EPA. In March 1994, the EPA listed the "Alcoa (Point Comfort)/Lavaca Bay
Site" on the National Priorities List. In December 2001, the EPA issued its
Record of Decision (ROD) for the site. That ROD selected the final remedial
approach for the site, which is fully reserved. The company is negotiating a
Consent Order with the EPA under which it will undertake to implement the
remedy. The company and certain federal and state natural resource trustees, who
previously served Alcoa with notice of their intent to file suit to recover
damages for alleged loss or injury of natural resources in Lavaca Bay, have
cooperatively identified restoration alternatives and approaches for Lavaca Bay.
The cost of such restoration is reserved and Alcoa anticipates negotiating a
Consent Decree with the trustees under which it will implement the restoration.

60

     Troutdale. In 1994, the EPA added Reynolds' Troutdale, Oregon primary
aluminum production plant to the National Priorities List of Superfund sites.
Alcoa is cooperating with the EPA and, under a September 1995 Consent Order, is
working with the EPA to identify cleanup solutions for the site. Following
curtailment of active production operations and based on further evaluation of
remedial options, the company has determined the most probable cost of cleanup.
This amount has been fully reserved. The company anticipates a final ROD to be
issued by the EPA in 2002.

     Sherwin. In connection with the sale of the Sherwin alumina refinery in
Texas, which was required to be divested as part of the Reynolds merger in 2000
(see Note C), Alcoa has agreed to retain responsibility for the remediation of
certain properties, including former waste disposal areas, and a share of the
ultimate closure costs of other active waste disposal areas. The most probable
cost of such remediation has been evaluated and is fully reserved.

     Based on the above, it is possible that Alcoa's results of operations, in a
particular period, could be materially affected by matters relating to these
sites. However, based on facts currently available, management believes that
adequate reserves have been provided and that the disposition of these matters
will not have a materially adverse effect on the financial position or liquidity
of the company.

     Alcoa's remediation reserve balance at the end of 2001 and 2000 was $431
and $447 (of which $74 and $78 were classified as a current liability),
respectively, and reflects the most probable costs to remediate identified
environmental conditions for which costs can be reasonably estimated. Of the
2001 reserve balance, approximately 8% relates to the Massena, New York plant
sites, 6% relates to the Troutdale, Oregon plant site, and 23% relates to the
Sherwin, Texas site. Remediation costs charged to the reserve were $72 in 2001,
$77 in 2000 and $47 in 1999. They include expenditures currently mandated, as
well as those not required by any regulatory authority or third party. In 2001,
the reserve balance was increased by $56 primarily as a result of acquisitions
and the shutdown of the company's magnesium plant in Addy, Washington. In 2000,
the reserve balance was increased by $350 as a result of acquisitions.

     Included in annual operating expenses are the recurring costs of managing
hazardous substances and environmental programs. These costs are estimated to be
about 2% of cost of goods sold.

Supplemental Financial Information

Quarterly Data (unaudited)
(dollars in millions, except per-share amounts)

2001                        First   Second    Third    Fourth     Year
- -----------------------------------------------------------------------
Sales                   $  6,176    $5,991   $5,511   $5,181   $22,859
Income (loss) from
   operations                500       339      391     (114)    1,116
Net income (loss)*           404       307      339     (142)+     908
Earnings per share:
   Basic                    0.47      0.36     0.40    (0.17)     1.06
   Diluted                  0.46      0.35     0.39    (0.17)     1.05
- -----------------------------------------------------------------------

* After special charges of $114, or 13 cents per share, in the second quarter
  and $241, or 28 cents per share, in the fourth quarter (See Note B) +The 2001
  fourth quarter includes an after-tax credit of $22, or three cents per share,
  related to changes in the LIFO index.

2000                        First   Second    Third    Fourth     Year
- -----------------------------------------------------------------------
Sales                   $  4,509    $5,569   $6,298   $6,560   $22,936
Income from
   operations                457       462      459      492     1,870
Net income                   347       377      368      392*    1,484
Earnings per share:
   Basic                     .47       .47      .42      .45      1.82
   Diluted                   .47       .47      .42      .45      1.80
- -----------------------------------------------------------------------

* The 2000 fourth quarter includes an after-tax credit of $18, or two cents per
  share, related to changes in the LIFO index and LIFO liquidations.

Number of Employees (unaudited)
                                              2001       2000      1999
- -----------------------------------------------------------------------
Other Americas                              38,700     46,500    45,100
U.S.                                        56,500     61,600    38,400
Europe                                      27,700     27,400    18,800
Pacific                                      6,100      6,500     5,400
- -----------------------------------------------------------------------
                                           129,000    142,000   107,700
- -----------------------------------------------------------------------

                                                                              61

Shareholder Information

Annual Meeting

The annual meeting of shareholders will be at 9:30 a.m. Friday, April 19, 2002
at the Westin Convention Center Pittsburgh.

