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                                    FORM 10-K
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 For the fiscal year ended December 31, 2003 Commission file number 1-3605

                     KAISER ALUMINUM & CHEMICAL CORPORATION
             (Exact name of registrant as specified in its charter)

                                    DELAWARE
                            (State of Incorporation)

                                   94-0928288
                      (I.R.S. Employer Identification No.)
         5847 SAN FELIPE, SUITE 2500,            HOUSTON, TEXAS 77057-3268
    (Address of principal executive offices)           (Zip Code)

       Registrant's telephone number, including area code: (713) 267-3777

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

                                                   Name of each exchange
       Title of each class                          on which registered
       Cumulative Convertible Preference Stock
       (par value $100)
       4 1/8% Series                                       None
       4 3/4% (1957 Series)                                None
       4 3/4% (1959 Series)                                None
       4 3/4% (1966 Series)                                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. /X/

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2).  Yes / /     No  /X/

As of February 29, 2004, there were 46,171,365 shares of the common stock of the
registrant outstanding, all of which were owned by Kaiser Aluminum Corporation,
the parent corporation of the registrant.



                       Documents Incorporated By Reference
                                      None

--------------------------------------------------------------------------------

                                      NOTE


Kaiser Aluminum & Chemical Corporation's Report on Form 10-K filed with the
Securities and Exchange Commission includes all exhibits required to be filed
with the Report. Copies of this Report on Form 10-K, including only Exhibit 21
of the exhibits listed on pages 109 - 114 of this Report, are available without
charge upon written request. The registrant will furnish copies of the other
exhibits to this Report on Form 10-K upon payment of a fee of 25 cents per page.
Please contact the office set forth below to request copies of this Report on
Form 10-K and for information as to the number of pages contained in each of the
exhibits and to request copies of such exhibits:



                                         Corporate Secretary
                                         Kaiser Aluminum & Chemical Corporation
                                         5847 San Felipe, Suite 2500
                                         Houston, Texas 77057-3268
                                         (713) 267-3777


                                TABLE OF CONTENTS
                                                                                           Page

PART I.................................................................................       1

     ITEM 1.      BUSINESS.............................................................       1

     ITEM 2.      PROPERTIES...........................................................      16

     ITEM 3.      LEGAL PROCEEDINGS....................................................      16

     ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................      18

PART II................................................................................      18

     ITEM 5.      MARKET FOR REGISTRANT'S COMMON EQUITY AND
                    RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF
                    EQUITY SECURITIES..................................................      18

     ITEM 6.      SELECTED FINANCIAL DATA..............................................      18

     ITEM 7.      MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
                    CONDITION AND RESULTS OF OPERATIONS................................      18

     ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...........      35

     ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA..........................      37

     ITEM 9.      CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                    ACCOUNTING AND FINANCIAL DISCLOSURE................................      90

     ITEM 9A.     CONTROLS AND PROCEDURES..............................................      90

PART III...............................................................................      90

     ITEM 10.     DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...................      90

     ITEM 11.     EXECUTIVE COMPENSATION...............................................      94

     ITEM 12.     SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                    AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.....................     102

     ITEM 13.     CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................     104

     ITEM 14.     PRINCIPAL ACCOUNTANT FEES AND SERVICES...............................     105

PART IV................................................................................     106

     ITEM 15.     EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
                    REPORTS ON FORM 8-K................................................     106

SIGNATURES        .....................................................................     108

INDEX OF EXHIBITS......................................................................     109

EXHIBIT 21        SUBSIDIARIES.........................................................     115


PART I

ITEM 1.       BUSINESS

This Annual Report on Form 10-K (the "Report") contains statements which
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. These statements appear in a number of
places in this Report (including, but not limited to, Item 1. "Business -
Business Operations," " - Competition," " - Environmental Matters," and " -
Factors Affecting Future Performance," Item 3. "Legal Proceedings," and Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations"). Such statements can be identified by the use of forward-looking
terminology such as "believes," "expects," "may," "estimates," "will," "should,"
"plans" or "anticipates" or the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy. Readers are cautioned
that any such forward-looking statements are not guarantees of future
performance and involve significant risks and uncertainties, and that actual
results may vary materially from those in the forward-looking statements as a
result of various factors. These factors include the effectiveness of
management's strategies and decisions, general economic and business conditions,
developments in technology, new or modified statutory or regulatory
requirements, and changing prices and market conditions. Certain sections of
this Report identify other factors that could cause differences between such
forward-looking statements and actual results (for example, see Item 1.
"Business - Factors Affecting Future Performance"). No assurance can be given
that these are all of the factors that could cause actual results to vary
materially from the forward-looking statements.

GENERAL

Kaiser Aluminum & Chemical Corporation (the "Company"), a Delaware corporation
organized in 1940, is a direct subsidiary of Kaiser Aluminum Corporation
("Kaiser" or "KAC") and an indirect subsidiary of MAXXAM Inc. ("MAXXAM"). Kaiser
owns all of the Company's Common Stock and MAXXAM and one of its wholly owned
subsidiaries together own approximately 62% of Kaiser's Common Stock, with the
remaining approximately 38% publicly held. The Company has historically operated
in all principal aspects of the aluminum industry - the mining of bauxite, the
refining of bauxite into alumina, the production of primary aluminum from
alumina, and the manufacture of fabricated (including semi-fabricated) aluminum
products. However, as discussed below, the Company expects it will emerge from
the Chapter 11 proceedings primarily as a fabricated products company.

REORGANIZATION PROCEEDINGS

The Company, Kaiser and 24 of the Company's subsidiaries have filed separate
voluntary petitions in the United States Bankruptcy Court for the District of
Delaware (the "Court") for reorganization under Chapter 11 of the United States
Bankruptcy Code (the "Code"); the Company, Kaiser and 15 of the Company's
subsidiaries (the "Original Debtors") filed in the first quarter of 2002 and
nine additional Company subsidiaries (the "Additional Debtors") filed in the
first quarter of 2003. The Original Debtors and Additional Debtors are
collectively referred to herein as the "Debtors" and the Chapter 11 proceedings
of these entities are collectively referred to herein as the "Cases." For
purposes of this Report, the term "Filing Date" means, with respect to any
particular Debtor, the date on which such Debtor filed its Case. None of the
Company's non-U.S. joint ventures are included in the Cases. The Cases are being
jointly administered. The Debtors are managing their businesses in the ordinary
course as debtors-in-possession subject to the control and administration of the
Court.

Original Debtors. During the first quarter of 2002, the Original Debtors filed
separate voluntary petitions for reorganization. The wholly owned subsidiaries
of the Company included in such filings were: Kaiser Bellwood Corporation
("Bellwood"), Kaiser Aluminium International, Inc. ("KAII"), Kaiser Aluminum
Technical Services, Inc. ("KATSI"), Kaiser Alumina Australia Corporation
("KAAC") (and its wholly owned subsidiary, Kaiser Finance Corporation ("KFC"))
and ten other entities with limited balances or activities.

The necessity for filing the Cases by the Original Debtors was attributable to
the liquidity and cash flow problems of the Company and its subsidiaries arising
in late 2001 and early 2002. The Company was facing significant near-term debt
maturities at a time of unusually weak aluminum industry business conditions,
depressed aluminum prices and a broad economic slowdown that was further
exacerbated by the events of September 11, 2001. In addition, the Company had
become increasingly burdened by asbestos litigation and growing legacy
obligations for retiree medical and pension costs. The confluence of these
factors created the prospect of continuing operating losses and negative cash
flows, resulting in lower credit ratings and an inability to access the capital
markets.

The outstanding principal of, and accrued interest on, all debt of the Original
Debtors became immediately due and payable upon commencement of the Cases.
However, the vast majority of the claims in existence at the Filing Date
(including claims for principal and accrued interest and substantially all legal
proceedings) are stayed (deferred) during the pendency of the Cases. In
connection with the filing of the Original Debtors' Cases, the Court, upon
motion by the Original Debtors, authorized the Original Debtors to pay or
otherwise honor certain unsecured pre-Filing Date claims, including employee
wages and benefits and customer claims in the ordinary course of business,
subject to certain limitations. In July 2002, the Court also issued a final
order authorizing the Company to fund the cash requirements of its foreign joint
ventures in the ordinary course of business and to continue using the Company's
existing cash management systems. The Original Debtors also have the right to
assume or reject executory contracts existing prior to the Filing Date, subject
to Court approval and certain other limitations. In this context, "assumption"
means that the Original Debtors agree to perform their obligations and cure
certain existing defaults under an executory contract and "rejection" means that
the Original Debtors are relieved from their obligations to perform further
under an executory contract and are subject only to a claim for damages for the
breach thereof. Any claim for damages resulting from the rejection of a
pre-Filing Date executory contract is treated as a general unsecured claim in
the Cases.

Generally, pre-Filing Date claims, including certain contingent or unliquidated
claims, against the Original Debtors will fall into two categories: secured and
unsecured. Under the Code, a creditor's claim is treated as secured only to the
extent of the value of the collateral securing such claim, with the balance of
such claim being treated as unsecured. Unsecured and partially secured claims do
not accrue interest after the Filing Date. A fully secured claim, however, does
accrue interest after the Filing Date until the amount due and owing to the
secured creditor, including interest accrued after the Filing Date, is equal to
the value of the collateral securing such claim.

The Court set January 31, 2003 as the last date by which holders of pre-Filing
Date claims against the Original Debtors (other than asbestos-related personal
injury claims and certain hearing loss claims) could file their claims. Any
holder of a claim that was required to file such claim by January 31, 2003 and
did not do so may be barred from asserting such claim against any of the
Original Debtors and, accordingly, may not be able to participate in any
distribution in any of the Cases on account of such claim. The Company has not
yet completed its analysis of all of the proofs of claim to determine their
validity. However, during the course of the Cases, certain matters in respect of
the claims have been resolved. Material provisions in respect of claim
settlements are included in the accompanying financial statements and are fully
disclosed elsewhere herein. The January 31, 2003 bar date does not apply to
asbestos-related personal injury claims, for which the Original Debtors reserve
the right to establish a separate bar date at a later time. A separate bar date
for certain hearing loss and coal tar pitch volatiles claims was reset to
February 29, 2004.

Additional Debtors. On January 14, 2003, the Additional Debtors filed separate
voluntary petitions for reorganization. The wholly owned subsidiaries included
in such filings were: Kaiser Bauxite Company ("KBC"), Kaiser Jamaica Corporation
("KJC"), Alpart Jamaica Inc. ("AJI"), Kaiser Aluminum & Chemical of Canada
Limited ("KACOCL") and five other entities with limited balances or activities.
Ancillary proceedings in respect of KACOCL and two other Additional Debtors were
also commenced in Canada simultaneously with the January 14, 2003 filings.

The Cases filed by the Additional Debtors were commenced, among other reasons,
to protect the assets held by these Debtors against possible statutory liens
that might have arisen and been enforced by the Pension Benefit Guaranty
Corporation ("PBGC") primarily as a result of the Company's failure to meet a
$17.0 million accelerated funding requirement to its salaried employee
retirement plan in January 2003. The filing of the Cases by the Additional
Debtors had no material impact on the Company's day-to-day operations.

In connection with the Additional Debtors' filings, the Court authorized the
Additional Debtors to continue to pay or otherwise honor certain pre-Filing Date
claims, including employee wages and benefits, and customer and vendor claims in
the ordinary course of business. The Court also approved the Additional Debtors'
continued participation in the Company's existing cash management systems and
routine intercompany transactions involving, among other transactions, the
transfer of materials and supplies among subsidiaries and affiliates.

In March 2003, the Court set May 15, 2003 as the last date by which holders of
pre-Filing Date claims against the Additional Debtors (other than
asbestos-related personal injury claims and certain hearing loss and coal tar
pitch volatiles claims) could file their claims. Any holder of a claim that was
required to file such claim by May 15, 2003 and did not do so may be barred from
asserting such claim against any of the Additional Debtors and, accordingly, may
not be able to participate in any distribution in any of the Cases on account of
such claim. The Company has not yet completed its analysis of all of the proofs
of claim to determine their validity. However, during the course of the Cases,
certain matters in respect of the claims have been resolved.

Material provisions in respect of claim settlements are included in the
accompanying financial statements and are fully disclosed elsewhere herein.

All Debtors. The following table sets forth certain financial information for
the Debtors and non-Debtors as of and for the year ended December 31, 2003 (in
millions).


                                                                           Consolidation/
                                                                             Elimination
                                                Debtors      Non-Debtors       Entries      Consolidated
                                           ---------------- -------------  --------------  ---------------

Net sales                                  $       1,272.5  $      106.2   $       (13.4)  $      1,365.3
Operating income (loss)                             (686.7)        (52.2)            -             (738.9)
Net income (loss)                                   (788.1)        (32.4)           32.4           (788.1)

Total assets                               $       1,393.2  $      579.5   $      (344.0)  $      1,628.7
Liabilities not subject to compromise                304.4         116.4            (2.0)           418.8
Liabilities subject to compromise                  2,820.0           -               -            2,820.0
Minority interests                                    -            105.6            15.5            121.1
Total stockholders' equity (deficit)              (1,731.2)        357.5          (357.5)        (1,731.2)

Two creditors' committees, one representing the unsecured creditors (the "UCC")
and the other representing the asbestos claimants (the "ACC"), have been
appointed as official committees in the Cases and, in accordance with the
provisions of the Code, have the right to be heard on all matters that come
before the Court. In August 2003, the Court approved the appointment of a
committee of salaried retirees (the "1114 Committee" and, together with the UCC
and the ACC, the "Committees") with whom the Debtors have negotiated necessary
changes, including the modification or termination, of certain retiree benefits
(such as medical and insurance) under Section 1114 of the Code. The Debtors
expect that the Committees, together with the legal representative for potential
future asbestos claimants (the "Futures' Representative") that has been
appointed in the Cases, play important roles in the Cases and in the negotiation
of the terms of any plan or plans of reorganization. The Debtors are required to
bear certain costs and expenses for the Committees and the Futures'
Representative, including those of their counsel and other advisors.

As provided by the Code, the Debtors had the exclusive right to propose a plan
of reorganization for 120 days following the initial Filing Date. The Court has
subsequently approved several extensions of the exclusivity period for all
Debtors, the most recent of which was set to expire February 29, 2004. A motion
to extend the exclusivity period for KAAC, KJC and AJI through April 30, 2004,
and for the remaining Debtors through June 30, 2004, was filed by the Company in
February 2004. By filing the motion to extend the exclusivity period, the period
is automatically extended until the April 26, 2004 Court hearing date. As the
Debtors' motion to extend the exclusivity period was agreed to by the UCC and as
the ACC and the Futures' Representative have indicated that they support a
common extension of the exclusivity period for all Debtors through either April
30, 2004 or June 30, 2004, the Debtors believe that it is likely that the
exclusivity period for all Debtors will be extended through at least April 30,
2004. Additional extensions may be sought. However, no assurance can be given
that any such future extension requests will be granted by the Court. If the
Debtors fail to file a plan of reorganization during the exclusivity period, or
if such plan is not accepted by the requisite numbers of creditors and equity
holders entitled to vote on the plan, other parties in interest in the Cases may
be permitted to propose their own plan(s) of reorganization for the Debtors.

The Debtors anticipate that substantially all liabilities of the Debtors as of
their Filing Date will be settled under one or more plans of reorganization to
be proposed and voted on in accordance with the provisions of the Code. Although
the Debtors intend to file and seek confirmation of such a plan or plans, there
can be no assurance as to when the Debtors will file such a plan or plans or as
to whether such plan or plans will be confirmed by the Court and consummated.

In working toward one or more plans of reorganization, the Debtors have been,
and continue to be, engaged in discussions with each of their key
constituencies, including the Committees, the Futures' Representative, the PBGC,
and the appropriate union representatives. The treatment of individual groups of
creditors in any such plan of reorganization cannot be determined definitively
at this time. The ultimate treatment of and recoveries to individual creditors
is dependent on, among other things, the total amount of claims against the
Debtors as ultimately determined by the Court, the priority of the applicable
claims, the outcome of ongoing discussions with the key constituencies, the
amount of value available for distribution in respect of claims and the
completion of the plan confirmation process consistent with applicable
bankruptcy law.

The Debtors' objective is to achieve the highest possible recoveries for all
stakeholders, consistent with the Debtors' abilities to pay, and to continue the
operations of their businesses. However, there can be no assurance that the
Debtors will be able to attain these objectives or achieve a successful
reorganization. While valuation of the Debtors' assets and estimation of
pre-Filing Date claims at this stage of the Cases are subject to inherent
uncertainties, the Debtors currently believe that, in the aggregate, it is
likely that their liabilities will be found to significantly exceed the fair
value of their assets. Therefore, the Debtors currently believe that it is
likely that substantially all pre-Filing Date claims will be settled at less
than 100% of their face value and the equity interests of the Company's
stockholders will be cancelled without consideration. Further, the Debtors
believe that it is likely that: (a) the claims of pre-petition creditors that
are given certain priorities by statute or have the benefit of guarantees or
other contractual or structural seniority will likely receive substantially
greater recoveries than pre-petition creditors that have no such priorities or
seniority; and (b) all pending and future asbestos-related personal injury
claims are likely to be resolved through the formation, pursuant to a plan of
reorganization, of a statutory trust to which all claims would be directed by a
channeling injunction that would permanently remove all asbestos liability from
the Debtors. A similar trust arrangement is anticipated in respect of pending
and future silica, hearing loss and coal tar pitch volatiles personal injury
claims. The trusts would be funded pursuant to statutory requirements and
agreements with representatives of the affected parties, using the Debtors'
insurance assets and certain other consideration that has yet to be agreed. No
assurances can be provided that the foregoing will ultimately be included in any
plan(s) of reorganization the Debtors may file. Further, while the Debtors
believe it is possible to successfully reorganize their operations and emerge
from Chapter 11 in 2004, their ability to do so is subject to inherent
market-related risks as well as successful negotiation and Court approval for
the treatment of creditors consistent with the applicable bankruptcy law.

The Debtors' Cases are being administered on a consolidated basis. In fact,
however, there are separate cases for each Debtor or twenty-six Cases in total.
The impacts of the Cases and any plans of reorganization proposed for individual
debtors will depend on each Debtor's specific circumstances and the differing
interests that creditors have in respect of such entities.

A substantial majority of the claims in the Cases are against the Company. These
include claims in respect of substantially all of the Debtors' debt obligations,
obligations in respect of pension and retiree medical benefits, asbestos-related
and personal injury claims, and known environmental obligations. As such, all of
these claimholders will have claims against the Company that, except as further
described below, will have to be satisfied by the Company's assets, which
generally include the alumina refinery located at Gramercy, Louisiana
("Gramercy"), the interests in Anglesey Aluminium Limited ("Anglesey"), the
interests in Volta Aluminium Company Limited ("Valco") and the fabricated
products plants (other than the London, Ontario, Canada and Richmond, Virginia
extrusion facilities, which are owned by separate subsidiaries that are also
Debtors). The Company's assets also include certain intercompany receivables
from certain of its Debtor subsidiaries for funding provided to its joint
venture affiliates.

In general, except as described below, there are a relatively modest number or
amount of third party trade and other claims against the Company's other Debtor
subsidiaries. Sixteen of the Debtors (including KAC) have no material ongoing
activities or operations and have no material assets or liabilities other than
intercompany items. The Company believes that it is likely that these entities
will ultimately be merged out of existence or dissolved in some manner. The
remaining Debtor subsidiaries (which include AJI, KJC, KAAC, KAII, KACOCL, KBC,
Bellwood, KATSI and KFC) own certain extrusion facilities or act largely as
intermediaries between the Company and certain of its other subsidiaries and
joint venture affiliates or interact with third parties on behalf of the Company
and its joint venture affiliates. As such, the vast majority of the pre-petition
claims against such entities are related to intercompany activities. However,
certain of those holders of claims against the Company also have claims against
certain Company subsidiaries that own the Company's interests in joint venture
affiliates and which represent a significant portion of the Company's
consolidated asset value. For example, noteholders have claims against each of
AJI and KJC, which own the Company's interests in Alumina Partners of Jamaica
("Alpart"), and KAAC, which owns the Company's interests in Queensland Alumina
Limited ("QAL"), as a result of AJI, KJC and KAAC having been subsidiary
guarantors of the Company's Senior Notes and Senior Subordinated Notes.
Additionally, the PBGC, pursuant to statute, has joint and several claims
against the Company and all entities which are 80% or more owned by the Company
(referred to as "Controlled Group Members"). Controlled Group Members include
each of AJI, KJC and KAAC, as well as all of the other Debtors. The only other
significant claims against AJI, KJC and KAAC are intercompany claims related to
funding provided to these entities by the Company. As such, it is likely that
the vast majority of any value realized in respect of the Company's interests in
Alpart and QAL, either from their disposition or realized upon emergence from
such operations, is likely to be for the benefit of the noteholders and the
PBGC.

In order to resolve the question of what consideration from any sale or other
disposition of AJI, KJC and/or KAAC, or their respective assets, should be for
the benefit of the Company and its claimholders (in respect of the Company's
intercompany claims against such entities), an intercompany settlement agreement
is being negotiated between the UCC and the Company (the "Intercompany
Agreement"). The proposed Intercompany Agreement would also release
substantially all other pre- and post-petition intercompany claims between the
Debtors. The proposed Intercompany Agreement, if finalized substantially in its
current form, would, among other things, provide for payments of cash by AJI,
KJC and KAAC to the Company of $85.0 million in respect of its intercompany
claims against AJI, KJC and KAAC plus any amounts up to $14.3 million plus
accrued and unpaid interest and fees paid by the Company to retire
Alpart-related debt. Under the proposed Intercompany Agreement, such amount
would be increased or decreased for (1) any net cash flows collected by or
funded by the Company between April 1, 2004 and the earlier of (a) AJI's, KJC's
and KAAC's emergence from Chapter 11 or (b) the sale of AJI's, KJC's and KAAC's
respective interests in and related to Alpart and QAL and (2) any purchase price
adjustments (other than incremental amounts related to what, if any, alumina
sales contracts are transferred) pursuant to the Company's January 2004
agreement to sell its interests in Alpart, if consummated. The proposed
Intercompany Agreement calls for such payments to be made to the Company at the
earlier of the sale of the Company's interests in Alpart and QAL or the
emergence of AJI, KJC and KAAC from Chapter 11. Under the proposed Intercompany
Agreement, all such payments, other than $28.0 million to be paid to the Company
upon the sale of Alpart and any amounts paid by the Company in respect of
retiring the Alpart-related debt, are likely to be held in escrow for the
benefit of the Company until the Company's emergence from the Cases. In the
interim, the Company's claims against these entities will be secured by liens.
There are still a number of issues with respect to the proposed Intercompany
Agreement that must be satisfactorily resolved. The Intercompany Agreement once
finalized will be subject to Court approval. Additionally, the ACC and the
Futures' Representative have not yet reviewed, commented on or agreed to the
terms of the Intercompany Agreement. The Company currently expects the Court to
consider the proposed Intercompany Agreement at the regularly scheduled April
2004 or May 2004 omnibus hearing. However, no assurances can be provided that
the issues can be resolved within the time frame necessary to submit the
Intercompany Agreement to the Court under that time frame.

At emergence from Chapter 11, the Company will have to pay or otherwise provide
for a material amount of claims. Such claims include accrued but unpaid
professional fees, priority tax and environmental claims, secured claims, and
certain post-petition obligations (collectively, "Exit Costs"). The Company
currently estimates that its Exit Costs will be in the range of $100.0 million
to $120.0 million. The Company currently expects to fund such Exit Costs using
the proceeds to be received under the proposed Intercompany Agreement together
with existing cash resources and available liquidity under an exit financing
facility that will replace the current Post-Petition Credit Agreement (see Note
7 of Notes to Consolidated Financial Statements). If payments under the proposed
Intercompany Agreement together with existing cash resources and liquidity
available under an exit financing facility are not sufficient to pay or
otherwise provide for all Exit Costs, the Company and its other Debtor
subsidiaries will not be able to emerge from Chapter 11 unless and until
sufficient funding can be obtained. Management believes it will be able to
successfully resolve any issues that may arise in respect of the proposed
Intercompany Agreement or be able to negotiate a reasonable alternative.
However, no assurances can be given in this regard.

The Company expects that, when the Debtors ultimately file a plan or plans of
reorganization, it is likely to reflect the Company's strategic vision for
emergence from Chapter 11: (a) a standalone going concern with manageable
leverage and financial flexibility, improved cost structure and competitive
strength; (b) a company positioned to execute its long-standing vision of market
leadership and growth in fabricated products; (c) a company that delivers a
broad product offering and leadership in service and quality for its customers
and distributors; and (d) a company with continued ownership of those commodity
assets that have the potential to generate significant cash at steady-state
metal prices and/or which provide a strategic hedge against the fabricated
products business' needs for primary aluminum. While the Company intends to
continue to pursue a standalone fabricated products company emergence strategy,
from time to time the Debtors may also evaluate other reorganization strategies,
consistent with the Debtors' responsibility to maximize the recoveries for its
stakeholders. The Company's advisors have developed a timeline that, assuming
the current pace of the Cases continues, is expected to allow the Company to
file a plan or plans of reorganization by mid-year 2004 and emerge from Chapter
11 as early as late in the third quarter of 2004. However, the Debtors' ability
to do so is subject to the confirmation of a plan of reorganization in
accordance with the applicable bankruptcy law and, accordingly, no assurances
can be given as to whether or when any plan or plans of reorganization will
ultimately be filed or confirmed.

In light of the Company's stated strategy and to further the Debtors' ultimate
planned emergence from Chapter 11, the Debtors, with the approval of the
Company's Board of Directors and in consultation with the UCC, the ACC and the
Futures' Representative, began exploring the possible sale of one or more of
their commodities assets during the third quarter of 2003. In particular, the
Debtors began exploring the possible sale of their interests in and related to:
(a) Alpart, (b) Anglesey, and (c) the Company's Gramercy alumina refinery and
Kaiser Jamaica Bauxite Company ("KJBC"). The possible sale of the Debtors'
interests in respect of Gramercy and KJBC was explored jointly given their
significant integration. More recently, the Company has also begun the process
of exploring the possible sale of its 20% interest in and related to QAL. While
the Company believes that the QAL-related interests are likely to be its most
valuable commodity asset and expects that there are or will be a number of
parties interested in acquiring such interests, no assurances can be given that
any such sale will occur. In addition, after extensive negotiations with the
Government of Ghana ("GoG") and the Volta River Authority ("VRA") failed to
result in a resolution to Volta Aluminium Company Limited's ("Valco") power
situation and other matters, the Company, in December 2003, entered into a
Memorandum of Understanding ("MOU") with the GoG and the VRA to sell its
interests in Valco (see Notes 1, 5 and 15 of Notes to Consolidated Financial
Statements for additional discussion regarding the MOU and the possible sale of
the Company's interests in Valco).

Financial Statement Presentation. The accompanying consolidated financial
statements have been prepared in accordance with AICPA Statement of Position
90-7 ("SOP 90-7"), Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code, and on a going concern basis, which contemplates the
realization of assets and the liquidation of liabilities in the ordinary course
of business. However, as a result of the Cases, such realization of assets and
liquidation of liabilities are subject to a significant number of uncertainties.

Upon emergence from the Cases, the Company expects to apply "fresh start"
accounting to its consolidated financial statements as required by SOP 90-7 .
Fresh start accounting is required if: (1) a debtor's liabilities are determined
to be in excess of its assets and (2) there will be a greater than 50% change in
the equity ownership of the entity. As previously disclosed, the Company expects
both such circumstances to apply. As such, upon emergence, the Company will
restate its balance sheet to equal the reorganization value as determined in its
plan(s) of reorganization and approved by the Court. Additionally, items such as
accumulated depreciation, accumulated deficit and accumulated other
comprehensive income (loss) will be reset to zero. The Company will allocate the
reorganization value to its individual assets and liabilities based on their
estimated fair value at the emergence date. Typically such items as current
liabilities, accounts receivable, and cash will be reflected at values similar
to those reported prior to emergence. Items such as inventory, property, plant
and equipment, long-term assets and long-term liabilities are more likely to be
significantly adjusted from amounts previously reported. Because fresh start
accounting will be adopted at emergence, and because of the significance of the
pending asset sales and liabilities subject to compromise (that will be relieved
upon emergence), comparisons between the current historical financial statements
and the financial statements upon emergence may be difficult to make.

SUMMARY OF OPERATIONS

The Company has historically sold significant amounts of alumina and primary
aluminum in domestic and international markets. The following table sets forth
historical product flows for the years ended December 31, 2003, 2002 and 2001.
However, as discussed above, the Company expects it will emerge from the Chapter
11 proceedings primarily as a fabricated products company.


                                                                Sources(1)                             Uses(1)
                                                   ------------------------------------  ----------------------------------
                                                                          Third Party       Third Party      Intersegment
                                                      Production(2)        Purchases       Shipments(2)        Transfers
                                                   ------------------  ----------------  -----------------  ---------------
                                                                            (in thousands of tons*)
Fabricated Products - expected to be core of
       reorganizing entity(3)
       2003                                                       -               165.5              168.9              -
       2002                                                       -               164.7              170.7              -
       2001                                                       -               187.1              192.5              -

Commodities - sales pending or
       disposition under consideration
Bauxite -
       2003                                                   6,094.5           1,578.8            1,525.5          4,694.6
       2002                                                   6,289.7           1,582.5            1,568.1          4,493.5
       2001                                                   5,628.3           1,916.3            1,512.2          4,355.4
Alumina -
       2003                                                   2,926.7              96.1            2,929.0           176.6
       2002                                                   2,848.5             258.9            2,626.6            343.9
       2001                                                   2,813.9(4)          115.0            2,582.7            422.8
Primary Aluminum  -
       2003                                                      84.8                .7               89.7            -
       2002                                                     187.4               6.1              194.8              1.7
       2001                                                     214.3              27.3              244.7              2.3

---------------------------

* All references to tons in this Report are to metric tons of 2,204.6 pounds.
(1)  Sources and uses will not equal due to the impact of intrasegment
     consumption, inventory changes and alumina and primary aluminum swaps.
(2)  Production and third party shipments include Kaiser's share of consolidated
     joint venture activities.
(3)  Fabricated products activity is reported in equivalent tons of primary
     aluminum. Third party purchases represent purchases of primary aluminum,
     including scrap.
(4)  During September 2001, the Company sold an 8.3% interest in QAL. See
     "Business Operations--Bauxite and Alumina Business Unit--QAL" below for a
     discussion of effects of the sale on alumina production.

BUSINESS OPERATIONS

The Company has historically conducted its business through its business units
(Fabricated products, Bauxite and alumina, Primary aluminum and Commodities
marketing), each of which is discussed below. As previously discussed, while the
Company has historically operated in all aspects of the aluminum industry, the
Company expects it will emerge from the Chapter 11 proceedings primarily as a
fabricated products company. As such, the Company has attempted to provide
additional information in this Annual Report on Form 10-K to separately disclose
amounts related to the Fabricated products business.

-   Fabricated Products Business Unit
The Fabricated products business operates (1) the Trentwood rolling mill, in
Spokane Valley, Washington, which produces heat-treat sheet and plate products;
(2) soft-alloy extrusion facilities located in Los Angeles, California; Sherman,
Texas; Tulsa, Oklahoma; Richmond, Virginia; and London, Ontario, Canada, which
produce rod, bar, tube, shapes and billet; (3) hard-alloy extrusion plants
located in Newark, Ohio, and Jackson, Tennessee, which produce rod, bar, screw
machine stock, redraw rod, forging stock and billet; and (4) an engineered
component (forging) facility located in Greenwood, South Carolina, which
produces products particularly well-suited for automotive applications because
of their high strength-to-weight properties. The Fabricated products business
also extrudes seamless tubing in both hard- and soft-alloys at a facility in
Richland, Washington, and produces drawn tube in both hard- and soft-alloys at
its operations in Chandler, Arizona. Soft-alloy extruded seamless and drawn
tubing is also produced at the Richmond, Virginia facility.

Primary and scrap aluminum to meet the business unit's manufacturing
requirements are purchased from third parties at market terms.

Major markets for the Fabricated products business include:

-   aerospace
-   ground transportation, including automobiles, light trucks, heavy duty
    trucks and trailers, and shipping containers
-   distribution
-   durable goods
-   ordnance
-   electrical

A significant portion of sales are made through distributors.

Through its sales and engineering office in Southfield, Michigan, the Fabricated
products business staff works with automobile makers and other customers and
plant personnel to create new automotive component designs and to improve
existing products.

Over the last several years, there has been a significant integration of the
Fabricated products business operations. The business operations of the plants
have similar economic characteristics and are similar in product and production
process, with common customers. Because of common customers, there has been
substantial integration of the sales force and management.

All of the Fabricated products business operations are owned directly by the
Company with two exceptions: (1) the London, Ontario facility is owned by
KACOCL, a wholly owned subsidiary, which was one of the Company's subsidiaries
that filed a petition for reorganization under the Code in January 2003, and (2)
the Richmond, Virginia facility, which is owned by Bellwood, also a wholly owned
subsidiary, which filed a petition for reorganization in February 2002. The
Company does not believe that KACOCL's or Bellwood's operations will be
adversely affected by the Cases.

In 2003, the Fabricated products business unit had approximately 600 customers,
including approximately 100 customers in the aerospace, transportation and
industrial markets, most of which represented heat-treat product shipments to
distributors who sell to a variety of industrial end-users. The largest and top
five customers for fabricated products accounted for approximately 10% and 30%,
respectively, of the business unit's third-party net sales. See Item 1.
"Business--Competition" in this Report. Sales are made directly to end-use
customers and distributors by Company sales personnel located in the United
States and Europe, and by independent sales agents in Asia, Mexico and the
Middle East.

-   Bauxite and Alumina Business Unit
The Company has historically been a major producer of alumina and sold
significant amounts of its alumina production in domestic and international
markets. The Company's strategy was to sell a substantial portion of the alumina
available to it in excess of its internal smelting requirements under multi-year
sales contracts with prices linked to the price of primary aluminum. However, as
previously disclosed, as a part of its reorganization process, the Company has
been exploring the possible sale of certain or all of its commodities assets,
which include the interests of the Bauxite and Alumina business unit. As more
fully discussed in Note 5 of Notes to Consolidated Financial Statements, the
Company will conduct an auction in April 2004 that may result in the sale of its
interests in and related to Alpart, is close to reaching an agreement in respect
of the sale of its interests in and related to Gramercy/KJBC and has begun
certain processes that could lead to the Company's interests in and related to
QAL being sold. Further, under the Intercompany Agreement, if approved by the
Court, any net cash flow related to Alpart's and QAL's activities beginning
April 1, 2004 would be for the benefit of AJI's, KJC's and the Company's
creditors and, to the extent collected by the Company in the interim, would
reduce the payments required to be made to the Company by AJI, KJC and KAAC
pursuant to the Intercompany Agreement.

The following table lists the Company's bauxite mining and alumina refining
facilities as of December 31, 2003:


                                                                                                 Annual
                                                                                             Production              Total
                                                                                               Capacity             Annual
                                                                            Company        Available to         Production
Activity                                 Facility        Location         Ownership         the Company           Capacity
------------------                   ------------  --------------  ----------------   -----------------   ----------------
                                                                                                 (tons)             (tons)

Bauxite Mining                       KJBC          Jamaica                    49.0%           4,500,000          4,500,000
                                     Alpart(1)     Jamaica                    65.0%           2,275,000          3,500,000
                                                                                      -----------------   ----------------

                                                                                              6,775,000          8,000,000
                                                                                      =================   ================

Alumina Refining                     Gramercy      Louisiana                 100.0%           1,250,000          1,250,000
                                     Alpart        Jamaica                    65.0%           1,072,500          1,650,000
                                     QAL           Australia                  20.0%             730,000          3,650,000
                                                                                      -----------------   ----------------

                                                                                              3,052,500          6,550,000
                                                                                      =================   ================
------------
(1) Alumina Partners of Jamaica ("Alpart") bauxite is refined into alumina at
    the Alpart refinery.

KJBC. The Government of Jamaica has granted the Company a mining lease for the
mining of bauxite which will, at a minimum, satisfy the bauxite requirements of
the Company's Gramercy, Louisiana, alumina refinery so that it will be able to
produce at its current rated capacity until 2020. KJBC mines bauxite from land
which is subject to the mining lease as an agent for the Company. The Company
holds its interest in KJBC through a wholly owned subsidiary (KBC) which was one
of the Company's subsidiaries that filed a petition for reorganization under the
Code in January 2003. KJBC did not file a petition for reorganization. The
Company and KBC have the authority from the Court to fund KJBC's cash
requirements in the ordinary course of business. Although the Company (through
KBC) owns 49% of KJBC, it is entitled to, and generally takes, all of its
bauxite output. A substantial majority of the bauxite mined by KJBC is refined
into alumina at the Gramercy facility and the remainder is sold to a third
party. KJBC's operations were impacted by the Gramercy incident (see Gramercy
below). The Government of Jamaica, which owns 51% of KJBC, has agreed to grant
the Company an additional bauxite mining lease. The new mining lease will be
effective upon the expiration of the current lease in 2020 and will enable the
Gramercy facility to produce at its rated capacity for an additional ten year
period.

Gramercy. Alumina produced by the Gramercy refinery is primarily sold to third
parties. The Gramercy refinery produces two products: smelter grade alumina and
chemical grade alumina (e.g. hydrate). Smelter grade alumina is sold under
multi-year contracts typically linked to London Metal Exchange prices ("LME
prices") for primary aluminum. Chemical grade alumina is sold at a premium price
over smelter grade alumina. Production at the plant was curtailed from July 1999
until December 2000 (at which time partial production commenced) as a result of
an explosion in the digestion area of the plant. Construction at the facility
was substantially completed in the third quarter of 2001. During the first nine
months of 2001, the plant operated at approximately 68% of its newly-rated
estimated annual capacity of 1,250,000 tons. During the fourth quarter of 2001,
the plant operated at approximately 90% of its newly-rated capacity. Since the
end of February 2002, the plant has, except for normal operating variations,
generally operated at approximately 100% of its newly-rated capacity. While
production was curtailed, the Company purchased alumina from third parties, in
excess of the amounts of alumina available from other Company-owned facilities,
to supply major customers' needs as well as to meet intersegment requirements.

Alpart. The Company owns a 65% interest in Alpart, and Hydro Aluminium a.s
("Hydro") owns the remaining 35% interest. The Company holds its interests in
Alpart through two wholly owned subsidiaries (KJC and AJI), which were two of
the Company's subsidiaries that filed petitions for reorganization under the
Code in January 2003. Alpart did not file a petition for reorganization. The
Debtors have the authority from the Court to fund their share of Alpart's cash
requirements in the ordinary course of business. Alpart holds bauxite reserves
and owns an alumina plant located in Jamaica. The Company has management
responsibility for the facility on a fee basis. The Company and Hydro are
responsible for their proportionate shares of Alpart's costs and expenses. The
Government of Jamaica has granted Alpart a mining lease and has entered into
other agreements with Alpart designed to assure that sufficient reserves of
bauxite will be available to Alpart to operate its refinery, as it may be
expanded up to a capacity of 2,000,000 tons per year, through the year 2024.
Alpart and JAMALCO, a joint venture between affiliates of Alcoa Inc. and the
Government of Jamaica, have been operating a bauxite mining operation joint
venture that consolidated their bauxite mining operations in Jamaica since the
first half of 2000. The joint venture agreement also grants Alpart certain
rights to acquire bauxite mined from JAMALCO's reserves with the objective to
optimize mining operations and capital costs. As part of the Company's
initiatives launched in 2001, Alpart's annual production capacity was increased
from 1,450,000 to 1,650,000 tons during late 2003.

QAL. The Company owns a 20% interest in QAL, after selling an approximate 8.3%
interest in September 2001. The Company holds its interest in QAL through a
wholly owned subsidiary (KAAC), which is one of the Company's subsidiaries that
filed a petition for reorganization under the Code in 2002. The Debtors have the
authority from the Court to fund its share of QAL's cash requirements in the
ordinary course of business. QAL, which is located in Queensland, Australia,
owns one of the largest and most competitive alumina refineries in the world.
QAL refines bauxite into alumina, essentially on a cost basis, for the account
of its shareholders under long-term tolling contracts. The shareholders,
including KAAC, purchase bauxite from another QAL shareholder under long-term
supply contracts. KAAC has contracted with QAL to take approximately 600,000
tons per year of alumina or pay standby charges. KAAC is unconditionally
obligated to pay amounts calculated to service its share ($60.0 million at
December 31, 2003) of certain debt of QAL, as well as other QAL costs and
expenses, including bauxite shipping costs. In recent years, since the
curtailment of the Mead and Tacoma smelters, the Company has sold its share of
QAL's production to third parties.

Customers. During 2003, the Company sold alumina to approximately 10 customers,
the largest and top five of which accounted for approximately 19% and 71%,
respectively, of the business unit's third-party net sales. All of the Company's
third-party sales of bauxite in 2003 were made to one customer, which sales
represent approximately 5% of the business unit's third-party net sales. The
Company's principal customers for bauxite and alumina consist of other aluminum
producers, trading intermediaries, and users of chemical grade alumina.
Marketing and sales efforts are conducted by personnel located in Baton Rouge,
Louisiana.

-   Primary Aluminum Business Unit
The Company has historically been a major producer of primary aluminum and sold
significant amounts of its primary aluminum production in domestic and
international markets. The Company's strategy was to sell a substantial portion
of the primary aluminum available to it in excess of its internal smelting
requirements to third parties. However, as previously disclosed, as a part of
its reorganization process, the Company has been exploring the possible sale of
certain or all of its commodities assets, which include the interests of the
Primary aluminum business unit. As more fully discussed in Note 5 of Notes to
Consolidated Financial Statements, the Company has entered into agreements to
sell the Company's interests in Valco and Mead smelting facilities.

The following table lists the Company's primary aluminum smelting facilities as
of December 31, 2003:


                                                                            Annual Rated            Total            2003
                                                                                Capacity           Annual         Average
                                                           Company         Available to             Rated       Operating
Location                                 Facility        Ownership           the Company         Capacity            Rate
-----------------                      ----------     ------------      ----------------      -----------    ------------
                                                                                  (tons)           (tons)
Ghana                                  Valco                   90%               180,000          200,000               8%
Wales, United Kingdom                  Anglesey                49%                66,150          135,000             107%
Washington, United States              Mead                   100%               200,000          200,000             __(1)
                                                                        ----------------      -----------
              Total                                                              446,150          535,000
                                                                        ================      ===========

--------
(1) Production has been completely curtailed since 2001.

Electric power represents an important production input for the Company at its
aluminum smelters and its cost can significantly affect the Business Unit's
profitability.

Valco. The Company manages, and directly owns a 90% interest in Valco, which
owns an aluminum smelter in Ghana. The Valco smelter uses pre-bake technology
and processes alumina supplied by the Company and the other participant into
primary aluminum under tolling contracts which provide for proportionate
payments by the participants. The Company's share of the primary aluminum is
sold to third parties. In December 2003, as discussed below, the Company entered
into a Memorandum of Understanding to sell its interests in Valco to the
Government of Ghana.

Valco's operating level has been subject to fluctuations resulting from the
amount of hydro-electric power it is allocated by the VRA. The operating level
over the last five years has ranged from none to four out of a total of five
potlines. The amount of power made available to Valco by the VRA depends in
large part on the level of the lake that is the primary source for generating
the hydroelectric power used to supply the smelter. The level of the lake is
primarily a function of the level of annual rainfall and the alternative
(non-Valco) uses of the power generated, as directed by the VRA.

During late 2000, Valco, the GoG and the VRA reached an agreement, subject to
Parliamentary approval, that would provide sufficient power for Valco to operate
at least three and one-half of its five potlines through 2017. However,
Parliamentary approval was not received and, in March 2002, the GoG reduced
Valco's power allocation forcing Valco to curtail one of its four operating
potlines. In December 2002, after substantial attempts to reach an amicable
solution, Valco and the Company filed for arbitration with the International
Chamber of Commerce in Paris against both the VRA and the GoG. An attempt of
mediation in January 2003 was also unsuccessful, following which Valco's power
allocation was further reduced in January 2003 resulting in the curtailment of
two additional operating potlines.

As previously disclosed, during the first half of 2003, the lake level was at or
near a record low level. Based on the level of the lake and the rate at which it
had been declining, the Company believed that curtailment of Valco's last
remaining operating potline was likely. Accordingly in light of the previous
curtailments ordered by the VRA and the declining lake level, in May 2003, the
Company curtailed the last operating potline. The curtailment of the last
operating potline was believed to: (1) offer the VRA and the GoG a contribution
toward conservation of the water supply to improve their ability to meet Valco's
future power needs as well as meet the near-term power needs of the rest of
Ghana, and (2) provide Valco its best opportunity to restart late in 2003 once
the annual rainy season had replenished the lake level and Valco's 2004 power
allocation was known. The rainy season ended in late 2003 and the lake level
crested at a more typical level. During 2003, Valco met regularly with the GoG
and the VRA in respect of the current and future power situation and other
matters including appropriate compensation to Valco for power curtailments. The
continuation of the negotiations and arbitration ultimately led to the MOU in
December 2003, whereby the Company agreed to sell its 90% interest in Valco to
the GoG for consideration of between $35.0 million and $100.0 million, plus
assumption of all of the Company's related liabilities and obligations. The MOU
contemplates that the transaction will close by April 30, 2004. The transaction
is subject to due diligence and a number of approvals, including by the
President or Cabinet of the GoG, the Parliament of Ghana, the Boards of
Directors of the Company and Valco and the Court. As a result, no assurance can
be given that the MOU will be approved by any or all of the parties. See Notes 5
and 15 of Notes to Consolidated Financial Statements for additional information
regarding the MOU and the possible sale of the Company's interests in Valco.

Valco did not file a petition for reorganization. The Company did not expect
Valco's operations to be adversely affected as a result of the Cases as the
Debtors had received the authority from the Court to fund Valco's cash
requirements in the ordinary course of business. The Company and the PBGC
entered into a stipulation, which was approved by the Court, that extended the
automatic stay in bankruptcy to Valco to prevent statutory liens from arising
against Valco in respect of certain pension obligations related to the Company's
U.S. pension plans (see Note 9 of Notes to Consolidated Financial Statements).
The stipulation currently expires on June 30, 2004. It can be extended beyond
that date either through agreement of the parties or involuntarily by order of
the Court. The Company is unable to assess at this time whether an extension of
the stipulation might be necessary or whether, if sought, an extension might be
obtained. If the stipulation were not extended, a PBGC lien could arise against
Valco that could have material consequences. The Company is unable to state at
this time whether a lien, if one arose, would be enforceable in Ghana against
Valco.

Anglesey. The Company also owns a 49% interest in Anglesey, which owns an
aluminum smelter at Holyhead, Wales. As discussed in Reorganization Proceedings
above, the Company has explored the possible sale of its interest in and related
to Anglesey and may explore the possibility of a sale again at some point in the
future. The Anglesey smelter uses pre-bake technology. The Company supplies 49%
of Anglesey's alumina requirements and purchases 49% of Anglesey's aluminum
output. The Company sells its share of Anglesey's output to third parties.
Anglesey operates under a power agreement that provides sufficient power to
sustain its operations at full capacity through September 2009.

Anglesey did not file a petition for reorganization. The Company does not expect
Anglesey's operations to be adversely affected as a result of the Cases as the
Debtors have received the authority from the Court to fund Anglesey's cash
requirements in the ordinary course of business.

Washington Smelters. The Company owned and operated two aluminum smelters in the
State of Washington (the Mead and Tacoma smelters) since the 1940s. Through
2000, the Bonneville Power Administration ("BPA") was supplying approximately
half of the electric power for the Mead and Tacoma smelters, with the balance
coming from other suppliers. In response to the unprecedented high market prices
for power in the Pacific Northwest, the Company curtailed primary aluminum
production at the Tacoma smelter and partially curtailed production at the Mead
smelter during the last half of 2000. Mead was subsequently fully curtailed in
early 2001. During this same period, as permitted under the BPA contract, the
Company remarketed to the BPA the available power that it had under contract
through September 30, 2001. As a result of the curtailments, the Company avoided
the need to purchase power on a variable market price basis and received cash
proceeds sufficient to more than offset the cash impact of the potline
curtailments over the period for which the power was sold.

The Company has previously disclosed that, in connection with the development of
a plan of reorganization, it conducted a study of the long-term competitive
position of the Mead and Tacoma facilities and potential options for these
facilities. When the Company received the preliminary results of the study, it
analyzed the findings and met with the United Steelworkers of America ("USWA")
and other parties prior to making its determination as to the appropriate
action(s). The outcome of the study and the Company's ongoing work on developing
a plan of reorganization led the Company to conclude that the Mead and Tacoma
facilities were unlikely to be able to compete with the much larger, newer and
more efficient smelters, generally located outside the United States except
perhaps as a "swing" facility.

In January 2003, the Company announced the indefinite curtailment of the Mead
facility. The curtailment of the Mead facility was due to the continuing
unfavorable market dynamics, specifically unattractive long-term power prices
and weak primary aluminum prices - both of which are significant impediments for
an older smelter with higher-than-average operating costs. The Mead facility was
initially expected to remain completely curtailed unless and until an
appropriate combination of reduced power prices, higher primary aluminum prices
and other factors occurred. In February 2004, the Company entered into an
agreement to sell the Mead facility (see Note 5 of Notes to Consolidated
Financial Statements for additional discussion of the sale of the Mead
facility).

In January 2003, the Court also approved the sale of the Tacoma smelter to the
Port of Tacoma. The sale closed in February 2003 (see Note 5 of Notes to
Consolidated Financial Statements for additional discussion on the sale of the
Tacoma facility).

Other. The Company uses proprietary retrofit and control technology in all of
its smelters. This technology - which includes the redesign of the cathodes,
anodes and bus that conduct electricity through reduction cells, improved feed
systems that add alumina to the cells, computerized process control and energy
management systems, and furnace technology for baking of anode carbon - has
significantly contributed to increased and more efficient production of primary
aluminum and enhanced the Company's ability to compete more effectively with the
industry's newer smelters.

The Company's principal primary aluminum customers consist of large trading
intermediaries and metal brokers. In 2003, the Company sold its primary aluminum
production to approximately five customers, of which the largest accounted for
approximately 82% of the business unit's third-party net sales. See
"-Competition" in this Report. Marketing and sales efforts are conducted by
personnel located in Baton Rouge, Louisiana.

-     Commodities Marketing Business Unit
The Company's operating results have historically been sensitive to changes in
the prices of alumina, primary aluminum, and fabricated aluminum products, and
also depend to a significant degree upon the volume and mix of all products
sold. Primary aluminum prices have been subject to significant cyclical
fluctuations. Alumina prices, as well as fabricated aluminum product prices
(which vary considerably among products), are significantly influenced by
changes in the price of primary aluminum and generally lag behind primary
aluminum prices by up to three months. From time to time in the ordinary course
of business, the Company has entered into hedging transactions to provide risk
management in respect of its net exposure of earnings and cash flow related to
primary aluminum price changes. Given the significance of primary aluminum
hedging activities to the Company, the Company has reported its primary
aluminum-related hedging activities as a separate segment. Primary
aluminum-related hedging activities have been managed centrally on behalf of all
of the Company's business segments to minimize transaction costs, to monitor
consolidated net exposures and to allow for increased responsiveness to changes
in market factors.

Hedging activities conducted in respect of the Company's cost exposure to energy
prices and foreign exchange rates are not considered a part of the Commodity
marketing segment. Rather, such activities are included in the results of the
business unit to which they relate.

COMPETITION

The Company has historically competed globally with companies in all aspects of
aluminum industry. Many of the Company's competitors have greater financial
resources than the Company. The Company competes with numerous domestic and
international fabricators in the sale of fabricated aluminum products. The
Company markets fabricated aluminum products it manufactures in the United
States and abroad. Sales are made directly and through distributors to a large
number of customers. Competition in the sale of fabricated products is based
upon quality, availability, price and service, including delivery performance.
The Company concentrates its fabricating operations on selected products in
which it believes it has production expertise, high-quality capability, and
geographic and other competitive advantages.

Primary aluminum and, to some degree, alumina are commodities with generally
standard qualities, and competition in the sale of these commodities is based
primarily upon price, quality and availability. Aluminum competes in many
markets with steel, copper, glass, plastic, and other materials. The Company
believes that, assuming the current relationship between worldwide supply and
demand for alumina and primary aluminum does not change materially, the loss of
any one of the Company's customers, including intermediaries, would not have a
material adverse effect on the Company's financial condition or results of
operations.

RESEARCH AND DEVELOPMENT

Net expenditures for the Fabricated products business unit's research and
development activities were $1.6 million in 2003, $1.4 million in 2002, and $2.1
million in 2001. The Company estimates that research and development
expenditures for Fabricated products will be approximately $2.7 million in 2004.

Net expenditures for all other business units' research and development
activities were $1.0 million in 2003, $.4 million in 2002 and $1.9 million in
2001. As discussed above, the Company expects it will emerge from the Chapter 11
proceedings primarily as a fabricated products company. Therefore, research and
development expenditures in 2004 for the Commodities business units are expected
to be minimal.

EMPLOYEES

At December 31, 2003, the Company employed approximately 4,500 persons, of which
approximately 2,100 were employed in the Fabricated products business unit,
approximately 2,300 were employed in the Commodities business units and
approximately 100 were employed in Corporate. At December 31, 2002, the Company
employed approximately 5,200 persons of which approximately 2,000 were employed
in the Fabricated products business unit, approximately 3,100 were employed in
the Commodities business units and less than 100 were employed in Corporate.

ENVIRONMENTAL MATTERS

The Company is subject to a wide variety of international, federal, state and
local environmental laws and regulations. For a discussion of this subject, see
"Factors Affecting Future Performance - the Company's current or past operations
subject it to environmental compliance, clean-up and damage claims that may be
costly" below. During the pendency of the Cases, substantially all pending
litigation, except certain environmental claims and litigation, against the
Debtors is stayed.

FACTORS AFFECTING FUTURE PERFORMANCE

This section discusses certain factors that could cause actual results to vary,
perhaps materially, from the results described in forward-looking statements
made in this Report. Forward-looking statements in this Report are not
guarantees of future performance and involve significant risks and
uncertainties. In addition to the factors identified below, actual results may
vary materially from those in such forward-looking statements as a result of a
variety of other factors including the effectiveness of management's strategies
and decisions, general economic and business conditions, developments in
technology, new or modified statutory or regulatory requirements, and changing
prices and market conditions. This Report also identifies other factors that
could cause such differences. No assurance can be given that these factors are
all of the factors that could cause actual results to vary materially from the
forward-looking statements.

-  The Cases and any plan or plans of reorganization may have adverse
   consequences on the Company and its stakeholders and/or our reorganization
   from the Cases may not be successful
Our objective is to achieve the highest possible recoveries for all
stakeholders, consistent with our ability to pay and the continuation of our
businesses. However, there can be no assurance that we will be able to attain
these objectives or achieve a successful reorganization and remain a going
concern. The consolidated financial statements included elsewhere in this Report
include some of the impacts of the Cases (e.g., some asset dispositions, some
claim resolutions, etc.) but not all of such effects of all such adjustments
relating to the recoverability and classification of recorded asset amounts or
the amount and classification of liabilities or the effect on existing
stockholders' equity that may result from any plans, arrangements or other
actions arising from the Cases, or the possible inability of the Debtors to
continue in existence. Adjustments necessitated by such plans, arrangements or
other actions could materially change the consolidated financial statements
included elsewhere in this Report.

While valuation of the Debtors' assets and pre-Filing Date claims at this stage
of the Cases is subject to inherent uncertainties, the Debtors currently believe
that it is likely that their liabilities will be found in the Cases to exceed
the fair value of their assets. Therefore, the Debtors currently believe that it
is likely that pre-Filing Date claims will be paid at less than 100% of their
face value and the equity interests of the Company's stockholders will be
cancelled without consideration. Because of such possibility, the value of the
Common Stock is speculative and any investment in the Common Stock would pose a
high degree of risk.

Additionally, while the Debtors operate their businesses as
debtors-in-possession pursuant to the Code during the pendency of the Cases, the
Debtors will be required to obtain the approval of the Court prior to engaging
in any transaction outside the ordinary course of business. In connection with
any such approval, creditors and other parties in interest may raise objections
to such approval and may appear and be heard at any hearing with respect to any
such approval. Accordingly, the Debtors may be prevented from engaging in
transactions that might otherwise be considered beneficial to the Company. The
Court also has the authority to oversee and exert control over the Debtors'
ordinary course operations.

At emergence from Chapter 11, the Company will have to pay or otherwise provide
for a material amount of claims. Such claims include accrued but unpaid
professional fees, priority tax and environmental claims, secured claims, and
certain post-petition obligations (collectively, "Exit Costs"). The Company
currently estimates that its Exit Costs will be in the range of $100.0 million
to $120.0 million. The Company currently expects to fund such Exit Costs using
the proceeds to be received under the proposed Intercompany Agreement together
with existing cash resources and available liquidity under an exit financing
facility that will replace the current Post-Petition Credit Agreement (see Note
7 of Notes to Consolidated Financial Statements). If payments under the proposed
Intercompany Agreement together with existing cash resources and liquidity
available under an exit financing facility are not sufficient to pay or
otherwise provide for all Exit Costs, the Company and its other Debtor
subsidiaries will not be able to emerge from Chapter 11 unless and until
sufficient funding can be obtained. Management believes it will be able to
successfully resolve any issues that may arise in respect of the proposed
Intercompany Agreement or be able to negotiate a reasonable alternative.
However, no assurances can be given in this regard.

-   We may not operate profitably in the future
We reported a net loss of $788.1 million for the year ended December 31, 2003,
which included a number of significant items and charges. Even if such items
were excluded from the results for 2003, results for the year ended December 31,
2003 would have been a net loss. There can be no assurance that we will generate
a profit from recurring operations or that we will operate profitably in future
periods. During 2003, the Company also experienced a net decrease in cash and
cash equivalents of $42.8 million; $87.8 million of which was used in operating
activities and $4.1 million of which was used in financing activities offset by
$49.1 million of which was provided from investing activities. The $87.8 million
of cash and cash equivalents used in operations included several items that were
significant. These receipt and payment items included: (a) receipts of (i)
asbestos-related insurance receipts of $18.6 million in respect of prior year
asbestos-related payments, (ii) cash outflows avoided as a result of the
Company's share of QAL net borrowings in the second and third quarters of 2003
that reduced the Company's cash requirements by approximately $11.0 million, and
(iii) the benefit from decreases in receivables and inventories of approximately
$20.0 million due to Valco's 2003 potline curtailment in excess of lost
earnings; and (b) payments of (i) a foreign income tax payment related to prior
periods of $22.0 million, and (ii) end of service benefits payments totaling
approximately $13.2 million in connection with the Valco potline curtailments.
The balance of the net cash used by operating activities in 2003 resulted from a
combination of adverse market factors in the business segments in which the
Company operates including: (a) primary aluminum prices that were below
long-term averages, (b) weak demand for fabricated metal products in general,
but particularly for engineered products, (c) higher than average fuel oil and
natural gas prices, and (d) significant expenditures in respect of retiree
medical and reorganization costs. Cash used by operating activities during the
year ended December 31, 2002 ($49.6 million) included several items not
typically considered part of our normal recurring operations including: (a)
asbestos-related insurance recoveries of $23.3 million; (b) approximately $30.0
million of funding to QAL in respect of QAL's scheduled debt maturities; and (c)
foreign income tax payments related to prior year activities of $8.0 million.

During March 2004, the Company received a waiver from the DIP Facility lenders
in respect of a financial covenant, for the quarter ended December 31, 2003 and
for all measurement periods through May 31, 2004. In connection with the waiver,
the Company agreed to reduce the available amount of the borrowing base by $25.0
million. The Company is currently working with the DIP Facility lenders to
complete an amendment that is anticipated, among other things, to: (1) reset the
financial covenant based on more recent forecasts; (2) authorize the sale of the
Company's interests in and related to Alpart, QAL, Gramercy/KJBC and Valco
within certain parameters, and (3) reduce the availability of the fixed asset
subcomponent to a level that, by emergence will be based on advances solely in
respect of machinery and equipment at the fabricated products facilities. While
the effect of such amendment will be to reduce overall availability, assuming
the previously mentioned commodity assets are sold, the Company currently
anticipates that once amended, availability under the DIP Facility will still
likely be in the $50.0 million - $100.0 million range and that amount should be
adequate for the fabricated products operations. This belief is based on the
fact that it was the commodities' assets and operations that subjected the
Company to the most variability and exposure both from a price risk basis as
well as from an operating perspective, thereby increasing the Company's
liquidity needs. While the Company anticipates that it will be successful in
completing an amendment to the DIP Facility along the lines outlined above in
time for an April 2004 or May 2004 Court hearing, no assurances can be given in
this regard.

-  Our earnings are sensitive to a number of variables
Our operating earnings are sensitive to a number of variables over which we have
no direct control. Key variables in this regard include prices for primary
aluminum and energy and general economic conditions.

The price of primary aluminum significantly affects our financial results.
Primary aluminum prices historically have been subject to significant cyclical
price fluctuations. The Company believes the timing of changes in the market
price of aluminum are largely unpredictable. Since 1993, the average LME
transaction price has ranged from approximately $.50 to $1.00 per pound. If the
Company were to complete the sale of its interests in and related to Alpart,
QAL, Gramercy/KJBC and Valco, the Company would change from being a net seller
of primary aluminum to a net user of primary aluminum. As such, the Company's
risk would be whether it can successfully pass on any metal price increases to
its customers. See Item 7A., Quantitative and Qualitative Disclosures About
Market Risks, Sensitivity for additional discussion.

Electric power has historically represented an important production input for us
at our aluminum smelters and its cost can significantly affect our
profitability. Power contracts for our smelters have varying contractual terms.
See "Business--Primary Aluminum Business Unit." Our earnings, particularly in
our Bauxite and Alumina business unit, are also sensitive to changes in the
prices for natural gas, fuel oil and diesel oil, which are used in our
production processes, and to foreign exchange rates in respect of our cash
commitments to our foreign subsidiaries and affiliates. Assuming the Company
were to complete the sale of its interests in and related to Alpart, QAL,
Gramercy/KJBC and Valco, the Company's exposure to energy prices would be
dramatically reduced, but not eliminated. See Item 7A., Quantitative and
Qualitative Disclosures About Market Risks, Sensitivity for additional
discussion.

Changes in global, regional, or country-specific economic conditions can have a
significant impact on overall demand for aluminum-intensive fabricated products
in the transportation, distribution, and aerospace markets. Such changes in
demand can directly affect our earnings by impacting the overall volume and mix
of such products sold. To the extent that these end-use markets weaken, demand
can also diminish for alumina and primary aluminum.

-  The Company's current or past operations subject it to environmental
   compliance, clean-up and damage claims that have been and continue to be
   costly
The operations of the Company's facilities are regulated by a wide variety of
international, federal, state and local environmental laws. These environmental
laws regulate, among other things, air and water emissions and discharges; the
generation, storage, treatment, transportation and disposal of solid and
hazardous waste; and the release of hazardous or toxic substances, pollutants
and contaminants into the environment. Compliance with these environmental laws
is costly. While legislative, regulatory and economic uncertainties make it
difficult for us to project future spending for these purposes, we currently
anticipate that in the 2004 - 2005 period, the Company's environmental capital
spending will be approximately $.5 million per year and that the Company's
operating costs will include pollution control costs totaling approximately
$15.8 million per year. However, subsequent changes in environmental laws may
change the way the Company must operate and may force the Company to spend more
than we currently project.

Additionally, the Company's current and former operations can subject it to
fines or penalties for alleged breaches of environmental laws and to other
actions seeking clean-up or other remedies under these environmental laws. The
Company also may be subject to damages related to alleged injuries to health or
to the environment, including claims with respect to certain waste disposal
sites and the clean-up of sites currently or formerly used by the Company.

Currently, the Company is subject to certain lawsuits under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 ("CERCLA"). The
Company, along with certain other companies, has been named as a Potentially
Responsible Party for clean-up costs at certain third-party sites listed on the
National Priorities List under CERCLA. As a result, the Company may be exposed
not only to its assessed share of clean-up but also to the costs of others if
they are unable to pay. Additionally, the Company's Mead, Washington, facility
has been listed on the National Priorities List under CERCLA. The Company and
the regulatory authorities agreed to a plan of remediation in respect of the
Mead facility in January 2000.

In response to environmental concerns, we have established environmental
accruals representing our estimate of the costs we reasonably expect the Company
to incur in connection with these matters. At December 31, 2003, the balance of
our accruals, which are primarily included in our long-term liabilities, was
$82.5 million. We estimate that the annual costs charged to these environmental
accruals will be approximately $25.4 million in 2004, $2.2 million to $4.3
million per year for the years 2005 through 2008 and an aggregate of
approximately $45.7 million thereafter. However, we cannot assure you that the
Company's actual costs will not exceed our current estimates. We believe that it
is reasonably possible that costs associated with these environmental matters
may exceed current accruals by amounts that could range, in the aggregate, up to
an estimated $15.4 million. See Note 12 of Notes to Consolidated Financial
Statements for additional information.

- The settlement of the asbestos-related matters may have a major impact on our
  plan or plans of reorganization
The Company has been one of many defendants in numerous lawsuits in which the
plaintiffs allege that they have injuries caused by exposure to asbestos during,
and as a result of, their employment or association with the Company, or
exposure to products containing asbestos produced or sold by the Company. The
lawsuits generally relate to products the Company sold more than 20 years ago.
Due to the Cases, existing lawsuits are stayed and new lawsuits cannot be
commenced against us or the Company.

Our December 31, 2003, balance sheet includes a liability for estimated
asbestos-related costs of $610.1 million. In determining the amount of the
liability, we have included estimates only for the costs of claims through 2011
because we do not have a reasonable basis for estimating costs beyond that
period. However, the plan of reorganization process could require an estimation
of the Company's entire asbestos-related liability, which may go beyond 2011.
Additional asbestos-related claims are likely to be asserted against the Company
as a part of the Chapter 11 process. Management cannot reasonably predict the
ultimate number of such claims or the amount of the associated liability.
However, it is likely that such amounts could exceed, perhaps significantly, the
liability amounts reflected in the Company's consolidated financial statements,
which (as previously stated) is only reflective of an estimate of claims through
2011. The Company's obligations in respect of the currently pending and future
asbestos-related claims will ultimately be resolved as a part of the overall
Chapter 11 proceedings. Management will periodically continue to reassess its
asbestos-related liabilities and estimated insurance recoveries as the Cases
proceed. However, absent unanticipated developments such as asbestos-related
legislation, material developments in other asbestos-related proceedings or in
the Company's Chapter 11 proceedings, it is not anticipated that the Company
will have sufficient information to reevaluate its asbestos-related obligations
and estimated insurance recoveries until later in the Cases. Any adjustments
ultimately deemed to be required as a result of the reevaluation of the
Company's asbestos-related liabilities or estimated insurance recoveries could
have a material impact on the Company's future financial statements.

We believe the Company has insurance coverage for a substantial portion of such
asbestos-related costs. Accordingly, our December 31, 2003 balance sheet
includes a long-term receivable for estimated insurance recoveries of $465.4
million. We believe that recovery of this amount is probable and additional
amounts may be recoverable in the future if additional claims are received.
However, we cannot assure you that all such amounts will be collected. The
timing and amount of future recoveries from the Company's insurance carriers
will depend on the pendency of the Cases and on the resolution of disputes
regarding coverage under the applicable insurance policies. During October 2001,
June 2003 and January 2004, the court ruled favorably on a number of policy
interpretation issues. Additionally, one of the favorable October 2001 rulings
was affirmed in February 2002 by an intermediate appellate court in response to
a petition from the insurers. The rulings did not result in any changes to our
estimates of current and future asbestos-related insurance recoveries. The trial
court may hear additional issues from time to time. The Company has entered into
settlement agreements with several of the insurers whose asbestos-related
obligations are primarily in respect of future asbestos claims. These settlement
agreements were approved by the Court. In accordance with the Court approval,
the insurers are to pay certain amounts, pursuant to the terms of an escrow
agreement, into a fund (the "Escrow Fund") in which the Company has no interest,
but which amounts will be available for the ultimate settlement of the Company's
asbestos-related claims. It is possible that settlements with additional
insurers will occur. However, no assurance can be given that such settlements
will occur. Given the expected significance of probable future asbestos-related
payments, the receipt of timely and appropriate payments from the Company's
insurers is critical to a successful plan of reorganization and our long-term
liquidity.

-  Our profits and cash flows may be adversely impacted by the results of the
   Company's hedging programs
From time to time in the ordinary course of business, the Company enters into
hedging transactions to limit its exposure resulting from price risks in respect
of primary aluminum prices, energy prices and foreign currency requirements. To
the extent that the prices for primary aluminum exceed the fixed or ceiling
prices established by the Company's hedging transactions or that energy costs or
foreign exchange rates are below the fixed prices, our profits and cash flow
would be lower than they otherwise would have been.

-   We operate in a highly competitive industry
Each of the segments of the aluminum industry in which the Company operates is
highly competitive. There are numerous companies who operate in the aluminum
industry. Certain of our competitors are substantially larger, have greater
financial resources than we do and may have other strategic advantages.

-  The Company is subject to political and regulatory risks in a number of
   countries
The Company operates facilities in the United States and in a number of other
countries, including Australia, Canada, Ghana, Jamaica, and the United Kingdom.
While we believe the Company's relationships in the countries in which it
operates are generally satisfactory, we cannot assure you that future
developments or governmental actions in these countries will not adversely
affect the Company's operations particularly or the aluminum industry generally.
Among the risks inherent in the Company's operations are unexpected changes in
regulatory requirements, unfavorable legal rulings, new or increased taxes and
levies, and new or increased import or export restrictions. The Company's
operations outside of the United States are subject to a number of additional
risks, including but not limited to currency exchange rate fluctuations,
currency restrictions, and nationalization of assets.

Assuming that the Company were to complete the sale of its interests in and
related to Alpart, QAL, Gramercy/KJBC and Valco, these risks would be reduced.
However, no assurance can be given that these sales will occur.

ITEM 2.       PROPERTIES

The locations and general character of the principal plants, mines, and other
materially important physical properties relating to the Company's operations
are described in Item 1 "- Business Operations" and those descriptions are
incorporated herein by reference. The Company owns in fee or leases all the real
estate and facilities used in connection with its business. Plants and equipment
and other facilities are generally in good condition and suitable for their
intended uses.

The Company's obligations under the DIP Facility are secured by, among other
things, liens on the Company's domestic plants. See Note 7 of Notes to
Consolidated Financial Statements for further discussion.

ITEM 3.       LEGAL PROCEEDINGS

This section contains statements which constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. See
Item 1 of this Report for cautionary information with respect to such
forward-looking statements.

REORGANIZATION PROCEEDINGS

During the pendency of the Cases, substantially all pending litigation, except
certain environmental claims and litigation, against the Debtors is stayed.
Generally, claims against a Debtor arising from actions or omissions prior to
its Filing Date will be settled in connection with the plan of reorganization.
See Item 1. "Business - Reorganization Proceedings" for a discussion of the
reorganization proceedings. Such discussion is incorporated herein by reference.

ASBESTOS-RELATED LITIGATION

The Company is a defendant in a number of lawsuits, some of which involve claims
of multiple persons, in which the plaintiffs allege that certain of their
injuries were caused by, among other things, exposure to asbestos during, and as
a result of, their employment or association with the Company or exposure to
products containing asbestos produced or sold by the Company. The lawsuits
generally relate to products the Company has not manufactured for more than 20
years. The lawsuits are currently stayed by the Cases. The portion of Note 12 of
Notes to Consolidated Financial Statements under the heading "Asbestos
Contingencies" is incorporated herein by reference.

LABOR MATTERS

In connection with the USWA strike and subsequent lock-out by the Company,
certain allegations of ULPs were filed by the USWA with the NLRB. As previously
disclosed, the Company responded to all such allegations and believed they were
without merit. Twenty-two of the twenty-four allegations of ULPs brought against
the Company by the USWA were dismissed in September 2001. In May 2002, the
administrative law judge ruled against the Company in respect of the two
remaining ULP allegations and recommended that the NLRB award back wages, plus
interest, less any earnings of the workers during the period of the lockout. The
administrative law judge's ruling did not contain any specific amount of
proposed award and was not self-executing. The USWA filed a proof of claim for
$240.0 million in the Cases in respect of this matter.

In January 2004, as part of its settlement with the USWA with respect to pension
and retiree medical benefits, the Company and the USWA agreed to settle their
case pending before the NLRB, subject to approval of the NLRB General Counsel
and the Court and ratification by the union members. The settlement was
subsequently ratified by the union members in February 2004. Further, the
settlement with respect to retiree medical and pension benefits and the NLRB
case has been approved by the Court subject to certain conditions. The agreement
may be terminated by either the USWA or the Company in certain circumstances.
See Note 9 of Notes to Consolidated Financial Statements for additional
discussion of agreements. Under the terms of the agreement, solely for the
purposes of determining distributions in connection with the reorganization, an
unsecured pre-petition claim in the amount of $175.0 million will be allowed.
The agreement to settle this matter was contingent on NLRB and Court approval
and ratification by union members. This amount was not reflected in the
Company's consolidated financial statements at December 31, 2003. However, the
charge and an offsetting liability associated with the settlement of this matter
will be reflected in the Company's consolidated financial statements if and when
the agreement with the USWA is ultimately approved by the Court. Also, as part
of the agreement, the Company agreed to adopt a position of neutrality regarding
the unionization of any employees of the reorganized company.

The portion of Note 12 of Notes to Consolidated Financial Statements under the
heading "Labor Matters" is incorporated herein by reference.

HEARING LOSS CLAIMS

During February 2004, the Company reached a settlement in respect of 400 claims,
which alleged that certain individuals who were employees of the Company,
principally at a facility previously owned and operated by the Company in
Louisiana, suffered hearing loss in connection with their employment. Under the
terms of the settlement, which is still subject to Court approval, the claimants
will be allowed claims totaling $15.8 million. As such, the Company recorded a
$15.8 million charge in the fourth quarter of 2003 and a corresponding
obligation. However, no cash payments by the Company are required in respect of
these amounts. Rather the settlement agreement contemplates that, at emergence,
these claims will be transferred to a separate trust along with certain rights
against certain corresponding insurance policies of the Company and that such
insurance policies will be the sole source of recourse to the claimants. While
the Company believes that the insurance policies are of value, no amounts have
been reflected in the Company's financial statements at December 31, 2003 in
respect of such policies as the Company could not with the level of certainty
necessary determine the amount of recoveries that were probable.

OTHER MATTERS

Various other lawsuits and claims are pending against the Company. While
uncertainties are inherent in the final outcome of such matters and it is
presently impossible to determine the actual costs that ultimately may be
incurred, management believes that the resolution of such uncertainties and the
incurrence of such costs should not have a material adverse effect on the
Company's consolidated financial position, results of operations, or liquidity.

See Note 12 of Notes to Consolidated Financial Statements for discussion of
additional litigation.

ITEM 4.       SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

No matter was submitted to a vote of security holders of the Company during the
fourth quarter of 2003.

PART II

ITEM 5.       MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
              MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

There is no established public market for the Company's Common Stock, which is
held solely by Kaiser. The Company has not paid any dividends on its Common
Stock during the two most recent fiscal years. In accordance with the Code and
the DIP Facility, the Company is currently not permitted to pay any dividends or
purchase any of its stock.

Kaiser's non-qualified stock option plans, which are Kaiser's only stock option
plans, have been approved by Kaiser's stockholders. The number of shares of
Common Stock to be issued upon exercise of outstanding options, the weighted
average price per share of the outstanding options and the number of shares of
Common Stock available for future issuance under Kaiser's non-qualified stock
option plans at December 31, 2003, included under the heading "Incentive Plans"
in Note 9 of Notes to Consolidated Financial Statements is incorporated herein
by reference.

See Note 7 of Notes to Consolidated Financial Statements under the heading "Debt
Covenants and Restrictions" and the " Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital Resources
- Capital Structure" for additional information, which information is
incorporated herein.

ITEM 6.       SELECTED FINANCIAL DATA

Selected financial data for the Company is incorporated herein by reference to
the table at page 7 of this Report, to the table at page 22 of Management's
Discussion and Analysis of Financial Condition and Results of Operations, to
Note 17 of Notes to Consolidated Financial Statements, and to the Five-Year
Financial Data on pages 88 - 89 in this Report.

ITEM 7.       MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
              RESULTS OF OPERATIONS

REORGANIZATION PROCEEDINGS

The Company, Kaiser, and 24 of the Company's subsidiaries have filed separate
voluntary petitions with the Court for reorganization under Chapter 11 of the
Code. The Company, Kaiser and 15 of the Company's subsidiaries (the "Original
Debtors") filed in the first quarter of 2002 and nine additional Company
subsidiaries (the "Additional Debtors") filed in the first quarter of 2003. The
Original Debtors and Additional Debtors are collectively referred to herein as
the "Debtors" and the Chapter 11 proceedings of these entities are collectively
referred to herein as the "Cases." For purposes of this Report, the term "Filing
Date" shall mean, with respect to any particular Debtor, the date on which such
Debtor filed its Case. None of the Company's non-U.S. joint ventures are
included in the Cases. The Cases are being jointly administered. The Debtors are
managing their businesses in the ordinary course as debtors-in-possession
subject to the control and administration of the Court.

As provided by the Code, the Debtors had the exclusive right to propose a plan
of reorganization for 120 days following the initial Filing Date. The Court has
subsequently approved several extensions of the exclusivity period for all
Debtors, the most recent of which was set to expire February 29, 2004. A motion
to extend the exclusivity period for KAAC, KJC and AJI through April 30, 2004,
and for the remaining Debtors through June 30, 2004, was filed by the Company in
February 2004. By filing the motion to extend the exclusivity period, the period
is automatically extended until the April 26, 2004 Court hearing date. As the
Debtors' motion to extend the exclusivity period was agreed to by the UCC and as
the ACC and the Futures' Representative have indicated that they support a
common extension of the exclusivity period for all Debtors through either April
30, 2004 or June 30, 2004, the Debtors believe that it is likely that the
exclusivity period for all Debtors will be extended through at least April 30,
2004. Additional extensions may be sought. However, no assurance can be given
that any such future extension requests will be granted by the Court. If the
Debtors fail to file a plan of reorganization during the exclusivity period, or
if such plan is not accepted by the requisite numbers of creditors and equity
holders entitled to vote on the plan, other parties in interest in the Cases may
be permitted to propose their own plan(s) of reorganization for the Debtors.

The Debtors anticipate that substantially all liabilities of the Debtors as of
their Filing Date will be settled under one or more plans of reorganization to
be proposed and voted on in accordance with the provisions of the Code. Although
the Debtors intend to file and seek confirmation of such a plan or plans, there
can be no assurance as to when the Debtors will file such a plan or plans or as
to whether such plan or plans will be confirmed by the Court and consummated.

In working toward one or more plans of reorganization, the Debtors have been,
and continue to be, engaged in discussions with each of their key
constituencies, including the Committees, the Futures' Representative, the PBGC,
and the appropriate union representatives. The treatment of individual groups of
creditors in any such plan of reorganization cannot be determined definitively
at this time. The ultimate treatment of and recoveries to individual creditors
is dependent on, among other things, the total amount of claims against the
Debtors as ultimately determined by the Court, the priority of the applicable
claims, the outcome of ongoing discussions with the key constituencies, the
amount of value available for distribution in respect of claims and the
completion of the plan confirmation process consistent with applicable
bankruptcy law.

The Debtors' objective is to achieve the highest possible recoveries for all
stakeholders, consistent with the Debtors' abilities to pay, and to continue the
operations of their businesses. However, there can be no assurance that the
Debtors will be able to attain these objectives or achieve a successful
reorganization. While valuation of the Debtors' assets and estimation of
pre-Filing Date claims at this stage of the Cases are subject to inherent
uncertainties, the Debtors currently believe that, in the aggregate, it is
likely that their liabilities will be found to significantly exceed the fair
value of their assets. Therefore, the Debtors currently believe that it is
likely that substantially all pre-Filing Date claims will be settled at less
than 100% of their face value and the equity interests of the Company's
stockholders will be cancelled without consideration. Further, the Debtors
believe that it is likely that: (a) the claims of pre-petition creditors that
are given certain priorities by statute or have the benefit of guarantees or
other contractual or structural seniority will likely receive substantially
greater recoveries than pre-petition creditors that have no such priorities or
seniority; and (b) all pending and future asbestos-related personal injury
claims are likely to be resolved through the formation, pursuant to a plan of
reorganization, of a statutory trust to which all claims would be directed by a
channeling injunction that would permanently remove all asbestos liability from
the Debtors. A similar trust arrangement is anticipated in respect of pending
and future silica, hearing loss and coal tar pitch volatiles personal injury
claims. The trusts would be funded pursuant to statutory requirements and
agreements with representatives of the affected parties, using the Debtors'
insurance assets and certain other consideration that has yet to be agreed. No
assurances can be provided that the foregoing will ultimately be included in any
plan(s) of reorganization the Debtors may file. Further, while the Debtors
believe it is possible to successfully reorganize their operations and emerge
from Chapter 11 in 2004, their ability to do so is subject to inherent
market-related risks as well as successful negotiation and Court approval for
the treatment of creditors consistent with the applicable bankruptcy law.

The Debtors' Cases are being administered on a consolidated basis. In fact,
however, there are separate cases for each Debtor or twenty-six Cases in total.
The impacts of the Cases and any plans of reorganization proposed for individual
debtors will depend on each Debtor's specific circumstances and the differing
interests that creditors have in respect of such entities.

A substantial majority of the claims in the Cases are against the Company. These
include claims in respect of substantially all of the Debtors' debt obligations,
obligations in respect of pension and retiree medical benefits, asbestos-related
and personal injury claims, and known environmental obligations. As such, all of
these claimholders will have claims against the Company that, except as further
described below, will have to be satisfied by the Company's assets, which
generally include the Gramercy alumina refinery, the interests in Anglesey, the
interests in Valco and the fabricated products plants (other than the London,
Ontario, Canada and Richmond, Virginia extrusion facilities, which are owned by
separate subsidiaries that are also Debtors). The Company's assets also include
certain intercompany receivables from certain of its Debtor subsidiaries for
funding provided to its joint venture affiliates.

In general, except as described below, there are a relatively modest number or
amount of third party trade and other claims against the Company's other Debtor
subsidiaries. Sixteen of the Debtors (including KAC) have no material ongoing
activities or operations and have no material assets or liabilities other than
intercompany items. The Company believes that it is likely that these entities
will ultimately be merged out of existence or dissolved in some manner. The
remaining Debtor subsidiaries (which include AJI, KJC, KAAC, KAII, KACOCL, KBC,
Bellwood, KATSI and KFC) own certain extrusion facilities or act largely as
intermediaries between the Company and certain of its other subsidiaries and
joint venture affiliates or interact with third parties on behalf of the Company
and its joint venture affiliates. As such, the vast majority of the pre-petition
claims against such entities are related to intercompany activities. However,
certain of those holders of claims against the Company also have claims against
certain Company subsidiaries that own the Company's interests in joint venture
affiliates and which represent a significant portion of the Company's
consolidated asset value. For example, noteholders have claims against each of
AJI and KJC, which own the Company's interests in Alpart, and KAAC, which owns
the Company's interests in QAL, as a result of AJI, KJC and KAAC having been
subsidiary guarantors of the Company's Senior Notes and Senior Subordinated
Notes. Additionally, the PBGC, pursuant to statute, has joint and several claims
against the Company and all entities which are 80% or more owned by the Company
(referred to as "Controlled Group Members"). Controlled Group Members include
each of AJI, KJC and KAAC, as well as all of the other Debtors. The only other
significant claims against AJI, KJC and KAAC are intercompany claims related to
funding provided to these entities by the Company. As such, it is likely that
the vast majority of any value realized in respect of the Company's interests in
Alpart and QAL, either from their disposition or realized upon emergence from
such operations, is likely to be for the benefit of the noteholders and the
PBGC.

In order to resolve the question of what consideration from any sale or other
disposition of AJI, KJC and/or KAAC, or their respective assets, should be for
the benefit of the Company and its claimholders (in respect of the Company's
intercompany claims against such entities), an intercompany settlement agreement
is being negotiated between the UCC and the Company (the "Intercompany
Agreement"). The proposed Intercompany Agreement would also release
substantially all other pre- and post-petition intercompany claims between the
Debtors. The proposed Intercompany Agreement, if finalized substantially in its
current form, would provide, among other things, for payments of cash by AJI,
KJC and KAAC to the Company of $85.0 million in respect of its intercompany
claims against AJI, KJC and KAAC plus any amounts up to $14.3 million plus
accrued and unpaid interest and fees paid by the Company to retire
Alpart-related debt. Under the proposed Intercompany Agreement, such amount
would be increased or decreased for (1) any net cash flows collected by or
funded by the Company between April 1, 2004 and the earlier of (a) AJI's, KJC's
and KAAC's emergence from Chapter 11 or (b) the sale of AJI's, KJC's and KAAC's
respective interests in and related to Alpart and QAL and (2) any purchase price
adjustments (other than incremental amounts related to what, if any, alumina
sales contracts are transferred) pursuant to the Company's January 2004
agreement to sell its interests in Alpart, if consummated. The proposed
Intercompany Agreement calls for such payments to be made to the Company at the
earlier of the sale of the Company's interests in Alpart and QAL or the
emergence of AJI, KJC and KAAC from Chapter 11. Under the proposed Intercompany
Agreement, all such payments, other than $28.0 million to be paid to the Company
upon the sale of Alpart and any amounts paid by the Company in respect of
retiring the Alpart-related debt, are likely to be held in escrow for the
benefit of the Company until the Company's emergence from the Cases. In the
interim, the Company's claims against these entities will be secured by liens.
There are still a number of issues with respect to the proposed Intercompany
Agreement that must be satisfactorily resolved. The Intercompany Agreement once
finalized will be subject to Court approval. Additionally, the ACC and the
Futures' Representative have not yet reviewed, commented on or agreed to the
terms of the Intercompany Agreement. The Company currently expects the Court to
consider the proposed Intercompany Agreement at the regularly scheduled April
2004 or May 2004 omnibus hearing. However, no assurances can be provided that
the issues can be resolved within the time frame necessary to submit the
Intercompany Agreement to the Court under that time frame.

At emergence from Chapter 11, the Company will have to pay or otherwise provide
for a material amount of claims. Such claims include accrued but unpaid
professional fees, priority tax and environmental claims, secured claims, and
certain post-petition obligations (collectively, "Exit Costs"). The Company
currently estimates that its Exit Costs will be in the range of $100.0 million
to $120.0 million. The Company currently expects to fund such Exit Costs using
the proceeds to be received under the proposed Intercompany Agreement together
with existing cash resources and available liquidity under an exit financing
facility that will replace the current Post-Petition Credit Agreement (see Note
7 of Notes to Consolidated Financial Statements). If payments under the proposed
Intercompany Agreement together with existing cash resources and liquidity
available under an exit financing facility are not sufficient to pay or
otherwise provide for all Exit Costs, the Company and its other Debtor
subsidiaries will not be able to emerge from Chapter 11 unless and until
sufficient funding can be obtained. Management believes it will be able to
successfully resolve any issues that may arise in respect of the proposed
Intercompany Agreement or be able to negotiate a reasonable alternative.
However, no assurances can be given in this regard.

The Company expects that, when the Debtors ultimately file a plan or plans of
reorganization, it is likely to reflect the Company's strategic vision for
emergence from Chapter 11: (a) a standalone going concern with manageable
leverage and financial flexibility, improved cost structure and competitive
strength; (b) a company positioned to execute its long-standing vision of market
leadership and growth in fabricated products; (c) a company that delivers a
broad product offering and leadership in service and quality for its customers
and distributors; and (d) a company with continued ownership of those commodity
assets that have the potential to generate significant cash at steady-state
metal prices and/or which provide a strategic hedge against the fabricated
products business' needs for primary aluminum. While the Company intends to
continue to pursue a standalone fabricated products company emergence strategy,
from time to time the Debtors may also evaluate other reorganization strategies,
consistent with the Debtors' responsibility to maximize the recoveries for its
stakeholders. The Company's advisors have developed a timeline that, assuming
the current pace of the Cases continues, is expected to allow the Company to
file a plan or plans of reorganization by mid-year 2004 and emerge from Chapter
11 as early as late in the third quarter of 2004. However, the Debtors' ability
to do so is subject to the confirmation of a plan of reorganization in
accordance with the applicable bankruptcy law and, accordingly, no assurances
can be given as to whether or when any plan or plans of reorganization will
ultimately be filed or confirmed.