Company News

Visit www.alcoa.com for current stock quotes, Securities and Exchange Commission
(SEC) filings, quarterly earnings reports and other company news. This
information is also available toll-free 24 hours a day by calling 1 800 522 6757
(in the U.S. and Canada) or 1 402 572 4993 (all other calls). Reports may be
requested by voice, fax or mail.

     Copies of the annual report, Forms 10-K and 10-Q may be requested through
the Internet, by calling the toll-free numbers, or by writing to Corporate
Communications at the corporate center address.

Investor Information

Security analysts and investors may write to Director - Investor Relations at
390 Park Avenue, New York, NY 10022-4608, call 1 212 836 2674, or E-mail
investor.relations@alcoa.com.

Other Publications

For a report of contributions and programs supported by Alcoa Foundation, write
Alcoa Foundation at the corporate center address, visit www.alcoa.com or call 1
412 553 2348.

     For a report on Alcoa's environmental, health and safety performance, write
Alcoa EHS Department at the corporate center address or visit www.alcoa.com.

Dividends

Alcoa's objective is to pay common stock dividends at rates competitive with
other investments of equal risk and consistent with the need to reinvest
earnings for long-term growth. In January 2002, the Board of Directors approved
a 20% increase in the quarterly common stock dividend from 12.5 cents per share
to 15 cents per share. The Board also approved eliminating the variable dividend
that was equal to 30% of Alcoa's annual earnings over $1.50 per basic share.
Basic earnings per share for 2001 did not meet the $1.50 threshold. Quarterly
dividends are paid to shareholders of record at each quarterly distribution
date.

Dividend Reinvestment

The company offers a Dividend Reinvestment and Stock Purchase Plan for
shareholders of Alcoa common and preferred stock. The plan allows shareholders
to reinvest all or part of their quarterly dividends in shares of Alcoa common
stock. Shareholders also may purchase additional shares under the plan with cash
contributions. The company pays brokerage commissions and fees on these stock
purchases.

Direct Deposit of Dividends

Shareholders may have their quarterly dividends deposited directly to their
checking, savings or money market accounts at any financial institution that
participates in the Automated Clearing House (ACH) system.

Shareholder Services

Shareholders with questions on account balances; dividend checks, reinvestment
or direct deposit; address changes; lost or misplaced stock certificates; or
other shareholder account matters may contact Alcoa's stock transfer agent,
registrar and dividend disbursing agent:

Equiserve Trust Company, N.A.       Telephone Response Center:
P.O. Box 2500                       1 800 317 4445
Jersey City, NJ 07303-2500          Outside U.S. and Canada:
                                    1 201 324 0313

Internet address: www.equiserve.com
Telecommunications Device for the Deaf (TDD): 1 201 222 4955

For shareholder questions on other matters related to Alcoa, write to Donna
Dabney, Office of the Secretary, at the corporate center headquarters address or
call 1 412 553 4707.

Stock Listing

Common: New York Stock Exchange, The Electronical Stock Exchange in Switzerland,
the Australian Stock Exchange and exchanges in Brussels, Frankfurt and London
Preferred: American Stock Exchange
Ticker symbol: AA

Quarterly Common Stock Information

                        2001                            2000
             ---------------------------   ----------------------------
Quarter         High      Low   Dividend      High       Low   Dividend
- -----------------------------------------------------------------------
First        $ 39.58   $ 30.63    $ .150    $ 43.63   $ 30.41    $ .125
Second         45.71     33.75      .150      37.06     27.88      .125
Third          42.00     27.36      .150      34.94     23.25      .125
Fourth         40.50     29.82      .150      35.00     23.13      .125
- -----------------------------------------------------------------------
Year         $ 45.71   $ 27.36    $ .600    $ 43.63   $ 23.13    $ .500
- -----------------------------------------------------------------------

Common Share Data

                        Estimated number            Average shares
                        of shareholders*          outstanding (000)
- -------------------------------------------------------------------
2001                           266,800                    857,990
2000                           265,300                    814,229
1999                           185,000                    733,888
1998                           119,000                    698,228
1997                            95,800                    688,904
- -------------------------------------------------------------------

* These estimates include shareholders who own stock
registered in their own names and those who own stock
through banks and brokers.