In light of the Company's stated strategy and to further the Debtors' ultimate
planned emergence from Chapter 11, the Debtors, with the approval of the
Company's Board of Directors and in consultation with the UCC, the ACC and the
Futures' Representative, began exploring the possible sale of one or more of
their commodities assets during the third quarter of 2003. In particular, the
Debtors began exploring the possible sale of their interests in and related to:
(a) Alpart, (b) Anglesey, and (c) Gramercy and KJBC. The possible sale of the
Debtors' interests in respect of Gramercy and KJBC was explored jointly given
their significant integration. More recently, the Company has also begun the
process of exploring the sale of its 20% interest in and related to QAL. While
the Company believes that the QAL-related interests are likely to be its most
valuable commodity asset and expects that there are or will be a number of
parties interested in acquiring such interests, no assurances can be given that
any such sale will occur.

In exploring the sale of its interest in and related to Alpart, Anglesey and
Gramercy/KJBC, the Debtors, through their investment advisors, surveyed the
potential market and initiated discussions with numerous parties believed to
have an interest in such assets. In addition, other parties contacted the
Debtors and/or their investment advisors to express an interest in purchasing
the assets. The Debtors provided (subject to confidentiality agreements)
information regarding the applicable interests to these parties, each of which
was asked to submit a non-binding expression of interest regarding the
individual assets. After receiving these initial expressions of interest from
potential purchasers, the Debtors determined which of the expressions of
interest received represented reasonable indications of value ("Qualified
Bids"). Potential bidders ("Qualified Bidders") that submitted Qualified Bids
were then permitted to conduct due diligence in respect of the assets for which
they submitted a Qualified Bid and to submit definitive proposals.

The Debtors reviewed the definitive proposals submitted and, in consultation
with the UCC, the ACC and the Futures' Representative, and other key
constituencies, determined with which Qualified Bidders the Debtors would pursue
further negotiations.

As previously disclosed, while the Company had stated that it was considering
the possibility of disposing of one or more of its commodity facilities, through
the third quarter of 2003, the Company still considered all of its commodity
assets as "held for use," as no definite decisions had been made regarding the
disposition of such assets. However, based on additional negotiations with
prospective buyers and discussions with key constituents, the Company concluded
that dispositions of Alpart and Gramercy/KJBC were likely and, therefore, that
recoverability should be evaluated differently at December 31, 2003. The change
in evaluation methodology is required because, under GAAP, assets to be held and
used are evaluated for recoverability differently than assets to be sold or
disposed of. Assets to be held and used are evaluated based on their expected
undiscounted future net cash flows. So long as the Company reasonably expects
that such undiscounted future net cash flows for each asset will exceed the
recorded value of the asset being evaluated, no impairment is required. However,
if plans to sell or dispose of an asset or group of assets meet a number of
specific criteria, then, under GAAP, such assets should be considered held for
sale/disposition and their recoverability should be evaluated, for each asset,
based on expected consideration to be received upon disposition. Sales or
dispositions at a particular time will be affected by, among other things, the
existing industry and general economic circumstances as well as the Company's
own circumstances, including whether or not assets will (or must) be sold on an
accelerated or more extended timetable. Such circumstances may cause the
expected value in a sale or disposition scenario to differ materially from the
realizable value over the normal operating life of assets, which would likely be
evaluated on long-term industry trends.

As more fully discussed in Notes 5 and 15 of Notes to Consolidated Financial
Statements, given uncertainties as to the ultimate consummation of these
transactions as well as the ultimate proceeds that may be received in respect of
a sale of the Company's interests in and related to Alpart and Valco, no
impairment charges have been recorded in the December 31, 2003 financial
statements. However, based on the minimum end of the range of expected proceeds
pursuant to the previously disclosed January 2004 agreement to sell the
Alpart-related interests, the amounts ultimately received from any such sale at
closing may be less than the current book value by approximately $50.0 million.
Additionally, based on the minimum purchase price pursuant to the MOU between
the Company and the GoG and the VRA in respect of the sale of the Company's
interests in Valco, it is possible that the amounts ultimately received may be
less than the Company's investment in Valco-related assets and liabilities by
$20.0 - $30.0 million. By contrast, in evaluating the recoverability of the
Company's basis in Gramercy/KJBC, the Company concluded that an impairment
charge of approximately $368.0 million was required as there were no offers that
were anywhere near the carrying value of the assets (see Note 5 of Notes to
Consolidated Financial Statements for a discussion of the impairment charge).
The actual amount of gain or loss if and when the sales are consummated may
differ from the foregoing amounts as a result of closing adjustments, changes in
economic circumstances and other matters.

OVERVIEW

The Company operates in the following business segments: Bauxite and alumina,
Primary aluminum, Fabricated products and Commodities marketing. The Company has
historically used a portion of its bauxite, alumina, and primary aluminum
production for additional processing at certain of its downstream facilities.
However, as previously disclosed, as a part of a plan of reorganization, the
Company expects that it will emerge from its Chapter 11 proceedings primarily as
a fabricated products company.

The table below provides selected operational and financial information on a
consolidated basis with respect to the Company for the years ended December 31,
2003, 2002 and 2001. The following data should be read in conjunction with the
Company's consolidated financial statements and the notes thereto contained
elsewhere herein. See Note 17 of Notes to Consolidated Financial Statements for
further information regarding segments. (All references to tons are to metric
tons of 2,204.6 pounds.) Intersegment transfers are valued at estimated market
prices.


                                                                                      Year Ended December 31,
                                                                          -----------------------------------------------
(In millions of dollars, except shipments and prices)                              2003             2002             2001
------------------------------------------------------------------------- -------------  ---------------   --------------
Fabricated Products:(1)
   Shipments (000 tons)                                                          168.9            170.7            192.5
   Net Sales                                                              $      597.8   $        608.6    $       737.5
   Operating Income (Loss)(2)                                             $      (25.7)  $        (22.2)   $         5.0

-------------------------------------------------------------------------------------------------------------------

Commodities, Corporate and Other:
   Shipments (000 tons) -
      Alumina
       Third Party                                                             2,929.0          2,626.6          2,582.7
       Intersegment                                                              176.6            343.9            422.8
                                                                          -------------  ---------------   --------------
             Total Alumina                                                     3,105.6          2,970.5          3,005.5
                                                                          -------------  ---------------   --------------
      Primary Aluminum
       Third Party                                                                89.7            194.8            244.7
       Intersegment                                                                -                1.7              2.3
                                                                          -------------  ---------------   --------------
             Total Primary Aluminum                                               89.7            196.5            247.0
                                                                          -------------  ---------------   --------------
   Average Realized Third Party Sales Price:
      Alumina (per ton)                                                   $        175   $          165    $         186
      Primary Aluminum (per pound)                                        $        .65   $          .62    $         .67
   Net Sales:
      Bauxite and Alumina
       Third Party (includes net sales of bauxite)                        $      539.5   $        458.1    $       508.3
       Intersegment                                                               30.2             58.6             77.9
                                                                          -------------  ---------------   --------------
             Total Bauxite & Alumina                                             569.7            516.7            586.2
                                                                          -------------  ---------------   --------------
   Primary Aluminum
       Third Party                                                               128.1            265.3            358.9
       Intersegment                                                                -                2.5              3.8
                                                                          -------------  ---------------   --------------
             Total Primary Aluminum                                              128.1            267.8            362.7
                                                                          -------------  ---------------   --------------
   Commodities Marketing                                                           7.1             39.1             22.9
   Minority Interests                                                             92.8             98.5            105.1
                                                                          -------------  ---------------   --------------
             Total Commodities Net Sales                                  $      797.7   $        922.1    $     1,076.9
                                                                          =============  ===============   ==============
   Operating Income (Loss):
      Bauxite & Alumina                                                   $      (80.1)  $        (48.5)   $       (46.9)
      Primary Aluminum                                                           (51.9)           (23.1)             5.1
      Commodities Marketing                                                         .2             36.2              5.6
      Corporate and Other(3)                                                     (74.5)           (98.8)           (68.2)
                                                                          -------------  ---------------   --------------
             Total Commodities, Corporate and Other                       $     (206.3)  $       (134.2)   $      (104.4)
                                                                          =============  ===============   ==============

-------------------------------------------------------------------------------------------------------------------

Combined:
   Net Sales -
      Fabricated Products                                                 $      597.8   $        608.6    $       737.5
      Commodities                                                                797.7            922.1          1,076.9
      Eliminations                                                               (30.2)           (61.1)           (81.7)
                                                                          -------------  ---------------   --------------
             Total Net Sales                                              $    1,365.3   $      1,469.6    $     1,732.7
                                                                          =============  ===============   ==============
   Operating Income (Loss) -
      Fabricated Products                                                 $      (25.7)  $        (22.2)   $         5.0
      Commodities, Corporate and Other                                          (206.3)          (134.2)          (104.4)
      Eliminations                                                                 4.1              1.7              1.0
      Other Operating (Charges) Benefits, Net(4)                                (511.0)          (251.2)           163.6
                                                                          -------------  ---------------   --------------
             Total Operating Income (Loss)                                $     (738.9)  $       (405.9)   $        65.2
                                                                          =============  ===============   ==============
   Net Income (Loss)                                                      $     (788.1)  $       (468.4)   $      (457.0)
                                                                          =============  ===============   ==============
   Capital Expenditures                                                   $       37.2   $         47.6    $       148.7
                                                                          =============  ===============   ==============

(1)    Average realized prices for the Company's Fabricated products segment is
       not presented as such prices are subject to fluctuations due to
       changes in product mix.
(2)    Operating results for 2003, 2002 and 2001 include LIFO inventory charges
       of $3.2, $3.5 and $4.5, respectively.
(3)    Operating results for 2002 include special pension charges of $24.1.
(4)    See Note 6 of Notes to Consolidated Financial Statements for a detailed
       summary of the components of Other operating (charges) benefits, net and
       the business segment to which the items relate.

This Report contains statements which constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
These statements appear in a number of places in this section (see "Overview,"
"Results of Operations," "Liquidity and Capital Resources" and "Other Matters").
Such statements can be identified by the use of forward-looking terminology such
as "believes," "expects," "may," "estimates," "will," "should," "plans" or
"anticipates" or the negative thereof or other variations thereon or comparable
terminology, or by discussions of strategy. Readers are cautioned that any such
forward-looking statements are not guarantees of future performance and involve
significant risks and uncertainties, and that actual results may vary materially
from those in the forward-looking statements as a result of various factors.
These factors include the effectiveness of management's strategies and
decisions, general economic and business conditions, developments in technology,
new or modified statutory or regulatory requirements and changing prices and
market conditions. See Item 1. "Business - Factors Affecting Future
Performance." No assurance can be given that these are all of the factors that
could cause actual results to vary materially from the forward-looking
statements.

SIGNIFICANT ITEMS

Market-related Factors. The Company's operating results are sensitive to changes
in the prices of alumina, primary aluminum, and fabricated aluminum products,
and also depend to a significant degree on the volume and mix of all products
sold and on the Company's hedging strategies. Primary aluminum prices have
historically been subject to significant cyclical price fluctuations. The
Company has also been sensitive to changes in prices for power, natural gas and
fuel oil, which have over recent years been subject to significant price
fluctuations. See Notes 2 and 13 of Notes to Consolidated Financial Statements
for a discussion of the Company's hedging activities.

Changes in global, regional, or country-specific economic conditions can have a
significant impact on overall demand for aluminum-intensive fabricated products
in the transportation, distribution, and packaging markets. Such changes in
demand can directly affect the Company's earnings by impacting the overall
volume and mix of such products sold. To the extent that these end-use markets
weaken, demand can also diminish for what the Company sometimes refers to as the
"upstream" products: alumina and primary aluminum.

During 2003, the LME price began the year at $.61 per pound and began a steady
increase ending 2003 at $.72 per pound. During 2002 and 2001, the average LME
price per pound for primary aluminum was $.61 and $.65, respectively. At
February 29, 2004, the LME price was approximately $.77 per pound.

For a discussion of the possible impacts of the reorganization on the Company's
sensitivity to changes in market conditions assuming that it emerges primarily
as a fabricated products company, see Quantitative and Qualitative Disclosures
About Market Risks, Sensitivity.

Liquidity/Negative Cash Flow. Cash and cash equivalents decreased by $42.8
million during 2003. The net decrease resulted from cash used by operating
activities ($87.8 million) and financing activities ($4.1 million) offset by net
cash generated from investing activities of $49.1 million (see Notes 5 and 11 of
Notes to Consolidated Financial Statements). The $87.8 million of cash used by
operating activities included certain items that were significant. The following
table displays the impact of such items on cash used by operating activities
(amounts in millions):


Net cash used by operating activities per Statement of Consolidated Cash Flows                       $       (87.8)
Less receipts:
   Asbestos-related insurance receipts in respect of prior year asbestos-related
       payments                                                                                              (18.6)
   The Company's share of QAL net borrowings in second and third
       quarters that reduced Company's cash requirements to fund QAL                                         (11.0)
   Benefit from decreases in receivables and inventories due to Valco potline curtailment
       in excess of lost earnings                                                                            (20.0)
Add payments:
   Foreign income tax payments related to prior years                                                         22.0
   End-of-service benefit payments in connection with Valco's potline curtailment                             13.2
                                                                                                     --------------
                                                                                                     $      (102.2)
                                                                                                     ==============

The negative cash flow in 2003 resulted from a combination of adverse market
factors in the business segments in which the Company operates including (a)
primary aluminum prices that were below long-term averages, (b) weak demand for
fabricated metal products in general, but particularly for engineered products,
(c) higher than average power, fuel oil and natural gas prices and (d)
significant expenditures in respect of retiree medical and reorganization costs.
See Liquidity and Capital Resources, Operating Activities, for a discussion of
operating activities cash flow.

Cash used in operations during 2002 of $49.6 million also had a number of
significant receipts and payments, and was affected by similar operating
conditions and market factors as those experienced in 2003.

At February 29, 2004, the Company had cash and cash equivalents of approximately
$13.6 million and availability under the DIP Facility's borrowing base of
approximately $172.2 million.

During March 2004, the Company received a waiver from the DIP Facility lenders
in respect of a financial covenant, for the quarter ended December 31, 2003 and
measurement periods through May 31, 2004. In connection with the waiver, the
Company agreed to reduce the available amount of the borrowing base by $25.0
million. The Company is currently working with the DIP Facility lenders to
complete an amendment that is anticipated, among other things, to: (1) reset the
financial covenant based on more recent forecasts; (2) authorize the sale of the
Company's interests in and related to Alpart, QAL, Gramercy/KJBC and Valco
within certain parameters, and (3) reduce the availability of the fixed asset
subcomponent to a level that, by emergence will be based on advances solely in
respect of machinery and equipment at the fabricated products facilities.

While the effect of the amendment will be to reduce overall availability,
assuming the previously mentioned commodity assets are sold, the Company
currently anticipates that once amended, availability under the DIP Facility
will likely be in the $50.0 million - $100.0 million range and that amount
should be adequate for the fabricated products operations. This belief is based
on the fact that it was the commodities' assets and operations that subjected
the Company to the most variability and exposure both from a price risk basis as
well as from an operating perspective. While the Company anticipates that it
will be successful in completing an amendment to the DIP Facility along the
lines outlined above in time for an April 2004 or May 2004 Court hearing, no
assurances can be given in this regard.

Valco Operating Level. The amount of power made available to Valco by the VRA
depends in large part on the level of the lake that is the primary source for
generating the hydroelectric power used to supply the smelter. The level of the
lake is primarily a function of the level of annual rainfall and the alternative
(non-Valco) uses of the power generated, as directed by the VRA.

During late 2000, Valco, the GoG and the VRA reached an agreement, subject to
Parliamentary approval, that would provide sufficient power for Valco to operate
at least three and one-half of its five potlines through 2017. However,
Parliamentary approval was not received and, in March 2002, the GoG reduced
Valco's power allocation forcing Valco to curtail one of its four operating
potlines. In December 2002, after substantial attempts to reach an amicable
solution, Valco and the Company filed for arbitration with the International
Chamber of Commerce in Paris against both the VRA and the GoG. An attempt of
mediation in January 2003 was also unsuccessful, following which Valco's power
allocation was further reduced in January 2003 resulting in the curtailment of
two additional operating potlines. Also, during the first half of 2003, the lake
level was at or near a record low level. Based on the level of the lake and the
rate at which it had been declining, the Company believed that curtailment of
Valco's last remaining operating potline was likely. Accordingly, in light of
the previous curtailments ordered by the VRA and the declining lake level, in
May 2003, the Company curtailed the last operating potline. The rainy season
ended in late 2003 and the lake level crested at a more typical level.

During 2003, Valco met regularly with the GoG and the VRA in respect of the
current and future power situation and other matters including appropriate
compensation for power curtailments. The continuation of the negotiations and
arbitration ultimately led to a MOU in December 2003, whereby the Company agreed
to sell its 90% interest in Valco to the GoG for consideration of between $35.0
million and $100.0 million, plus assumption of all of the Company's related
liabilities and obligations. The MOU contemplates that the transaction will
close by April 30, 2004. The transaction is subject to due diligence and a
number of approvals, including by the President or Cabinet of the GoG, the
Parliament of Ghana, the Boards of Directors of the Company and Valco and the
Court. As a result, no assurance can be given that the MOU will be approved by
any or all of the parties. See Notes 5 and 15 of Notes to Consolidated Financial
Statements for additional information regarding Valco and the possible sale of
the Company's interests in Valco.

Under the terms of the MOU, upon the execution of the MOU and the payout by the
GoG of the $7.0 million into escrow, the parties will suspend the arbitration
process. Upon the closing of the transaction, the parties will dismiss the
arbitration with prejudice. If the transaction does not close, the arbitration
will resume.

Benefit (Legacy) Cost Matters. The Company has previously disclosed since the
Filing Date that pension and retiree medical obligations were significant
factors that would have to be addressed during the reorganization process.

In December 2003, the Company was notified by the PBGC that the PBGC intended to
assume responsibility for the Salaried Employees Retirement Plan as of December
17, 2003. After appropriate consultation with its advisors, the UCC, the ACC and
certain other constituents, the Company reluctantly agreed to the termination of
the Salaried Employees Retirement Plan. As a result of the termination, the
Company recorded a non-cash pension charge of $121.2 million in the fourth
quarter of 2003, which amount has been included in Other operating charges
(benefits), net (see Note 6 of Notes to Consolidated Financial Statements).

In January 2004, the Company filed motions with the Court to terminate or
substantially modify postretirement medical obligations for both salaried and
certain hourly employees and for a distress termination of substantially all
domestic hourly pension plans. The Company subsequently reached agreements with
the 1114 Committee and union representatives that represent the vast majority of
the Company's hourly employees. The agreements provide for the termination of
existing salaried and hourly postretirement benefit plans, such as medical, and
the termination of substantially all existing hourly pension plans. Under the
agreements, salaried and hourly retirees would be provided an opportunity for
continued medical coverage through COBRA or a proposed Voluntary Employee
Beneficiary Association and active hourly employees would be provided with an
opportunity to participate in one or more replacement pension plans and/or
defined contribution plans. The agreements with the 1114 Committee and certain
of the unions have been approved by the Court, but are subject to certain
conditions, including Court approval of the Intercompany Agreement in a form
acceptable to the Debtors and the UCC. The PBGC must ultimately approve a
distress termination of the hourly plans. The PBGC has objected to the Company's
distress termination motion and has appealed the Court's ruling that the Company
has met the statutory criteria for a distress termination of the hourly pension
plans. The PBGC has also not completed its review of the replacement pension
plans or defined contribution plans (see Note 9 of Notes to Consolidated
Financial Statements for additional discussions). Negotiations with the PBGC are
ongoing.

Environmental Matters. The December 31, 2003 accrual balance includes
approximately $23.2 million that was recorded during 2003. Approximately $20.2
million of the amount recorded in 2003 relates to the previously disclosed
multi-site settlement agreement with various federal and state governmental
regulatory authorities and other parties in respect of the Company's
environmental exposure at a number of non-owned sites. During 2003, the Company
also provided additional accruals totaling approximately $3.0 million associated
with certain Company-owned properties with no current operations. These
additional accruals resulted from additional cost estimation efforts undertaken
by the Company in connection with its reorganization efforts (see Note 12 of
Notes to Consolidated Financial Statements for additional discussion fo the
environmental accrual).

RESULTS OF OPERATIONS

Summary. The Company reported a net loss of $788.1 million in 2003 compared to a
net loss of $468.4 million for 2002 and a net loss of $457.0 million for 2001.

Net sales in 2003 totaled $1,365.3 million compared to $1,469.6 million in 2002
and $1,732.7 million in 2001.

FABRICATED PRODUCTS

2003 as compared to 2002. Net sales of fabricated products decreased by 2%
during 2003 as compared to 2002 primarily as a result of a 1% decrease in
shipments. Shipments in 2003 were less than the comparable 2002 period due to
the exit of the can lid and tab stock and brazing sheet products in the second
quarter of 2002. During 2003, weaker demand for engineered products was offset
by a modest improvement in demand for general engineering and aerospace
heat-treat products. Prices for fabricated products were also weaker in 2003
than in the prior year.

Segment operating results (before Other operating charges, net) for 2003 were
worse than 2002 primarily due to the volume and price factors discussed above,
increased energy costs (approximately $10.5 million), a $3.2 million LIFO
inventory charge and increased pension related expenses. The foregoing were
offset, in part, by reductions in overhead and other operating costs as a result
of cost-cutting initiatives. Operating results for 2002 included a $3.5 million
LIFO inventory charge partially offset by reductions in overhead and other costs
as a result of cost cutting initiatives.

Segment operating results for 2003, discussed above, exclude a net gain of
approximately $3.9 million from the sale of equipment (see Note 6 of Notes to
Consolidated Financial Statements). Segment operating results for 2002 excluded
other operating costs of $7.9 million incurred in connection with cost reduction
initiatives and product line exit. Segment operating results for 2002 also
excluded a $1.6 million non-cash LIFO inventory charge associated with the
product line exit.

2002 as compared to 2001. Net sales of fabricated products decreased 17% in 2002
as compared to 2001 primarily due to a 11% decrease in product shipments and a
6% decrease in realized prices. Shipments in 2002 were lower than 2001 primarily
due to a continuation of soft aerospace products demand, a reduced general
aviation demand and by the second quarter of 2002 exit of the can lid and tab
stock and brazing sheet products offset modestly by an increase in general
engineering plate demand and ground transportation markets. The decrease in
average realized prices was due to the impact of weaker demand.

Segment operating results (before Other operating charges, net) for 2002 were
worse than 2001 primarily due to the decrease in shipments and product prices
discussed above. Operating results for 2002 were also adversely impacted by a
LIFO inventory charge of $3.5 million. Partially offsetting these adverse
impacts were reductions in overhead and other costs as a result of cost cutting
initiatives. Operating results for 2001 included a LIFO inventory charge of $4.5
million.

Segment operating results for 2002 exclude other operating costs of $7.9 million
incurred in connection with cost reduction initiatives and product line exit.
Segment operating results for 2002 also exclude a $1.6 million non-cash LIFO
inventory charge associated with the product line exits. Segment operating
results for 2001 exclude a non-cash impairment charge of $17.7 million
associated with certain equipment that the Company planned to sell or idle as a
result of the planned 2002 exit from the brazing heat-treat and tab stock
product lines and other operating costs of $10.7 million also incurred in
connection with cost reduction initiatives.

COMMODITIES AND CORPORATE AND OTHER

2003 as compared to 2002.

Bauxite and Alumina - Third party net sales of alumina for 2003 increased 19% as
compared to the same period in 2002, due to a 13% increase in third party
shipments and a 6% increase in third party average realized prices. Third party
shipments for 2003 were higher than 2002 primarily due to reduced intersegment
shipments resulting from Valco's 2003 potline curtailments (see "Recent Events
and Developments -- Valco Operating Level" above). The increase in average
realized prices is due to increases in primary aluminum market prices to which
the Company's third-party alumina sales contracts are linked.

Intersegment net sales of alumina for 2003 decreased 48% compared to the same
period in 2002. The decrease was primarily the result of 49% decreases in
intersegment shipments due to the 2003 Valco potline curtailment. In the
near-term, the only intersegment shipments expected are to Anglesey.

Segment operating results (before Other operating charges, net) for 2003 were
worse than the comparable period in 2002. The primary reason for the
period-to-period decrease in operating income was higher energy costs of
approximately $46.5 million. Although cost performance improved year to year,
the segment's operating results were adversely impacted by separate unrelated
short-term power outages at Alpart, the Gramercy facility and QAL and the
Company's share of non-cash inventory write-downs at QAL totaling approximately
$.8 million. Also, segment operating results for 2003 were adversely impacted by
increased pension related expenses, an increase in foreign exchange rates and a
$1.2 million LIFO inventory charge. These impacts were only partially offset by
the net increase in shipments and increase in average realized prices discussed
above and by improved cost performance. Results for 2002 included an increase of
$4.4 million in the allowance for doubtful accounts and a LIFO charge of $.5
million.

Segment operating results for 2003, discussed above, excludes non-cash charges
of approximately $368.0 million resulting from the write-down of the Company's
interests in Gramercy and KJBC (which are included in Operating charges, net).
Segment operating results for 2002 excluded Other operating charges, net of $2.0
million incurred in connection with cost reduction initiatives.

Primary Aluminum - Third party net sales of primary aluminum decreased 52% for
2003 as compared to the same period in 2002 due to a 54% decrease in third party
shipments offset by a 5% increase in third party average realized prices. The
decrease in third party shipments was primarily due to the 2003 Valco potline
curtailment discussed above. The increase in the average realized prices was
primarily due to increases in primary aluminum market prices.

Segment operating results (before Other operating charges, net) for 2003 were
worse than the comparable period in 2002. The primary reason for the decrease
was the decrease in net shipments discussed above. Segment operating loss for
2003 also includes $11.1 million of charges for end-of-service benefits
associated with the 2003 Valco potline curtailments discussed above and a $2.3
million LIFO inventory charge. The foregoing were only partially offset by
increased prices discussed above, lower depreciation expense, resulting from the
2002 year-end impairment of the Mead smelter assets ($13.0 million), and
reductions in overhead costs primarily due to the Mead and Valco curtailments.

Segment operating results for 2003, discussed above, exclude a pre-Filing Date
claim of approximately $3.2 million related to a restructured transmission
service agreement (see Note 3 of Notes to Consolidated Financial Statements).
Segment operating results for 2003 also exclude restructuring charges of $1.3
million resulting from the Mead facility indefinite curtailment (see Note 6 of
Notes to Consolidated Financial Statements) and a net gain of approximately $9.5
million from the sale of the Tacoma facility (see Note 5 of Notes to
Consolidated Financial Statements). Segment operating results for 2002 excluded
a non-cash charge of approximately $138.5 million related to the write-down of
the Washington smelter assets to their estimated fair value, a non-cash charge
of approximately $21.4 million related to a write-down of certain aluminum and
alumina inventories, an $.8 million LIFO inventory charge which resulted in
connection with the write-down of the aluminum and alumina inventories and other
operating costs of $2.7 million incurred in connection with cost reduction
initiatives. Segment operating results for 2002 also excluded approximately
$58.8 million of pension and postretirement benefits and related obligations for
the hourly employees who had been on a laid-off status and under the terms of
their labor contract are eligible for early retirement because of the indefinite
curtailment of the Mead facility.

Commodities Marketing - In 2003, net sales for this segment represents net
settlements with unaffiliated counterparties for maturing derivative positions.
In 2002, net sales for this segment primarily represented recognition of
deferred gains from hedges closed prior to the commencement of the Cases. Gains
or losses associated with these liquidated positions were deferred in Other
comprehensive income and were recognized as income and costs over the original
hedging periods as the underlying purchases/sales occur.

Segment operating income for 2003 decreased compared to 2002 due to the
prevailing market prices during 2003 versus the higher prices implicit in the
liquidation of the positions in January 2002.

Eliminations - Eliminations of intersegment profit vary from period to period
depending on fluctuations in market prices as well as the amount and timing of
the affected segments' production and sales. Eliminations for 2002 included a
benefit of $2.8 million of deferred intersegment profit offsetting the $21.4
million inventory write-down in the Primary Aluminum segment discussed above.

Corporate and Other - Corporate operating expenses represent corporate general
and administrative expenses which are not allocated to the Company's business
segments. Corporate operating expenses (before Other operating charges, net) for
2003 as compared to 2002, were lower primarily because corporate expenses in
2002 included special pension settlement charges of approximately $19.9 million,
and payments of approximately $4.2 million to a trust in respect of certain
management compensation agreements. Corporate expenses in 2003 included a
decrease in payroll-related expenses resulting from 2002 job eliminations and
other overhead expenses which were substantially offset by an increase in
pension-related expenses. See Note 9 of Notes to Consolidated Financial
Statements for a discussion of the special pension settlement charges in 2002.

Corporate operating results for 2003, discussed above, exclude a pension charge
of approximately $121.2 million related to the salaried employees pension plan,
an environmental multi-site settlement charge of $15.7 million and hearing loss
claims of $15.8 million (all of which are included in Other operating charges,
net). Corporate operating results for 2002 excluded a non-cash impairment charge
of approximately $20.0 million related to the Company's non-operating properties
(which is included in Other operating charges, net).

2002 as compared to 2001.

Bauxite and Alumina - Third party net sales of alumina for 2002 decreased 10% as
compared to 2001, primarily due to an 11% decrease in third party average
realized prices. The decrease in average realized prices was due to a decrease
in primary aluminum market prices to which the Company's third party alumina
sales contracts are linked. Third party shipments were up modestly primarily due
to the curtailment of one of Valco's operating potlines in March 2002 discussed
below.

Intersegment net sales for 2002 decreased 25% as compared to 2001 as the result
of a 19% decrease in the intersegment shipments and a 7% decrease in
intersegment average realized prices. The decrease in shipments was due to
reduced shipments to the Primary alumina business unit primarily due to the
curtailment of one of Valco's operating potlines in March 2002. The decrease in
intersegment average realized prices is the result of a decrease in primary
aluminum prices from period to period as intersegment transfers are made on the
basis of primary aluminum market prices on a lagged basis of one month.

Segment operating results (before Other operating charges, net) for 2002 were
modestly worse than 2001. The decrease was primarily due to the decrease in the
average realized price discussed above and the reduction in alumina shipments
associated with the sale of a portion of our interest in QAL offset by the
decrease in abnormal Gramercy related net start-up costs, favorable caustic
prices at QAL and the return to a more normal cost performance at KJBC (from a
historical perspective) resulting in part from increased production volume (due
to the Gramercy restart). Results for 2002 also included an increase of $4.4
million in the allowance for doubtful accounts and a LIFO charge of $.5 million.
Operating results for 2001 included: (1) abnormal Gramercy-related start-up
costs and litigation costs of $64.9 million and $6.5 million, respectively,
offset by business interruption-related insurance accruals of $36.6 million; and
(2) a LIFO inventory charge of $3.7 million.

Segment operating results for 2002, discussed above, excluded other operating
costs of $2.0 million incurred in connection with cost reduction initiatives.
Segment operating results for 2001 exclude non-recurring costs of $15.8 million
also incurred in connection with cost reduction initiatives.

Primary Aluminum - Third party net sales of primary aluminum decreased 26% for
2002 as compared to 2001 as a result of a 20% decrease in third party shipments
and a 7% decrease in third party average realized prices. The decrease in
shipments was primarily due to the curtailment of one of Valco's operating
potlines in March 2002 and the curtailment of the rod operations at the Tacoma
facility in the second quarter of 2001. The decrease in the average realized
prices was primarily due to the decrease in primary aluminum market prices.

The Northwest smelters have been completely curtailed since the beginning of
2001. At this time, the Mead facility was expected to remain curtailed
indefinitely unless and until an appropriate combination of reduced power prices
and higher primary aluminum prices occurs. The Tacoma facility was sold in
February 2003. As a result, intersegment net sales of primary aluminum for 2002
and 2001 were minimal. Beginning in the first quarter of 2001, the Flat-rolled
products business unit began purchasing its own primary aluminum rather than
relying on the Primary aluminum business unit to supply its aluminum
requirements through production or third party purchases. The Engineered
products business unit was already responsible for purchasing the majority of
its primary aluminum requirements.

Segment operating results (before Other operating charges, net) for 2002 were
substantially worse than 2001. The primary reasons for the decrease were the
decreases in the average realized prices and net shipments discussed above and
Valco potline shutdown and pension costs, offset by lower alumina metal prices
and reductions in overhead costs. Results for 2002 also included a LIFO
inventory charge of $2.1 million.

Segment operating results for 2002, discussed above, exclude a non-cash charge
of approximately $138.5 million related to the write-down of the Washington
smelter assets to their estimated fair value, a non-cash charge of approximately
$21.4 million related to a write-down of certain aluminum and alumina
inventories, an $.8 million LIFO inventory charge which resulted in connection
with the write-down of the aluminum and alumina inventories and other operating
costs of $2.7 million incurred in connection with cost reduction initiatives.
Segment operating results for 2002 also exclude approximately $58.8 million of
pension and postretirement benefits and related obligations for the hourly
employees who had been on a laid-off status and under the terms of their labor
contract are eligible for early retirement because of the indefinite curtailment
of the Mead facility. Segment operating results for 2001 excluded non-recurring
net power sales gains of $229.2 million. These gains were offset by costs of
$7.5 million also incurred in connection with cost reduction initiatives and
contractual labor costs related to the Washington smelter impairment of $12.7
million.

Commodities Marketing - In 2002, net sales for this segment primarily represents
recognition of deferred gains from hedges closed prior to the commencement of
the Cases. See Note 13 of Notes to Consolidated Financial Statements. Gains or
losses associated with these liquidated positions are initially deferred in
Other comprehensive income and are subsequently recognized over the original
hedging periods as the underlying purchases/sales occur. In 2001, net sales for
this segment represented net settlements with third party brokers for maturing
derivative positions.

Segment operating results for 2002 increased compared to the comparable periods
in 2001 due to the higher prices implicit in the liquidation of the positions in
January 2002 versus the prevailing market prices during 2001.

Eliminations - Eliminations of intersegment profit vary from period to period
depending on fluctuations in market prices as well as the amount and timing of
the affected segments' production and sales. Eliminations for 2002 included a
benefit of $2.8 million of deferred intersegment profit offsetting the $21.4
million inventory write-down in the Primary aluminum business segment discussed
above.

Corporate and Other - Corporate operating expenses represent corporate general
and administrative expenses which are not allocated to the Company's business
segments. The increase in corporate operating expenses (excluding Other
operating charges, net) in 2002 as compared to 2001 was due largely to higher
medical and pension cost accruals for active and retired employees and non-cash
pension charges of $19.9 million, charges of $5.1 million related to the
Company's key employee retention program and payments in January 2002 of
approximately $4.2 million to a trust in respect of certain management
compensation agreements offset in part primarily by reduced salary and
litigation expenses.

Corporate operating results for 2002, discussed above, excluded a non-cash
impairment charge of approximately $20.0 million related to the Kaiser Center
office complex, one of the Company's non-operating properties. Corporate
operating results for 2001, discussed above, exclude non-recurring costs of $1.2
million incurred in connection with the Company's cost reduction initiatives.

LIQUIDITY AND CAPITAL RESOURCES

As a result of the filing of the Cases, claims against the Debtors for principal
and accrued interest on secured and unsecured indebtedness existing on their
Filing Date are stayed while the Debtors continue business operations as
debtors-in-possession, subject to the control and supervision of the Court. See
Note 1 of Notes to Consolidated Financial Statements for additional discussion
of the Cases. At this time, it is not possible to predict the effect of the
Cases on the businesses of the Debtors.

Operating Activities. In 2003, Fabricated products operating activities provided
$29.4 million of cash. This amount compares with 2002 when Fabricated products
operating activities provided $58.6 million of cash and 2001 when Fabricated
products operating activities provided $99.3 million of cash. Cash provided by
Fabricated products in 2003 was largely due to cost-cutting initiatives which
offset reduced product prices and shipments. In contrast, cash provided by
operations in 2002 and 2001 was largely due to reductions in working capital as
a result of product line exits and lean manufacturing initiatives. All of the
foregoing exclude consideration of pension and retiree cash payments made by the
Company on behalf of current and former employees of the Fabricated products
facilities. Such amounts are part of the "legacy" costs that the Company
internally categorizes as a corporate cash outflow. As more fully discussed in
Benefit (Legacy) Cost Matters, the Company expects that substantially all such
benefits related to previously existing benefit plans are likely to be cancelled
as part of the reorganization process.

In 2003, Commodities and Corporate operating activities used $117.2 million of
cash. This amount compares with 2002 when Commodities and Corporate operating
activities used $108.2 million of cash and 2001 when Commodities and Corporate
operating activities provided cash of $150.6 million. Cash outflows for the
Commodities and Corporate operating activities in 2003, 2002 and 2001 include
cash payments of approximately $60.0 million, $55.0 million and $57.0 million,
respectively, in respect of retiree medical obligations for all current and
former operating units. Corporate operating activities also used approximately
$10.0 million and $22.0 million in respect of contributions to pension plans
sponsored by the Company or its subsidiaries in 2002 and 2001, respectively.
However, as previously discussed, there were no material contributions in
respect of Company sponsored domestic pension plans in 2003. The balance of the
net cash used by Commodities and Corporate operating activities in 2003 resulted
from a combination of adverse market factors, primarily in the commodities
business segments, including: (a) primary aluminum prices that were below
long-term averages, (b) higher than average fuel oil and natural gas prices, and
(c) significant expenditures in respect of reorganization costs. The major
reason for the difference between cash used in 2002 and cash generated in 2001
was the non-recurring benefit of the power sales in 2001.

Investing Activities. Total capital expenditures for Fabricated products were
$8.9, $10.2 and $21.4 million in 2003, 2002 and 2001, respectively. The capital
expenditures in 2003, 2002 and 2001 were made primarily to improve production
efficiency, reduce operating costs and expand capacity at existing facilities.

Total capital expenditures for Commodities and Corporate were $28.3 million,
$37.4 million and $127.3 million in 2003, 2002 and 2001, respectively (of which
$8.9, $9.6 and $10.4 million were funded by the minority partners in certain
foreign joint ventures). Capital expenditures in 2003 and 2002 included $17.4
million and $17.1 million, respectively, related to the Company's share of costs
related to Alpart's previously reported expansion of capacity from 1,450,000
metric tons to 1,650,000 metric tons. Capital expenditures in 2001 included
$78.6 million spent with respect to rebuilding the Gramercy facility. The
remaining capital expenditures in 2003, 2002 and 2001 were made primarily to
improve production efficiency, reduce operating costs and expand capacity at
other existing facilities.

Total capital expenditures for Fabricated products are currently expected to be
between $7.0 million and $12.0 million per year in each of 2004 and 2005. The
level of capital expenditures may be adjusted from time to time depending on the
Company's price outlook for metal and other products, the Company's ability to
assure future cash flows through the Company's financial position and other
factors.

Financing Activities and Liquidity. On February 12, 2002, the Company and Kaiser
entered into the DIP Facility which provides for a secured, revolving line of
credit through the earlier of February 13, 2005 (extended from February 12, 2004
in August 2003), the effective date of a plan of reorganization or voluntary
termination by the Company. In March 2003, certain of the Additional Debtors
were added as co-guarantors and the DIP Facility lenders received super priority
status with respect to certain of the Additional Debtors' assets. The Company is
able to borrow under the DIP Facility by means of revolving credit advances and
to issue letters of credit (up to $125.0 million) in an aggregate amount equal
to the lesser of $285.0 million (reduced from $300.0 million in August 2003) or
a borrowing base relating to eligible accounts receivable, eligible inventory
and eligible fixed assets reduced by certain reserves, as defined in the DIP
Facility agreement. The DIP Facility is guaranteed by the Company and certain
significant subsidiaries of the Company. Interest on any outstanding borrowings
will bear a spread over either a base rate or LIBOR, at the Company's option.

The DIP Facility requires the Company to comply with certain covenants and
places restrictions on the Company's, Kaiser's and the Company's subsidiaries'
ability to, among other things, incur debt and liens, make investments, pay
dividends, sell assets, undertake transactions with affiliates, make capital
expenditures, and enter into unrelated lines of business.

During March 2004, the Company received a waiver from the DIP Facility lenders
in respect of a financial covenant, for the quarter ended December 31, 2003 and
for all measurement periods through May 31, 2004 million. In connection with the
waiver, the Company agreed to reduce the available amount of the borrowing base
by $25.0 million. The Company is currently working with the DIP Facility lenders to
complete an amendment that is anticipated, among other things, to: (1) reset the
financial covenant based on more recent forecasts; (2) authorize the sale of the
Company's interests in Alpart, QAL, Gramercy/KJBC and Valco within certain
parameters, and (3) reduce the availability of the fixed asset subcomponent to a
level that, by emergence will be based on advances solely in respect of
machinery and equipment at the fabricated products facilities.

While the effect of the amendment will be to reduce overall availability,
assuming the previously mentioned commodity assets are sold, the Company
currently anticipates that once amended, availability under the DIP Facility
will likely be in the $50.0 million - $100.0 million range and that amount
should be adequate for the fabricated products operations. This belief is based
on the fact that it was the commodities' assets and operations that subjected
the Company to the most variability and exposure both from a price risk basis as
well as from an operating perspective. While the Company anticipates that it
will be successful in completing an amendment to the DIP Facility along the
lines outlined above in time for an April 2004 or May 2004 Court hearing, no
assurances can be given in this regard.

The Company currently believes that the cash and cash equivalents of $35.9
million at December 31, 2003, cash flows from operations, cash proceeds from the
sale of assets that are ultimately determined not to be an important part of the
reorganized entity and cash available from the DIP Facility will provide
sufficient working capital to allow the Company to meet its obligations during
the pendency of the Cases. At February 29, 2004, there were no outstanding
borrowings under the revolving credit facility and there were outstanding
letters of credit of approximately $45.3 million. As of February 29, 2004,
$172.2 million (of which $79.7 million could be used for additional letters of
credit) was available to the Company under the DIP Facility.

Commitments and Contingencies. During the pendency of the Cases, substantially
all pending litigation against the Debtors, except that relating to certain
environmental matters, is stayed. Generally, claims against a Debtor arising
from actions or omissions prior to its Filing Date will be satisfied as part of
a plan of reorganization. See Note 12 of Notes to Consolidated Financial
Statements for a more complete discussion of these matters.

The Company is subject to a number of environmental laws, to fines or penalties
assessed for alleged breaches of the environmental laws, and to claims and
litigation based upon such laws. Based on the Company's evaluation of these and
other environmental matters, the Company has established environmental accruals
of $82.5 million at December 31, 2003. However, the Company believes that it is
reasonably possible that changes in various factors could cause costs associated
with these environmental matters to exceed current accruals by amounts that
could range, in the aggregate, up to an estimated $15.4 million.

The Company is also a defendant in a number of asbestos-related lawsuits that
generally relate to products the Company has not sold for more than 20 years.
The lawsuits are currently stayed by the Cases. Based on past experience and
reasonably anticipated future activity, the Company has established a $610.1
million accrual at December 31, 2003, for estimated asbestos-related costs for
claims filed and estimated to be filed through 2011, before consideration of
insurance recoveries. However, the Company believes that substantial recoveries
from insurance carriers are probable. The Company reached this conclusion based
on prior insurance-related recoveries in respect of asbestos-related claims,
existing insurance policies and the advice of outside counsel with respect to
applicable insurance coverage law relating to the terms and conditions of these
policies. Accordingly, the Company has recorded an estimated aggregate insurance
recovery of $465.4 million (determined on the same basis as the asbestos-related
cost accrual) at December 31, 2003. Although the Company has settled
asbestos-related coverage matters with certain of its insurance carriers, other
carriers have not yet agreed to settlements and disputes with carriers exist.
The timing and amount of future recoveries from its insurance carriers will
depend on the pendency of the Cases and on the resolution of disputes regarding
coverage under the applicable insurance policies.

In connection with the USWA strike and subsequent lock-out by the Company,
certain allegations of ULPs were filed by the USWA with the NLRB. As previously
disclosed, the Company responded to all such allegations and believed they were
without merit. Twenty-two of the twenty-four allegations of ULPs brought against
the Company by the USWA were dismissed in September 2001. In May 2002, the
administrative law judge ruled against the Company in respect of the two
remaining ULP allegations and recommended that the NLRB award back wages, plus
interest, less any earnings of the workers during the period of the lockout. The
administrative law judge's ruling did not contain any specific amount of
proposed award and was not self-executing. The USWA filed a proof of claim for
$240.0 million in the Cases in respect of this matter.

In January 2004, as part of its settlement with the USWA with respect to pension
and retiree medical benefits, the Company and the USWA agreed to settle their
case pending before the NLRB, subject to approval of the NLRB General Counsel
and the Court and ratification by union members. The settlement was subsequently
ratified by the union members in February 2004. Further, the settlement with
respect to retiree medical and pension benefits and the NLRB case has been
approved by the Court subject to certain conditions and the agreement may be
terminated by either the USWA or the Company in certain circumstances. Under the
terms of the agreement, solely for the purposes of determining distributions in
connection with the reorganization, an unsecured pre-petition claim in the
amount of $175.0 million will be allowed. The agreement to settle this matter
was contingent on NLRB and Court approval and ratification by union members.
This amount was not reflected in the Company's consolidated financial statements
at December 31, 2003. However, the charge and an offsetting liability associated
with the settlement of this matter will be reflected in the Company's
consolidated financial statements if and when the agreement with the USWA is
ultimately approved by the Court. Also, as part of the agreement, the Company
agreed to adopt a position of neutrality regarding the unionization of any
employees of the reorganized company.

During February 2004, the Company reached a settlement in respect of 400 claims,
which alleged that certain individuals who were employees of the Company,
principally at a facility previously owned and operated by the Company in
Louisiana, suffered hearing loss in connection with their employment. Under the
terms of the settlement, which is still subject to Court approval, the claimants
will be allowed claims totaling $15.8 million. However, no cash payments by the
Company are required in respect of these amounts. Rather the settlement
agreement contemplates that, at emergence, these claims will be transferred to a
separate trust along with certain rights against certain corresponding insurance
policies of the Company and that such insurance policies will be the sole source
of recourse to the claimants. While the Company believes that the insurance
policies are of value, no amounts have been reflected in the Company's financial
statements at December 31, 2003 in respect of such policies as the Company could
not with the level of certainty necessary determine the amount of recoveries
that were probable.

OTHER MATTERS

Income Tax Matters. In light of the Cases, the Company has provided valuation
allowances for all of its net deferred income tax assets as the Company no
longer believes that the "more likely than not" recognition criteria is
appropriate. A substantial portion or all of its tax attributes may be utilized
to offset any gains that may result from the possible commodity asset sales
and/or cancellation of indebtedness as a part of the Company's reorganization.
See Note 8 of Notes to Consolidated Financial Statements for a discussion of
these and other income tax matters.

CRITICAL ACCOUNTING POLICIES

Critical accounting policies are those that are both very important to the
portrayal of the Company's financial condition and results, and require
management's most difficult, subjective, and/or complex judgments. Typically,
the circumstances that make these judgments difficult, subjective and/or complex
have to do with the need to make estimates about the effect of matters that are
inherently uncertain. While the Company believes that all aspect of its
financial statements should be studied and understood in assessing its current
(and expected future) financial condition and results, the Company believes that
the accounting policies that warrant additional attention include:

   1.  The consolidated financial statements as of and for the year ended
       December 31, 2003 have been prepared on a "going concern" basis in
       accordance with AICPA Statement of Position 90-7, Financial Reporting by
       Entities in Reorganization Under the Bankruptcy Code, and do not include
       possible impacts arising in respect of the Cases. The interim
       consolidated financial statements included elsewhere in this Report do
       not include any adjustments relating to the recoverability and
       classification of recorded asset amounts or the amount and classification
       of liabilities or the effect on existing stockholders' equity that may
       result from any plans, arrangements or other actions arising from the
       Cases, or the possible inability of the Company to continue in existence.
       Adjustments necessitated by such plans, arrangements or other actions
       could materially change the interim consolidated financial statements
       included elsewhere in this Report. For example,

       a.   If the Company were to decide to sell certain assets not deemed a
            critical part of a reorganized Kaiser, such asset sales could result
            in gains or losses (depending on the asset sold) and such gains or
            losses could be significant. This is because, under generally
            accepted accounting principles ("GAAP"), assets to be held and used
            are evaluated for recoverability differently than assets to be sold
            or disposed of. Assets to be held and used are evaluated based on
            their expected undiscounted future net cash flows. So long as the
            Company reasonably expects that such undiscounted future net cash
            flows for each asset will exceed the recorded value of the asset
            being evaluated, no impairment is required. However, if plans to
            sell or dispose of an asset or group of assets meet a number of
            specific criteria, then, under GAAP, such assets should be
            considered held for sale/disposition and their recoverability should
            be evaluated, for each asset, based on expected consideration to be
            received upon disposition. Sales or dispositions at a particular
            time will be affected by, among other things, the existing industry
            and general economic circumstances as well as the Company's own
            circumstances, including whether or not assets will (or must) be
            sold on an accelerated or more extended timetable. Such
            circumstances may cause the expected value in a sale or disposition
            scenario to differ materially from the realizable value over the
            normal operating life of assets, which would likely be evaluated on
            long-term industry trends.

            As previously disclosed, while the Company had stated that it was
            considering the possibility of disposing of one or more of its
            commodity facilities, the Company, through the third quarter of
            2003, still considered all of its commodity assets as "held for
            use," as no definite decisions had been made regarding the
            disposition of such assets. However, based on additional
            negotiations with prospective buyers and discussions with key
            constituents, the Company concluded that dispositions of its
            interests in and related to Alpart, Gramercy/KJBC and Valco were
            possible and, therefore, that recoverability should be considered
            differently at the end of 2003. As a result of the change in
            status, the Company recorded impairment charges of approximately
            $368.0 million in the fourth quarter of 2003. The actual amount of
            gain or loss if and when the sales are consummated may differ from
            these amounts as a result of closing adjustments and other
            matters. Management cannot conclude that the sale of the Company's
            interests in and related to one or all of the above noted
            facilities is "probable" due to numerous uncertainties including
            that Court approval is required and has not yet been obtained.

        b.  Additional pre-Filing Date claims may be identified through the
            proof of claim reconciliation process and may arise in connection
            with actions taken by the Debtors in the Cases. For example, while
            the Debtors consider rejection of the Bonneville Power
            Administration ("BPA") contract to be in the Company's best
            long-term interests, such rejection may increase the amount of
            pre-Filing Date claims by approximately $75.0 million based on the
            BPA's proof of claim filed in connection with the Cases in respect
            of the contract rejection.

       c.   As more fully discussed below, the amount of pre-Filing Date
            claims ultimately allowed by the Court in respect of contingent
            claims and benefit obligations may be materially different from
            the amounts reflected in the Consolidated Financial Statements.

       While valuation of the Company's assets and pre-Filing Date claims at
       this stage of the Cases is subject to inherent uncertainties, the Company
       currently believes that it is likely that its liabilities will be found
       in the Cases to exceed the fair value of its assets. Therefore, the
       Company currently believes that it is likely that substantially all
       pre-Filing Date claims will be paid at less than 100% of their face value
       and the equity interests of the Company's stockholders will be cancelled
       without consideration.

       Additionally, upon emergence from the Cases, the Company expects to apply
       "fresh start" accounting to its consolidated financial statements as
       required by SOP 90-7. Fresh start accounting is required if: (1) a
       debtor's liabilities are determined to be in excess of its assets and (2)
       there will be a greater than 50% change in the equity ownership of the
       entity. As previously disclosed, the Company expects both such
       circumstances to apply. As such, upon emergence, the Company will restate
       its balance sheet to equal the reorganization value as determined in its
       plan of reorganization and approved by the Court. Additionally, items
       such as accumulated depreciation, accumulated deficit and accumulated
       other comprehensive income (loss) will be reset to zero. The Company will
       allocate the reorganization value to its individual assets and
       liabilities based on their estimated fair value at the emergence date.
       Typically such items as current liabilities, accounts receivable, and
       cash will be reflected at values similar to those reported prior to
       emergence. Items such as inventory, property, plant and equipment,
       long-term assets and long-term liabilities are more likely to be
       significantly adjusted from amounts previously reported. Because fresh
       start accounting will be adopted at emergence, and because of the
       significance of the pending asset sales and liabilities subject to
       compromise (that will be relieved upon emergence), the current historical
       financial statements will be of less value from a perspective of
       comparability to the emerging entity.

   2.  The Company's judgments and estimates with respect to commitments and
       contingencies, in particular: (a) future asbestos related costs and
       obligations as well as estimated insurance recoveries, and (b) possible
       liability in respect of claims of unfair labor practices ("ULPs") which
       were not resolved as a part of the Company's September 2000 labor
       settlement.

       Valuation of legal and other contingent claims is subject to a great deal
       of judgment and substantial uncertainty. Under GAAP, companies are
       required to accrue for contingent matters in their financial statements
       only if the amount of any potential loss is both "probable" and the
       amount (or a range) of possible loss is "estimatable." In reaching a
       determination of the probability of an adverse ruling in respect of a
       matter, the Company typically consults outside experts. However, any such
       judgments reached regarding probability are subject to significant
       uncertainty. The Company may, in fact, obtain an adverse ruling in a
       matter that it did not consider a "probable" loss and which, therefore,
       was not accrued for in its financial statements. Additionally, facts and
       circumstances in respect of a matter can change causing key assumptions
       that were used in previous assessments of a matter to change. It is
       possible that amounts at risk in respect of one matter may be "traded
       off" against amounts under negotiations in a separate matter. Further, in
       estimating the amount of any loss, in many instances a single estimation
       of the loss may not be possible. Rather, the Company may only be able to
       estimate a range for possible losses. In such event, GAAP requires that a
       liability be established for at least the minimum end of the range.

       The Company has had two potentially material contingent obligations that
       are subject to significant uncertainty and variability in their outcome:
       (a) the United Steelworkers of America's ("USWA") ULP claim, and (b) the
       net obligation in respect of asbestos-related matters. Both of these
       matters are discussed in Note 12 of Notes to Consolidated Financial
       Statements and it is important that you read this note.

       As more fully discussed in Note 12 of Notes to Consolidated Financial
       Statements, we have not accrued any amount in our December 31, 2003
       financial statements in respect of the USWA ULP matter. We did not accrue
       any amount in the past as we did not consider the loss to be "probable."
       Our assessment had been that the possible range of loss in this matter
       was anywhere from zero to $250.0 million based on the proof of claims
       filed (and other information provided) by the National Labor Relations
       Board ("NLRB") and USWA in connection with the Company's reorganization
       proceedings. While the Company continues to believe that the ULP charges
       were without merit, during January 2004, the Company agreed to allow a
       claim in favor of the USWA in the amount of the $175.0 million as a
       compromise and in return for the USWA agreeing to substantially reduce
       and/or eliminate certain benefit payments as more fully discussed in Note
       9 of Notes to Consolidated Financial Statements. As the agreement to
       settle this matter was contingent on NLRB and Court approval and
       ratification by union members, all of which were not received until
       February 2004, this amount was not reflected in the Company's
       consolidated financial statements at December 31, 2003. However, the
       charge and an offsetting liability associated with the settlement of this
       matter will be reflected in the Company's consolidated financial
       statements if and when the agreement with the USWA is ultimately approved
       by the Court.

       Also, as more fully discussed in Note 12 of Notes to Consolidated
       Financial Statements, the Company is one of many defendants in personal
       injury claims by large number of persons who assert that their injuries
       were caused by, among other things, exposure to asbestos during their
       employment or association with the Company or by exposure to products
       containing asbestos last produced or sold by the Company more than 20
       years ago. It is difficult to predict the number of claims that will
       ultimately be made against the Company or the settlement value of such
       claims. As of December 31, 2003, the Company had recorded an obligation
       for approximately $610.1 million in respect of pending and an estimate of
       possible future asbestos claims through 2011. The Company did not accrue
       for amounts past 2011 because the Company believed that significant
       uncertainty existed in trying to estimate any such amounts. However, it
       is possible that a different number of claims will be made through 2011
       and that the settlement amounts during this period may differ and that
       this will cause the actual amounts to differ materially from the
       Company's estimate. Further, the Company expects that, during its
       reorganization process, an estimate will have to be made in respect of
       its exposure to asbestos-related claims after 2011 and that such amounts
       could be substantial. Due to the Cases, holders of asbestos claims are
       stayed from continuing to prosecute pending litigation and from
       commencing new lawsuits against the Debtors. However, during the pendency
       of the Cases, the Company expects additional asbestos claims will be
       asserted as part of the claims process. A separate creditors' committee
       representing the interests of the asbestos claimants, the ACC, has been
       appointed. The Debtors' obligations with respect to present and future
       asbestos claims will be resolved pursuant to a plan of reorganization.

       The Company believes that it has insurance coverage in respect of its
       asbestos-related exposures and that substantial recoveries in this regard
       are probable. At December 31, 2003, the Company had recorded a receivable
       for approximately $465.4 million in respect of expected insurance
       recoveries related to existing claims and the estimate future claims
       through 2011. However, the actual amount of insurance recoveries may
       differ from the amount recorded and the amount of such differences could
       be material. Further, depending on the amount of asbestos-related claims
       ultimately determined to exist (including those in the periods after
       2011), it is possible that the amount of such claims could exceed the
       amount of additional insurance recoveries available.

       See Note 12 of Notes to Consolidated Financial Statements for a more
       complete discussion of these matters.

   3.  The Company's judgments and estimates in respect of its employee benefit
       plans.

       Pension and post-retirement medical obligations included in the
       consolidated balance sheet are based on assumptions that are subject to
       variation from year-to-year. Such variations can cause the Company's
       estimate of such obligations to vary significantly. Restructuring actions
       (such as the indefinite curtailment of the Mead smelter) can also have a
       significant impact on such amounts.

       For pension obligations, the most significant assumptions used in
       determining the estimated year-end obligation are the assumed discount
       rate and long-term rate of return ("LTRR") on pension assets. Since
       recorded pension obligations represent the present value of expected
       pension payments over the life of the plans, decreases in the discount
       rate (used to compute the present value of the payments) will cause the
       estimated obligations to increase. Conversely, an increase in the
       discount rate will cause the estimated present value of the obligations
       to decline. The LTRR on pension assets reflects the Company's assumption
       regarding what the amount of earnings will be on existing plan assets
       (before considering any future contributions to the plans). Increases in
       the assumed LTRR will cause the projected value of plan assets available
       to satisfy pension obligations to increase, yielding a reduced net
       pension obligation. A reduction in the LTRR reduces the amount of
       projected net assets available to satisfy pension obligations and, thus,
       causes the net pension obligation to increase.

       For post-retirement obligations, the key assumptions used to estimate the
       year-end obligations are the discount rate and the assumptions regarding
       future medical costs increases. The discount rate affects the
       post-retirement obligations in a similar fashion to that described above
       for pension obligations. As the assumed rate of increase in medical costs
       goes up, so does the net projected obligation. Conversely, if the rate of
       increase is assumed to be smaller, the projected obligation will decline.

       As more fully discussed in Note 9 of Notes to Consolidated Financial
       Statements, all of the Company's material pension and medical benefit
       plans are being (or have been) terminated as a part of the Company's
       reorganization efforts, subject to the PBGC's rights, including the
       ongoing appeal, as to the termination of the hourly pension plans. If and
       when an agreement with the PBGC is reached or the appeal is otherwise
       resolved, the Company's obligations with respect to the existing plans
       will become fixed. However, at this time it is not possible to definitely
       determine the "final" amount of such obligations as the value of such
       amounts will be subject to negotiations among and between the Company and
       the constituents of the ongoing Cases.

       In preparing the Company's financial statements at December 31, 2003, the
       Company has reflected its obligations in respect of these plans using
       assumptions consistent with those used in accordance with GAAP for
       ongoing plans. The Company believes that this represents a reasonable
       estimation methodology. The Company currently believes that there are
       arguments that it can make that the final allowed claim amounts should be
       less than that reflected in the financial statements. The Company also
       expects that certain constituents will assert that the value of their
       obligations is in excess of the amounts reflected in the financial
       statements.

       See Note 9 of Notes to Consolidated Financial Statements and Recent
       Events and Developments, Benefit (Legacy) Cost Matters above for
       information regarding the Company's pension and post-retirement
       obligations. Actual results may differ from the assumptions made in
       computing the estimated December 31, 2003 obligations and such
       differences may be material.

   4.  The Company's judgments and estimates in respect to environmental
       commitments and contingencies.

       The Company is subject to a number of environmental laws and regulations
       ("environmental laws"), to fines or penalties assessed for alleged
       breaches of the environmental laws, and to claims and litigation based
       upon such laws. The Company currently is subject to a number of claims
       under the Comprehensive Environmental Response, Compensation and
       Liability Act of 1980, as amended by the Superfund Amendments
       Reauthorization Act of 1986 ("CERCLA"), and, along with certain other
       entities, has been named as a potentially responsible party for remedial
       costs at certain third-party sites listed on the National Priorities List
       under CERCLA.

       Based on the Company's evaluation of these and other environmental
       matters, the Company has established environmental accruals, primarily
       related to potential solid waste disposal and soil and groundwater
       remediation matters. These environmental accruals represent the Company's
       estimate of costs reasonably expected to be incurred on a going concern
       basis in the ordinary course of business based on presently enacted laws
       and regulations, currently available facts, existing technology, and the
       Company's assessment of the likely remediation action to be taken.
       However, making estimates of possible environmental remediation costs is
       subject to inherent uncertainties. As additional facts are developed and
       definitive remediation plans and necessary regulatory approvals for
       implementation of remediation are established or alternative technologies
       are developed, changes in these and other factors may result in actual
       costs exceeding the current environmental accruals.

       An example of how environmental accruals could change is provided by the
       multi-site agreement discussed in Note 12 of Notes to Consolidated
       Financial Statements. As a means of expediting the reorganization process
       and to assure treatment of the claims under a plan of reorganization that
       is favorable to the Debtors and their stakeholders, it may be in the best
       interests of the stakeholders for the Company to agree to claim amounts
       in excess of previous accruals, which were based on an ordinary course,
       going concern basis.

CONTRACTUAL OBLIGATIONS AND COMMERCIAL COMMITMENTS
In a new regulation issued in January 2003, the Securities and Exchange
Commission adopted amendments to existing rules, which require the Company to
provide explanations of its known contractual obligations in a tabular format
and its off-balance sheet arrangements in a separately captioned subsection of
the Management's Discussion and Analysis ("MD&A") section of the Company's
Annual Reports on Form 10-K and Quarterly Reports on Form 10-Q. Although such
items are already fully disclosed in the Company's Commitments and Contingencies
notes (see Note 12 of Notes to Consolidated Financial Statements), the principle
of the amendments is that the Company should disclose, in a single section,
information regarding: (1) its obligations and commitments to make future
payments, such as debt and lease agreements, and (2) material off-balance sheet
arrangements and their material effects on the Company's financial condition,
results of operations, liquidity, etc. in a tabular format.

The following summarizes the Company's significant contractual obligations at
December 31, 2003 (dollars in millions):

                                                                                 Payments due in
                                                            --------------------------------------------------------
                                                               Less than       2 - 3          4 - 5       More than
           Contractual Obligations                Total         1 Year         Years          Years        5 years
--------------------------------------------  ------------- -------------- -------------  ------------- ------------
Long-term debt, including capital lease of
   $2.5(a)                                    $       25.5  $         1.3  $        1.4   $        1.0  $      21.8
Operating leases                                      15.5            7.5           6.8             .5           .7
                                              ------------- -------------- -------------  ------------- ------------

Total cash contractual obligations            $       41.0  $         8.8  $        8.2   $        1.5  $      22.5
                                              ============= ============== =============  ============= ============

(a)           See Note 7 of Notes to Consolidated Financial Statements for
              information in respect of long-term debt. Long-term debt
              obligations exclude debt subject to compromise of approximately
              $848.2 million, which amounts will be dealt with in connection
              with a plan of reorganization. See Notes 1 and 7 of Notes to
              Consolidated Financial Statements for additional information about
              debt subject to compromise.

The following paragraphs summarize the Company's off-balance sheet arrangements.

The Company owns a 20% interest in QAL, which owns one of the largest and most
competitive alumina refineries in the world, located in Queensland, Australia.
QAL refines bauxite into alumina, essentially on a cost basis, for the account
of its shareholders under long-term tolling contracts. The Company currently
sells its share of QAL's production to third parties. The shareholders,
including the Company, purchase bauxite from another QAL shareholder under
long-term purchase contracts. These tolling and purchase contracts are scheduled
to expire in 2008. Under the agreements, the Company is unconditionally
obligated to pay its proportional share of debt, operating costs and certain
other costs of QAL. The Company's share of the aggregate minimum amount of
future principal payments as of December 31, 2003 is $60.0 million, which will
mature in varying amounts from 2005 to 2008. The Company's share of QAL's
scheduled debt principal repayment in July 2003 was funded with additional QAL
borrowings. The Company's share of payments, including operating costs and
certain other expenses under the agreements, has generally ranged between $70
million and $100 million per year over the past three years. However, as
discussed more fully in Note 1 of Notes to Consolidated Financial Statements,
the Company is considering the possibility of selling its interests in QAL. If
the Company's interest in QAL were to be sold, the Company believes that its
obligations in respect of its share of the QAL debt would be assumed by the
buyer.

The Company has agreements to supply alumina to and to purchase aluminum from
Anglesey, a 49.0%-owned aluminum smelter in Holyhead, Wales.

As of December 31, 2003, outstanding letters of credit under the DIP Facility
were approximately $43.8 million, substantially all of which expire within the
next twelve months. The letters of credit relate primarily to environmental,
insurance, Alpart-related debt and other activities. Approximately $15.3 million
of the letters of credit are in respect of the Company's 65% share of the $22.0
million Alpart CARIFA financing (see Note 7 of Notes to Consolidated Financial
Statements) which are reflected in the debt maturities table above. As such,
that portion of the letters of credit is duplicative of the obligation reflected
in the table above. In connection with the expected sale of the Company's
interests in Alpart (see Note 5 of Notes to Consolidated Financial Statements),
the Company expects that at closing Alpart will repay the CARIFA financing and
the Company's letter of credit obligation under the DIP Facility securing the
loans will be cancelled.

Upon emergence from Chapter 11 proceedings, the Company anticipates that it will
provide some form of yet to be determined defined contribution pension plan in
respect of its salaried employees. Pursuant to the terms of the USWA agreement,
the Company will be required to make annual contributions into the Steelworkers
Pension Trust on the basis of one dollar per USWA employee per hour worked. In
addition, the Company will institute a defined contribution pension plan for
active USWA employees. Company contributions to the plan will range from eight
hundred dollars to twenty-four hundred dollars per employee per year, depending
on age and years of service. The Company believes that similar defined
contribution pension plans will be established for non-USWA hourly employees
subject to collective bargaining agreements. The Company currently estimates
that contributions to all such plans will range from $3.0 million to $6.0
million per year. However, because the PBGC is still reviewing these plans, the
benefits could change.

As a replacement for the Company's current postretirement benefit plans,
pursuant to agreements with the 1114 Committee and certain of the unions, the
Company will fund one or more Voluntary Employee Beneficiary Associations
("VEBA") into which the Company will contribute certain amounts on emergence
from Chapter 11 proceedings and on an annual basis through 2012. The initial
contribution will be an amount not to exceed $36.0 million and will be payable
on emergence from the Chapter 11 proceedings so long as the Company's liquidity
is at least $50.0 million after considering such payments. To the extent that
less than the full $36.0 million is paid and the Company's interests in Anglesey
are subsequently sold, a portion of the Anglesey interests' proceeds, in certain
circumstances, will be used to pay the shortfall. In addition to the foregoing,
the Company will, on an annual basis, be required to pay 10% of the first $20.0
million of annual cash flow, as defined, plus 20% of annual cash flow, as
defined, above $20.0 million. Such annual payments shall not exceed $20.0
million and will also be limited (with no carryover to future years) to the
extent that the payments do not cause the Company's liquidity to be less than
$50.0 million. The agreements with the 1114 Committee and unions have been
approved by the Court, subject to certain conditions, including Court approval
of the Intercompany Agreement in a form accepted to the Debtors and the UCC. No
assurances can be given as to if and when final Court approval will be obtained.

At emergence from Chapter 11, the Company will have to pay or otherwise provide
for a material amount of claims. Such claims include accrued but unpaid
professional fees, priority tax and environmental claims, secured claims, and
certain post-petition obligations (collectively, "Exit Costs"). The Company
currently estimates that its Exit Costs will be in the range of $100.0 million
to $120.0 million. The Company expects to fund such Exit Costs using the
proceeds to be received under the proposed Intercompany Agreement together with
existing cash resources and available liquidity under an exit financing facility
that will replace the current Post-Petition Credit Agreement (see Note 7 of
Notes to Consolidated Financial Statements). Given the material portion of the
Exit Costs represented by the expected Intercompany Agreement payments, such
payments are a critical element for the Company's successful emergence from the
Cases. If the proposed Intercompany Agreement were not ultimately approved by
the Court or otherwise put into effect or a reasonable alternative were not
negotiated, it is unlikely that the Company or its other debtor subsidiaries
will be able to emerge from Chapter 11. Management believes it will be able to
successfully resolve any issues that may arise in respect of the proposed
Intercompany Agreement or be able to negotiate a reasonable alternative.
However, no assurances can be given in this regard. An exit financing facility
to replace the current Post-Petition Credit Agreement is also critical for the
Company's successful emergence from the Cases.

ITEM 7A.     QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company's operating results are sensitive to changes in the prices of
alumina, primary aluminum, and fabricated aluminum products, and also depend to
a significant degree upon the volume and mix of all products sold. As discussed
more fully in Notes 2 and 12 of Notes to Consolidated Financial Statements, the
Company historically has utilized hedging transactions to lock-in a specified
price or range of prices for certain products which it sells or consumes in its
production process and to mitigate the Company's exposure to changes in foreign
currency exchange rates. However, because the agreements underlying the
Company's hedging positions provided that the counterparties to the hedging
contracts could liquidate the Company's hedging positions if the Company filed
for reorganization, the Company chose to liquidate these positions in advance of
the initial Filing Date. The Company has only completed limited hedging
activities since the Filing Date (see below). The Company anticipates that,
subject to prevailing economic conditions, it may enter into additional hedging
transactions with respect to primary aluminum prices, natural gas and fuel oil
prices and foreign currency values to protect the interests of its constituents.
However, no assurance can be given as to when or if the Company will enter into
such additional hedging activities.

SENSITIVITY

Alumina and Primary Aluminum. The Company has historically been exposed to
commodity price risks and opportunities in respect of alumina and primary
aluminum production in excess of internal requirements that has been sold in
domestic and international markets. The Company's hedging transactions have been
intended to provide price risk management in respect of the net exposure of
earnings resulting from (i) anticipated sales of alumina, primary aluminum and
fabricated aluminum products, less (ii) expected purchases of certain items,
such as aluminum scrap, rolling ingot, and bauxite, whose prices fluctuate with
the price of primary aluminum. On average, before consideration of hedging
activities, variations in production and shipment levels, and timing issues
related to price changes, the Company estimates that during 2003 each $.01
increase (decrease) in the market price per price-equivalent pound of primary
aluminum increases (decreases) the Company's annual pre-tax earnings by
approximately $5.0 million, based on recent operating levels. The lower 2003
impact (as compared to prior periods) on pre-tax earnings linked to primary
aluminum prices was due to the Valco potline curtailments. As of December 31,
2003, the Company had options covering substantially all of the Company's net
hedgeable volume for the first quarter of 2004 (at a strike price of
approximately $.64 per pound).

Assuming that the Company's interests in and related to Alpart, QAL,
Gramercy/KJBC, and Valco are sold (and that Anglesey remains a part of the
emerging entity), the Company would no longer be a net seller of alumina and
aluminum. Rather, net sales of primary aluminum by Anglesey (reduced by the
equivalent primary aluminum impact of alumina requirements) would offset
approximately two-thirds of the primary aluminum requirements of the fabricated
products business (based on 2003 primary aluminum purchases). As such, the
emerging entity would be a net consumer of primary aluminum. However, the
Company's pricing of fabricated aluminum products is generally intended to
lock-in a conversion margin (representing the value added from the fabrication
process(es)) and to pass metal price risk on to its customers. The fabricated
aluminum products business does, however, from time to time enter into fixed
price arrangements (that include the primary aluminum price component). In such
instances, the Company may use third party hedging instruments to eliminate
price exposure or may consider such fixed price arrangements as a notional
(internal) hedge of primary aluminum to be produced at Anglesey. At December 31,
2003, the fabricated products business held contracts for the delivery of
fabricated aluminum products that have the effect of fixing or capping the metal
price component of the contract during the period 2004 - 2008 totaling
approximately (in 000 pounds of primary aluminum): 2004: 73,000, 2005: 40,000,
2006: 34,000, 2007: 34,000, and 2008: 10,000.

Foreign Currency. The Company enters into forward exchange contracts to hedge
material cash commitments for foreign currencies. The Company's primary foreign
exchange exposure is related to the Company's Australian Dollar (A$) commitments
in respect of activities associated with QAL. The Company estimates that, before
consideration of any hedging activities, a US $0.01 increase (decrease) in the
value of the A$ results in an approximate $1.5 million (decrease) increase in
the Company's annual pre-tax operating income.

Energy. The Company is exposed to energy price risk from fluctuating prices for
natural gas, fuel oil and diesel oil consumed in the production process. The
Company estimates that each $1.00 change in natural gas prices (per mcf) impacts
the Company's annual pre-tax operating results by approximately $20.0 million.
Approximately two-thirds of such exposure relates to the Gramercy facility with
the remaining one-third primarily relating to the Company's fabricated products
business. Further, the Company estimates that each $1.00 change in fuel oil
prices (per barrel) impacts the Company's annual pre-tax operating results by
approximately $3.0 million. A substantial majority of such price exposure
relates to the operations at Alpart with most of the remaining exposure relating
to KJBC's operations.

The Company from time to time in the ordinary course of business enters into
hedging transactions with major suppliers of energy and energy related financial
instruments. As of December 31, 2003, the Company had option contracts which cap
the average price the Company would pay for natural gas to approximately $6.10
per mcf so that, when combined with price limits in the physical gas supply
agreement, substantially all of the Company's exposure to increases in natural
gas prices during January 2004 was limited.

ITEM 8.      FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
                                                                                                       PAGE

   Independent Auditors' Report..........................................................................38

   Copy of Report of Independent Public Accountants......................................................39

   Consolidated Balance Sheets...........................................................................40

   Statements of Consolidated Income (Loss)..............................................................41

   Statements of Consolidated Stockholders' Equity (Deficit) and Comprehensive Income (Loss) ............42

   Statements of Consolidated Cash Flows.................................................................43

   Notes to Consolidated Financial Statements............................................................44

   Quarterly Financial Data (Unaudited)..................................................................87

   Five-Year Financial Data..............................................................................88


INDEPENDENT AUDITORS' REPORT
--------------------------------------------------------------------------------

To the Stockholders and the Board of Directors of Kaiser Aluminum & Chemical
Corporation:

We have audited the accompanying consolidated balance sheets of Kaiser Aluminum
& Chemical Corporation (Debtor-In-Possession) and subsidiaries as of
December 31, 2003 and 2002, and the related consolidated statements of income
(loss), stockholders' equity (deficit) and comprehensive income (loss) and cash
flows for the years then ended. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits. The consolidated
financial statements of Kaiser Aluminum & Chemical Corporation for the year
ended December 31, 2001 were audited by other auditors who have ceased
operations. In their report, dated April 10, 2002, those auditors expressed an
unqualified opinion on those consolidated financial statements with an
explanatory paragraph as to the Company's ability to continue as a going
concern.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards 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. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Kaiser Aluminum & Chemical
Corporation and subsidiaries as of December 31, 2003 and 2002, and the results
of their operations and their cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States of America.

As discussed in Note 1, the Company, Kaiser Aluminum Corporation, its parent
company, and certain of the Company's subsidiaries have filed for reorganization
under Chapter 11 of the Federal Bankruptcy Code. The accompanying consolidated
financial statements do not purport to reflect or provide for the consequences
of the bankruptcy proceedings. In particular, such financial statements do not
purport to show (a) as to assets, their realizable value on a liquidation basis
or their availability to satisfy liabilities; (b) as to pre-petition
liabilities, the amounts that may be allowed for claims or contingencies, or the
status and priority thereof; (c) as to stockholder accounts, the effect of any
changes that may be made in the capitalization of the Company; or (d) as to
operations, the effect of any changes that may be made in its business.

The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Notes 1 and
2, the action of filing for reorganization under Chapter 11 of the Federal
Bankruptcy Code, losses from operations and stockholders' capital deficiency
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans concerning these matters are also discussed in Note
1. The financial statements do not include adjustments that might result from
the outcome of this uncertainty.

As discussed above, the financial statements of the Company for the year ended
December 31, 2001 were audited by other auditors who have ceased operations. As
described in Note 17, the Company changed the composition of its reportable
segments in 2003, and the amounts disclosed in the 2001 financial statements
relating to reportable segments have been restated to conform to the 2003
composition of reportable segments. We audited the adjustments that were applied
to the restated disclosures for reportable segments reflected in the 2001
financial statements. Our procedures included (i) agreeing the previously
reported segment net sales, operating income (loss), depreciation and
amortization and capital expenditures to the previously issued financial
statements and related notes, (ii) combining the previously reported segment net
sales, operating income (loss), depreciation and amortization and capital
expenditures of the Flat-Rolled Products and Engineered Products segments, the
sum of which represents the restated reportable segment amounts and (iii)
testing the mathematical accuracy of the combination of the previously reported
segment amounts resulting in the restated reportable segment amounts. In our
opinion such adjustments are appropriate and have been properly applied.
However, we were not engaged to audit, review, or apply any procedures to the
2001 financial statements of the Company other than with respect to such
adjustments and, accordingly, we do not express an opinion or any other form of
assurance on the 2001 financial statements taken as a whole.


/S/ DELOITTE & TOUCHE LLP


Houston, Texas
March 29, 2004


COPY OF REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
--------------------------------------------------------------------------------

Below is a copy of the report previously issued by Arthur Andersen LLP, the
Company's former independent public accountants, related to the Company's Annual
Report for the year ended December 31, 2001. Arthur Andersen ceased operations
in 2002 and is unable to issue an updated report. Certain financial statements
covered by this report have not been included in the accompanying financial
statements.

To the Stockholders and the Board of Directors of Kaiser Aluminum & Chemical
Corporation:

We have audited the accompanying consolidated balance sheets of Kaiser Aluminum
& Chemical Corporation (a Delaware corporation) and subsidiaries as of December
31, 2001 and 2000, and the related statements of consolidated income (loss),
stockholders' equity and comprehensive income (loss) and cash flows for each of
the three years in the period ended December 31, 2001. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards 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. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Kaiser Aluminum & Chemical
Corporation and subsidiaries as of December 31, 2001 and 2000, and the results
of their operations and their 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.

The accompanying consolidated financial statements have been prepared in
accordance with generally accepted accounting principles applicable to a going
concern which contemplate among other things, realization of assets and payment
of liabilities in the normal course of business. As discussed in Note 1 to the
consolidated financial statements, on February 12, 2002, the Company, Kaiser
Aluminum Corporation, its parent company, and certain of the Company's
subsidiaries filed for reorganization under Chapter 11 of the United States
Bankruptcy Code. This action raises substantial doubt about the Company's
ability to continue as a going concern. The consolidated financial statements do
not include any adjustments relating to the recoverability and classification of
recorded asset amounts or the amount and classification of liabilities or the
effects on existing stockholders' equity that may result from any plans,
arrangements or other actions arising from the aforementioned proceedings, or
the possible inability of the Company to continue in existence.



ARTHUR ANDERSEN LLP


Houston, Texas
April 10, 2002

CONSOLIDATED BALANCE SHEETS

                                                                                                        December 31,
                                                                                                  -------------------------
(In millions of dollars, except share amounts)                                                           2003          2002
----------------------------------------------------------------------------------------------    -----------    ----------

ASSETS
Current assets:
   Cash and cash equivalents                                                                      $     35.9     $    78.7
   Receivables:
     Trade, less allowance for doubtful receivables of $10.8 and $11.0                                 102.7         103.1
     Other                                                                                              53.9          51.4
   Inventories                                                                                         206.2         254.9
   Prepaid expenses and other current assets                                                            32.5          33.5
                                                                                                  -----------    ----------

     Total current assets                                                                              431.2         521.6

Investments in and advances to unconsolidated affiliates                                                57.0          69.7
Property, plant, and equipment - net                                                                   612.6       1,009.9
Other assets                                                                                           527.9         629.2
                                                                                                  -----------    ----------

     Total                                                                                        $  1,628.7     $ 2,230.4
                                                                                                  ===========    ==========

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Liabilities not subject to compromise -
   Current liabilities:
     Accounts payable                                                                             $    134.0     $   129.0
     Accrued interest                                                                                    1.0           2.9
     Accrued salaries, wages, and related expenses                                                      52.2          46.7
     Accrued postretirement medical benefit obligation - current portion                                32.5          60.2
     Other accrued liabilities                                                                          46.1          64.3
     Payable to affiliates                                                                              52.4          28.0
     Long-term debt - current portion                                                                    1.3            .9
                                                                                                  -----------    ----------

     Total current liabilities                                                                         319.5         332.0

   Long-term liabilities                                                                                75.1          86.9
   Long-term debt                                                                                       24.2          42.7
                                                                                                  -----------    ----------
                                                                                                       418.8         461.6
Liabilities subject to compromise                                                                    2,820.0       2,726.0
Minority interests                                                                                     121.1         121.1
Commitments and contingencies
Stockholders' equity (deficit):
   Preference stock - cumulative and convertible, par value $100, authorized
     1,000,000 shares, issued and outstanding 8,669 shares                                                .7            .7
   Common stock, par value 331/3 cents, authorized 100,000,000 shares;
     issued and outstanding, 46,171,365 shares                                                          15.4          15.4
   Additional capital                                                                                2,454.0       2,454.8
   Accumulated deficit                                                                              (1,901.7)     (1,113.6)
   Accumulated other comprehensive income (loss)                                                      (107.9)       (243.9)
   Note receivable from parent                                                                      (2,191.7)     (2,191.7)
                                                                                                  -----------    ----------

     Total stockholders' equity (deficit)                                                           (1,731.2)     (1,078.3)
                                                                                                  -----------    ----------

         Total                                                                                    $  1,628.7     $ 2,230.4
                                                                                                  ===========    ==========

       The accompanying notes to consolidated financial statements are an
                       integral part of these statements.

STATEMENTS OF CONSOLIDATED INCOME (LOSS)


                                                                                            Year Ended December 31,
                                                                                    ---------------------------------------
(In millions of dollars)                                                                   2003          2002          2001
---------------------------------------------------------------------------------   -----------   -----------   -----------

Net sales                                                                           $  1,365.3    $  1,469.6    $  1,732.7
                                                                                    -----------   -----------   -----------

Costs and expenses:
   Cost of products sold                                                               1,423.4       1,408.2       1,638.4
   Depreciation and amortization                                                          73.2          91.5          90.2
   Selling, administrative, research and development, and general                         96.6         124.6         102.5
   Other operating charges (benefits), net                                               511.0         251.2        (163.6)
                                                                                    -----------   -----------   -----------

     Total costs and expenses                                                          2,104.2       1,875.5       1,667.5
                                                                                    -----------   -----------   -----------

Operating income (loss)                                                                 (738.9)       (405.9)         65.2

Other income (expense):
   Interest expense (excluding unrecorded contractual interest expense
     of $95.0 in 2003 and $84.0 in 2002)                                                 (10.7)        (20.7)       (109.0)
   Reorganization items                                                                  (27.0)        (33.3)           -
   Gain on sale of interest in QAL                                                          -             -          163.6
   Other - net                                                                            (6.5)           .4         (32.8)
                                                                                    -----------   -----------   -----------

Income (loss) before income taxes and minority interests                                (783.1)       (459.5)         87.0

Provision for income taxes                                                               (14.2)        (14.7)       (548.3)

Minority interests                                                                         9.2           5.8           4.3
                                                                                    -----------   -----------   -----------

Net loss                                                                            $   (788.1)   $   (468.4)   $   (457.0)
                                                                                    ===========   ===========   ===========


       The accompanying notes to consolidated financial statements are an
                       integral part of these statements.


STATEMENTS OF CONSOLIDATED STOCKHOLDERS' EQUITY (DEFICIT) AND COMPREHENSIVE
INCOME (LOSS)

(In millions of dollars)
--------------------------------------------------------------------------------

                                                                                               Accumulated         Note
                                                                                     Accu-           Other   Receivable
                                            Preference      Common    Additional   mulated   Comprehensive         From
                                                 Stock       Stock       Capital   Deficit   Income (Loss)       Parent      Total
----------------------------------------- ------------ ----------- ------------- ---------  -------------- ------------ ----------
BALANCE, DECEMBER 31, 2000                $        .7  $     15.4  $    2,300.8  $ (188.1)  $        (1.8) $  (2,040.0) $    87.0
   Net loss                                        -           -            -      (457.0)            -             -      (457.0)
   Minimum pension liability adjustment,
     net of income tax benefit of $38.0            -           -            -           -           (64.5)          -       (64.5)
   Cumulative effect of accounting change,
     net of income tax provision of $.5            -           -            -           -             1.8           -          1.8
   Unrealized net gain in value of derivative
     instruments arising during the
     year, net of income tax provision
     of $19.4                                      -           -            -           -            33.1           -        33.1
   Reclassification adjustment for
     net realized gains on derivative
     instruments included in net loss,
     net of income tax benefit of $5.8             -           -            -           -           (10.9)          -       (10.9)
   Adjustment of valuation allowances for
     net deferred income tax assets provided
     in respect of items reflected in Other
     comprehensive income (loss)                   -           -            -           -           (25.0)          -       (25.0)
                                                                                                                        ----------
   Comprehensive income (loss)                     -           -            -           -             -             -      (522.5)
   Interest on note receivable to parent           -           -          135.2         -             -         (135.2)         -
   Contributions for LTIP shares and
     restricted stock accretion                    -           -            1.6         -             -             -         1.6
   Dividends                                       -           -            -         (.1)            -             -         (.1)
                                          ------------ ----------- ------------- ---------  -------------- ------------ ----------
BALANCE DECEMBER 31, 2001                          .7        15.4       2,437.6    (645.2)          (67.3)    (2,175.2)    (434.0)
   Net loss                                        -           -            -      (468.4)            -             -      (468.4)
   Minimum pension liability adjustment            -           -            -           -          (136.6)          -      (136.6)
   Unrealized net decrease in value of
     derivative instruments arising during the
     year prior to settlement                      -           -            -           -           (12.1)          -       (12.1)
   Reclassification adjustment for net
     realized gains on derivative instruments
     included in net loss, net                     -           -            -           -           (27.9)          -       (27.9)
                                                                                                                        ----------
   Comprehensive income (loss)                     -           -            -           -             -             -      (645.0)
   Interest on note receivable to parent           -           -           16.5         -             -          (16.5)         -
   Contributions for LTIP shares                   -           -             .7         -             -             -          .7
                                          ------------ ----------- ------------- ---------  -------------- ------------ ----------
BALANCE, DECEMBER 31, 2002                         .7        15.4       2,454.8  (1,113.6)         (243.9)    (2,191.7)  (1,078.3)
   Net loss                                        -           -            -      (788.1)            -             -      (788.1)
   Minimum pension liability adjustment            -           -            -           -           138.6           -       138.6
   Unrealized net decrease in value of
     derivative instruments arising during
     the year                                      -           -            -           -            (1.6)          -        (1.6)
   Reclassification adjustment for net realized
     gains on derivative instruments included
     in net loss                                   -           -            -           -            (1.0)          -        (1.0)
                                                                                                                        ----------
   Comprehensive income (loss)                     -           -            -           -             -             -      (652.1)
   Restricted stock cancellations                  -           -           (1.0)        -             -             -        (1.0)
   Restricted stock accretion                      -           -             .2         -             -             -          .2
                                          ------------ ----------- ------------- ---------  -------------- ------------ ----------
BALANCE, DECEMBER 31, 2003                $        .7  $     15.4  $    2,454.0  $(1,901.7) $      (107.9) $  (2,191.7) $(1,731.2)
                                          ============ =========== ============= =========  ============== ============ ==========

         The accompanying notes to consolidated financial statements are
                     an integral part of these statements.