Corporate Center

Alcoa                                    Alcoa Inc. is incorporated
201 Isabella St. at 7th St. Bridge       in the Commonwealth
Pittsburgh, PA 15212-5858                of Pennsylvania.
Telephone: 1 412 553 4545
Fax: 1 412 553 4498
Internet: www.alcoa.com

66

                                                                      Exhibit 21

              SUBSIDIARIES AND EQUITY ENTITIES OF THE REGISTRANT
                           (As of December 31, 2001)
                  (Reported Under Item 601 of Regulation S-K)

                                                                          State or
                                                                          Country of
Name                                                                      Organization
- ----                                                                      ------------
                                                                       
Alcoa Brazil Holdings Company                                             Delaware

    Alcoa Aluminio S.A.                                                   Brazil
    Abalco S.A.                                                           Brazil

Alcoa Building Products, Inc.**                                           Ohio

Alcoa Closure Systems International, Inc.                                 Delaware

Alcoa International Holdings Company                                      Delaware

     AIHC Export, Ltd.                                                    Barbados
     Alcoa Europe Holding B.V.                                            Netherlands
         Alcoa Automotive GmbH                                            Germany
         Alcoa Chemie Nederland B.V.                                      Netherlands
         Alcoa Europe S.A.                                                Switzerland
         Alcoa Inespal, S.A.                                              Spain
           Alumina Espanola, S.A.                                         Spain
           Aluminio Espanol, S.A.                                         Spain
         Alcoa Italia S.p.A.                                              Italy
         Alcoa Transformacion, S.A.                                       Spain
         Norsk Alcoa A/S                                                  Norway
           Alcoa Automotive Castings Scandinavian Casting Center ANS      Norway
     Alcoa Inter-America, Inc.                                            Delaware
     Alcoa-Kofem Kft                                                      Hungary
     Alcoa of Australia Limited                                           Australia
     Alcoa UK Holdings Limited                                            United Kingdom
         Alcoa Manufacturing (G.B.) Limited                               United Kingdom
              Baco Consumer Products Limited                              United Kingdom
              UK Aluminium Holdings Limited                               United Kingdom
                  British Aluminium Limited                               United Kingdom

Alcoa Latin American Holdings Corporation                                 British Virgin Islands

Alcoa Laudel, Inc.                                                        Delaware

Alcoa Power Generating Inc.***                                            Tennessee

                                                                    State or
                                                                    Country of
Name                                                                Organization
- ----                                                                ------------

Alcoa Securities Corporation                                        Delaware

    Alcoa Remediation Management, Inc.                              Delaware
    Alcoa CSI de Mexico en Saltillo, S.A. de C.V.                   Mexico
    Alcoa Fujikura Ltd.                                             Delaware
        Stribel GmbH                                                Germany
        Six "R" Communications, L.L.C.                              Delaware
        Tele-Tech Company, Inc.                                     Kentucky
    Pimalco, Inc.                                                   Arizona
    Tifton Aluminum Company, Inc.                                   Delaware

Alcoa (Shanghai) Aluminum Products Company Limited                  China

Alcoa World Alumina LLC*                                            Delaware

    AAC Holdings Company                                            Delaware
        Alcoa Steamship Company, Inc.                               New York
    Alcoa Minerals of Jamaica, L.L.C.                               Delaware
    Halco (Mining) Inc.                                             Delaware
        Compagnie des Bauxites de Guinee                            Delaware
    St. Croix Alumina, L.L.C.                                       Delaware
    Suriname Aluminum Company, L.L.C.                               Delaware

Alumax Inc.                                                         Delaware

    Alcoa Extrusions, Inc.                                          Pennsylvania
    Alumax Foils, Inc.                                              Delaware
    Alumax Mill Products, Inc.                                      Delaware
    Aluminerie Lauralco, Inc.                                       Delaware
    Eastalco Aluminum Company                                       Delaware
    Intalco Aluminum Corporation                                    Delaware
    Kawneer Company, Inc.                                           Delaware

Howmet International Inc.                                           Delaware

Cordant Technologies Holding Company                                Delaware

    Huck International Inc.                                         Delaware

Gulf Closures W.L.L.                                                Bahrain

                                                                    State or
                                                                    Country of
Name                                                                Organization
- ----                                                                ------------

Reynolds Metals Company                                             Delaware

    Reynolds International, Inc.                                    Delaware
        RMCC Company                                                Delaware
           Alcoa Canada Ltd.****                                    Quebec
              Alcoa Ltd.*****                                       Quebec
        Reynolds International do Brasil Participacoes, Ltda.       Brazil
        Alcoa Architectural Products SAS                            France
    Reynolds Aluminium Deutschland, Inc.                            Delaware
    Reynolds Becancour, Inc.                                        Delaware
        RB Sales Company, Limited                                   Delaware
    Reynolds Consumer Products, Inc.                                Delaware
    RMC Delaware, Inc.                                              Delaware
        Southern Graphic Systems, Inc.                              Kentucky
        RMC Properties, Ltd.                                        Delaware
        Saint George Insurance Company                              Vermont

Shibazaki Seisakusho Limited                                        Japan

*      Registered to do business in Alabama, Arkansas, California, Florida,
       Georgia, Louisiana, North Carolina, Pennsylvania and Texas under the name
       of Alcoa World Chemicals.