STATEMENTS OF CONSOLIDATED CASH FLOWS


                                                                                                   Year Ended December 31,
                                                                                          ----------------------------------------
(In millions of dollars)                                                                           2003          2002         2001
----------------------------------------------------------------------------------------  -------------  ------------  -----------

Cash flows from operating activities:
   Net loss                                                                               $     (788.1)  $    (468.4)  $   (457.0)
   Adjustments to reconcile net loss to net cash (used) provided by operating activities:
       Depreciation and amortization (including deferred financing costs of $4.8, $3.9 and
         $5.1, respectively)                                                                      78.0          95.4         95.3
       Non-cash charges for reorganization items, other operating charges and other              513.5         257.0         41.7
       Gains - sale of Tacoma facility in 2003, sale of real estate and miscellaneous
         equipment in 2002 and sale of QAL interest and real estate in 2001                      (14.5)         (3.8)      (173.6)
       Equity in (income) loss of unconsolidated affiliates, net of distributions                 (6.4)         (8.0)         1.1
       Minority interests                                                                         (9.2)         (5.8)        (4.3)
       (Increase) decrease in trade and other receivables                                         (2.1)         57.9        225.7
       Decrease in inventories, excluding LIFO adjustments and other non-cash operating items     42.0          31.1         66.7
       (Increase) decrease in prepaid expenses and other current assets                            (.3)         46.5         23.2
       Increase (decrease) in accounts payable (associated with operating activities)
         and accrued interest                                                                     10.4          20.5        (39.1)
       Increase (decrease) in payable to affiliates and other accrued liabilities                 44.3         (67.8)       (48.5)
       (Decrease) increase in accrued and deferred income taxes                                  (31.6)        (24.6)       519.9
       Net cash impact of changes in long-term assets and liabilities                             67.1          32.4        (12.5)
       Other                                                                                       9.1         (12.0)        11.3
                                                                                          -------------  ------------  -----------

         Net cash (used) provided by operating activities                                        (87.8)        (49.6)       249.9
                                                                                          -------------  ------------  -----------

Cash flows from investing activities:
   Net proceeds from disposition: primarily Tacoma facility and interests in
office building
     complex in 2003, equipment in 2002 and QAL interest and real estate in 2001                  86.3          31.4        171.6
   Capital expenditures (including $78.6 in 2001 related to the Gramercy facility)               (37.2)        (47.6)      (148.7)
   Decrease in accounts payable (Gramercy-related) and other                                       -              -         (32.2)
                                                                                          -------------  ------------  -----------

         Net cash provided (used) by investing activities                                         49.1         (16.2)        (9.3)
                                                                                          -------------  ------------  -----------

Cash flows from financing activities:
   Incurrence of financing costs                                                                  (4.1)         (8.8)          -
   Repayments of debt (including $30.4 under credit agreement)                                     -              -        (105.1)
   Redemption of preference stock                                                                  -              -          (5.5)
   Preference stock dividends paid                                                                 -              -           (.1)
                                                                                          -------------  ------------  -----------

         Net cash used by financing activities                                                    (4.1)         (8.8)      (110.7)
                                                                                          -------------  ------------  -----------

Net (decrease) increase in cash and cash equivalents during the year                             (42.8)        (74.6)       129.9
Cash and cash equivalents at beginning of year                                                    78.7         153.3         23.4
                                                                                          -------------  ------------  -----------

Cash and cash equivalents at end of year                                                  $       35.9   $      78.7   $    153.3
                                                                                          =============  ============  ===========

Supplemental disclosure of cash flow information:
   Interest paid, net of capitalized interest of $1.1, $1.2 and $3.5                      $        4.0   $       5.4   $    106.0
   Income taxes paid                                                                              46.1          37.5         52.1

       The accompanying notes to consolidated financial statements are an
                       integral part of these statements.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------


(In millions of dollars, except share amounts)
--------------------------------------------------------------------------------

1.   REORGANIZATION PROCEEDINGS

Kaiser Aluminum & Chemical Corporation (the "Company"), its parent company,
Kaiser Aluminum Corporation ("Kaiser" or "KAC"), and 24 of the Company's
subsidiaries have filed separate voluntary petitions in the United States
Bankruptcy Court for the District of Delaware (the "Court") for reorganization
under Chapter 11 of the United States Bankruptcy Code (the "Code"); the Company,
Kaiser and 15 of the Company's subsidiaries (the "Original Debtors") filed in
the first quarter of 2002 and nine additional Company subsidiaries (the
"Additional Debtors") filed in the first quarter of 2003. The Original Debtors
and Additional Debtors are collectively referred to herein as the "Debtors" and
the Chapter 11 proceedings of these entities are collectively referred to herein
as the "Cases." For purposes of this Report, the term "Filing Date" means, with
respect to any particular Debtor, the date on which such Debtor filed its Case.
None of the Company's non-U.S. joint ventures are included in the Cases. The
Cases are being jointly administered. The Debtors are managing their businesses
in the ordinary course as debtors-in-possession subject to the control and
administration of the Court.

Original Debtors. During the first quarter of 2002, the Original Debtors filed
separate voluntary petitions for reorganization. The wholly owned subsidiaries
of the Company included in such filings were: Kaiser Bellwood Corporation
("Bellwood"), Kaiser Aluminium International, Inc. ("KAII"), Kaiser Aluminum
Technical Services, Inc. ("KATSI"), Kaiser Alumina Australia Corporation
("KAAC") (and its wholly owned subsidiary, Kaiser Finance Corporation ("KFC"))
and ten other entities with limited balances or activities.

The necessity for filing the Cases by the Original Debtors was attributable to
the liquidity and cash flow problems of the Company and its subsidiaries arising
in late 2001 and early 2002. The Company was facing significant near-term debt
maturities at a time of unusually weak aluminum industry business conditions,
depressed aluminum prices and a broad economic slowdown that was further
exacerbated by the events of September 11, 2001. In addition, the Company had
become increasingly burdened by asbestos litigation and growing legacy
obligations for retiree medical and pension costs. The confluence of these
factors created the prospect of continuing operating losses and negative cash
flows, resulting in lower credit ratings and an inability to access the capital
markets.

The outstanding principal of, and accrued interest on, all debt of the Original
Debtors became immediately due and payable upon commencement of the Cases.
However, the vast majority of the claims in existence at the Filing Date
(including claims for principal and accrued interest and substantially all legal
proceedings) are stayed (deferred) during the pendency of the Cases. In
connection with the filing of the Original Debtors' Cases, the Court, upon
motion by the Original Debtors, authorized the Original Debtors to pay or
otherwise honor certain unsecured pre-Filing Date claims, including employee
wages and benefits and customer claims in the ordinary course of business,
subject to certain limitations. In July 2002, the Court also issued a final
order authorizing the Company to fund the cash requirements of its foreign joint
ventures in the ordinary course of business and to continue using the Company's
existing cash management systems. The Original Debtors also have the right to
assume or reject executory contracts existing prior to the Filing Date, subject
to Court approval and certain other limitations. In this context, "assumption"
means that the Original Debtors agree to perform their obligations and cure
certain existing defaults under an executory contract and "rejection" means that
the Original Debtors are relieved from their obligations to perform further
under an executory contract and are subject only to a claim for damages for the
breach thereof. Any claim for damages resulting from the rejection of a
pre-Filing Date executory contract is treated as a general unsecured claim in
the Cases.

Generally, pre-Filing Date claims, including certain contingent or unliquidated
claims, against the Original Debtors will fall into two categories: secured and
unsecured. Under the Code, a creditor's claim is treated as secured only to the
extent of the value of the collateral securing such claim, with the balance of
such claim being treated as unsecured. Unsecured and partially secured claims do
not accrue interest after the Filing Date. A fully secured claim, however, does
accrue interest after the Filing Date until the amount due and owing to the
secured creditor, including interest accrued after the Filing Date, is equal to
the value of the collateral securing such claim.

The Court set January 31, 2003 as the last date by which holders of pre-Filing
Date claims against the Original Debtors (other than asbestos-related personal
injury claims and certain hearing loss claims) could file their claims. Any
holder of a claim that was required to file such claim by January 31, 2003 and
did not do so may be barred from asserting such claim against any of the
Original Debtors and, accordingly, may not be able to participate in any
distribution in any of the Cases on account of such claim. The Company has not
yet completed its analysis of all of the proofs of claim to determine their
validity. However, during the course of the Cases, certain matters in respect of
the claims have been resolved. Material provisions in respect of claim
settlements are included in the accompanying financial statements and are fully
disclosed elsewhere herein. The January 31, 2003 bar date does not apply to
asbestos-related personal injury claims, for which the Original Debtors reserve
the right to establish a separate bar date at a later time. A separate bar date
for certain hearing loss and coal tar pitch volatiles claims was reset to
February 29, 2004.

Additional Debtors. On January 14, 2003, the Additional Debtors filed separate
voluntary petitions for reorganization. The wholly owned subsidiaries included
in such filings were: Kaiser Bauxite Company ("KBC"), Kaiser Jamaica Corporation
("KJC"), Alpart Jamaica Inc. ("AJI"), Kaiser Aluminum & Chemical of Canada
Limited ("KACOCL") and five other entities with limited balances or activities.
Ancillary proceedings in respect of KACOCL and two Additional Debtors were also
commenced in Canada simultaneously with the January 14, 2003 filings.

The Cases filed by the Additional Debtors were commenced, among other reasons,
to protect the assets held by these Debtors against possible statutory liens
that might have arisen and been enforced by the Pension Benefit Guaranty
Corporation ("PBGC") primarily as a result of the Company's failure to meet a
$17.0 accelerated funding requirement to its salaried employee retirement plan
in January 2003 (see Note 9 for additional information regarding the accelerated
funding requirement). The filing of the Cases by the Additional Debtors had no
impact on the Company's day-to-day operations.

In connection with the Additional Debtors' filings, the Court authorized the
Additional Debtors to continue to pay or otherwise honor certain pre-Filing Date
claims, including employee wages and benefits, and customer and vendor claims in
the ordinary course of business. The Court also approved the Additional Debtors'
continued participation in the Company's existing cash management systems and
routine intercompany transactions involving, among other transactions, the
transfer of materials and supplies among subsidiaries and affiliates.

In March 2003, the Court set May 15, 2003 as the last date by which holders of
pre-Filing Date claims against the Additional Debtors (other than
asbestos-related personal injury claims and certain hearing loss and coal tar
pitch volatiles claims) could file their claims. Any holder of a claim that was
required to file such claim by May 15, 2003 and did not do so may be barred from
asserting such claim against any of the Additional Debtors and, accordingly, may
not be able to participate in any distribution in any of the Cases on account of
such claim. The Company has not yet completed its analysis of all of the proofs
of claim to determine their validity. However, during the course of the Cases,
certain matters in respect of the claims have been resolved. Material provisions
in respect of claim settlements are included in the accompanying financial
statements and are fully disclosed elsewhere herein.

All Debtors. Two creditors' committees, one representing the unsecured creditors
(the "UCC") and the other representing the asbestos claimants (the "ACC"), have
been appointed as official committees in the Cases and, in accordance with the
provisions of the Code, have the right to be heard on all matters that come
before the Court. In August 2003, the Court approved the appointment of a
committee of salaried retirees (the "1114 Committee" and, together with the UCC
and the ACC, the "Committees") with whom the Debtors have negotiated necessary
changes, including the modification or termination, of certain retiree benefits
(such as medical and insurance) under Section 1114 of the Code. The Debtors
expect that the Committees, together with the legal representative for potential
future asbestos claimants (the "Futures' Representative") that has been
appointed in the Cases, play important roles in the Cases and in the negotiation
of the terms of any plan or plans of reorganization. The Debtors are required to
bear certain costs and expenses for the Committees and the Futures'
Representative, including those of their counsel and other advisors.

As provided by the Code, the Debtors had the exclusive right to propose a plan
of reorganization for 120 days following the initial Filing Date. The Court has
subsequently approved several extensions of the exclusivity period for all
Debtors, the most recent of which was set to expire February 29, 2004. A motion
to extend the exclusivity period for KAAC, KJC and AJI through April 30, 2004,
and for the remaining Debtors through June 30, 2004, was filed by the Company in
February 2004. By filing the motion to extend the exclusivity period, the period
is automatically extended until the April 26, 2004 Court hearing date. As the
Debtors' motion to extend the exclusivity period was agreed to by the UCC and as
the ACC and the Futures' Representative have indicated that they support a
common extension of the exclusivity period for all Debtors through either April
30, 2004 or June 30, 2004, the Debtors believe that it is likely that the
exclusivity period for all Debtors will be extended through at least April 30,
2004. Additional extensions may be sought. However, no assurance can be given
that any such future extension requests will be granted by the Court. If the
Debtors fail to file a plan of reorganization during the exclusivity period, or
if such plan is not accepted by the requisite numbers of creditors and equity
holders entitled to vote on the plan, other parties in interest in the Cases may
be permitted to propose their own plan(s) of reorganization for the Debtors.

The Debtors anticipate that substantially all liabilities of the Debtors as of
their Filing Date will be settled under one or more plans of reorganization to
be proposed and voted on in accordance with the provisions of the Code. Although
the Debtors intend to file and seek confirmation of such a plan or plans, there
can be no assurance as to when the Debtors will file such a plan or plans or as
to whether such plan or plans will be confirmed by the Court and consummated.

In working toward one or more plans of reorganization, the Debtors have been,
and continue to be, engaged in discussions with each of their key
constituencies, including the Committees, the Futures' Representative, the PBGC,
and the appropriate union representatives. The treatment of individual groups of
creditors in any such plan of reorganization cannot be determined definitively
at this time. The ultimate treatment of and recoveries to individual creditors
is dependent on, among other things, the total amount of claims against the
Debtors as ultimately determined by the Court, the priority of the applicable
claims, the outcome of ongoing discussions with the key constituencies, the
amount of value available for distribution in respect of claims and the
completion of the plan confirmation process consistent with applicable
bankruptcy law.

The Debtors' objective is to achieve the highest possible recoveries for all
stakeholders, consistent with the Debtors' abilities to pay, and to continue the
operations of their businesses. However, there can be no assurance that the
Debtors will be able to attain these objectives or achieve a successful
reorganization. While valuation of the Debtors' assets and estimation of
pre-Filing Date claims at this stage of the Cases are subject to inherent
uncertainties, the Debtors currently believe that, in the aggregate, it is
likely that their liabilities will be found to significantly exceed the fair
value of their assets. Therefore, the Debtors currently believe that it is
likely that substantially all pre-Filing Date claims will be settled at less
than 100% of their face value and the equity interests of the Company's
stockholders will be cancelled without consideration. Further, the Debtors
believe that it is likely that: (a) the claims of pre-petition creditors that
are given certain priorities by statute or have the benefit of guarantees or
other contractual or structural seniority will likely receive substantially
greater recoveries than pre-petition creditors that have no such priorities or
seniority; and (b) all pending and future asbestos-related personal injury
claims are likely to be resolved through the formation, pursuant to a plan of
reorganization, of a statutory trust to which all claims would be directed by a
channeling injunction that would permanently remove all asbestos liability from
the Debtors. A similar trust arrangement is anticipated in respect of pending
and future silica, hearing loss and coal tar pitch volatiles personal injury
claims. The trusts would be funded pursuant to statutory requirements and
agreements with representatives of the affected parties, using the Debtors'
insurance assets and certain other consideration that has yet to be agreed. No
assurances can be provided that the foregoing will ultimately be included in any
plan(s) of reorganization the Debtors may file. Further, while the Debtors
believe it is possible to successfully reorganize their operations and emerge
from Chapter 11 in 2004, their ability to do so is subject to inherent
market-related risks as well as successful negotiation and Court approval for
the treatment of creditors consistent with the applicable bankruptcy law.

The Debtors' Cases are being administered on a consolidated basis. In fact,
however, there are separate cases for each Debtor or twenty-six Cases in total.
The impacts of the Cases and any plans of reorganization proposed for individual
debtors will depend on each Debtor's specific circumstances and the differing
interests that creditors have in respect of such entities.

A substantial majority of the claims in the Cases are against the Company. These
include claims in respect of substantially all of the Debtors' debt obligations,
obligations in respect of pension and retiree medical benefits, asbestos-related
and personal injury claims, and known environmental obligations. As such, all of
these claimholders will have claims against the Company that, except as further
described below, will have to be satisfied by the Company's assets, which
generally include the alumina refinery located at Gramercy, Louisiana
("Gramercy"), the interests in Anglesey Aluminium Limited ("Anglesey"), the
interests in Volta Aluminium Company Limited ("Valco") and the fabricated
products plants (other than the London, Ontario, Canada and Richmond, Virginia
extrusion facilities, which are owned by separate subsidiaries that are also
Debtors). The Company's assets also include certain intercompany receivables
from certain of its Debtor subsidiaries for funding provided to its joint
venture affiliates.

In general, except as described below, there are a relatively modest number or
amount of third party trade and other claims against the Company's other Debtor
subsidiaries. Sixteen of the Debtors (including KAC) have no material ongoing
activities or operations and have no material assets or liabilities other than
intercompany items. The Company believes that it is likely that these entities
will ultimately be merged out of existence or dissolved in some manner. The
remaining Debtor subsidiaries (which include AJI, KJC, KAAC, KAII, KACOCL, KBC,
Bellwood, KATSI and KFC) own certain extrusion facilities or act largely as
intermediaries between the Company and certain of its other subsidiaries and
joint venture affiliates or interact with third parties on behalf of the Company
and its joint venture affiliates. As such, the vast majority of the pre-petition
claims against such entities are related to intercompany activities. However,
certain of those holders of claims against the Company also have claims against
certain Company subsidiaries that own the Company's interests in joint venture
affiliates and which represent a significant portion of the Company's
consolidated asset value. For example, noteholders have claims against each of
AJI and KJC, which own the Company's interests in Alumina Partners of Jamaica
("Alpart"), and KAAC, which owns the Company's interests in Queensland Alumina
Limited ("QAL"), as a result of AJI, KJC and KAAC having been subsidiary
guarantors of the Company's Senior Notes and Senior Subordinated Notes.
Additionally, the PBGC, pursuant to statute, has joint and several claims
against the Company and all entities which are 80% or more owned by the Company
(referred to as "Controlled Group Members"). Controlled Group Members include
each of AJI, KJC and KAAC, as well as all of the other Debtors. The only other
significant claims against AJI, KJC and KAAC are intercompany claims related to
funding provided to these entities by the Company. As such, it is likely that
the vast majority of any value realized in respect of the Company's interests in
Alpart and QAL, either from their disposition or realized upon emergence from
such operations, is likely to be for the benefit of the noteholders and the
PBGC.

In order to resolve the question of what consideration from any sale or other
disposition of AJI, KJC and/or KAAC, or their respective assets, should be for
the benefit of the Company and its claimholders (in respect of the Company's
intercompany claims against such entities), an intercompany settlement agreement
is being negotiated between the UCC and the Company (the "Intercompany
Agreement"). The proposed Intercompany Agreement would also release
substantially all other pre-and post-petition intercompany claims between the
Debtors. The proposed Intercompany Agreement, if finalized substantially in its
current form, would, among other things, provide for payments of cash by AJI,
KJC and KAAC to the Company of $85.0 in respect of its intercompany claims
against AJI, KJC and KAAC plus any amounts up to $14.3 plus accrued and unpaid
interest and fees paid by the Company to retire Alpart-related debt. Under the
proposed Intercompany Agreement, such amount would be increased or decreased for
(1) any net cash flows collected by or funded by the Company between April 1,
2004 and the earlier of (a) AJI's, KJC's and KAAC's emergence from Chapter 11 or
(b) the sale of AJI's, KJC's and KAAC's respective interests in and related to
Alpart and QAL and (2) any purchase price adjustments (other than incremental
amounts related to what, if any, alumina sales contracts are transferred)
pursuant to the Company's January 2004 agreement to sell its interests in
Alpart, if consummated. The proposed Intercompany Agreement calls for such
payments to be made to the Company at the earlier of the sale of the Company's
interests in Alpart and QAL or the emergence of AJI, KJC and KAAC from Chapter
11. Under the proposed Intercompany Agreement, all such payments, other than
$28.0 to be paid to the Company upon the sale of Alpart and any amounts paid by
the Company in respect of retiring the Alpart-related debt, are likely to be
held in escrow for the benefit of the Company until the Company's emergence from
the Cases. In the interim, the Company's claims against these entities will be
secured by liens. There are still a number of issues with respect to the
proposed Intercompany Agreement that must be satisfactorily resolved. The
Intercompany Agreement once finalized will be subject to Court approval.
Additionally, the ACC and the Futures' Representative have not yet reviewed,
commented on or agreed to the terms of the Intercompany Agreement. The Company
currently expects the Court to consider the proposed Intercompany Agreement at
the regularly scheduled April 2004 or May 2004 omnibus hearing. However, no
assurances can be provided that the issues can be resolved within the time frame
necessary to submit the Intercompany Agreement to the Court under that time
frame.

At emergence from Chapter 11, the Company will have to pay or otherwise provide
for a material amount of claims. Such claims include accrued but unpaid
professional fees, priority tax and environmental claims, secured claims, and
certain post-petition obligations (collectively, "Exit Costs"). The Company
currently estimates that its Exit Costs will be in the range of $100.0 to
$120.0. The Company currently expects to fund such Exit Costs using the proceeds
to be received under the proposed Intercompany Agreement together with existing
cash resources and available liquidity under an exit financing facility that
will replace the current Post-Petition Credit Agreement (see Note 7). If
payments under the proposed Intercompany Agreement together with existing cash
resources and liquidity available under an exit financing facility are not
sufficient to pay or otherwise provide for all Exit Costs, the Company and its
other Debtor subsidiaries will not be able to emerge from Chapter 11 unless and
until sufficient funding can be obtained. Management believes it will be able to
successfully resolve any issues that may arise in respect of the proposed
Intercompany Agreement or be able to negotiate a reasonable alternative.
However, no assurances can be given in this regard.

The Company expects that, when the Debtors ultimately file a plan or plans of
reorganization, it is likely to reflect the Company's strategic vision for
emergence from Chapter 11: (a) a standalone going concern with manageable
leverage and financial flexibility, improved cost structure and competitive
strength; (b) a company positioned to execute its long-standing vision of market
leadership and growth in fabricated products; (c) a company that delivers a
broad product offering and leadership in service and quality for its customers
and distributors; and (d) a company with continued ownership of those commodity
assets that have the potential to generate significant cash at steady-state
metal prices and/or which provide a strategic hedge against the fabricated
products business' needs for primary aluminum. While the Company intends to
continue to pursue a standalone fabricated products company emergence strategy,
from time to time the Debtors may also evaluate other reorganization strategies,
consistent with the Debtors' responsibility to maximize the recoveries for its
stakeholders. The Company's advisors have developed a timeline that, assuming
the current pace of the Cases continues, is expected to allow the Company to
file a plan or plans of reorganization by mid-year 2004 and emerge from Chapter
11 as early as late in the third quarter of 2004. However, the Debtors' ability
to do so is subject to the confirmation of a plan of reorganization in
accordance with the applicable bankruptcy law and, accordingly, no assurances
can be given as to whether or when any plan or plans of reorganization will
ultimately be filed or confirmed.

In light of the Company's stated strategy and to further the Debtors' ultimate
planned emergence from Chapter 11, the Debtors, with the approval of the
Company's Board of Directors and in consultation with the UCC, the ACC and the
Futures' Representative, began exploring the possible sale of one or more of
their commodities assets during the third quarter of 2003. In particular, the
Debtors began exploring the possible sale of their interests in and related to:
(a) Alpart, (b) Anglesey, and (c) the Company's Gramercy alumina refinery and
Kaiser Jamaica Bauxite Company ("KJBC"). The possible sale of the Debtors'
interests in respect of Gramercy and KJBC was explored jointly given their
significant integration. More recently, the Company has also begun the process
of exploring the possible sale of its 20% interest in and related to QAL. While
the Company believes that the QAL-related interests are likely to be its most
valuable commodity asset and expects that there are or will be a number of
parties interested in acquiring such interests, no assurances can be given that
any such sale will occur.

In exploring the sale of its interest in and related to Alpart, Anglesey and
Gramercy/KJBC, the Debtors, through their advisors, surveyed the potential
market and initiated discussions with numerous parties believed to have an
interest in such assets. In addition, other parties contacted the Debtors and/or
their investment advisors to express an interest in purchasing the assets. The
Debtors provided (subject to confidentiality agreements) information regarding
the applicable interests to these parties, each of which was asked to submit a
non-binding expression of interest regarding the individual assets. After
receiving these initial expressions of interest from potential purchasers, the
Debtors determined which of the expressions of interest received represented
reasonable indications of value ("Qualified Bids"). Potential bidders
("Qualified Bidders") that submitted Qualified Bids were then permitted to
conduct due diligence in respect of the assets for which they submitted a
Qualified Bid and to submit definitive proposals.

The Debtors reviewed the definitive proposals submitted and, in consultation
with the UCC, the ACC and the Futures' Representative, and other key
constituencies, determined with which Qualified Bidders the Debtors would pursue
further negotiations.

As previously disclosed, while the Company had stated that it was considering
the possibility of disposing of one or more of its commodity facilities, through
the third quarter of 2003, the Company still considered all of its commodity
assets as "held for use," as no definite decisions had been made regarding the
disposition of such assets. However, based on additional negotiations with
prospective buyers and discussions with key constituents, the Company concluded
that dispositions of Alpart and Gramercy/KJBC were likely and, therefore, that
recoverability should be evaluated differently at December 31, 2003. The change
in evaluation methodology is required because, under generally accepted
accounting principles ("GAAP"), assets to be held and used are evaluated for
recoverability differently than assets to be sold or disposed of. Assets to be
held and used are evaluated based on their expected undiscounted future net cash
flows. So long as the Company reasonably expects that such undiscounted future
net cash flows for each asset will exceed the recorded value of the asset being
evaluated, no impairment is required. However, if plans to sell or dispose of an
asset or group of assets meet a number of specific criteria, then, under GAAP,
such assets should be considered held for sale/disposition and their
recoverability should be evaluated, for each asset, based on expected
consideration to be received upon disposition. Sales or dispositions at a
particular time will be affected by, among other things, the existing industry
and general economic circumstances as well as the Company's own circumstances,
including whether or not assets will (or must) be sold on an accelerated or more
extended timetable. Such circumstances may cause the expected value in a sale or
disposition scenario to differ materially from the realizable value over the
normal operating life of assets, which would likely be evaluated on long-term
industry trends.

As more fully discussed in Note 5, given uncertainties as to the ultimate
consummation of these transactions as well as the ultimate proceeds that may be
received in respect of a sale of the Company's interests in Alpart and Valco, no
impairment charges have been recorded in the December 31, 2003 financial
statements. However, based on the minimum end of the range of expected proceeds
pursuant to the previously disclosed January 2004 agreement to sell the
Alpart-related interests, the amounts ultimately received from any such sale at
closing may be less than the current book value by approximately $50.0.
Additionally, based on the minimum purchase price pursuant to the Memorandum of
Understanding ("MOU") between the Company and the Government of Ghana ("GoG")
and the Volta River Authority ("VRA") in respect of the sale of the Company's
interests in Valco, it is possible that the amounts ultimately received may be
less than the Company's investment in Valco-related assets and liabilities by
$20.0 - $30.0 (see Note 5). By contrast, in evaluating the recoverability of the
Company's basis in Gramercy/KJBC, the Company concluded that an impairment
charge of approximately $368.0 was required because all offers received for such
assets were substantially below the carrying value of the assets (see Note 5).
The actual amount of gain or loss if and when the potential sales are
consummated may differ from these amounts as a result of closing adjustments,
changes in economic circumstances and other matters.

Financial Statement Presentation. The accompanying consolidated financial
statements have been prepared in accordance with AICPA Statement of Position
90-7 ("SOP 90-7"), Financial Reporting by Entities in Reorganization Under the
Bankruptcy Code, and on a going concern basis, which contemplates the
realization of assets and the liquidation of liabilities in the ordinary course
of business. However, as a result of the Cases, such realization of assets and
liquidation of liabilities are subject to a significant number of uncertainties.

Upon emergence from the Cases, the Company expects to apply "fresh start"
accounting to its consolidated financial statements as required by SOP 90-7.
Fresh start accounting is required if: (1) a debtor's liabilities are determined
to be in excess of its assets and (2) there will be a greater than 50% change in
the equity ownership of the entity. As previously disclosed, the Company expects
both such circumstances to apply. As such, upon emergence, the Company will
restate its balance sheet to equal the reorganization value as determined in its
plan(s) of reorganization and approved by the Court. Additionally, items such as
accumulated depreciation, accumulated deficit and accumulated other
comprehensive income (loss) will be reset to zero. The Company will allocate the
reorganization value to its individual assets and liabilities based on their
estimated fair value at the emergence date. Typically such items as current
liabilities, accounts receivable, and cash will be reflected at values similar
to those reported prior to emergence. Items such as inventory, property, plant
and equipment, long-term assets and long-term liabilities are more likely to be
significantly adjusted from amounts previously reported. Because fresh start
accounting will be adopted at emergence, and because of the significance of the
pending asset sales and liabilities subject to compromise (that will be relieved
upon emergence), comparisons between the current historical financial statements
and the financial statements upon emergence may be difficult to make.

Financial Information. Condensed consolidating financial statements of the
Debtors and non-Debtors are set forth below:

                                          CONDENSED CONSOLIDATING BALANCE SHEETS
                                                     DECEMBER 31, 2003

                                                                              Consolidation/
                                                                                Elimination
                                                Debtors       Non-Debtors         Entries        Consolidated
                                             -------------  ---------------  ----------------- ----------------
Current assets                               $      328.1   $        103.1   $          -      $         431.2
Investments in subsidiaries and affiliates          400.8               .2             (344.0)            57.0
Intercompany receivables (payables), net            (88.3)            88.3              -                 -
Property and equipment, net                         232.1            380.5              -                612.6
Other assets                                        520.5              7.4              -                527.9
                                             -------------  ---------------  ----------------- ----------------
                                             $    1,393.2   $        579.5   $         (344.0) $       1,628.7
                                             =============  ===============  ================= ================

Liabilities not subject to compromise -
     Current liabilities                     $      230.2   $         91.3   $           (2.0) $         319.5
     Long-term liabilities                           74.2             25.1              -                 99.3
Liabilities subject to compromise                 2,820.0             -                 -              2,820.0
Minority interests                                    -              105.6               15.5            121.1
Stockholders' equity (deficit)                   (1,731.2)           357.5             (357.5)        (1,731.2)
                                             -------------  ---------------  ----------------- ----------------
                                             $    1,393.2   $        579.5   $         (344.0) $       1,628.7
                                             =============  ===============  ================= ================

                                    CONDENSED CONSOLIDATING STATEMENTS OF INCOME (LOSS)
                                           FOR THE YEAR ENDED DECEMBER 31, 2003

                                                                              Consolidation/
                                                                                Elimination
                                                Debtors       Non-Debtors         Entries        Consolidated
                                             -------------  ---------------  ----------------- ----------------
Net sales                                    $    1,272.5   $        106.2   $          (13.4) $       1,365.3
                                             -------------  ---------------  ----------------- ----------------
Costs and expenses -
     Operating costs and expenses                 1,448.2            158.4              (13.4)         1,593.2
     Other operating charges (benefits), net        511.0             -                 -                511.0
                                             -------------  ---------------  ----------------- ----------------
                                                  1,959.2            158.4              (13.4)         2,104.2
                                             -------------  ---------------  ----------------- ----------------
Operating income (loss)                            (686.7)           (52.2)             -               (738.9)
Interest expense                                     (9.6)            (1.1)             -                (10.7)
All other income (expense), net                     (45.5)              .8               11.2            (33.5)
Income tax and minority interests                   (25.1)            20.1              -                 (5.0)
Equity in income of subsidiaries                    (21.2)            -                  21.2             -
                                             -------------  ---------------  ----------------- ----------------
Net income (loss)                            $     (788.1)  $        (32.4)  $           32.4  $        (788.1)
                                             =============  ===============  ================= ================


                                     CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                                           FOR THE YEAR ENDED DECEMBER 31, 2003

                                                                              Consolidation/
                                                                                Elimination
                                                Debtors       Non-Debtors         Entries        Consolidated
                                             -------------  ---------------  ----------------- ----------------
Net cash provided (used) by:
     Operating activities                    $     (113.9)  $         26.1   $          -      $         (87.8)
     Investing activities                            75.6            (26.5)             -                 49.1
     Financing activities                            (4.1)            -                 -                 (4.1)
                                             -------------  ---------------  ----------------- ----------------
Net decrease in cash and cash equivalents           (42.4)             (.4)             -                (42.8)
Cash and cash equivalents, beginning of
     period                                          77.6              1.1              -                 78.7
                                             -------------  ---------------  ----------------- ----------------
Cash and cash equivalents, end of period     $       35.2   $           .7   $          -      $          35.9
                                             =============  ===============  ================= ================

                                          CONDENSED CONSOLIDATING BALANCE SHEETS
                                                     DECEMBER 31, 2002

                                                                         Consolidation/
                                                                           Elimination
                                             Debtors       Non-Debtors       Entries         Consolidated
                                         --------------   -------------  ---------------    --------------

Current assets                           $       406.9    $      114.7   $         -        $       521.6
Investments in subsidiaries and affiliates       428.7              .1           (359.1)             69.7
Intercompany receivables (payables)             (106.4)          106.4             -                  -
Property and equipment, net                      630.9           379.0             -              1,009.9
Other assets                                     620.8             8.4             -                629.2
                                         --------------   -------------  ---------------    --------------
                                         $     1,980.9    $      608.6   $       (359.1)    $     2,230.4
                                         ==============   =============  ===============    ==============

Liabilities not subject to compromise -
     Current liabilities                 $       244.1    $       89.9   $         (2.0)    $       332.0
     Long-term liabilities                        89.1            40.5             -                129.6
Liabilities subject to compromise              2,726.0             -               -              2,726.0
Minority interests                                 -             102.3             18.8             121.1
Stockholders' equity                          (1,078.3)          375.9           (375.9)         (1,078.3)
                                         --------------   -------------  ---------------    --------------
                                         $     1,980.9    $      608.6   $       (359.1)    $     2,230.4
                                         ==============   =============  ===============    ==============

                                    CONDENSED CONSOLIDATING STATEMENTS OF INCOME (LOSS)
                                           FOR THE YEAR ENDED DECEMBER 31, 2002


                                                                         Consolidation/
                                                                           Elimination
                                             Debtors       Non-Debtors       Entries         Consolidated
                                         --------------   -------------  ---------------    --------------

Net sales                                $     1,371.2    $      209.7   $       (111.3)    $     1,469.6
                                         --------------   -------------  ---------------    --------------
Costs and expenses -
     Operating costs and expenses              1,508.6           227.0           (111.3)          1,624.3
     Other operating charges (benefits),
        net                                      250.2             1.0             -                251.2
                                         --------------   -------------  ---------------    --------------
                                               1,758.8           228.0           (111.3)          1,875.5
                                         --------------   -------------  ---------------    --------------
Operating income (loss)                         (387.6)          (18.3)            -               (405.9)
Interest expense                                 (19.4)           (1.3)            -                (20.7)
All other income (expense), net                  (43.4)             .2             10.3             (32.9)
Provision for income tax and minority
     interests                                   (15.5)            6.6             -                 (8.9)
Equity in income of subsidiaries                  (2.5)            -                2.5               -
                                         --------------   -------------  ---------------    --------------
Net income (loss)                        $      (468.4)   $      (12.8)  $         12.8     $      (468.4)
                                         ==============   =============  ===============    ==============


                                     CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                                           FOR THE YEAR ENDED DECEMBER 31, 2002


                                                                          Consolidation/
                                                                            Elimination
                                            Debtors         Non-Debtors       Entries         Consolidated
                                       ----------------   --------------  ---------------    --------------

Net cash provided (used) by:
     Operating activities              $         (84.7)   $        35.1   $         -        $       (49.6)
     Investing activities                         18.1            (34.3)            -                (16.2)
     Financing activities                         (8.8)             -               -                 (8.8)
                                       ----------------   --------------  ---------------    --------------
Net (decrease) increase in cash and
     cash equivalents                            (75.4)              .8             -                (74.6)
Cash and cash equivalents at beginning
     of period                                   153.0               .3             -                153.3
                                       ----------------   --------------  ---------------    --------------
Cash and cash equivalents at end of
     period                            $          77.6    $         1.1   $         -        $        78.7
                                       ================   ==============  ===============    ==============

Classification of Liabilities as "Liabilities Not Subject to Compromise" Versus
"Liabilities Subject to Compromise." Liabilities not subject to compromise
include: (1) liabilities incurred after the Filing Date of the Cases; (2)
pre-Filing Date liabilities that the Debtors expect to pay in full, including
priority tax and employee claims and certain environmental liabilities, even
though certain of these amounts may not be paid until a plan of reorganization
is approved; and (3) pre-Filing Date liabilities that have been approved for
payment by the Court and that the Debtors expect to pay (in advance of a plan of
reorganization) over the next twelve-month period in the ordinary course of
business, including certain employee related items (salaries, vacation and
medical benefits), claims subject to a currently existing collective bargaining
agreement, and certain postretirement medical and other costs associated with
retirees (however, see note (2) to the table below).

Liabilities subject to compromise refer to all other pre-Filing Date liabilities
of the Debtors. The amounts of the various categories of liabilities that are
subject to compromise are set forth below. These amounts represent the Company's
estimates of known or probable pre-Filing Date claims that are likely to be
resolved in connection with the Cases. Such claims remain subject to future
adjustments. Further, the Debtors currently believe that it is likely that
substantially all pre-Filing Date claims will be settled at less than 100% of
their face value and the equity interests of the Company's stockholders will be
cancelled without consideration.

The amounts subject to compromise at December 31, 2003 and 2002 consisted of the
following items:


                                                                                      2003               2002
                                                                                 ---------------   ----------------
Items, absent the Cases, that would have been considered current:
     Accounts payable                                                            $         50.8    $          47.6
     Accrued interest                                                                      47.5               44.0
     Accrued salaries, wages and related expenses(1)                                      159.0               59.0
     Accrued postretirement medical obligation(2)                                          32.5               -
     Other accrued liabilities (including asbestos liability of $130.0 - Note 12)         148.0              150.6
Items, absent the Cases, that would have been considered long-term:
     Accrued pension benefits                                                             289.0              362.7
     Accrued postretirement medical obligation(2)                                         652.4              672.4
     Long-term liabilities(3)                                                             592.6              559.5
     Debt (Note 7)                                                                        848.2              830.2
                                                                                 ---------------   ----------------
                                                                                 $      2,820.0    $       2,726.0
                                                                                 ===============   ================

(1)     Accrued salaries, wages and related expenses represent estimated minimum
        pension contributions that, absent the Cases, would have otherwise been
        payable. Amounts for the period ended December 31, 2003 include
        approximately $100.0 associated with estimated special liquidity and
        other pension contributions that were not made. As previously disclosed,
        the Company does not currently expect to make any pension contributions
        in respect of its domestic pension plans. See Note 9 for additional
        information about non-payment of pension contributions.
(2)     In February 2004, the Company concluded an agreement with the 1114
        Committee and union representatives that represent the vast majority of
        the hourly employees with regard to the termination of the existing
        salaried and hourly postretirement benefit plans. The Company has
        included the first six months of 2004 postretirement medical obligations
        payments totaling $32.5 as liabilities not subject to compromise (see
        Note 9 for additional information about termination of postretirement
        benefit plans).
(3)     Long-term liabilities include hearing loss claims of $15.8 at December
        31, 2003 (Note 12), environmental liabilities of $43.0 at December 31,
        2003 and $21.7 at December 31, 2002 (Note 12) and asbestos liabilities
        of $480.1 at December 31, 2003 and 2002 (Note 12).

The classification of liabilities "not subject to compromise" versus liabilities
"subject to compromise" is based on currently available information and
analysis. As the Cases proceed and additional information and analysis is
completed or, as the Court rules on relevant matters, the classification of
amounts between these two categories may change. The amount of any such changes
could be significant. Additionally, as the Company evaluates the proofs of claim
filed in the Cases, adjustments will be made for those claims that the Company
believes will probably be allowed by the Court. The amount of such claims could
be significant.

Reorganization Items. Reorganization items under the Cases are expense or income
items that are incurred or realized by the Company because it is in
reorganization. These items include, but are not limited to, professional fees
and similar types of expenses incurred directly related to the Cases, loss
accruals or gains or losses resulting from activities of the reorganization
process, and interest earned on cash accumulated by the Debtors because they are
not paying their pre-Filing Date liabilities. For the years ended December 31,
2003 and 2002, reorganization items were as follows:

                                                                         2003          2002
                                                                     ------------  -------------
Professional fees                                                    $      27.5   $       28.8
Accelerated amortization of certain deferred
   financing costs                                                            -             4.5
Interest income                                                              (.8)          (1.8)
Other                                                                         .3            1.8
                                                                     ------------  -------------
                                                                     $      27.0   $       33.3
                                                                     ============  =============

As required by SOP 90-7, in the first quarter of 2002, the Company recorded the
Debtors' pre-Filing Date debt that is subject to compromise at the allowed
amount. Accordingly, the Company accelerated the amortization of debt-related
premium, discount and costs attributable to this debt and recorded a net expense
of approximately $4.5 in Reorganization items during the first quarter of 2002.

Trust Fund. During the first quarter of 2002, the Company paid $5.8 into a trust
fund in respect of potential liability obligations of directors and officers.
This amount is included in Other assets.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Going Concern. The consolidated financial statements of the Company have been
prepared on a "going concern" basis which contemplates the realization of assets
and the liquidation of liabilities in the ordinary course of business; however,
as a result of the commencement of the Cases, such realization of assets and
liquidation of liabilities are subject to a significant number of uncertainties.
Specifically, the consolidated financial statements do not include all of the
necessary adjustments to present: (a) the realizable value of assets on a
liquidation basis or the availability of such assets to satisfy liabilities, (b)
the amount which will ultimately be paid to settle liabilities and contingencies
which may be allowed in the Cases, or (c) the effect of any changes which may be
made in connection with the Debtors' capitalizations or operations as a result
of a plan of reorganization. Because of the ongoing nature of the Cases, the
discussions and consolidated financial statements contained herein are subject
to material uncertainties.

Additionally, as discussed above (see Financial Statement Presentation), the
Company believes that it would, upon emergence, apply fresh start accounting to
its consolidated financial statements which would also adversely impact the
comparability of the December 31, 2003 financial statements to the financial
statements of the entity upon emergence.

Principles of Consolidation. The consolidated financial statements include the
statements of the Company and its majority owned subsidiaries. The Company is a
wholly owned subsidiary of Kaiser, which is a subsidiary of MAXXAM Inc.
("MAXXAM"). The Company operates in all principal aspects of the aluminum
industry-the mining of bauxite (the major aluminum bearing ore), the refining of
bauxite into alumina (the intermediate material), the production of primary
aluminum, and the manufacture of fabricated and semi-fabricated aluminum
products. The Company's production levels of alumina and primary aluminum allows
it to be a major seller of alumina and primary aluminum to domestic and
international third parties (see Note 17).

The preparation of financial statements in accordance with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of contingent assets
and liabilities known to exist as of the date the financial statements are
published, and the reported amounts of revenues and expenses during the
reporting period. Uncertainties, with respect to such estimates and assumptions,
are inherent in the preparation of the Company's consolidated financial
statements; accordingly, it is possible that the actual results could differ
from these estimates and assumptions, which could have a material effect on the
reported amounts of the Company's consolidated financial position and results of
operation.

Investments in 50%-or-less-owned entities are accounted for primarily by the
equity method. Intercompany balances and transactions are eliminated.

Recognition of Sales. Sales are recognized when title, ownership and risk of
loss pass to the buyer.

Cash and Cash Equivalents. The Company considers only those short-term, highly
liquid investments with original maturities of 90 days or less to be cash
equivalents.

Inventories. Substantially all product inventories are stated at last-in,
first-out ("LIFO") cost, not in excess of market value. Replacement cost is not
in excess of LIFO cost. Other inventories, principally operating supplies and
repair and maintenance parts, are stated at the lower of average cost or market.
Inventory costs consist of material, labor, and manufacturing overhead,
including depreciation. Inventories consist of the following:

                                                                                 December 31,
                                                                         ----------------------------
                                                                             2003           2002
                                                                         ------------   -------------
Fabricated products -
   Finished products                                                     $      27.8    $       31.3
   Work in process                                                              30.1            30.0
   Raw materials                                                                22.8            27.3
   Operating supplies and repairs and maintenance parts                         11.7            13.1
                                                                         ------------   -------------
                                                                                92.4           101.7
                                                                         ------------   -------------
Commodities -
   Bauxite and alumina                                                          46.1            73.7
   Primary aluminum                                                               .1             5.2
   Work in process                                                               4.1             4.7
   Operating supplies and repair and maintenance parts                          63.5            69.6
                                                                         ------------   -------------
                                                                               113.8           153.2
                                                                         ------------   -------------
                                                                         $     206.2    $      254.9
                                                                         ============   =============


Inventories were reduced by the following charges during the years ended
December 31, 2003, 2002 and 2001.