**     Registered to do business in Ohio under the name of Mastic.

***    Registered to do business in Tennessee under the names Tapoco and APG
       Trading, in Indiana under the name of AGC, in North Carolina under the
       names of Yadkin and Tapoco, in New York under the name of Long Sault and
       in Washington under the name of Colockum.

****   Effective January 1, 2002, the name of the company was changed from
       Reynolds Aluminum Company of Canada, Ltd. to Alcoa Canada Ltd.

*****  Effective January 1, 2002, the name of the company was changed from
       Canadian Reynolds Metals Company, Ltd. to Alcoa Ltd.

The names of a number of subsidiaries and equity entities have been omitted
because considered in the aggregate they would not constitute a significant
subsidiary.

                                                                      Exhibit 23

                      CONSENT OF INDEPENDENT ACCOUNTANTS

    We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (Registration No. 333-74874) and Form S-8 (Registration
Nos. 33-22346, 33-24846, 33-49109, 33-60305, 333-27903, 333-62663, 333-79575,
333-91331, 333-32516, 333-36208, 333-36214, 333-37740, 333-39708 and 333-47116)
of Alcoa Inc., of our report dated January 9, 2002 relating to the financial
statements, which appears in the Annual Report to Shareholders, which is
incorporated in this Annual Report on Form 10-K. We also consent to the
incorporation by reference of our report dated January 9, 2002 relating to the
financial statement schedule which appears in this Form 10-K.

                                                   /s/PricewaterhouseCoopers LLP
                                                   PricewaterhouseCoopers LLP

600 Grant Street
Pittsburgh, Pennsylvania
March 4, 2002

                               POWER OF ATTORNEY

     KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned Directors of Alcoa
Inc. (the "Company") hereby constitute and appoint RICHARD B. KELSON, WILLIAM B.
PLUMMER, TIMOTHY S. MOCK and DONNA C. DABNEY, or any of them, their true and
lawful attorneys-in-fact and agents to do any and all acts and things and to
execute any and all instruments which said attorneys-in-fact and agents, or any
of them, may deem necessary or advisable or may be required:

          (1)  To enable the Company to comply with the Securities Exchange Act
     of 1934, as amended ("the "1934 Act"), and any rules, regulations or
     requirements of the Securities and Exchange Commission (the "Commission")
     in respect thereof, in connection with the filing under the 1934 Act of the
     Company's Annual Report on Form 10-K for the year ended December 31, 2001
     (the "2001 Annual Report"), including specifically, but without limiting
     the generality of the foregoing, power and authority to sign the name of
     each of the undersigned in the capacity of Director of the Company to the
     2001 Annual Report to be filed with the Commission and to any instruments
     or documents filed as part of or in connection with the 2001 Annual Report,
     including any amendments or supplements thereto; and

          (2)  To enable the Company to comply with the Securities Act of 1933,
     as amended (the "1933 Act"), and any rules, regulations or requirements of
     the Commission in respect thereof, in connection with the registration
     under the 1933 Act of the offer and sale or delivery of shares of common
     stock of the Company to be issued under the Alcoa Stock Incentive Plan or
     any successor plan, including specifically, but without limiting the
     generality of the foregoing, power and authority to sign the name of each
     of the undersigned in the capacity of Director of the Company to any
     registration statement on Form S-8, or on such other form as may be
     appropriate, to be filed with the Commission in respect of said shares and
     said Plan or successor plan, or either of them, to any and all pre-
     effective amendments, post-effective amendments and supplements to any such
     registration statements, and to any instruments or documents filed as part
     of or in connection with any such registration statement or any such
     amendments or supplements thereto;

granting unto each of said attorneys-in-fact and agents full power and authority
to do and perform each and every act and thing requisite and necessary to be
done, as fully to all intents and purposes as the undersigned might or could do
in person, and the undersigned hereby ratify and confirm all that said
attorneys-in-fact and agents, or any of them, shall do or cause to be done by
virtue hereof.

     IN WITNESS WHEREOF, the undersigned have subscribed these presents on the
date set opposite their names below.

/s/ Kathryn S. Fuller                     January 11, 2002
- -------------------------
Kathryn S. Fuller

/s/ Joseph T. Gorman                       January 11, 2002
- -------------------------
Joseph T. Gorman

/s/ Judith M. Gueron                       January 11, 2002
- -------------------------
Judith M. Gueron

/s/ Sir Ronald Hampel                  January 11, 2002
- --------------------------
Sir Ronald Hampel

/s/ John P. Mulroney                   January 11, 2002
- --------------------------
John P. Mulroney

/s/ Henry B. Schacht                   January 11, 2002
- -------------------------
Henry B. Schacht

/s/ Franklin A. Thomas                 January 11, 2002
- -------------------------
Franklin A. Thomas

/s/ Marina v.N. Whitman                January 11, 2002
- -------------------------
Marina v.N. Whitman