                                                                                         2003          2002            2001
------------------------------------------------------------------------------   ------------  ------------   -------------
Included in cost of products sold:
   LIFO inventory charges                                                        $       6.6   $       6.1    $        8.2
Included in other operating charges (benefits), net (see Note 6):
   Net realizable value charges -
      Northwest smelters impairment (Primary Aluminum), net of
        intersegment profit elimination on Primary Aluminum impairment
        charges of $2.8                                                                   -            18.6            -
      Operating supplies and repair and maintenance parts (Bauxite &
        Alumina - $5.0 and Primary Aluminum - $.6)                                        -             -              5.6
   LIFO inventory charges associated with permanent inventory reductions -                -
      Northwest smelters impairment (Primary Aluminum)                                    -             .9             -
      Product line exit (Fabricated Products)                                             -            1.6             -
                                                                                 ------------  ------------   -------------
                                                                                 $       6.6   $      27.2    $       13.8
                                                                                 ============  ============   =============

The LIFO inventory charges resulted from reductions in inventory volumes that
were in inventory layers with higher costs than current market prices.

Depreciation. Depreciation is computed principally by the straight-line method
at rates based on the estimated useful lives of the various classes of assets.
The principal estimated useful lives of land improvements, buildings, and
machinery and equipment are 8 to 25 years, 15 to 45 years, and 10 to 22 years,
respectively.

Stock-Based Compensation. The Company applies the intrinsic value method to
account for a stock-based compensation plan whereby compensation cost is
recognized only to the extent that the quoted market price of the stock at the
measurement date exceeds the amount an employee must pay to acquire the stock.
No compensation cost has been recognized for this plan as the exercise price of
the stock options granted in 2001 were at or above the market price. No stock
options were granted in 2003 and 2002. The pro forma after-tax effect of the
estimated fair value of the grants would be to increase the net loss in 2003,
2002 and 2001 by $.4, $.6 and $.3, respectively. The pro forma after tax effect
of the estimated fair value of the grants would have resulted in no change in
the basic/diluted loss per share for 2003, 2002 and 2001. The fair value of the
2001 stock option grants were estimated using a Black-Scholes option pricing
model.

The pro forma effect of the estimated value of stock options may not be
meaningful, because as a part of a plan of reorganization for the Company, it is
likely the equity interests of the holders of outstanding options will be
cancelled without consideration.

Other Income (Expense). Amounts included in Other income (expense) in 2003, 2002
and 2001, other than interest expense, reorganization items and gain on sale of
QAL interest, included the following pre-tax gains (losses):
                                                                                           Year Ended December 31,
                                                                                  -------------------------------------------
                                                                                           2003          2002            2001
----------------------------------------------------------------------------      -------------  ------------  --------------
Gains on sale of real estate and miscellaneous equipment associated with
   properties with no operations (Note 5)                                         $        -     $       3.8   $         6.9
Mark-to-market gains (losses) (Note 13)                                                    -             (.4)           35.6
Adjustment to environmental liabilities (Note 12)                                         (7.5)           -            (13.5)
Foreign currency exchange associated with foreign tax settlement (Note 8)                 (1.7)           -              -
Asbestos-related charges (Note 12)                                                         -              -            (57.2)
Investment write-off (Note 4)                                                              -              -             (2.8)
                                                                                  -------------  ------------  --------------
   Significant items, net                                                                 (9.2)          3.4           (31.0)
All other, net                                                                             2.7          (3.0)           (1.8)
                                                                                  -------------  ------------  --------------
                                                                                  $       (6.5)  $        .4   $       (32.8)
                                                                                  =============  ============  ==============

Deferred Financing Costs. Costs incurred to obtain debt financing are deferred
and amortized over the estimated term of the related borrowing. Such
amortization is included in Interest expense. As a result of the Cases, the
amortization of the deferred financing costs related to the Debtors' unsecured
debt was discontinued on the Filing Date.

Goodwill. Through the year ended December 31, 2001, the goodwill associated with
the acquisition of the Chandler, Arizona facility (see Note 5) was being
amortized on a straight-line basis over 20 years. Beginning with the first
quarter of 2002, the Company discontinued the amortization of goodwill
consistent with Statement of Financial Accounting Standards No. 142, Goodwill
and Other Intangible Assets ("SFAS No. 142"). However, the discontinuance of
amortization of goodwill did not have a material effect on the Company's results
of operations or financial condition (the amount of amortization in 2001 was
less than $.8). In accordance with SFAS No. 142, the Company reviews goodwill
for impairment at least annually in the fourth quarter of each year. As of
December 31, 2003, unamortized goodwill was approximately $11.4 and was included
in Other assets in the accompanying consolidated balance sheets.

Foreign Currency. The Company uses the United States dollar as the functional
currency for its foreign operations.

Derivative Financial Instruments. Hedging transactions using derivative
financial instruments are primarily designed to mitigate the Company's exposure
to changes in prices for certain of the products which the Company sells and
consumes and, to a lesser extent, to mitigate the Company's exposure to changes
in foreign currency exchange rates. The Company does not utilize derivative
financial instruments for trading or other speculative purposes. The Company's
derivative activities are initiated within guidelines established by management
and approved by the Company's board of directors. Hedging transactions are
executed centrally on behalf of all of the Company's business segments to
minimize transaction costs, monitor consolidated net exposures and allow for
increased responsiveness to changes in market factors.

The Company reports derivative activities pursuant to Statement of Financial
Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and
Hedging Activities. SFAS No. 133 requires companies to recognize all derivative
instruments as assets or liabilities in the balance sheet and to measure those
instruments at fair value by "marking-to-market" all of their hedging positions
at each period-end (see Note 13). Changes in the market value of the Company's
open hedging positions resulting from the mark-to-market process represent
unrealized gains or losses. Such unrealized gains or losses will fluctuate,
based on prevailing market prices at each subsequent balance sheet date, until
the transaction date occurs. These changes are recorded as an increase or
reduction in stockholders' equity through either other comprehensive income or
net income, depending on the facts and circumstances with respect to the hedge
and its documentation. To the extent that changes in market values of the
Company's hedging positions are initially recorded in other comprehensive
income, such changes reverse out of Other comprehensive income (offset by any
fluctuations in other "open" positions) and are recorded in net income (included
in Net sales or Cost of products sold, as applicable) when the subsequent
physical transactions occur. Additionally, if the level of physical transactions
ever falls below the net exposure hedged, "hedge" accounting must be terminated
for such "excess" hedges. In such an instance, the mark-to-market changes on
such excess hedges would be recorded in the income statement rather than in
Other comprehensive income. This did not occur during 2001, 2002 or 2003.

Differences between Other comprehensive income and Net income, which have
historically been small, may become significant in future periods as a result of
SFAS No. 133. In general, SFAS No. 133 will result in material fluctuations in
Other comprehensive income and Stockholders' equity in periods of price
volatility, despite the fact that the Company's cash flow and earnings will be
"fixed" to the extent hedged. This result is contrary to the intent of the
Company's hedging program, which is to "lock-in" a price (or range of prices)
for products sold/used so that earnings and cash flows are subject to reduced
risk of volatility.

SFAS No. 133 required that, as of the date of the initial adoption, the
difference between the market value of derivative instruments recorded on the
Company's consolidated balance sheet and the previous carrying amount of those
derivatives be reported in Net income or Other comprehensive income, as
appropriate, as the cumulative effect of a change in accounting principle. Based
on authoritative accounting literature issued during the first quarter of 2001,
it was determined that all of the cumulative impact of adopting SFAS No. 133
should be recorded in Other comprehensive income. The cumulative effect amount
was reclassified to earnings during 2001.

Fair Value of Financial Instruments. Given the fact that the fair value of
substantially all of the Company's outstanding indebtedness will be determined
as part of the plan of reorganization, it is impracticable and inappropriate to
estimate the fair value of these financial instruments at December 31, 2003 and
2002.

New Accounting Pronouncements. Statement of Financial Accounting Standards No.
132 (revised 2003), Employers' Disclosure about Pensions and Other
Postretirement Benefits ("SFAS No. 132 (revised)") was issued in 2003 and was
effective for financial statements with fiscal years ending after December 15,
2003. SFAS No. 132 (revised) retains the disclosures required by SFAS No. 132,
which standardizes the disclosure requirements for pension and other
postretirement benefits, and adds additional disclosures which include, among
other things, information describing the type of plan assets, plan obligations
and plan cash flows (see Note 9 for additional disclosures). The adoption of
SFAS No. 132 (revised) did not have a material impact on the Company's financial
statements.

Statement of Financial Accounting Standards No. 149, Amendment of Statement 133
on Derivative Instruments and Hedging Activities ("SFAS No. 149") was issued in
April 2003. Statement 133, issued in June 1998, established accounting and
reporting standards for derivative instruments. SFAS No. 149 amends Statement
133 primarily to incorporate a number of implementation issue decisions made by
the Financial Accounting Standards Board as part of the Derivatives
Implementation Group process. SFAS No. 149 was effective as of July 1, 2003 and
its adoption did not have a material impact on the Company's financial
statements.

Statement of Financial Accounting Standards No. 150, Accounting for Certain
Financial Instruments with Characteristics of Both Liabilities and Equity ("SFAS
No. 150") was issued in May 2003 and was first applied to the Company's
consolidated financial statements beginning July 1, 2003. In general terms, SFAS
No. 150 requires a company to classify as a liability financial instruments that
it issues, such as shares of its equity stock, that are mandatory redeemable or
include an unconditional repurchase obligation. This contrasts from previous
accounting where these financial instruments were classified in the balance
sheet either in the equity section or between the liabilities section and the
equity section. The adoption of SFAS No. 150 did not have a material impact on
the Company's financial statements.

3. PACIFIC NORTHWEST SMELTER CURTAILMENTS AND RELATED POWER MATTERS

Power Remarketing. In response to the unprecedented high market prices for power
in the Pacific Northwest, the Company (first partially and then fully) curtailed
the primary aluminum production at the Tacoma and Mead, Washington smelters
during the last half of 2000. As a result of the curtailments, as permitted
under the Bonneville Power Administration ("BPA") contract, the Company
remarketed the power that it had under contract through September 30, 2001 (the
end of the prior contract period). In connection with such power remarketing,
the Company recorded net pre-tax gains of approximately $229.2 in 2001. Gross
proceeds were offset by employee-related expenses, a non-cash LIFO inventory
charge and other fixed commitments. The resulting net gain has been reflected as
Other operating charges (benefits), net (see Note 6). The net gain amount
resulted from gross proceeds of $259.5.

Smelter Operating Rate. Historically, the Company owned and operated two
aluminum smelters in the State of Washington. Through 2000, the BPA was
supplying approximately half of the electric power for the Mead and Tacoma
smelters, with the balance coming from other suppliers. In response to the
unprecedented high market prices for power in the Pacific Northwest, the Company
curtailed primary aluminum production at the Tacoma smelter and partially
curtailed production at the Mead smelter during the last half of 2000. Mead was
subsequently fully curtailed in early 2001. During this same period, as
permitted under the BPA contract, the Company remarketed to the BPA the
available power that it had under contract through September 30, 2001. As a
result of the curtailments, the Company avoided the need to purchase power on a
variable market price basis and received cash proceeds sufficient to more than
offset the cash impact of the potline curtailments over the period for which the
power was sold. The Company has previously disclosed that, in connection with
its reorganization, it conducted a study of the long-term competitive position
of the Mead and Tacoma facilities and potential options for these facilities.
When the Company received the preliminary results of the study, it analyzed the
findings and met with the USWA and other parties prior to making its
determination as to the appropriate action(s). The outcome of the study and the
Company's ongoing work on its reorganization led the Company to conclude that
the Tacoma and Mead facilities could not compete with the much larger, newer and
more efficient smelters, generally located outside the United States.

In January 2003, the Company announced the indefinite curtailment of the Mead
facility. The Mead facility was expected to remain completely curtailed unless
and until an appropriate combination of reduced power prices, higher primary
aluminum prices and other factors occurs. For the Company to make such a
decision, it would have had to be able to purchase such power at a reasonable
price in relation to current and expected market conditions for a sufficient
term to justify its restart costs, which could be significant depending on the
number of lines restarted and the length of time between the shutdown and
restart. However, in February 2004, the Company entered into an agreement to
sell the Mead facility. See Note 5 for discussions of the Northwest smelters
2002 impairment charge and sale of the Mead facility.

In January 2003, the Court also approved the sale of the Tacoma facility to the
Port of Tacoma. The sale closed in February 2003. See Note 5 for additional
discussion on the sale of the Tacoma facility.

Future Power Supply. During October 2000, the Company signed a new power
contract with the BPA under which the BPA, starting October 1, 2001, was to
provide the Company's operations in the State of Washington with approximately
290 megawatts of power through September 2006. The contract provided the Company
with sufficient power to fully operate the Company's Trentwood facility, as well
as approximately 40% of the combined capacity of the Company's Mead and Tacoma
aluminum smelting operations which had been curtailed since the last half of
2000.

As a part of the reorganization process, the Company concluded that it was in
its best interest to reject the BPA contract as permitted by the Code. As such,
with the authorization of the Court, the Company rejected the BPA contract on
September 30, 2002. The contract rejection gives rise to a pre-petition claim
(see Note 1). The BPA has filed a proof of claim for approximately $75.0 in
connection with the Cases in respect of the contract rejection. The claim is
expected to be settled in the overall context of the Debtors' plan of
reorganization. Accordingly, any payments that may be required as a result of
the rejection of the BPA contract are expected to only be made pursuant to a
plan of reorganization and upon the Company's emergence from the Cases. The
amount of the BPA claim will be determined either through a negotiated
settlement, litigation or a computation of prevailing power prices over the
contract period. As the amount of the BPA's claim in respect of the contract
rejection has not been determined, no provision has been made for the claim in
the accompanying financial statements. The Company has entered into a rolling
short-term contract with an alternate supplier to provide the power necessary to
operate its Trentwood facility.

In addition to the BPA power contract, the Company had a transmission service
agreement with the BPA under which the BPA transmitted power to the Company's
Mead, Tacoma and Trentwood facilities. In October 2003, with the approval of the
Court, the BPA agreement was restructured. Key aspects of the restructuring
included: (a) the existing transmission service agreement was terminated; (b)
the Company and the BPA entered into two new transmission service agreements
that provide for the transmission of power for the Mead and Trentwood facilities
at reduced transmission costs; and (c) the Company and the BPA agreed that the
BPA would be allowed to file an unsecured pre-Filing Date claim of approximately
$3.2 (which amount has been reflected in Other operating charges, net - see Note
6 in respect of the termination of the existing agreement).

4. INVESTMENTS IN AND ADVANCES TO UNCONSOLIDATED AFFILIATES

Summary of combined financial information is provided below for unconsolidated
aluminum investments, most of which supply and process raw materials. The
investees are QAL (20.0% owned), Anglesey (49.0% owned) and KJBC (49.0% owned).
The Company's equity in income (loss) before income taxes of such operations is
treated as a reduction (increase) in Cost of products sold. At December 31, 2003
and 2002, the Company's net receivables from these affiliates were not material.

In September 2001, the Company sold an approximate 8.3% interest in QAL and
recorded a pre-tax gain of approximately $163.6 (included in Other
income/(expense) in the accompanying consolidated statements of income (loss)).
As a result of the transaction, the Company now owns a 20% interest in QAL. The
total value of the transaction was approximately $189.0, consisting of a cash
payment of approximately $159.0 plus the purchaser's assumption of approximately
$30.0 of off-balance sheet QAL indebtedness guaranteed by the Company prior to
the sale.

In June 2001, the Company wrote-off its investment of $2.8 in MetalSpectrum,
LLC, a start-up, e-commerce entity in which the Company was a founding partner
(in 2000) (see Note 2). MetalSpectrum ceased operations during the second
quarter of 2001.

As more fully discussed in Note 5, the Company is close to reaching an agreement
to sell its interest in and related to KJBC together with its interest in and
related to the Gramercy alumina facility. In addition, as part of the program to
explore commodity asset divestiture(s), the Company is now considering the
possibility of selling its interests in and related to QAL (see Note 1).


Summary of Combined Financial Position

                                                                                                          December 31,
                                                                                                   ---------------------------
                                                                                                          2003            2002
---------------------------------------------------------------------------------------------      -----------     -----------

Current assets                                                                                     $    289.0      $    199.1
Non-current assets (primarily property, plant, and equipment, net)                                      417.0           409.5
                                                                                                   -----------     -----------
   Total assets                                                                                    $    706.0      $    608.6
                                                                                                   ===========     ===========

Current liabilities                                                                                $     87.7      $    239.3
Long-term liabilities (primarily long-term debt)                                                        334.7           119.3
Stockholders' equity                                                                                    283.6           250.0
                                                                                                   -----------     -----------
   Total liabilities and stockholders' equity                                                      $    706.0      $    608.6
                                                                                                   ===========     ===========

Summary of Combined Operations

                                                                                              Year Ended December 31,
                                                                                        -----------------------------------
                                                                                            2003          2002         2001
------------------------------------------------------------------------------------    --------      --------     --------
Net sales                                                                               $ 585.5       $ 584.3      $ 633.5
Costs and expenses                                                                       (539.4)       (518.4)      (621.5)
Provision for income taxes                                                                 (2.6)         (3.0)        (3.9)
                                                                                        --------      --------     --------
Net income (loss)                                                                       $  43.5       $  62.9      $   8.1
                                                                                        ========      ========     ========

Company's equity in income (loss)                                                       $  10.7       $  14.0      $   1.7
                                                                                        ========      ========     ========

Dividends received                                                                      $   4.3       $   6.0      $   2.8
                                                                                        ========      ========     ========

The Company's equity in income (loss) differs from the summary net income (loss)
due to varying percentage ownerships in the entities and equity method
accounting adjustments.

The Company and its affiliates have interrelated operations. The Company
provides some of its affiliates with services such as management and
engineering. Significant activities with affiliates include the acquisition and
processing of bauxite, alumina, and primary aluminum. Purchases from these
affiliates were $230.5, $223.4 and $266.0, in the years ended December 31, 2003,
2002 and 2001, respectively.

5. PROPERTY, PLANT, AND EQUIPMENT

The major classes of property, plant, and equipment are as follows:

                                                                                                        December 31,
                                                                                                 --------------------------
                                                                                                       2003            2002
--------------------------------------------------------------------------------------------     ----------      ----------

Land and improvements                                                                            $   128.7       $   129.7
Buildings                                                                                            163.4           183.3
Machinery and equipment                                                                            1,355.2         1,735.2
Construction in progress                                                                              26.7            48.4
                                                                                                 ----------      ----------
                                                                                                   1,674.0         2,096.6
Accumulated depreciation                                                                          (1,061.4)       (1,086.7)
                                                                                                 ----------      ----------
     Property, plant, and equipment, net                                                         $   612.6       $ 1,009.9
                                                                                                 ==========      ==========

During the period from 2001 to 2003, the Company completed several dispositions
and, based on changes in circumstances, recorded impairment charges as discussed
below:

2003 -

-    As previously disclosed, as part of the Company's plan to explore the
     divestiture of certain of its commodity assets (see Note 1):

     (a) The Company entered into an agreement in January 2004 to sell its
         interest in Alpart. Net proceeds from the sale pursuant to the
         agreement would, at a minimum, be in the range of $160.0 to $170.0,
         subject to certain closing and post-closing adjustments. However, such
         purchase price may increase, possibly significantly, depending on what,
         if any, alumina sales contracts are transferred to the buyer as a part
         of the transaction. The Company has previously disclosed that, using
         the minimum end of the range of proceeds under the aforementioned
         agreement, a net loss on the sale of its interests in the range of
         approximately $50.0 would occur. In February 2004, another potential
         purchaser filed certain objections with the Court in respect of the
         January 2004 sales agreement and stated that they were willing to bid
         significantly more than the other party for the Company's interests in
         and related to Alpart. Under the terms outlined in the objection if the
         Company were ultimately to enter into an agreement with the second
         party, it is likely that any such sale of the Company's interest, if
         and when consummated, could result in a gain. In March 2004, the Court
         ordered that an auction be held during April 2004 in respect of the
         possible sale of the Company's interests in and related to Alpart.
         While the Company believes that it is likely that the interests in and
         related to Alpart will be sold, it is unclear at what price such
         interests will be sold. As such, the Company cannot currently determine
         what, if any, impairment exists and, thus, no impairment charges in
         respect of the Company's interests in Alpart have been recorded in the
         accompanying financial statements. At the minimum end of the range
         under the January 2004 agreement, an impairment charge in the range of
         $50.0 would be required. However, if (a) the other interested party
         were to be successful in its objections to the January 2004 agreement
         and purchase the Company's interests at the price stated in its Court
         motion, or (b) the terms of any contracts ultimately transferred
         pursuant to the January 2004 agreement are favorable, then it is
         possible that little or no gain or loss would result upon the sale.

     (b) At the end of March 2004, the Company was close to reaching an
         agreement to sell its interests in the Gramercy facility and KJBC. Net
         proceeds from the sale are expected to be in the $20.0 range. The
         Company expects that, if the agreement is finalized, it would likely be
         submitted to the Court for consideration in the second quarter of 2004.
         While the potential sale of Gramercy has not yet been approved by the
         Court and, therefore, may not ultimately occur or may close under
         different terms and conditions, the Company determined that the fair
         value of its interests in Gramercy/KJBC was below the carrying value of
         the assets because all offers received for such assets were
         substantially below the carrying value of the assets. Accordingly, the
         Company adjusted the carrying value of its interest in Gramercy/KJBC to
         their estimated fair value, which resulted in a fourth quarter 2003
         non-cash impairment charge of approximately $368.0 (which amount was
         reflected in Other operating charges (benefits), net - see Note 6).
         Previously, the Company had evaluated the book value of its interests
         of the Gramercy/KJBC assets on a "hold and use" basis assuming a normal
         economic life for the facility and more normal market conditions than
         have recently existed and such analysis indicated that no impairment
         charge was required. Final adjustments to the carrying value of the
         Gramercy facility and KJBC assets may cause the actual loss from the
         sale of the Company's interest in and related to the Gramercy facility
         and KJBC, if consummated, to vary from the impairment charge.

-     As more fully discussed in Note 15, during 2003, the Company and Valco
      participated in extensive negotiations with the GoG and the VRA regarding
      the power situation and other matters. Such negotiations did not result in
      a resolution of such matters. However, as an outgrowth of such
      negotiations, the Company, the GoG and the VRA entered into a MOU in
      December 2003 pursuant to which the Company would sell its 90% interest in
      and related to Valco to the GoG for consideration of between $35.0 and
      $100.0, plus assumption of all of the Company's related liabilities and
      obligations. The MOU contemplates that the transaction will close by April
      30, 2004. The consideration would be paid in 2004 and beyond. During 2004,
      assuming the $35.0 minimum consideration, the GoG would pay $7.0 in cash
      to the Company and $18.0 in cash to Valco, thereby reducing the Company's
      funding the Valco. The remainder of the consideration (a minimum of $10.0)
      would be paid in cash to the Company over a four-year period from the
      closing date. The GoG obligation to the Company would be guaranteed by the
      Bank of Ghana. As the purchase price in respect of the MOU cannot be
      determined at this time, the Company cannot determine to what extent, if
      any, the fair value of its interests in Valco is below the carrying value
      of the assets. Accordingly, the Company has not adjusted the carrying
      value of its interests in Valco during the fourth quarter of 2003.
      However, if the minimum price in respect of the MOU were paid, a reduction
      in the net carrying value related to Valco's assets and liabilities in the
      range of $20.0 - $30.0 would be required. The transaction is subject to
      due diligence and a number of approvals, including the President or
      Cabinet of the GoG, the Parliament of Ghana, the Boards of Directors of
      the Company and Valco and the Court. As a result, no assurance can be
      given that the MOU will be approved by any or all of the parties.

-     The Company has previously disclosed that, in connection with its
      reorganization, it conducted a study of the long-term competitive position
      of the Mead and Tacoma facilities and potential options for these
      facilities. When the Company received the preliminary results of the
      study, it analyzed the findings and met with the USWA and other parties
      prior to making its determination as to the appropriate action(s). The
      outcome of the study and the Company's ongoing work on its reorganization
      led the Company to conclude that the Tacoma facility, whose aluminum
      smelting operations have been curtailed since the last half of 2000, and
      the Mead facility, whose aluminum smelting operations have been curtailed
      since January 2001, could not compete with the much larger, newer and more
      efficient smelters, generally located outside the United States.

     (a) As a result, the Company entered into an agreement, which was approved
         by the Court in January 2003, to sell the Tacoma facility to the Port
         of Tacoma (the "Port"). Gross proceeds from the sale, before
         considering approximately $4.0 of proceeds being held in escrow pending
         the resolution of certain environmental and other issues, were
         approximately $12.1. The Port also agreed to assume the on-site
         environmental remediation obligations. The sale closed in February
         2003. The sale resulted in a pre-tax gain of approximately $9.5 (which
         amount was reflected in Other operating charges (benefits), net - see
         Note 6). The operating results of the Tacoma facility for years ended
         December 31, 2003, 2002 and 2001 have not been reported as discontinued
         operations in the accompanying Statements of Consolidated Income (Loss)
         because such amounts were not material. The Tacoma facility's loss
         before income tax benefit was $5.1 and $4.4 (Unaudited) in 2002 and
         2001, respectively.

     (b) In February 2004, the Company entered into an agreement to sell the
         Mead facility and certain related property in connection with which it
         will receive net cash proceeds of approximately $3.0 and the buyer will
         assume certain site-related liabilities. The sale of the Mead property
         will be subject to an auction in accordance with the Code to determine
         if a higher value can be obtained. The auction bidding procedures were
         approved by the Court in March 2004, and the Company expects the sale
         of the Mead facility and related property to close during the second
         quarter of 2004. The Company expects that the sale will result in a
         pre-tax gain in the $10.0 range. It is possible that all or some
         portion of the proceeds from the sale may need to be held in escrow
         until emergence from the Chapter 11 proceedings for the benefit of the
         holders of the 7.6% solid waste disposal revenue bonds (see Note 7).

-     In July 2003, with Court approval, the Company sold certain equipment at
      the Trentwood facility that was no longer required as a part of past
      product rationalizations. Proceeds from the sale were approximately $7.0,
      resulting in a net gain of approximately $5.0 after considering sale
      related costs. The gain on the sale of this equipment has been netted
      against additional impairment charges of approximately $1.1 associated
      with equipment to be abandoned or otherwise disposed of primarily as a
      result of product rationalizations (which amounts were reflected in Other
      operating charges (benefits), net - see Note 6). The equipment that was
      sold in July 2003 had been impaired to a zero basis in the fourth quarter
      of 2001. The impairment was based on information available at that time
      and the expectation that proceeds from the eventual sale of the equipment
      would be fully offset by sale related costs to be borne by the Company
      (see below for additional information regarding the 2001 Trentwood
      impairment charge).

2002 -

-     As previously disclosed, the Company was evaluating its options for
      minimizing the near-term negative cash flow at its Mead and Tacoma
      facilities and how to optimize the use and/or value of the facilities in
      connection with its reorganization. The Company conducted a study of the
      long-term competitive position of the Mead and Tacoma facilities and
      potential options for these facilities. Once the Company received the
      preliminary results of the study in the fourth quarter of 2002, it
      analyzed the findings and met with the USWA and other parties prior to
      making its determination as to the appropriate action(s). The outcome of
      the study and the Company's ongoing work on its reorganization led the
      Company to indefinitely curtail the Mead facility in January 2003. The
      curtailment of the Mead facility was due to the continuing unfavorable
      market dynamics, specifically unattractive long-term power prices and weak
      primary aluminum prices - both of which are significant impediments for an
      older smelter with higher-than-average operating costs. The Mead facility
      is expected to remain completely curtailed unless and until an appropriate
      combination of reduced power prices, higher primary aluminum prices and
      other factors occurs. As a result of indefinite curtailment, the Company
      evaluated the recoverability of the December 31, 2002 carrying value of
      its Northwest smelters. The Company determined that the expected future
      undiscounted cash flows of the smelters was below their carrying value.
      Accordingly, the Company adjusted the carrying value of its Northwest
      smelting assets to their estimated fair value, which resulted in a
      non-cash impairment charge of approximately $138.5 (which amount was
      reflected in Other operating charges (benefits), net - see Note 6). The
      estimated fair value was based on anticipated future cash flows discounted
      at a rate commensurate with the risk involved. Additionally, during
      December 2002, the Company accrued approximately $58.8 of pension,
      postretirement benefit and related obligations for the hourly employees
      who had been on a laid-off status and under the terms of their labor
      contract are eligible for early retirement because of the indefinite
      curtailment (which amount was reflected in Other operating charges
      (benefits), net - see Note 6). The indefinite curtailment of the Mead
      facility also resulted in a $18.6 net realizable value charge and a $.9
      LIFO inventory charge for certain of the inventories at the facility (see
      Notes 2 and 6).

-     In December 2002, with Court approval, the Company sold its Oxnard,
      California aluminum forging facility because the Company had determined
      that the facility was not necessary for a successful operation and
      reorganization of its business. Net proceeds from the sale were
      approximately $7.4. The sale resulted in a net of loss of $.2 (included in
      Other operating charges (benefits) net - see Note 6) which included $1.1
      of employee benefits and related costs associated with approximately 60
      employees that were terminated in December 2002.

-     In June 2002, with Court approval, the Company sold certain of the
      Trentwood facility equipment, previously associated with the lid and tab
      stock product lines discussed below, for total proceeds of $15.8, which
      amount approximated its previously estimated fair value. As a result, the
      sale did not have a material impact on the Company's operating results for
      the year ended December 31, 2002.

-     In the ordinary course of business, the Company sold non-operating real
      estate and certain miscellaneous equipment for total proceeds of
      approximately $7.5 ($3.0 in the fourth quarter). These transactions
      resulted in pre-tax gains of $3.8 (included in Other income (expense) -
      see Note 2).

2001 -

-     During 2001, as part of its ongoing initiatives to generate cash benefits,
      the Company sold certain non-operating real estate for net proceeds
      totaling approximately $7.9, resulting in a pre-tax gain of $6.9 (included
      in Other income (expense) - see Note 2).

-     In the latter part of 2001, the Company concluded that the profitability
      of its Trentwood facility could be enhanced by further focusing resources
      on its core, heat-treat business and by exiting lid and tab stock product
      lines used in the beverage container market and brazing sheet for the
      automotive market. As a result of this decision, the Company concluded it
      would sell or idle several pieces of equipment resulting in an impairment
      charge of approximately $17.7 at December 31, 2001 (which amount was
      reflected in Other operating charges (benefits), net - see Note 6).

6.   OTHER OPERATING CHARGES (BENEFITS), NET

The income (loss) impact associated with Other operating (charges) benefits, net
for 2003, 2002 and 2001, was as follows:


                                                                                        Year Ended December 31,
                                                                            -----------------------------------------------
                                                                                      2003             2002            2001
--------------------------------------------------------------------------  --------------   --------------  --------------
Pension charge related to salaried employees pension plan -
     Corporate (Note 9)                                                     $      (121.2)   $         -     $         -
Impairment charges -
     Interests in Gramercy/KJBC - Bauxite & Alumina (Note 5)                       (368.0)             -               -
     Washington smelters, including contractual labor costs - Primary
         Aluminum (Notes 2 and 5)                                                     -             (219.6)          (12.7)
     Office complex - Corporate (Note 12)                                             -              (20.0)            -
     Equipment - Fabricated Products (Note 5)                                         -                -             (17.7)
Restructuring charges:
     Bauxite & Alumina                                                                (.1)            (2.0)          (10.8)
     Primary Aluminum                                                                (1.3)            (2.7)           (6.9)
     Fabricated Products                                                              -               (7.9)          (10.7)
     Corporate                                                                        -                -              (1.2)
Restructured transmission service agreement - Primary Aluminum (Note 3)              (3.2)             -               -
Environmental multi-site settlement - Corporate (Note 12)                           (15.7)             -               -
Hearing loss claims - Corporate (Note 12)                                           (15.8)             -               -
Gain on sale of Tacoma facility - Primary Aluminum (Note 5)                           9.5              -               -
Gain on sale of equipment, net - Fabricated Products (Note 5)                         3.9              -
Loss on sale of Oxnard facility - Fabricated Products (Note 5)                        -                (.2)            -
Inventory and net realizable value charges -
     Product line exit charges - Fabricated Products                                  -               (1.6)            -
     Operating supplies and repairs and maintenance parts (Note 2)                    -                -              (5.6)
Eliminations - Intersegment profit elimination on Primary Aluminum
     inventory charge (Note 2)                                                        -                2.8             -
Net gains from power sales (Primary Aluminum) (Note 3)                                -                -             229.2
Other                                                                                  .9              -               -
                                                                            --------------   --------------  --------------
                                                                            $      (511.0)   $      (251.2)  $       163.6
                                                                            ==============   ==============  ==============

2003 -

Restructuring charges in 2003 consist of employee benefit costs associated with
approximately 20 job eliminations (all of which have been eliminated) during the
first half of 2003 resulting primarily from the Primary aluminum business
segment's Mead facility's indefinite curtailment (see Note 3).

2002 -

The product line exit charge in 2002 relates to a $1.6 LIFO inventory charge
which resulted from the Fabricated products segment's exit from the lid and tab
stock and brazing sheet product lines (see Note 2).

Restructuring charges result from the Company's initiatives to increase cash
flow, generate cash and improve the Company's financial flexibility.
Restructuring charges for 2002 consist of $10.1 of employee benefit and related
costs associated with 140 job eliminations (all of which had been eliminated
prior to December 31, 2002) and $2.5 of third party costs associated with cost
reduction initiatives.

2001 -

The contractual labor costs related to smelter curtailments in 2001 consisted of
certain compensation costs associated with laid-off USWA workers that the
Company estimated would be required to operate the Northwest smelters at up to a
40% operating rate. The costs had been accrued through early 2003 because the
Company did not expect to restart the Northwest smelters prior to that date.

Restructuring charges for 2001 consist of $17.9 of employee benefit and related
costs associated with 355 job eliminations (all of which have been eliminated)
and $11.7 of third party costs associated with cost reduction initiatives. The
2000 restructuring charges were associated with the Primary aluminum and
Corporate segments' ongoing cost reduction initiatives. During 2000, these
initiatives resulted in restructuring charges for employee benefit and other
costs for approximately 50 job eliminations at the Company's Tacoma facility and
approximately 50 employee eliminations due to consolidation or elimination of
certain corporate staff functions. All job eliminations associated with these
initiatives have occurred.

7.   LONG-TERM DEBT

Long-term debt consists of the following:

                                                                                               December 31,
                                                                                     --------------------------------
                                                                                               2003              2002
----------------------------------------------------------------------------------   --------------    --------------
Secured:
     Post-Petition Credit Agreement                                                  $         -       $         -
     8 1/4% Alpart CARIFA Loans due 2007                                                      22.0              22.0
     7.6% Solid Waste Disposal Revenue Bonds due 2027                                          1.0              19.0
     Other borrowings (fixed rate)                                                             2.5               2.6
Unsecured or Undersecured:
     9 7/8% Senior Notes due 2002, net                                                       172.8             172.8
     10 7/8% Senior Notes due 2006, net                                                      225.0             225.0
     12 3/4% Senior Subordinated Notes due 2003                                              400.0             400.0
     7.6% Solid Waste Disposal Revenue Bonds due 2027                                         18.0               -
     Other borrowings (fixed and variable rates)                                              32.4              32.4
                                                                                     --------------    --------------

Total                                                                                        873.7             873.8

Less  - Current portion                                                                        1.3                .9
           Pre-Filing Date claims included in subject to compromise (i.e. unsecured
               debt) (Note 1)                                                                848.2             830.2
                                                                                     --------------    --------------
Long-term debt                                                                       $        24.2     $        42.7
                                                                                     ==============    ==============

Post-Petition Credit Agreement. On February 12, 2002, the Company and Kaiser
entered into the DIP Facility with a group of lenders for debtor-in-possession
financing. In March 2003, certain of the Additional Debtors were added as
co-guarantors and the DIP Facility lenders received super-priority status with
respect to certain of the Additional Debtors' assets. The DIP Facility provides
for a secured, revolving line of credit through the earlier of February 13, 2005
(extended from February 12, 2004 as discussed below), the effective date of a
plan of reorganization or voluntary termination by the Company. Under the DIP
Facility, the Company is able to borrow amounts by means of revolving credit
advances and to have issued for its benefit letters of credit (up to $125.0) in
an aggregate amount equal to the lesser of $285.0 (reduced from $300.0 in August
2003 as discussed below) or a borrowing base relating to eligible accounts
receivable, eligible inventory and an amortizing fixed asset component, reduced
by certain reserves, as defined in the DIP Facility agreement. The DIP Facility
is guaranteed by the Company and certain significant subsidiaries of the
Company. Interest on any outstanding borrowings will bear a spread over either a
base rate or LIBOR, at the Company's option. As of December 31, 2003, $141.9 was
available to the Company under the DIP Facility (of which up to $81.7 could be
used for additional letters of credit) and no borrowings were outstanding under
the revolving credit facility.

The DIP Facility requires the Company to comply with certain covenants and
places restrictions on the Company's, Kaiser's and the Company's subsidiaries'
ability to, among other things, incur debt and liens, make investments, pay
dividends, sell assets, undertake transactions with affiliates, make capital
expenditures, and enter into unrelated lines of business.

During March 2004, the Company received a waiver from the DIP Facility lenders
in respect of a financial covenant, for the quarter ended December 31, 2003 and
for all measurement periods through May 31, 2004. In connection with the waiver,
the Company agreed to reduce the available amount of the borrowing base by
$25.0. The Company is currently working with the DIP Facility lenders to
complete an amendment that is anticipated, among other things, to: (1) reset the
financial covenant based on more recent forecasts; (2) authorize the sale of the
Company's interests in Alpart, QAL, Gramercy/KJBC and Valco within certain
parameters and (3) reduce the availability of the fixed asset subcomponent to a
level that, by emergence will be based on advances solely in respect of
machinery and equipment at the fabricated products facilities.

While the effect of the amendment will be to reduce overall availability,
assuming the previously mentioned commodity assets are sold, the Company
currently anticipates that once amended, availability under the DIP Facility
will likely be in the $50.0 - $100.0 range and that amount should be adequate
for the fabricated products operations. This belief is based on the fact that it
was the commodities' assets and operations that subjected the Company to the
most variability and exposure both from a price risk basis as well as from an
operating perspective. While the Company anticipates that it will be successful
in completing an amendment to the DIP Facility along the lines outlined above in
time for an April 2004 or May 2004 Court hearing, no assurances can be given in
this regard.

During 2003, the Company and the DIP Facility lenders completed three
amendments. The amendments included the following: (a) modifications that
permitted the Company to take certain actions necessary to facilitate access by
QAL to amounts available to QAL under its financing arrangements, thereby
reducing the Company's and the other owners' funding requirements for QAL (the
Company's share of such additional financings at QAL was $43.0), (b) an
extension of the maturity of the DIP Facility from February 2004 to February
2005, (c) an increase in the eligible borrowing base amount under the DIP
Facility by, among other things, restoring the amortizing fixed asset component
to the original $100.0 amount, (d) the incorporation of the May 2003 limited
waiver and a further modification of the financial covenant, and (e) a reduction
of the commitment amount of the DIP Facility to $285.0.

8 1/4% Alpart CARIFA Loans. In December 1991, Alumina Partners of Jamaica
("Alpart") entered into a loan agreement with the Caribbean Basin Projects
Financing Authority ("CARIFA"). As of December 31, 2003, Alpart's obligations
under the loan agreement were secured by two letters of credit aggregating
$23.5. The Company was a party to one of the two letters of credit in the amount
of $15.3 in respect of its 65% ownership interest in Alpart. Alpart has also
agreed to indemnify bondholders of CARIFA for certain tax payments that could
result from events, as defined, that adversely affect the tax treatment of the
interest income on the bonds.

Pursuant to the CARIFA loan agreement, the Alpart CARIFA financing would have to
be repaid at time of closing of the sale if the Company completes the previously
disclosed sale of its interests in Alpart (see Notes 1 and 5). However, such
repayment would have an essentially neutral effect on the Company's liquidity
as, upon any such payment, the Company's letter of credit obligation under the
DIP Facility securing the loans would be cancelled.

7.6% Solid Waste Disposal Revenue Bonds. The 7.6% solid waste disposal revenue
bonds (the "Solid Waste Bonds") are secured by certain (but not all) of the
facilities and equipment at the curtailed Mead facility (see Note 4). The
Company currently believes that it is likely that the value of the collateral
securing the Solid Waste Bonds is insufficient for full recovery of the
bondholders' claim. The Company estimates the value of the collateral to be in
the $1.0 range. As a result, during the fourth quarter of 2003, the Company
reclassified $18.0 of the Solid Waste Bonds balance to Liabilities subject to
compromise (see Note 1). Also, see Note 5 regarding the possible sale of the
Mead facility.

9 7/8% Notes, 10 7/8% Notes and 12 3/4% Notes. The obligations of the Company
with respect to its 9 7/8% Senior Notes due 2002 (the "9 7/8% Notes"), its 10
7/8% Senior Notes due 2006 (the "10 7/8% Notes") and its 12 3/4% Senior
Subordinated Notes due 2003 (the "12 3/4% Notes") are guaranteed, jointly and
severally, by certain subsidiaries of the Company. During 2001, prior to
concluding that, as a result of the events outlined in Note 1, the Company
should file the Cases, the Company had purchased $52.2 of the 9 7/8% Notes. The
net gain from the purchase of the notes was less than $1.1 and has been included
in Other income (expense) in the accompanying statements of consolidated income
(loss).

Debt Covenants and Restrictions. The DIP Facility requires the Company to comply
with certain financial covenants and places restrictions on the Company's and
Kaiser's ability to, among other things, incur debt and liens, make investments,
pay dividends, undertake transactions with affiliates, make capital
expenditures, and enter into unrelated lines of business. The DIP Facility is
secured by, among other things, (i) mortgages on the Company's major domestic
plants; (ii) subject to certain exceptions, liens on the accounts receivable,
inventory, equipment, domestic patents and trademarks, and substantially all
other personal property of the Company and certain of its subsidiaries; (iii) a
pledge of all the stock of the Company owned by the Company; and (iv) pledges of
all of the stock of a number of the Company's wholly owned domestic
subsidiaries, pledges of a portion of the stock of certain foreign subsidiaries,
and pledges of a portion of the stock of certain partially owned foreign
affiliates.

The indentures governing the 9 7/8% Notes, the 10 7/8% Notes and the 12 3/4%
Notes (collectively, the "Indentures") restrict, among other things, the
Company's ability to incur debt, undertake transactions with affiliates, and pay
dividends. Further, the Indentures provide that the Company must offer to
purchase the 9 7/8% Notes, the 10 7/8% Notes and the 12 3/4% Notes,
respectively, upon the occurrence of a Change of Control (as defined therein).

8.   INCOME TAXES

Income (loss) before income taxes and minority interests by geographic area is
as follows:

                                                                                          Year Ended December 31,
                                                                                -------------------------------------------
                                                                                      2003             2002            2001
--------------------------------------------------------------------------      ----------      -----------      ----------
Domestic                                                                        $  (676.0)      $   (481.0)      $  (126.2)
Foreign                                                                            (107.1)            21.5           213.2
                                                                                ----------      -----------      ----------

     Total                                                                      $  (783.1)      $   (459.5)      $    87.0
                                                                                ==========      ===========      ==========

Income taxes are classified as either domestic or foreign, based on whether
payment is made or due to the United States or a foreign country. Certain income
classified as foreign is also subject to domestic income taxes.

The (provision) benefit for income taxes on income (loss) before income taxes
and minority interests consists of:


                                                                   Federal           Foreign           State          Total
--------------------------------------------------------      ------------      ------------     -----------     ----------
2003     Current                                              $        -        $     (13.4)     $       -       $   (13.4)
         Deferred                                                      -                (.8)             -             (.8)
                                                              ------------      ------------     -----------     ----------
              Total                                           $        -        $     (14.2)     $       -       $   (14.2)
                                                              ============      ============     ===========     ==========

2002     Current                                              $       (.2)      $     (31.7)     $      (.3)     $   (32.2)
         Deferred                                                     3.2              14.5             (.4)          17.3
                                                              ------------      ------------     -----------     ----------
              Total                                           $       3.0       $     (17.2)     $      (.7)     $   (14.9)
                                                              ============      ============     ===========     ==========

2001     Current                                              $      (1.1)      $     (40.6)     $       -       $   (41.7)
         Deferred                                                  (484.3)               .5           (24.7)        (508.5)
                                                              ------------      ------------     -----------     ----------
              Total                                           $    (485.4)      $     (40.1)     $    (24.7)     $  (550.2)
                                                              ============      ============     ===========     ==========

A reconciliation between the (provision) benefit for income taxes and the amount
computed by applying the federal statutory income tax rate to income (loss)
before income taxes and minority interests is as follows:


                                                                                            Year Ended December 31,
                                                                                    ---------------------------------------
                                                                                            2003          2002         2001
----------------------------------------------------------------------------------  ------------  ------------  -----------
Amount of federal income tax (provision) benefit based on the statutory rate        $     274.2   $     160.9   $    (30.3)
Increase in valuation allowances and revision of prior years' tax estimates              (277.1)       (151.6)      (513.9)
Percentage depletion                                                                        6.4           7.6          4.9
Foreign taxes                                                                             (14.2)        (28.9)        (9.6)
Other                                                                                      (3.5)         (2.9)        (1.3)
                                                                                    ------------  ------------  -----------
Provision for income taxes                                                          $     (14.2)  $     (14.9)  $   (550.2)
                                                                                    ============  ============  ===========


Included in increase in valuation allowances and revision of prior years' tax
estimates for 2002 shown above include a benefit of $14.3 for revisions to prior
years' estimates. Of this amount, approximately $8.8 relates to the resolution
of certain prior year income tax matters.

Deferred Income Taxes. The components of the Company's net deferred income tax
assets (liabilities) are as follows:

                                                                                                      December 31,
                                                                                              -----------------------------
                                                                                                      2003             2002
------------------------------------------------------------------------------------------    ------------      -----------
Deferred income tax assets:
   Postretirement benefits other than pensions                                                $     268.6       $    274.6
   Loss and credit carryforwards                                                                    387.6            278.0
   Other liabilities                                                                                272.8            288.8
   Other                                                                                            111.9            121.7
   Property, plant and equipment                                                                     12.1               -
   Valuation allowances                                                                          (1,043.5)          (861.8)
                                                                                              ------------      -----------
     Total deferred income tax assets-net                                                             9.5            101.3
                                                                                              ------------      -----------

Deferred income tax liabilities:
   Property, plant, and equipment                                                                      -             (94.3)
   Other                                                                                            (25.7)           (22.5)
                                                                                              ------------      -----------
     Total deferred income tax liabilities                                                          (25.7)          (116.8)
                                                                                              ------------      -----------

Net deferred income tax assets (liabilities)(1)                                               $     (16.2)      $    (15.5)
                                                                                              ============      ===========


(1)  These deferred income tax liabilities are included in the Consolidated
     Balance Sheets as of December 31, 2003 and 2002, respectively, in the
     caption entitled Long-term liabilities.

For the years ended December 31, 2003 and 2002, as a result of the Cases, the
Company did not recognize U.S. income tax benefits for the losses incurred from
its domestic operations (including temporary differences) or any U.S. income tax
benefits for foreign income taxes. Instead, the increases in federal and state
deferred tax assets as a result of additional net operating losses and foreign
tax credits ("FTC") generated in 2003 and 2002 were fully offset by increases in
valuation allowances.

Tax Attributes. At December 31, 2003, the Company had certain tax attributes
available to offset regular federal income tax requirements, subject to certain
limitations, including net operating loss and general business credit
carryforwards of $870.5 and $.7, respectively, which expire periodically through
2023 and 2011, respectively, FTC carryforwards of $13.9, which expire in 2008,
and alternative minimum tax ("AMT") credit carryforwards of $24.0, which have an
indefinite life. The Company also has AMT net operating loss and FTC
carryforwards of $731.8 and $13.9, respectively, available, subject to certain
limitations, to offset future alternative minimum taxable income, which expire
periodically through 2023 and 2008, respectively.

A substantial portion of such attributes may be utilized to offset taxable gains
that may result from sales of certain commodity facilities as discussed in Note
1. Additionally, a substantial portion or all of any remaining attributes not
used in any such sale transactions would likely be used to offset any gains that
may result from the cancellation of indebtedness as a part of the Company's
reorganization. Lastly, any amounts not utilized by the Company prior to
emergence from Chapter 11 will likely be subject to certain limitations as to
their utilization post-emergence.

Other. In March 2003, the Company paid approximately $22.0 in settlement of
certain foreign tax matters in respect of a number of prior periods.

9.   EMPLOYEE BENEFIT AND INCENTIVE PLANS

Historical Pension and Other Postretirement Benefit Plans. The Company and its
subsidiaries have historically provided (a) postretirement health care and life
insurance benefits to eligible retired employees and their dependents and (b)
pension benefit payments to retirement plans. Substantially all employees became
eligible for health care and life insurance benefits if they reached retirement
age while still working for the Company or its subsidiaries. The Company did not
fund the liability for these benefits, which were expected to be paid out of
cash generated by operations. The Company reserved the right, subject to
applicable collective bargaining agreements, to amend or terminate these
benefits. Retirement plans were generally non-contributory for salaried and
hourly employees and generally provided for benefits based on formulas which
considered such items as length of service and earnings during years of service.

The assets of the Company-sponsored pension plans, like numerous other
companies' pension plans, are, to a substantial degree, invested in the capital
markets and managed by a third party. The performance of the stock market over
the last several years and the resulting declines in the value of the assets
held in the Company's pension plans together with declining interest rates
caused the discounted value of the projected liabilities to increase and has had
an increasingly adverse impact on the Company's operating results. In addition,
medical costs have continued to escalate causing the Company's costs to continue
to increase.

The Company has stated since the inception of its Chapter 11 proceedings that
legacy items that included its pension and post-retirement benefit plans would
have to be addressed before the Company could successfully reorganize. The
Company previously disclosed that it did not intend to make any pension
contributions in respect to its domestic pension plans during the pendency of
the Cases as it believes that virtually all amounts are pre-Filing Date
obligations. The Company did not make required accelerated funding payments to
its salaried employee retirement plan of $17.0 in January 2003, $83.0 in April
2003, $60.5 in July 2003 or $64.8 in October 2003 (such amounts are separate
standalone requirements and not additive). As a result, during 2003, the Company
engaged in lengthy negotiations with the PBGC, the 1114 Committee and the
appropriate union representatives for the hourly employees subject to collective
bargaining agreements regarding its plans to significantly modify or terminate
these benefits.

In December 2003, the PBGC notified the Company that it intended to assume
responsibility for the salaried employees retirement plan and the Company
reluctantly agreed to the termination of the plan. In January 2004, the Company
filed motions with the Court to terminate or substantially modify postretirement
medical obligations for both salaried and certain hourly employees and for the
distressed termination of substantially all domestic hourly pension plans. The
Company subsequently concluded agreements with the 1114 Committee and union
representatives that represent the vast majority of the Company's hourly
employees. The agreements provide for the termination of existing salaried and
hourly postretirement medical benefit plans, and the termination of existing
hourly pension plans. Under the agreements, salaried and hourly retirees would
be provided an opportunity for continued medical coverage through COBRA or a
proposed Voluntary Employee Beneficiary Association ("VEBA") and active salaried
and hourly employees would be provided with an opportunity to participate in one
or more replacement pension plans and/or defined contribution plans. The
agreements with the 1114 Committee and certain of the unions have been approved
by the Court, but are subject to certain conditions, including Court approval of
the Intercompany Agreement in a form acceptable to the Debtors and the UCC (see
Note 1). The PBGC must ultimately approve a distress termination of the hourly
plans. The PBGC has objected to the Company's distress termination motion and
has appealed the Court's ruling that the Company has met the statutory criteria
for a distress termination of the hourly pension plans (see discussion in "Cash
Flow" below). Negotiations with the PBGC are ongoing.

Assumptions -
The following recaps the key assumptions used and the amounts reflected in the
Company's financial statements with respect to the Company's pension plans and
other postretirement benefit plans. In accordance with generally accepted
accounting principles, only certain impacts of the changes in the Company's
pension and other postretirement benefit plans discussed above have been
reflected in such information. Any such 2003 impacts, as well as impacts
expected to be incurred in 2004, are discussed below.

The Company uses a December 31 measurement date for the majority of its plans.

Weighted-average assumptions used to determine benefit obligations as of
December 31 and net periodic benefit cost for the years ended December 31 are:


                                                       Pension Benefits                 Medical/Life Benefits
                                             ------------------------------------ ---------------------------------
                                                   2003        2002          2001       2003       2002        2001
                                             ---------- -----------  ------------ ---------- ---------- -----------

Benefit obligations assumptions:
   Discount rate                                  6.00%       6.75%         7.25%      6.00%      6.75%       7.25%
   Rate of compensation increase                  4.00%       4.00%         4.00%      4.00%      4.00%       4.00%

Net periodic benefit cost assumptions:
   Discount rate                                  6.00%       6.75%         7.25%      6.75%      7.25%       7.75%
   Expected return on plan assets                 9.00%       9.00%         9.00%          -          -           -
   Rate of compensation increase                  4.00%       4.00%         4.00%      4.00%      4.00%       4.00%

In 2003, the average annual assumed rate of increase in the per capita cost of
covered benefits (i.e., health care cost trend rate) is 10.0% for all
participants. The assumed rate of increase is assumed to decline gradually to
5.0% in 2010 for all participants and remain at that level thereafter. In 2002,
the average annual assumed rate of increase in the per capita cost of covered
benefits was 8.5% for all participants. The assumed rate of increase was assumed
to decline gradually to 5.0% in 2010 for all participants 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 assumed
health care cost trend rates would have the following effects:


                                                                              1% Increase               1% Decrease
                                                                       ------------------------    ---------------------
Increase (decrease) to total of service and interest cost              $                   8.3     $               (7.1)
Increase (decrease) to the postretirement benefit obligation                             110.3                    (96.8)

As more fully discussed above, all of the Company's material pension and
postretirement medical benefit plans are being (or have been) terminated as a
part of the Company's reorganization efforts. As such, the Company's obligations
with respect to the existing plans are (or will become) fixed. However, at this
time it is not possible to definitely determine the "final" amount of such
obligations as the value of such amounts will be subject to negotiations among
and between the Company and the constituents of the ongoing Cases and subject to
Court approval.

In preparing the Company's financial statements at December 31, 2003, the
Company has reflected its obligations in respect of these plans using
assumptions consistent with those used in accordance with GAAP for ongoing
plans. The Company believes that this represents a reasonable estimation
methodology. The Company currently believes that there are reasonable scenarios
under which the final allowed claim amounts would be less than that reflected in
the financial statements. The Company also expects that certain constituents
will assert that the value of their obligations is in excess of the amounts
reflected in the financial statements. The amount of pension liability related
to the terminated salaried employee pension plan included in the table below is
approximately $201.0. This compares to the claim filed by the PBGC in early 2003
in respect of this plan of approximately $230.0. However, as the PBGC's claim
was made at the beginning of 2003, such amount would have to be adjusted for
activity in 2003 (return on assets, payments, accrued service, etc.) for it to
be comparable to the amount reflected in the December 31, 2003 financial
statements.

Benefit Obligations and Funded Status -
The following table presents the benefit obligations and funded status of the
Company's pension and other postretirement benefit plans as of December 31, 2003
and 2002, and the corresponding amounts that are included in the Company's
Consolidated Balance Sheets.


                                                                         Pension Benefits          Medical/Life Benefits
                                                                   ---------------------------- ---------------------------
                                                                             2003          2002          2003          2002
                                                                   -------------- ------------- ------------- -------------
Change in Benefit Obligation:
   Obligation at beginning of year                                 $       913.4  $      915.6  $      790.1  $      868.2
   Service cost                                                             10.8          48.6           7.1          37.8
   Interest cost                                                            60.7          62.0          51.3          56.2
   Currency exchange rate change                                            (7.1)         (2.1)          -             -
   Plan participants contributions                                           1.7           1.8           -             -
   Curtailments, settlements and amendments                               (280.2)        (87.2)          -           (94.2)
   Actuarial (gain) loss                                                    76.5          42.9         225.9         (22.4)
   Benefits paid                                                           (83.6)        (68.2)        (60.4)        (55.5)
                                                                   -------------- ------------- ------------- -------------
     Obligation at end of year                                             692.2         913.4       1,014.0         790.1
                                                                   -------------- ------------- ------------- -------------


                                                                         Pension Benefits          Medical/Life Benefits
                                                                   -------------- ------------- ------------- -------------

Change in Plan Assets:
   FMV of plan assets at beginning of year                                 466.1         670.8           -             -
   Actual return on assets                                                  98.6         (57.0)          -             -
   Currency exchange rate change                                            (6.6)         (1.9)          -             -
   Employer contributions                                                   10.0           9.8          60.4          55.5
   Assets for which contributions transferred to the PBGC                  (75.5)          -             -             -
   Benefits paid (including lump sum payments of $87.4 in 2002)            (83.6)       (155.6)        (60.4)        (55.5)
                                                                   -------------- ------------- ------------- -------------
   FMV of plan assets at end of year                                       409.0         466.1           -             -
                                                                   -------------- ------------- ------------- -------------

   Obligation in excess of plan assets                                     283.2         447.3       1,014.0         790.1
   Unrecognized net actuarial loss                                        (133.9)       (257.7)       (421.5)       (205.3)
   Unrecognized prior service costs                                        (31.5)        (36.9)        125.2         147.7
   Adjustment required to recognize minimum liability                      103.5         242.1           -             -
   Estimated net liability to PBGC in respect of salaried
     plan termination                                                      201.2           -             -             -
   Intangible asset and other                                               31.9          36.8           -             -
                                                                   -------------- ------------- ------------- -------------
     Accrued benefit liability                                     $       454.4  $      431.6  $      717.7  $      732.5
                                                                   ============== ============= ============= =============

The accumulated benefit obligation for all defined benefit pension plans was
$916.0 and $879.4 at December 31, 2003 and 2002, respectively.

The projected benefit obligation, aggregate accumulated benefit obligation and
fair value of plan assets for pension plans with accumulated benefit obligation
in excess of plan assets were $933.6, $892.5 and $439.6, respectively, as of
December 31, 2003 and $874.8, $854.7 and $424.6, respectively, as of December
31, 2002.

Components of Net Periodic Benefit Cost -
The following table presents the components of net periodic benefit cost for the
years ended December 31, 2003, 2002 and 2001:


                                                       Pension Benefits                       Medical/Life Benefits
                                          ------------------------------------------ --------------------------------------
                                                  2003           2002           2001         2003         2002         2001
----------------------------------------- ------------ -------------- -------------- ------------ ------------ ------------
Service cost                              $      10.2  $        47.9  $        38.6  $       7.1  $      37.8  $      12.1
Interest cost                                    60.7           62.0           63.6         51.3         56.2         48.7
Expedited return on plan assets                 (38.6)         (58.0)         (70.9)          -            -            -
Amortization of prior service cost                3.6            3.8            5.5        (22.5)       (23.0)       (15.1)
Amortization of net (gain) loss                  16.1            6.5            (.5)         9.7         11.8           -
                                          ------------ -------------- -------------- ------------ ------------ ------------
Net periodic benefit costs                       52.0           62.2           36.3         45.6         82.8         45.7
Curtailments, settlements, etc.                 122.9           26.4          -               -          -            -
                                          ------------ -------------- -------------- ------------ ------------ ------------
Adjusted net periodic benefit cost        $     174.9  $        88.6  $        36.3  $      45.6  $      82.8  $      45.7
                                          ============ ============== ============== ============ ============ ============

(1)      Approximately $122.1 of the $174.9 adjusted net periodic benefit costs
         in 2003, $60.9 of the $88.6 adjusted net periodic benefit costs in
         2002, and $24.5 of the $36.3 adjusted net periodic benefit costs in
         2001 were provided in respect of other operating charges and/or
         restructuring activities (see Notes 3 and 6).
(2)      Approximately $30.7 of the $82.8 adjusted net periodic benefit costs in
         2002 related to medical/life benefit accruals that were provided in
         respect of restructuring activities (see Notes 3 and 6).

Additional Information -
The increase (decrease) in the minimum liability included in other comprehensive
income was $(138.6), $136.6 and $64.5 for the years ended December 31, 2003,
2002 and 2001, respectively.

Plan Assets -
As discussed above, in December 2003, the PBGC notified the Company it intended
to assume responsibility for the salaried employees retirement plan and in
February 2004, the Court approved the distressed termination of all of the
material domestic hourly pension plans. Upon termination, the plan's assets and
the administration of the plans will be transferred to the PBGC. As such, the
Company cannot predict how plan assets will be invested in the future and, thus,
comparisons to prior investments are of limited value.

However, the Company's pension plan weighted average asset allocation at
December 31, 2003 and 2002, by asset category, consisted primarily of equity
securities of approximately 65%, debt securities of 30% and other of 5%. The
vast majority of the Company's pension plan assets were managed by a trustee.

Cash Flow -
Domestic Plans. As previously discussed, the Company since filing the Chapter 11
proceedings has not made and does not intend to make any further significant
contributions to any of its domestic pension plans.

Upon emergence from Chapter 11 proceedings, the Company anticipates that it will
provide some form of yet to be determined defined contribution pension plan in
respect of its salaried employees. Pursuant to the terms of the USWA agreement,
the Company will be required to make annual contributions into the Steelworkers
Pension Trust on the basis of one dollar per USWA employee per hour worked. In
addition, the Company will institute a defined contribution pension plan for
active USWA employees. Company contributions to the plan will range from eight
hundred dollars to twenty-four hundred dollars per employee per year, depending
on age and years of service. The Company believes that similar defined
contribution pension plans will be established for non-USWA hourly employees
subject to collective bargaining agreements. The Company currently estimates
that contributions to all such plans will range from $3.0 to $6.0 per year.

As a replacement for the Company's current postretirement benefit plans, the
Company will fund one or more VEBAs into which the Company will contribute
certain amounts on emergence from Chapter 11 proceedings and on an annual basis
through 2012. The initial contribution will be an amount not to exceed $36.0 and
will be payable on emergence from the Chapter 11 proceedings so long as the
Company's liquidity is at least $50.0 after considering such payments. To the
extent that less than the full $36.0 is paid and the Company's interests in
Anglesey are subsequently sold, a portion of the Anglesey interests' proceeds,
in certain circumstances, will be used to pay the shortfall. In addition to the
foregoing, the Company will, on an annual basis, be required to pay 10% of the
first $20.0 of annual cash flow, as defined, plus 20% of annual cash flow, as
defined, above $20.0. Such annual payments shall not exceed $20.0 and will also
be limited (with no carryover to future years) to the extent that the payments
do not cause the Company's liquidity to be less than $50.0.

However, the PBGC has not completed its review of the replacement pension plans
or the defined contribution plans.

Foreign Plans. Contributions to foreign pension plans were approximately $9.8
and $9.0 during 2003 and 2002, respectively, and primarily related to the
Company's interests in commodity assets being considered for sale. As a result
of the potential sales of the Company's investments in such assets, future
contributions to foreign pension plans could decline to a nominal amount.

Changes in 2002 Impacting Benefit Plans -

The foregoing medical benefit liability and cost data reflects the fact that in
February 2002, the Company notified its salaried retirees that, given the
significant escalation in medical costs and the increased burden it was
creating, the Company was going to require such retirees to fund a portion of
their medical costs beginning May 1, 2002. The impact of such charges reduced
the estimated cash payments by the Company by approximately $10.0 per year. The
financial statement benefits of this change will, however, be reflected over the
remaining employment period of the Company's employees in accordance with
generally accepted accounting principles.

During 2002, approximately 230 salaried employees retired. These retirements
resulted in lump sum payments which triggered a special provision under the
Employee Retirement Income Security Act ("ERISA") that required the Company to
make accelerated funding payments to its salaried employee pension plan of $17.0
in January 2003, $83.0 in April 2003, $60.5 in July 2003 and $64.8 in October
2003 (such amounts are separate standalone requirements and not additive).
However, because substantially all of the amounts would have been classified as
a pre-Filing Date obligation requiring Court approval before payment and
represented a small portion of the legacy liabilities that must be addressed in
the Company's reorganization, the Company did not make the payments. Since the
Company did not make the payments, it was no longer in compliance with ERISA's
minimum funding requirements and, in turn, was prohibited by ERISA from making
lump-sum distributions from the salaried employee pension plan to employees who
retire after December 31, 2002.

Significant Charges in 2003 and 2002 -

In December 2003, in connection with the Company's termination of its salaried
employees retirement plan (as discussed above), the Company recorded a non-cash
charge of $121.2, which amount has been included in Other operating charges
(benefits), net (see Note 6). The charge represents certain net losses
previously deferred in accordance with GAAP. The charge had no material impact
on the pension liability associated with the plan since the Company had
previously recorded a minimum pension liability, as also required by GAAP, which
amount was offset by a charge to Stockholders' equity. Upon the termination of
the hourly pension plans in 2004 (as more fully discussed above), the Company
expects that it will record similar charges for the material hourly plans that
are terminated. The Company currently estimates that such charges will be in the
range of $130.0.

During 2002, the Company's Corporate segment recorded charges of $24.1 -
(included in Corporate selling, administrative, research and development, and
general expense), for additional pension expense. The charges were recorded
because:

      (1)  The lump sum payments from the assets of the Company's salaried
           employee pension plan exceeded a stipulated level prescribed by GAAP.
           Accordingly, a partial "settlement," as defined by GAAP, was deemed
           to have occurred. Under GAAP, if a partial "settlement" occurs, a
           charge must be recorded for a portion of any unrecognized net
           actuarial losses not reflected in the consolidated balance sheet. The
           portion of the total unrecognized actuarial losses of the plan ($75.0
           at December 31, 2001) that had to be recorded as a charge was the
           relative percentage of the total projected benefit obligation of the
           plan ($300.0 at December 31, 2001) settled by the lump sum payments
           totaling $75.0 in 2002; and

      (2)  During 2002, the Company also paid $4.2 into a trust fund in respect
           of certain obligations attributable to certain non-qualified pension
           benefits under management compensation agreements. These payments
           also represented a "settlement" and resulted in a charge of $4.2.

In addition to the foregoing, during 2002, the Primary aluminum segment
reflected approximately $58.8 of charges for pension, postretirement medical
benefits and related obligations in respect of the indefinite curtailment of the
Mead facility. This amount consisted of approximately $29.0 of incremental
pension charges and $29.8 of incremental postretirement medical and related
charges.

Postemployment Benefits. The Company has historically provided certain benefits
to former or inactive employees after employment but before retirement. However,
as a part of the agreements more fully discussed above, such benefits are
expected to be discontinued in mid-2004.

Restricted Common Stock. Kaiser has a restricted stock plan, which is one of its
stock incentive compensation plans, for its officers and other employees. During
January 2002, approximately 95,000 restricted shares of Kaiser's Common Stock
were issued to officers and other employees. The fair value of the restricted
shares issued is being amortized to expense over the terms of the applicable
restriction periods. In addition, in 2001, approximately 1,086,000 restricted
shares were issued in exchange for certain employees, who held stock options to
purchase Kaiser's Common Stock, cancelling a total of approximately 3,617,000
options. The value of the restricted stock issued was based on the fair value of
the options. During 2003 and 2002, approximately 377,000 and 406,000 of the
unvested restricted shares, respectively, were cancelled or voluntarily
forfeited.

Incentive Plans. The Company has an unfunded incentive compensation program,
which provides incentive compensation based on performance against annual plans
and over rolling three-year periods. In addition, Kaiser has a "nonqualified"
stock option plan and the Company has a defined contribution plan for salaried
employees which provides for matching contributions by the Company at the
discretion of the board of directors. Given the challenging business environment
encountered during 2003 and 2002 and the disappointing results of operations for
both years, only modest incentive payments were made and no matching
contribution were awarded in respect of either year. The Company's expense for
all of these plans was $6.1, $1.7 and $4.5 for the years ended December 31,
2003, 2002 and 2001, respectively.

Up to 8,000,000 shares of Kaiser's Common Stock were initially reserved for
issuance under the Company's stock incentive compensation plans. At December 31,
2003, 4,187,286 shares of Common Stock remained available for issuance under
those plans. Stock options granted pursuant to Kaiser's nonqualified stock
option program are to be granted at or above the prevailing market price,
generally vest at a rate of 20 - 33% per year, and have a five or ten year term.
Information concerning nonqualified stock option plan activity is shown below.
The weighted average price per share for each year is shown parenthetically.


                                                                                     2003              2002            2001
------------------------------------------------------------------------    -------------    --------------   -------------

Outstanding at beginning of year ($5.63, $8.37 and $10.24,
   respectively)                                                               1,454,861         1,560,707       4,375,947
Granted ($2.89 in 2001)                                                              -                 -           874,280
Expired or forfeited ($8.86, $5.71 and $10.39, respectively)                    (604,721)         (105,846)     (3,689,520)
                                                                            -------------    --------------   -------------

Outstanding at end of year ($3.34, $5.63 and $8.37, respectively)                850,140         1,454,861       1,560,707
                                                                            =============    ==============   =============

Exercisable at end of year ($3.34, $6.84 and $9.09, respectively)                645,659           987,306         695,183
                                                                            =============    ==============   =============

Options exercisable at December 31, 2003 had exercisable prices ranging from
$1.72 to $12.75 and a weighted average remaining contractual life of 7.5 years.
Given that the average sales price of Kaiser's Common Stock is currently in the
$.10 per share range, the Company believes it is unlikely any of the stock
options will be exercised. Further, as a part of a plan of reorganization, the
Company believes that it is likely that the equity interests of the holders of
outstanding options will be cancelled without consideration.

10.   MINORITY INTERESTS

Minority Interests in Consolidated Affiliates. The Company owns a 90% interest
in Valco and a 65% interest in Alpart. These companies' financial statements are
fully consolidated into the Company's consolidated financial statements because
they are majority-owned. However, as discussed in Note 5, the Company has
entered into agreements to sell its interests in Valco and Alpart. Such sales
are subject to Court approval and numerous other conditions.

11.   STOCKHOLDERS' EQUITY

Preference Stock. The Company has four series of $100 par value Cumulative
Convertible Preference Stock ("$100 Preference Stock") outstanding with annual
dividend requirements of between 4 1/8% and 4 3/4%. The Company has the option
to redeem the $100 Preference Stock at par value plus accrued dividends. The
Company does not intend to issue any additional shares of the $100 Preference
Stock. By its terms, the $100 Preference Stock can be exchanged for per share
cash amounts between $69 - $80. The Company records the $100 Preference Stock at
their exchange amounts for financial statement presentation and includes such
amounts in minority interests. At December 31, 2003 and 2002, outstanding shares
of $100 Preference Stock were 8,669. In accordance with the Code and DIP
Facility, the Company is not permitted to repurchase or redeem any of its stock.
Further, as a part of a plan of reorganization, the Company believes it is
likely that the equity interests of the holders of the $100 Preference Stock
will be cancelled without consideration.

Note Receivable from Parent. The Note receivable from parent bears interest at a
fixed rate of 6 5/8% and matures on December 21, 2020. Accrued interest is
accounted for as additional contribution to capital. However, since the Note
receivable from parent is unsecured, the accrual of interest was discontinued as
of the Filing Date. The payment of the Note receivable from parent and accrued
interest will be resolved in connection with the Cases.  See Note 1 for a
discussion of the Intercompany Agreement.

12.   COMMITMENTS AND CONTINGENCIES

Impact of Reorganization Proceedings. During the pendency of the Cases,
substantially all pending litigation, except certain environmental claims and
litigation, against the Debtors is stayed. Generally, claims against a Debtor
arising from actions or omissions prior to its Filing Date will be settled in
connection with the plan of reorganization.

Commitments. The Company has a variety of financial commitments, including
purchase agreements, tolling arrangements, forward foreign exchange and forward
sales contracts (see Note 13), letters of credit, and guarantees. Such purchase
agreements and tolling arrangements include long-term agreements for the
purchase and tolling of bauxite into alumina in Australia by QAL. These
obligations are scheduled to expire in 2008. Under the agreements, the Company
is unconditionally obligated to pay its proportional share (20%) of debt,
operating costs, and certain other costs of QAL. The Company's share of the
aggregate minimum amount of required future principal payments as of December
31, 2003, was $60.0 which amount matures in varying amounts during the 2005 to
2008 period. The Company's share of QAL's debt increased by approximately $8.0
during 2003 as additional drawdowns on QAL financing (the Company's share $40.0)
more than offset the Company's share ($32.0) of QAL's debt principal payment.
During July 2002, the Company made payments of approximately $29.5 to QAL to
fund the Company's share of QAL's scheduled debt maturities. The Company's share
of payments, including operating costs and certain other expenses under the
agreements, has generally ranged between $70 - $100 over the past three years.
However, as discussed more fully in Note 1, the Company is considering the
possibility of selling its interests in QAL. If the Company's interest in QAL
were to be sold, the Company believes that the Company's obligations in respect
of its share of QAL's debt would be assumed by the buyer. The Company also has
agreements to supply alumina to and to purchase aluminum from Anglesey.

Minimum rental commitments under operating leases at December 31, 2003, are as
follows: years ending December 31, 2004 - $7.5; 2005 - $4.7; 2006 - $2.1; 2007 -
$.3; 2008 - $.2; thereafter - $.7. Pursuant to the Code, the Debtors may elect
to reject or assume unexpired pre-petition leases. (At this time, no decisions
have been made as to which significant leases will be accepted or rejected (see
Note 1)). Rental expenses were $15.2, $38.3 and $41.0, for the years ended
December 31, 2003, 2002 and 2001, respectively.

The Company had a long-term liability, net of estimated subleases income, on an
office complex in Oakland, California, in which the Company had not maintained
offices for a number of years, but for which it is responsible for lease
payments as master tenant through 2008 under a sale-and-leaseback agreement. The
Company also held an investment in certain notes issued by the owners of the
building (which were included in Other Assets). In October 2002, the Company
entered into a contract to sell its interests and obligations in the office
complex. As the contract amount was less than the asset's net carrying value
(included in Other assets), the Company recorded a non-cash impairment charge in
the fourth quarter of 2002 of approximately $20.0 (which amount was reflected in
Other operating charges (benefits), net - see Note 6). The sale was approved by
the Court in February 2003 and closed in March 2003. Net cash proceeds were
approximately $61.1.

Environmental Contingencies. The Company is subject to a number of environmental
laws, to fines or penalties assessed for alleged breaches of the environmental
laws, and to claims and litigation based upon such laws. The Company currently
is subject to a number of claims under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendments
Reauthorization Act of 1986 ("CERCLA"), and, along with certain other entities,
has been named as a potentially responsible party for remedial costs at certain
third-party sites listed on the National Priorities List under CERCLA.

Based on the Company's evaluation of these and other environmental matters, the
Company has established environmental accruals, primarily related to potential
solid waste disposal and soil and groundwater remediation matters. During the
year ended December 31, 2003 and 2001, the Company recorded charges of $23.2 and
$13.5 to increase its environmental accrual. Additionally, the Company's
environmental accruals were increased during the year ended December 31, 2001,
by approximately $6.0 in connection with purchase of certain property. The
following table presents the changes in such accruals, which are primarily
included in Long-term liabilities, for the years ended December 31, 2003, 2002
and 2001:


                                                                      2003        2002       2001
--------------------------------------------------------------     -------     -------    -------

Balance at beginning of period                                     $ 59.1      $ 61.2     $ 46.1
Additional accruals                                                  25.6         1.5       23.1
Less expenditures                                                    (2.2)       (3.6)      (8.0)
                                                                   -------     -------    -------

Balance at end of period(1)                                        $ 82.5      $ 59.1     $ 61.2
                                                                   =======     =======    =======

(1)   As of December 31, 2003 and 2002, $43.0 and $21.7, respectively, of the
      environmental accrual was included in Liabilities subject to compromise
      (see Note 1) and the balance was included in Long-term liabilities.

These environmental accruals represent the Company's estimate of costs
reasonably expected to be incurred based on presently enacted laws and
regulations, currently available facts, existing technology, and the Company's
assessment of the likely remediation action to be taken. In the ordinary course,
the Company expects that these remediation actions will be taken over the next
several years and estimates that annual expenditures to be charged to these
environmental accruals will be approximately $25.4 in 2004, $2.2 to $4.3 per
year for the years 2005 through 2008 and an aggregate of approximately $45.7
thereafter. Approximately $20.2 of the adjustments to the environmental
liabilities in 2003 (see below) that applied to non-owned property sites has
been included in the after 2008 balance because such amounts are expected to be
settled solely in connection with the Debtors' plan or plans of reorganization.

Approximately $20.2 of the amount provided in 2003 relates to the previously
disclosed multi-site settlement agreement with various federal and state
governmental regulatory authorities and other parties in respect of the
Company's environmental exposure at a number of non-owned sites. Under this
agreement, among other things, the Company agreed to claims at such sites
totaling $25.6 ($20.2 greater than amounts that had previously been accrued for
these sites) and, in return, the governmental regulatory authorities have agreed
that such claims would be treated as pre-Filing Date unsecured claims (i.e.
liabilities subject to compromise). The Company recorded the portion of the
$20.2 accrual that relates to locations with operations ($15.7) in Other
operating charges (benefits), net (see Note 6). The remainder of the accrual
($4.5), which relates to locations that have not operated for a number of years
was recorded in Other income (expense) (see Note 2).

During 2003, the Company also provided additional accruals totaling
approximately $3.0 associated with certain Company-owned properties with no
current operations (recorded in Other income (expense) - see Note 2). These
additional accruals resulted primarily from additional cost estimation efforts
undertaken by the Company in connection with its reorganization efforts. The
additional accruals were recorded as liabilities not subject to compromise as
they relate to properties owned by the Company.

As additional facts are developed and definitive remediation plans and necessary
regulatory approvals for implementation of remediation are established or
alternative technologies are developed, changes in these and other factors may
result in actual costs exceeding the current environmental accruals. The Company
believes that it is reasonably possible that costs associated with these
environmental matters may exceed current accruals by amounts that could range,
in the aggregate, up to an estimated $15.4 (a majority of which are estimated to
relate to owned sites that are likely not subject to compromise). As the
resolution of these matters is subject to further regulatory review and
approval, no specific assurance can be given as to when the factors upon which a
substantial portion of this estimate is based can be expected to be resolved.
However, the Company is currently working to resolve certain of these matters.

The Company believes that it has insurance coverage available to recover certain
incurred and future environmental costs and is pursuing claims in this regard.
However, no amounts have been accrued in the financial statements with respect
to such potential recoveries.

Asbestos Contingencies. The Company has been one of many defendants in a number
of lawsuits, some of which involve claims of multiple persons, in which the
plaintiffs allege that certain of their injuries were caused by, among other
things, exposure to asbestos during, and as a result of, their employment or
association with the Company or exposure to products containing asbestos
produced or sold by the Company. The lawsuits generally relate to products the
Company has not sold for more than 20 years. As of the initial Filing Date,
approximately 112,000 claims were pending. The lawsuits are currently stayed by
the Cases.

Due to the Cases, holders of asbestos claims are stayed from continuing to
prosecute pending litigation and from commencing new lawsuits against the
Debtors. However, during the pendency of the Cases, the Company expects
additional asbestos claims will be filed as part of the claims process. A
separate creditors' committee representing the interests of the asbestos
claimants has been appointed. The Debtors' obligations with respect to present
and future asbestos claims will be resolved pursuant to a plan of
reorganization.

The Company has accrued a liability for estimated asbestos-related costs for
claims filed to date and an estimate of claims to be filed through 2011. At
December 31, 2003, the balance of such accrual was $610.1, all of which was
included in Liabilities subject to compromise (see Note 1). The Company's
estimate is based on the Company's view, at December 31, 2003, of the current
and anticipated number of asbestos-related claims, the timing and amounts of
asbestos-related payments, the status of ongoing litigation and settlement
initiatives, and the advice of Wharton Levin Ehrmantraut & Klein, P.A., with
respect to the current state of the law related to asbestos claims. However,
there are inherent uncertainties involved in estimating asbestos-related costs
and the Company's actual costs could exceed the Company's estimates due to
changes in facts and circumstances after the date of such estimate. Further,
while the Company does not presently believe there is a reasonable basis for
estimating asbestos-related costs beyond 2011 and, accordingly, no accrual has
been recorded for any costs which may be incurred beyond 2011, the Company
expects that the plan of reorganization process could require an estimation of
the Company's entire asbestos-related liability, which may go beyond 2011, and
that such costs could be substantial.

The Company believes that it has insurance coverage available to recover a
substantial portion of its asbestos-related costs. Although the Company has
settled asbestos-related coverage matters with certain of its insurance
carriers, other carriers have not yet agreed to settlements and disputes with
carriers exist. The timing and amount of future recoveries from these insurance
carriers will depend on the pendency of the Cases and on the resolution of any
disputes regarding coverage under the applicable insurance policies. The Company
believes that substantial recoveries from the insurance carriers are probable
and additional amounts may be recoverable in the future if additional claims are
added. The Company reached this conclusion after considering its prior
insurance-related recoveries in respect of asbestos-related claims, existing
insurance policies, and the advice of Heller Ehrman White & McAuliffe LLP
with respect to applicable insurance coverage law relating to the terms and
conditions of those policies. During 2000, the Company filed suit in San
Francisco Superior Court against a group of its insurers, which suit was
thereafter split into two related actions. Additional insurers were added to the
litigation in 2000 and 2002. During October 2001, June 2003 and February 2004,
the court ruled favorably on a number of policy interpretation issues.
Additionally, one of the favorable October 2001 rulings was affirmed in February
2002 by an intermediate appellate court in response to a petition from the
insurers. The rulings did not result in any changes to the Company's estimates
of its current or future asbestos-related insurance recoveries. The trial court
may hear additional issues from time to time. Given the expected significance of
probable future asbestos-related payments, the receipt of timely and appropriate
payments from its insurers is critical to a successful plan of reorganization
and the Company's long-term liquidity.

The following tables present historical information regarding the Company's
asbestos-related balances and cash flows:


                                                                                  December 31,
                                                                        --------------------------------
                                                                                  2003              2002
------------------------------------------------------------------      --------------    --------------
Liability                                                               $       610.1     $       610.1
Receivable (included in Other assets)(1)                                        465.4             484.0
                                                                        --------------    --------------

                                                                        $       144.7     $       126.1
                                                                        ==============    ==============

(1)   The asbestos-related receivable was determined on the same basis as the
      asbestos-related cost accrual. However, no assurances can be given that
      the Company will be able to project similar recovery percentages for
      future asbestos-related claims or that the amounts related to future
      asbestos-related claims will not exceed the Company's aggregate insurance
      coverage. As of December 31, 2003 and 2002, $6.1 and $24.7, respectively,
      of the receivable amounts relate to costs paid. The remaining receivable
      amounts relate to costs that are expected to be paid by the Company in the
      future.


                                                                         Year Ended December 31,                  Inception
                                                               -------------------------------------------
                                                                       2003          2002             2001          To Date
                                                               ------------  ------------    -------------  ---------------
Payments made, including related legal costs................   $        -    $     (17.1)    $     (118.1)  $       (355.7)
Insurance recoveries........................................          18.6          23.3             90.3            263.5
                                                               ------------  ------------    -------------  ---------------
                                                               $      18.6   $       6.2     $      (27.8)  $         92.2
                                                               ============  ============    =============  ===============

During the pendency of the Cases, all asbestos litigation is stayed. As a
result, the Company does not expect to make any asbestos payments in the near
term. Despite the Cases, the Company continues to pursue insurance collections
in respect of asbestos-related amounts paid prior to its Filing Date.

Management continues to monitor claims activity, the status of lawsuits
(including settlement initiatives), legislative developments, and costs incurred
in order to ascertain whether an adjustment to the existing accruals should be
made to the extent that historical experience may differ significantly from the
Company's underlying assumptions. This process resulted in the Company
reflecting charges of $57.2 (included in Other income(expense) - see Note 2) in
the year ended December 31, 2001 for asbestos-related claims, net of expected
insurance recoveries, based on cost and other trends experienced by the Company
and other companies. Additional asbestos-related claims are likely to be
asserted as a part of the Chapter 11 process. Management cannot reasonably
predict the ultimate number of such claims or the amount of the associated
liability. However, it is likely that such amounts could exceed, perhaps
significantly, the liability amounts reflected in the Company's consolidated
financial statements, which (as previously stated) is only reflective of an
estimate of claims through 2011. The Company's obligations in respect of the
currently pending and future asbestos-related claims will ultimately be
determined (and resolved) as a part of the overall Chapter 11 proceedings.
Management will continue to periodically reassess its asbestos-related
liabilities and estimated insurance recoveries as the Cases proceed. However,
absent unanticipated developments such as asbestos-related legislation, material
developments in other asbestos-related proceedings or in the Company's Chapter
11 proceedings, it is not anticipated that the Company will have sufficient
information to reevaluate its asbestos-related obligations and estimated
insurance recoveries until later in the Cases. Any adjustments ultimately deemed
to be required as a result of any reevaluation of the Company's asbestos-related
liabilities or estimated insurance recoveries could have a material impact on
the Company's future financial statements.

The Company has entered into settlement agreements with several of the insurers
whose asbestos-related obligations are primarily in respect of future asbestos
claims. These settlement agreements were approved by the Court. In accordance
with the Court approval, the insurers are to pay certain amounts, pursuant to
the terms of an escrow agreement, into a fund (the "Escrow Fund") in which the
Company has no interest, but which amounts will be available for the ultimate
settlement of the Company's asbestos-related claims. Because the Escrow Fund is
under the control of the escrow agent, who will make distributions only pursuant
to a Court order, the Escrow Fund is not included in the accompanying
consolidated balance sheet at December 31, 2003.

In addition, since neither the Company nor Kaiser received any economic benefit
or suffered any economic detriment and have not been relieved of any
asbestos-related obligation as a result of the receipt of the escrow funds,
neither the asbestos-related receivable or the asbestos-related liability have
been adjusted as a result of these transactions. As of December 31, 2003, the
insurers had paid $7.9 into the Escrow Fund. It is possible that settlements
with additional insurers will occur. However, no assurance can be given that
such settlements will occur.

Labor Matters. In connection with the United Steelworkers of America ("USWA")
strike and subsequent lock-out by the Company, which was settled in September
2000, certain allegations of unfair labor practices ("ULPs") were filed with the
National Labor Relations Board ("NLRB") by the USWA. As previously disclosed,
the Company responded to all such allegations and believed that they were
without merit. Twenty-two of twenty-four allegations of ULPs previously brought
against the Company by the USWA have been dismissed. A trial before an
administrative law judge for the two remaining allegations concluded in
September 2001. In May 2002, the administrative law judge ruled against the
Company in respect of the two remaining ULP allegations and recommended that the
NLRB award back wages, plus interest, less any earnings of the workers during
the period of the lockout. The administrative law judge's ruling did not contain
any specific amount of proposed award and was not self-executing. The USWA filed
a proof of claim for $240.0 in the Cases in respect of this matter.

In January 2004, as part of its settlement with the USWA with respect to pension
and retiree medical benefits, the Company and the USWA agreed to settle their
case pending before the NLRB, subject to approval of the NLRB General Counsel
and the Court and ratification by union members. The settlement was subsequently
ratified by the union members in February 2004. Further, the settlement with
respect to retiree medical and pension benefits and the NLRB case has been
approved by the Court subject to certain conditions. The agreement may be
terminated by either the USWA or the Company in certain circumstances (see Note
9). Under the terms of the agreement, solely for the purposes of determining
distributions in connection with the reorganization, an unsecured pre-petition
claim in the amount of $175.0 will be allowed. The agreement to settle this
matter was contingent on NLRB and Court approval and ratification by union
members. This amount was not reflected in the Company's consolidated financial
statements at December 31, 2003. However, the charge and an offsetting liability
associated with the settlement of this matter will be reflected in the Company's
consolidated financial statements if and when the agreement with the USWA is
ultimately approved by the Court. Also, as part of the agreement, the Company
agreed to adopt a position of neutrality regarding the unionization of any
employees of the reorganized company.

Hearing Loss Claims. During February 2004, the Company reached a settlement in
respect of 400 claims, which alleged that certain individuals who were employees
of the Company, principally at a facility previously owned and operated by the
Company in Louisiana, suffered hearing loss in connection with their employment.
Under the terms of the settlement, which is still subject to Court approval the
claimants will be allowed claims totaling $15.8. As such, the Company recorded a
$15.8 charge (in Other operating charges (benefits), net - see Note 6) in the
fourth quarter of 2003 and a corresponding obligation (included in Liabilities
subject to compromise - see Note 1). However, no cash payments by the Company
are required in respect of these amounts. Rather the settlement agreement
contemplates that, at emergence, these claims will be transferred to a separate
trust along with certain rights against certain corresponding insurance policies
of the Company and that such insurance policies will be the sole source of
recourse to the claimants. While the Company believes that the insurance
policies are of value, no amounts have been reflected in the Company's financial
statements at December 31, 2003 in respect of such policies as the Company could
not with the level of certainty necessary determine the amount of recoveries
that were probable.

Other Contingencies. The Company is involved in various other claims, lawsuits,
and other proceedings relating to a wide variety of matters related to past or
present operations. While uncertainties are inherent in the final outcome of
such matters, and it is presently impossible to determine the actual costs that
ultimately may be incurred, management currently believes that the resolution of
such uncertainties and the incurrence of such costs should not have a material
adverse effect on the Company's consolidated financial position, results of
operations, or liquidity.

13.   DERIVATIVE FINANCIAL INSTRUMENTS AND RELATED HEDGING PROGRAMS

In conducting its business, the Company has historically used various
instruments, including forward contracts and options, to manage the risks
arising from fluctuations in aluminum prices, energy prices and exchange rates.
The Company has historically entered into hedging transactions from time to time
to limit its exposure resulting from (1) its anticipated sales of alumina,
primary aluminum, and fabricated aluminum products, net of expected purchase
costs for items that fluctuate with aluminum prices, (2) the energy price risk
from fluctuating prices for natural gas, fuel oil and diesel oil used in its
production process, and (3) foreign currency requirements with respect to its
cash commitments with foreign subsidiaries and affiliates. As the Company's
hedging activities are generally designed to lock-in a specified price or range
of prices, gains or losses on the derivative contracts utilized in the hedging
activities (except the impact of those contracts discussed below which have been
marked to market) generally offset at least a portion of any losses or gains,
respectively, on the transactions being hedged.

2003. The following table summarizes the Company's material derivative positions
at December 31, 2003.


                                                                                  Estimated %
                                                                Notional          of Periods           Carrying/
                                                                Amount of       Sales/Purchases         Market
              Commodity                      Period             Contracts           Hedged               Value
-------------------------------       -------------------     --------------   ----------------    ---------------
Aluminum (in tons*) -
   Option contracts                    1/04 through 3/04              65,000          86%          $         (1.4)

Natural gas (in mmbtu per day):
   Option contracts                           1/04                        50          94%                       .1

In January and February 2004, the Company purchased additional option contracts
which cap the price that the Company would have to pay for approximately 100% of
its natural gas requirements for February and March 2004.

The Company anticipates that, subject to prevailing economic conditions, it may
enter into additional hedging transactions with respect to primary aluminum
prices to protect the interests of its constituents. However, no assurance can
be given as to when or if the Company will enter into such additional hedging
activities.

As of December 31, 2003, the Company had sold forward a vast majority of the
alumina available to it in excess of its projected internal smelting
requirements for 2004 and 2005 at prices indexed to future prices of primary
aluminum.

2002. Because the agreements underlying the Company's hedging positions provided
that the counterparties to the hedging contracts could liquidate the Company's
hedging positions if the Company filed for reorganization, the Company chose to
liquidate these positions in advance of the Filing Date. Proceeds from the
liquidation totaled approximately $42.2. A net gain of $23.3 associated with
these liquidated positions was deferred. The individual hedging gains/losses are
being recognized over the period during which the underlying transactions to
which the hedges related are expected to occur. As of December 31, 2003, the
remaining unamortized amount was a net loss of approximately $2.3.

2001. During the first quarter of 2001, the Company recorded a mark-to-market
benefit of $6.8 (included in Other income (expense)) related to the application
of SFAS No. 133. However, starting in the second quarter of 2001, the income
statement impact of mark-to-market changes was essentially eliminated as
unrealized gains or losses resulting from changes in the value of these hedges
began being recorded in Other comprehensive income (see Note 2) based on changes
in SFAS No. 133 enacted in April 2001.

During late 1999 and early 2000, the Company entered into certain aluminum
contracts with a counterparty. While the Company believed that the transactions
were consistent with its stated hedging objectives, these positions did not
qualify for treatment as a "hedge" under accounting guidelines. Accordingly, the
positions were marked-to-market each period. A recap of mark-to-market pre-tax
gains (losses) for these positions, together with the amount discussed in the
paragraph above, is provided in Note 2. During the fourth quarter of 2001, the
Company liquidated all of the remaining positions. This resulted in the
recognition of approximately $3.3 of additional mark-to-market income during
2001.

14.   KEY EMPLOYEE RETENTION PROGRAM

In June 2002, the Company adopted a key employee retention program (the "KERP"),
which was approved by the Court in September 2002. The KERP is a comprehensive
program that is designed to provide financial incentives sufficient to retain
certain key employees during the Cases. The KERP includes six key elements: a
retention plan, a severance plan, a change in control plan, a completion
incentive plan, the continuation for certain participants of an existing
supplemental employee retirement plan ("SERP") and a long-term incentive plan.
The retention plan is expected to have a total cost of up to approximately $7.3
per year. The total cost of the KERP will vary depending on the level of
continuing participation in each period. Under the KERP, retention payments
commenced in September 2002 and are being paid every six months through March
31, 2004, except that 50% of the amounts payable to certain senior officers will
be withheld until the Debtors emerge from the Cases or as otherwise agreed
pursuant to the KERP. The severance and change in control plans, which are
similar to the provisions of previous arrangements that existed for certain key
employees, generally provide for severance payments of between six months and
three years of salary and certain benefits, depending on the facts and
circumstances and the level of employee involved. The completion incentive plan
generally provides for payments of up to an aggregate of approximately $1.2 to
certain senior officers provided that the Debtors emerge from the Cases in 30
months or less from the initial Filing Date. If the Debtors emerge from the
Cases after 30 months from the initial Filing Date, the amount of the payments
will be reduced accordingly. The SERP generally provides additional
non-qualified pension benefits for certain active employees at the time that the
KERP was approved, who would suffer a loss of benefits based on Internal Revenue
Code limitations, so long as such employees are not subsequently terminated for
cause or voluntarily terminate prior to reaching their retirement age. The
long-term incentive plan generally provides for incentive awards to key
employees based on an annual cost reduction target. Payment of such awards
generally will be made: (a) 50% when the Debtors emerge from the Cases and (b)
50% one year from the date the Debtors emerge from the Cases. During 2003 and
2002, the Company has recorded charges of $6.1 and $5.1, respectively (included
in Selling, administrative, research and development, and general), related to
the KERP.

--------
   * All references to tons in this report refer to metric tons of 2,204.6
     pounds.

15.   VALCO RELATED MATTERS

Valco's operating level has been subject to fluctuations resulting from the
amount of power it is allocated by the VRA. The operating level over the last
five years has ranged from none to four out of a total of five potlines. The
amount of power made available to Valco by the VRA depends in large part on the
level of the lake that is the primary source for generating the hydroelectric
power used to supply the smelter. The level of the lake is primarily a function
of the level of annual rainfall and the alternative (non-Valco) uses of the
power generated, as directed by the VRA.

During late 2000, Valco, the GoG and the VRA reached an agreement, subject to
Parliamentary approval, that would provide sufficient power for Valco to operate
at least three and one-half of its five potlines through 2017. However,
Parliamentary approval was not received and, in March 2002, the GoG reduced
Valco's power allocation forcing Valco to curtail one of its four operating
potlines. In December 2002, after substantial attempts to reach an amicable
solution, Valco and the Company filed for arbitration with the International
Chamber of Commerce in Paris against both the VRA and the GoG. An attempt of
mediation in January 2003 was also unsuccessful, following which Valco's power
allocation was further reduced in January 2003 resulting in the curtailment of
two additional operating potlines.

As previously disclosed, during the first half of 2003, the lake level was at or
near a record low level. Based on the level of the lake and the rate at which it
had been declining, the Company believed that curtailment of Valco's last
remaining operating potline was likely. Accordingly, in light of the previous
curtailments ordered by the VRA and the declining lake level, in May 2003, the
Company curtailed the last operating potline. The curtailment of the last
operating potline was believed to: (1) offer the VRA and the GoG a contribution
toward conservation of the water supply to improve their ability to meet Valco's
future power needs as well as meet the near-term needs of the rest of Ghana and
(2) provide Valco its best opportunity to restart late in 2003 once the annual
rainy season had replenished the lake level and Valco's 2004 power allocation
was known. The rainy season subsequently ended in late 2003 and the lake level
crested at a more typical level. However, Valco has not restarted any potlines
and does not currently expect to restart any potlines in the near-term
unless/until a satisfactory resolution of issues between Valco, the VRA and the
GoG can be resolved.

During 2003, Valco met regularly with the GoG and the VRA in respect of the
current and future power situation and other matters including appropriate
compensation for power curtailments. The continuation of the negotiations and
arbitration ultimately led to the MOU whereby the Company agreed to sell its
interests in Valco to the GoG. See Note 5 for a discussion of the MOU. Under the
terms of the MOU, upon execution of the MOU and payment of an amount ($7.0) into
escrow, the parties will suspend the arbitration process. Upon the closing of
the sale, the parties will dismiss the arbitration with prejudice.

During 2003, $13.2 of employee end-of-service benefits were paid ($.4 in the
fourth quarter) in connection with the 2003 potline curtailments. Charges
associated with such payments totaled $11.1 ($3.0 in the fourth quarter). All
charges are included in Cost of products sold. The $3.0 charge in the fourth
quarter of 2003 related to expected payments in early 2004 and was recorded
pursuant to contractual terms as the Company believes that it is probable that a
restart of Valco potlines will not occur during the first half of 2004.

16.   SUBSEQUENT EVENTS

In addition to the subsequent events disclosed elsewhere in the Notes to the
financial statements, during March 2004: (1) the Company completed the sale of
certain land that was adjacent to the Mead facility. Net cash proceeds from the
sale were approximately $7.0 after closing costs and expenses of approximately
$1.0; (2) the Company settled certain alumina contract claims it had against a
customer for cash proceeds of approximately $1.6; and (3) the Company reached an
agreement in respect of which it expects to receive approximately $1.25 in
respect of outstanding obligations of a former affiliate during the second
quarter of 2004. In connection with the agreement, a $5.0 guarantee of certain
indebtedness of the former affiliate previously provided by the Company (which
had been reflected in Liabilities subject to compromise) will be extinguished.

None of the foregoing transactions have been reflected in the consolidated
balance sheet at December 31, 2003 or in the Company's consolidated results of
operations for the year ended December 31, 2003.

17.   SEGMENT AND GEOGRAPHICAL AREA INFORMATION

The Company's operations are located in many foreign countries, including
Australia, Canada, Ghana, Jamaica, and the United Kingdom. Foreign operations in
general may be more vulnerable than domestic operations due to a variety of
political and other risks. Sales and transfers among geographic areas are made
on a basis intended to reflect the market value of products.

During the second quarter of 2003, the Company elected to change its business
segment reporting. Two of the Company's previously reported operating segments,
Flat-rolled products and Engineered products, have been designated as one
business segment, Fabricated products. The previously reported segments were
combined primarily due to a significant integration in the organization and
management of the two segments, as well as the similarity of their economic
characteristics, products, customers and production and distribution processes.
The change in segment reporting is also an outgrowth of the Company's strategic
vision as part of its planning for its ultimate emergence from Chapter 11.
Financial data for prior periods has been conformed to the revised segment
reporting.

The Company's operations are organized and managed by product type. The Company
operations include three operating segments of the aluminum industry and its
commodities marketing and corporate segments. The aluminum industry segments
include: Alumina and bauxite, Primary aluminum and Fabricated products. The
Alumina and bauxite business unit's principal products are smelter grade alumina
and chemical grade alumina hydrate, a value-added product, for which the Company
receives a premium over smelter grade market prices. The Primary aluminum
business unit produces commodity grade products as well as value-added products
such as rod and billet, for which the Company receives a premium over normal
commodity market prices. The Fabricated products group sells value-added
products such as heat treat aluminum sheet and plate which are used in the
aerospace and general engineering markets and serves a wide range of industrial
segments including the automotive, distribution, aerospace and general
engineering markets. The Company uses a portion of its bauxite, alumina and
primary aluminum production for additional processing at its downstream
facilities. Transfers between business units are made at estimated market
prices. The Commodities marketing segment includes the results of the Company's
alumina and aluminum hedging activities (see Note 13). The accounting policies
of the segments are the same as those described in Note 2. Business unit results
are evaluated internally by management before any allocation of corporate
overhead and without any charge for income taxes, interest expense or Other
operating charges (benefits), net.

Financial information by operating segment at December 31, 2003, 2002 and 2001
is as follows:

                                                                                           Year Ended December 31,
                                                                                  -----------------------------------------
                                                                                         2003           2002           2001
---------------------------------------------------------------------------       -----------    -----------    -----------
Net Sales:
   Fabricated Products                                                            $    597.8     $    608.6     $    737.5
                                                                                  -----------    -----------    -----------
   Bauxite and Alumina:
     Net sales to unaffiliated customers                                               539.5          458.1          508.3
     Intersegment sales                                                                 30.2           58.6           77.9
                                                                                  -----------    -----------    -----------
                                                                                       569.7          516.7          586.2
                                                                                  -----------    -----------    -----------
   Primary Aluminum:
     Net sales to unaffiliated customers                                               128.1          265.3          358.9
     Intersegment sales                                                                   -             2.5            3.8
                                                                                  -----------    -----------    -----------
                                                                                       128.1          267.8          362.7
                                                                                  -----------    -----------    -----------
   Commodities Marketing                                                                 7.1           39.1           22.9
   Minority Interests                                                                   92.8           98.5          105.1
   Eliminations                                                                        (30.2)         (61.1)         (81.7)
                                                                                  -----------    -----------    -----------
                                                                                  $  1,365.3     $  1,469.6     $  1,732.7
                                                                                  ===========    ===========    ===========
Equity in income (loss) of unconsolidated affiliates:
   Bauxite and Alumina                                                            $      7.4     $     10.4     $     (2.3)
   Primary Aluminum                                                                      3.3            3.6            4.0
                                                                                  -----------    -----------    -----------
                                                                                  $     10.7     $     14.0     $      1.7
                                                                                  ===========    ===========    ===========
Operating income (loss):
   Fabricated Products(1)                                                         $    (25.7)    $    (22.2)    $      5.0
   Bauxite and Alumina                                                                 (80.1)         (48.5)         (46.9)
   Primary Aluminum                                                                    (51.9)         (23.1)           5.1
   Commodities Marketing                                                                  .2           36.2            5.6
   Eliminations                                                                          4.1            1.7            1.0
   Corporate and Other(2)                                                              (74.5)         (98.8)         (68.2)
   Other Operating (Charges) Benefits, Net - Note 6                                   (511.0)        (251.2)         163.6
                                                                                  -----------    -----------    -----------
                                                                                  $   (738.9)    $   (405.9)    $     65.2
                                                                                  ===========    ===========    ===========

(1) Operating results for 2003, 2002 and 2001 include LIFO inventory charges of
    $3.2, $3.5 and $4.5, respectively. (2) Operating results for 2002 include
    special pension charges of $24.1.


                                                                                           Year Ended December 31,
                                                                                  -----------------------------------------
                                                                                         2003           2002           2001
---------------------------------------------------------------------------       -----------    -----------    -----------
Depreciation and amortization:
   Fabricated Products                                                            $     22.8     $     27.0     $     29.7
   Bauxite and Alumina                                                                  40.1           39.2           37.8
   Primary Aluminum                                                                      8.5           21.6           21.6
   Corporate and Other                                                                   1.8            3.7            1.1
                                                                                  -----------    -----------    -----------
                                                                                  $     73.2     $     91.5     $     90.2
                                                                                  ===========    ===========    ===========
Capital expenditures:
   Fabricated Products                                                            $      8.9     $     10.2     $     21.4
   Bauxite and Alumina                                                                  27.7           28.3          117.8
   Primary Aluminum                                                                       .6            8.4            8.7
   Corporate and Other                                                                    -              .7             .8
                                                                                  -----------    -----------    -----------
                                                                                  $     37.2     $     47.6     $    148.7
                                                                                  ===========    ===========    ===========


                                                                                     December 31,
                                                                           --------------------------------
                                                                                     2003              2002
------------------------------------------------------------------------   --------------    --------------
Investments in and advances to unconsolidated affiliates:
   Bauxite and Alumina                                                     $        43.7     $        54.3
   Primary Aluminum                                                                 13.0              15.1
   Corporate and Other                                                                .3                .3
                                                                           --------------    --------------

                                                                           $        57.0     $        69.7
                                                                           ==============    ==============
Segment assets:
   Fabricated Products                                                     $       413.5     $       424.9
   Bauxite and Alumina - Note 5                                                    517.2             887.1
   Primary Aluminum - Note 5                                                       218.4             271.0
   Commodities Marketing                                                            (3.5)             (3.3)
   Corporate and Other                                                             483.1             650.7
                                                                           --------------    --------------

                                                                           $     1,628.7     $     2,230.4
                                                                           ==============    ==============


                                                                                               Year Ended December 31,
                                                                                           --------------------------------
                                                                                                     2003              2002
---------------------------------------------------------------------------------------    --------------    --------------
Income taxes paid:
   Fabricated Products -
     United States                                                                         $          .1     $          .1
     Canada                                                                                          4.7               3.0
                                                                                           --------------    --------------

                                                                                                     4.8               3.1
                                                                                           --------------    --------------
   Commodities, Corporate and Other -
     United States                                                                                  -                  -
     Foreign                                                                                        41.3              34.4
                                                                                           --------------    --------------
                                                                                                    41.3              34.4
                                                                                           --------------    --------------

                                                                                           $        46.1     $        37.5
                                                                                           ==============    ==============

Geographical information for net sales, based on country of origin, and
long-lived assets follows:


                                                                                         Year Ended December 31,
                                                                              ---------------------------------------------
                                                                                      2003             2002            2001
-------------------------------------------------------------------------     ------------    -------------    ------------
Net sales to unaffiliated customers:
   Fabricated Products -
     United States                                                            $     525.6     $      534.2     $     654.6
     Canada                                                                          72.2             74.4            82.9
                                                                              ------------    -------------    ------------
                                                                                    597.8            608.6           737.5
                                                                              ------------    -------------    ------------
   Commodities -
     United States                                                                  254.7            293.9           362.7
     Jamaica                                                                        263.1            189.7           219.4
     Ghana                                                                           26.8            171.7           221.3
     United Kingdom                                                                  98.9             93.2            92.8
     Australia                                                                      124.0            112.5            99.0
                                                                              ------------    -------------    ------------
                                                                                    767.5            861.0           995.2
                                                                              ------------    -------------    ------------
                                                                              $   1,365.3     $    1,469.6     $   1,732.7
                                                                              ============    =============    ============


                                                                                    December 31,
                                                                            -----------------------------
                                                                                    2003             2002
------------------------------------------------------------------------    ------------    -------------
Long-lived assets: (1)
   Fabricated Products -
     United States                                                          $     207.3     $      221.9
     Canada                                                                        17.9             18.8
                                                                            ------------    -------------
                                                                                  225.2            240.7
                                                                            ------------    -------------
   Commodities, Corporate and Other -
     United States - Note 5                                                        11.2            395.0
     Jamaica                                                                      305.1            313.4
     Ghana                                                                         77.3             85.0
     United Kingdom                                                                13.0             15.1
     Australia                                                                     37.8             30.4
                                                                            ------------    -------------
                                                                                  444.4            838.9
                                                                            ------------    -------------
                                                                            $     669.6     $    1,079.6
                                                                            ============    =============

(1)  Long-lived assets include Property, plant, and equipment, net and
     Investments in and advances to unconsolidated affiliates. Prepared on a
     going-concern basis - see Note 2.

The aggregate foreign currency gain included in determining net income was
immaterial for the years ended December 31, 2003, 2002 and 2001. No single
customer accounted for sales in excess of 10% of total revenue in 2003, 2002 and
2001. Export sales were less than 10% of total revenue during the years ended
December 31, 2003, 2002 and 2001.

18.  SUPPLEMENTAL GUARANTOR INFORMATION

KAAC, KFC, KJC, AJI, Bellwood and Kaiser Micromill Holding, LLC, Kaiser Sierra
Micromills, LLC, Kaiser Texas Micromill Holdings, LLC, and Kaiser Texas Sierra
Micromills, LLC (collectively referred to as the "Micromill Subsidiaries") are
domestic wholly-owned (direct or indirect) subsidiaries of the Company that have
provided, joint and several, guarantees of the 9 7/8% Notes, the 10 7/8% Notes
and the 1 2 3/4% Notes (the "Notes") (see Note 7). Such guarantees are full and
unconditional. KAAC and KJC and AJI are direct subsidiaries, which serve as
holding companies for the Company's investments in QAL and Alpart, respectively.
KFC is a wholly-owned subsidiary of KAAC, whose principal business is making
loans to the Company and its subsidiaries. Bellwood is a wholly-owned subsidiary
that holds the Company's interests in an extrusion plant located in Richmond,
Virginia. The Micromill Subsidiaries are domestic wholly-owned (direct or
indirect) subsidiaries of the Company which were formed to hold (directly or
indirectly) certain of the Company's interests in the Micromill facilities and
related projects, if any. Since the Company sold the Micromill assets in early
2000, the Micromill Subsidiaries' only asset is an interest in future payments
based on subsequent performance and profitability of the Micromill technology.
KAAC, KFC, KJC, AJI, Bellwood, KTC and the Micromill Subsidiaries are
hereinafter collectively referred to as the Subsidiary Guarantors. All of the
Subsidiary Guarantors have filed voluntary petitions for reorganization (see
Note 1).

The accompanying financial information presents consolidating balance sheets,
statements of income (loss) and statements of cash flows showing separately the
Company, Subsidiary Guarantors, other subsidiaries and eliminating entries.


                                          CONDENSED CONSOLIDATING BALANCE SHEETS
                                                     DECEMBER 31, 2003


                                                             SUBSIDIARY         OTHER         ELIMINATING
                                               COMPANY       GUARANTORS     SUBSIDIARIES        ENTRIES     CONSOLIDATED
                                          ---------------- --------------- ---------------  -------------- --------------
ASSETS
Current assets                            $         231.6  $         58.0  $        141.6   $         -    $       431.2
Investments in subsidiaries                       2,617.2           174.0         -              (2,791.2)           -
Intercompany advances receivable (payable)       (2,203.0)          511.9         1,691.1             -              -
Investments in and advances to
   unconsolidated affiliates                         13.3            37.7             6.0             -             57.0
Property and equipment, net                         191.5            21.4           399.7             -            612.6
Deferred income taxes                               (88.5)           41.6            46.9             -              -
Other assets                                        519.8              .2             7.9             -            527.9
                                          ---------------- --------------- ---------------  -------------- --------------
                                          $       1,281.9  $        844.8  $      2,293.2   $    (2,791.2) $     1,628.7
                                          ================ =============== ===============  ============== ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities                       $         161.2  $         44.1  $        114.2   $         -    $       319.5
Other long-term liabilities                          60.0            12.4             2.7             -             75.1
Long-term debt                                        2.2            -               22.0             -             24.2
Liabilities subject to compromise                 2,789.7            16.5            13.8             -          2,820.0
Minority interests                                   -               -               15.6           105.5          121.1
Stockholders' equity                             (1,731.2)          771.8         2,124.9        (2,896.7)      (1,731.2)
                                          ---------------- --------------- ---------------  -------------- --------------
                                          $       1,281.9  $        844.8  $      2,293.2   $    (2,791.2) $     1,628.7
                                          ================ =============== ===============  ============== ==============


                                          CONDENSED CONSOLIDATING BALANCE SHEETS
                                                     DECEMBER 31, 2002


                                                             SUBSIDIARY         OTHER         ELIMINATING
                                               COMPANY       GUARANTORS     SUBSIDIARIES        ENTRIES     CONSOLIDATED
                                          ---------------- --------------- ---------------  -------------- --------------
ASSETS
Current assets                            $         284.1  $         82.1  $        155.4   $         -    $       521.6
Investments in subsidiaries                       2,707.5           167.9            -           (2,875.4)           -
Intercompany advances receivable (payable)       (2,267.9)          588.0         1,679.9             -              -
Investments in and advances to
   unconsolidated affiliates                         15.3            30.4            24.0             -             69.7
Property and equipment, net                         578.6            23.2           408.1             -          1,009.9
Deferred income taxes                               (54.9)           16.7            38.2             -              -
Other assets                                        610.4              .2            18.6             -            629.2
                                          ---------------- --------------- ---------------  -------------- --------------
                                          $       1,873.1  $        908.5  $      2,324.2   $    (2,875.4) $     2,230.4
                                          ================ =============== ===============  ============== ==============

LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities                       $         171.7  $         45.8  $        114.5   $         -    $       332.0
Other long-term liabilities                          56.8            12.1            18.0             -             86.9
Long-term debt                                       20.7            -               22.0             -             42.7
Liabilities subject to compromise                 2,702.2            13.6            10.2             -          2,726.0
Minority interests                                   -               -               18.8           102.3          121.1
Stockholders' equity                             (1,078.3)          837.0         2,140.7        (2,977.7)      (1,078.3)
                                          ---------------- --------------- ---------------  -------------- --------------
                                          $       1,873.1  $        908.5  $      2,324.2   $    (2,875.4) $     2,230.4
                                          ================ =============== ===============  ============== ==============


                                    CONDENSED CONSOLIDATING STATEMENTS OF INCOME (LOSS)
                                           FOR THE YEAR ENDED DECEMBER 31, 2003


                                                             SUBSIDIARY         OTHER         ELIMINATING
                                               COMPANY       GUARANTORS     SUBSIDIARIES        ENTRIES     CONSOLIDATED
                                          ---------------- --------------- ---------------  -------------- --------------
Net sales                                 $         933.9  $        441.4  $        669.3   $      (679.3) $     1,365.3
Costs and expenses:
   Operating costs and expenses                   1,130.9           459.9           681.7          (679.3)       1,593.2
   Other operating charges, net                     492.8              .2            18.0             -            511.0
                                          ---------------- --------------- ---------------  -------------- --------------
Operating income (loss)                            (689.8)          (18.7)          (30.4)            -           (738.9)
Interest expense                                     (9.7)           -               (1.0)            -            (10.7)
Reorganization items                                (27.0)           -               -                             (27.0)
Other income (expense), net                          78.4           (74.7)          (10.2)            -             (6.5)
Provision for income taxes                          (13.1)           (4.5)            3.4             -            (14.2)
Minority interests                                   -                6.0             3.2             -              9.2
Equity in loss of subsidiaries                     (126.9)           -               -              126.9            -
                                          ---------------- --------------- ---------------  -------------- --------------
Net income (loss)                         $        (788.1) $        (91.9) $        (35.0)  $       126.9  $      (788.1)
                                          ================ =============== ===============  ============== ==============

                                    CONDENSED CONSOLIDATING STATEMENTS OF INCOME (LOSS)
                                           FOR THE YEAR ENDED DECEMBER 31, 2002


                                                             SUBSIDIARY         OTHER         ELIMINATING
                                               COMPANY       GUARANTORS     SUBSIDIARIES        ENTRIES     CONSOLIDATED
                                          ---------------- --------------- ---------------  -------------- --------------
Net sales                                 $       1,078.6  $        428.7  $        905.7   $      (943.4) $     1,469.6
Costs and expenses:
   Operating costs and expenses                   1,266.9           442.3           858.5          (943.4)       1,624.3
   Other operating charges, net                     250.2            -                1.0             -            251.2
                                          ---------------- --------------- ---------------  -------------- --------------
Operating income (loss)                            (438.5)          (13.6)           46.2             -           (405.9)
Interest expense                                    (17.0)           -               (3.7)            -            (20.7)
Reorganization items                                (33.3)           -               -                             (33.3)
Other income (expense), net                           9.6           (14.2)            5.0             -               .4
Provision for income taxes                           (1.3)           (1.9)          (11.5)            -            (14.7)
Minority interests                                   -                5.6              .2             -              5.8
Equity in income (loss) of subsidiaries              12.1            -               -              (12.1)           -
                                          ---------------- --------------- ---------------  -------------- --------------
Net income (loss)                         $        (468.4) $        (24.1) $         36.2   $       (12.1) $      (468.4)
                                          ================ =============== ===============  ============== ==============

                                    CONDENSED CONSOLIDATING STATEMENTS OF INCOME (LOSS)
                                           FOR THE YEAR ENDED DECEMBER 31, 2001


                                                             SUBSIDIARY         OTHER         ELIMINATING
                                               COMPANY       GUARANTORS     SUBSIDIARIES        ENTRIES     CONSOLIDATED
                                          ---------------- --------------- ---------------  -------------- --------------
Net sales                                 $       1,342.4  $        530.6  $      1,063.1   $   (1,203.4)  $     1,732.7
Costs and expenses:
   Operating costs and expenses                   1,500.2           505.5         1,028.8        (1,203.4)       1,831.1
   Other operating charges, net                    (167.3)           -                3.7             -           (163.6)
                                          ---------------- --------------- ---------------  -------------- --------------
Operating income (loss)                               9.5            25.1            30.6             -             65.2
Interest expense                                   (106.7)           -               (2.3)            -           (109.0)
Other income (expense), net                         (70.5)          181.8            19.5             -            130.8
Provision for income taxes                         (420.8)         (103.5)          (24.0)            -           (548.3)
Minority interests                                   -                5.2             (.9)            -              4.3
Equity in income of subsidiaries                    131.5            -               -             (131.5)           -
                                          ---------------- --------------- ---------------  -------------- --------------
Net income (loss)                         $        (457.0) $        108.6  $         22.9   $      (131.5) $      (457.0)
                                          ================ =============== ===============  ============== ==============


                                     CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                                           FOR THE YEAR ENDED DECEMBER 31, 2003


                                                             SUBSIDIARY         OTHER         ELIMINATING
                                               COMPANY       GUARANTORS     SUBSIDIARIES        ENTRIES     CONSOLIDATED
                                          ---------------- --------------- ---------------  -------------- --------------
Net cash provided (used) by:
   Operating activities                   $        (112.4) $         33.8  $         (9.2)  $         -    $       (87.8)
   Investing activities                              70.6             (.1)          (21.4)            -             49.1
   Financing activities                              (4.1)           -               -                -             (4.1)
Intercompany activity                                 7.4           (33.8)           26.4             -              -
                                          ---------------- --------------- ---------------  -------------- --------------
Net decrease in cash and cash
   equivalents during the year                      (38.5)            (.1)           (4.2)            -            (42.8)
Cash and cash equivalents at
   beginning of year                                 72.8              .5             5.4             -             78.7
                                          ---------------- --------------- ---------------  -------------- --------------
Cash and cash equivalents at
   end of year                            $          34.3  $           .4  $          1.2   $         -    $        35.9
                                          ================ =============== ===============  ============== ==============

                                     CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                                           FOR THE YEAR ENDED DECEMBER 31, 2002


                                                             SUBSIDIARY         OTHER         ELIMINATING
                                               COMPANY       GUARANTORS     SUBSIDIARIES        ENTRIES     CONSOLIDATED
                                          ---------------- --------------- ---------------  -------------- --------------
Net cash provided (used) by:
   Operating activities                   $        (100.9) $         38.3  $         13.0   $         -    $       (49.6)
   Investing activities                              20.6            (2.0)          (34.8)            -            (16.2)
   Financing activities                              (8.8)           -               -                -             (8.8)
Intercompany activity                                10.4           (35.8)           25.4             -              -
                                          ---------------- --------------- ---------------  -------------- --------------
Net decrease in cash and
   cash equivalents during the year                 (78.7)             .5             3.6             -            (74.6)
Cash and cash equivalents at
   beginning of year                                151.5            -                1.8             -            153.3
                                          ---------------- --------------- ---------------  -------------- --------------
Cash and cash equivalents at
   end of year                            $          72.8  $           .5  $          5.4   $         -    $        78.7
                                          ================ =============== ===============  ============== ==============

                                     CONDENSED CONSOLIDATING STATEMENTS OF CASH FLOWS
                                           FOR THE YEAR ENDED DECEMBER 31, 2001


                                                             SUBSIDIARY         OTHER         ELIMINATING
                                               COMPANY       GUARANTORS     SUBSIDIARIES        ENTRIES     CONSOLIDATED
                                          ---------------- --------------- ---------------  -------------- --------------
Net cash provided (used) by:
   Operating activities                   $         366.4  $       (108.8) $         (7.7)  $         -    $       249.9
   Investing activities                            (136.7)          146.7           (19.3)            -             (9.3)
   Financing activities                             (88.5)           -              (22.2)            -           (110.7)
Intercompany activity                               (12.1)          (37.9)           50.0             -              -
                                          ---------------- --------------- ---------------  -------------- --------------
Net increase in cash and cash
   equivalents during the year                      129.1            -                 .8             -            129.9
Cash and cash equivalents at
   beginning of year                                 22.4            -                1.0             -             23.4
                                          ---------------- --------------- ---------------  -------------- --------------
Cash and cash equivalents at
   end of year                            $         151.5  $         -     $          1.8   $         -    $       153.3
                                          ================ =============== ===============  ============== ==============

Notes to Condensed Consolidating Financial Information

Income Taxes - The income tax provisions for the years ended December 31, 2003
and 2002 relate primarily to foreign income taxes. As a result of the Cases, the
Company did not recognize U.S. income tax benefits for the losses incurred from
domestic operations (including temporary differences) or any U.S. tax benefit
for foreign income taxes. Instead, the increases in federal and state deferred
tax assets as a result of additional net operating losses and foreign tax
credits generated in 2003 and 2002 were offset by equal increases in valuation
allowances. Consolidated income tax provision for 2001 has been allocated based
on the income (loss) before income taxes of the Company, Subsidiary Guarantors
and other subsidiaries.

Foreign Currency - The functional currency of the Company and its subsidiaries
is the United States Dollar, and accordingly, pre-tax translation gains (losses)
are included in the Company's and Subsidiary Guarantors' operating income (loss)
and other income (expense), net balances. Such amounts for the Company totaled
$66.8, $15.8 and $(9.8) for the years ended December 31, 2003, 2002 and 2001,
respectively. Such amounts for the Subsidiary Guarantors totaled $(68.7),
$(16.2) and $11.2 for the years ended December 31, 2003, 2002 and 2001,
respectively.

Debt Covenants and Restrictions - The Indentures contain restrictions on the
ability of the Company's subsidiaries to transfer funds to the Company in the
form of dividends, loans or advances.

Impact of Cases - For a discussion of the impact of the Cases on the Company and
Subsidiary Guarantors, see Note 1 and other Notes herein.


QUARTERLY FINANCIAL DATA (UNAUDITED)
--------------------------------------------------------------------------------

                                                                                     Quarter Ended
                                                             ------------------------------------------------------------
(In millions of dollars, except share amounts)                    March 31,     June 30,    September 30,    December 31,
----------------------------------------------------------   --------------  -----------  ---------------   -------------
                                                                   (1)           (1)            (1)
2003
   Net sales                                                 $       339.4   $    358.4          $ 327.1         $ 340.4
   Operating loss                                                    (51.0)       (53.1)           (75.0)         (559.8)
   Net loss                                                          (65.1)       (61.3)           (88.6)         (573.1)(2)

2002
   Net sales                                                 $       370.6   $    386.3   $        348.0    $      364.7
   Operating loss                                                    (36.7)       (36.7)           (65.6)         (266.9)
   Net loss                                                          (64.1)       (50.4)           (83.3)         (270.6)(3)

2001
   Net sales                                                 $       480.3   $    446.8          $  430.3        $ 375.3
   Operating income (loss)                                           215.5        (27.6)           (35.9)          (86.8)
   Net income (loss)                                                 119.9        (64.1)           (68.6)         (581.4)(4)

(1)   Quarterly results include a number of items that are significant and/or
      may not be typical that may cause an individual quarter's results not to
      be indicative of the underlying operating performance. See the applicable
      quarterly report on Form 10-Q for a recap of such items.
(2)   Includes the following pre-tax items: impairment charges related to the
      Company's interest in Gramercy/KJBC of $368.0, pension charge of $121.2,
      hearing loss claims charge of $15.8 and certain other operating charges,
      net totaling $6.0 (see Note 6 of Notes to Consolidated Financial
      Statements).
(3)   Includes the following pre-tax items: impairment charges of $215.4,
      restructuring charges of $2.6 and LIFO inventory charges of $3.1 (see
      Notes 2 and 6 of Notes to Consolidated Financial Statements).
(4)   Includes increase in valuation allowances for net deferred income tax
      assets of $505.4 and the following pre-tax items: restructuring charges of
      $8.2, abnormal Gramercy start-up and other costs of $16.5, contract labor
      costs related to smelter curtailment of $9.4, impairment charges related
      to Trentwood equipment of $17.7 and certain other operating charges
      totaling $9.6 (see Notes 2 and 6 of Notes to Consolidated Financial
      Statements).


FIVE-YEAR FINANCIAL DATA
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------

                                                                                           December 31,
                                                                  --------------------------------------------------------------
(In millions of dollars)                                                  2003        2002         2001        2000         1999
----------------------------------------------------------------  ------------  ----------  -----------  ----------  -----------
ASSETS                                                                    (1)
Current assets:
   Cash and cash equivalents                                      $      35.9   $    78.7   $    153.3   $    23.4   $     21.2
   Receivables                                                          156.6       154.5        212.9       436.0        266.9
   Inventories                                                          206.2       254.9        313.3       396.2        546.1
   Prepaid expenses and other current assets                             32.5        33.5         86.2       162.7        145.6
                                                                  ------------  ----------  -----------  ----------  -----------
     Total current assets                                               431.2       521.6        765.7     1,018.3        979.8

Investments in and advances to unconsolidated affiliates                 57.0        69.7         63.0        77.8         96.9
Property, plant, and equipment - net                                    612.6     1,009.9      1,215.4     1,176.1      1,053.7
Deferred income taxes                                                      -            -           -        452.3        438.2
Other assets                                                            527.9       629.2        706.1       622.9        634.3
                                                                  ------------  ----------  -----------  ----------  -----------
     Total                                                        $   1,628.7   $ 2,230.4   $  2,750.2   $ 3,347.4   $  3,202.9
                                                                  ============  ==========  ===========  ==========  ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities not subject to compromise -
   Current liabilities:
     Accounts payable and accruals                                $     233.3   $   242.9   $    513.7   $   671.8   $    501.5
     Accrued postretirement medical benefit obligation -
       current portion                                                   32.5        60.2         62.0        58.0         51.5
     Payable to affiliates                                               52.4        28.0         54.2        80.0         84.6
     Long-term debt - current portion                                     1.3          .9        173.5        31.6           .3
                                                                  ------------  ----------  -----------  ----------  -----------
       Total current liabilities                                        319.5       332.0        803.4       841.4        637.9

   Long-term liabilities                                                 75.1        86.9        920.0       703.9        727.3
   Accrued postretirement medical benefit obligation                       -            -        642.2       656.9        678.3
   Long-term debt                                                        24.2        42.7        700.8       957.8        972.5
                                                                  ------------  ----------  -----------  ----------  -----------
                                                                        418.8       461.6      3,066.4     3,160.0      3,016.0
Liabilities subject to compromise                                     2,820.0     2,726.0           -            -           -
Minority interests                                                      121.1       121.1        117.8       100.4         96.7
Redeemable preference stock                                                -            -           -            -         19.5

Stockholders' equity:
   Preference stock                                                        .7          .7           .7          .7          1.5
   Common stock                                                          15.4        15.4         15.4        15.4         15.4
   Additional capital                                                 2,454.0     2,454.8      2,437.6     2,300.8      2,173.0
   Accumulated deficit                                               (1,901.7)   (1,113.6)      (645.2)     (188.1)      (205.1)
   Accumulated other comprehensive income (loss)                       (107.9)     (243.9)       (67.3)       (1.8)        (1.2)
     Less: Note receivable from parent                               (2,191.7)   (2,191.7)    (2,175.2)   (2,040.0)    (1,912.9)
                                                                  ------------  ----------  -----------  ----------  -----------
       Total stockholders' equity                                    (1,731.2)   (1,078.3)      (434.0)       87.0         70.7
                                                                  ------------  ----------  -----------  ----------  -----------
       Total                                                      $   1,628.7   $ 2,230.4   $  2,750.2   $ 3,347.4   $  3,202.9
                                                                  ============  ==========  ===========  ==========  ===========

(1)  Prepared on a "going concern" basis. See Notes 1 and 2 of Notes to
     Consolidated Financial Statements for a discussion of the possible impact
     of the Cases. Also, as more fully discussed in Note 1 of Notes to
     Consolidated Financial Statements, the Company expects that, upon emergence
     from the Cases, fresh start accounting would be applied which would
     adversely affect comparability of the December 31, 2003 balance sheet to
     the balance sheet of the entity upon emergence.

FIVE-YEAR FINANCIAL DATA
STATEMENTS OF CONSOLIDATED INCOME (LOSS)
--------------------------------------------------------------------------------


                                                                                     Year Ended December 31,
                                                              --------------------------------------------------------------------
(In millions of dollars)                                                2003          2002           2001         2000        1999
----------------------------------------------------------    --------------  ------------   ------------  -----------  ----------
                                                                       (1)
Net sales                                                     $     1,365.3   $   1,469.6    $   1,732.7   $  2,169.8   $ 2,083.6
                                                              --------------  ------------   ------------  -----------  ----------

Costs and expenses:
   Cost of products sold                                            1,423.4       1,408.2        1,638.4      1,891.4     1,893.5
   Depreciation and amortization                                       73.2          91.5           90.2         76.9        89.5
   Selling, administrative, research and development, and
     general                                                           96.6         124.6          102.5        103.8       105.1
   Other operating charges (benefits), net                            511.0         251.2         (163.6)       (41.9)       24.1
                                                              --------------  ------------   ------------  -----------  ----------
     Total costs and expenses                                       2,104.2       1,875.5        1,667.5      2,030.2     2,112.2
                                                              --------------  ------------   ------------  -----------  ----------

Operating income (loss)                                              (738.9)       (405.9)          65.2        139.6       (28.6)

Other income (expense):
   Interest expense (excluding unrecorded contractual
     interest expense of $95.0 and $84.0 in 2003 and
     2002, respectively)                                              (10.7)        (20.7)        (109.0)      (109.6)     (110.1)
   Reorganization items                                               (27.0)        (33.3)            -            -            -
   Gain on sale of interest in QAL                                      -              -           163.6           -            -
   Gain on involuntary conversion at Gramercy facility                  -              -              -            -         85.0
   Other - net                                                         (6.5)           .4          (32.8)        (4.3)      (35.8)
                                                              --------------  ------------   ------------  -----------  ----------

Income (loss) before income taxes and minority interests             (783.1)       (459.5)          87.0         25.7       (89.5)

(Provision) benefit for income taxes                                  (14.2)        (14.7)        (548.3)       (11.7)       32.6

Minority interests                                                      9.2           5.8            4.3          3.5         4.5
                                                              --------------  ------------   ------------  -----------  ----------

Net income (loss)                                             $      (788.1)  $    (468.4)   $    (457.0)  $     17.5   $   (52.4)
                                                              ==============  ============   ============  ===========  ==========

Dividends per common share                                    $         -     $        -     $        -    $       -    $       -
                                                              ==============  ============   ============  ===========  ==========


(1)  Prepared on a "going concern" basis. See Notes 1 and 2 of Notes to
     Consolidated Financial Statements for a discussion of the possible impact
     of the Cases.

ITEM 9.       CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
              FINANCIAL DISCLOSURE

None.

ITEM 9A.      CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures. An evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures was performed as of the end of the period covered by this Report
under the supervision and with the participation of the Company's management,
including the Chief Executive Officer and Chief Financial Officer. Based on that
evaluation, the Company's management, including the Chief Executive Officer and
Chief Financial Officer, concluded that the Company's disclosure controls and
procedures were effective.

Changes in Internal Control. There have been no significant changes in the
Company's internal controls or in other factors that could significantly affect
internal controls subsequent to the date of their evaluation. Additionally, no
changes in the Company's internal controls over financial reporting have
occurred during the Company's most recently completed quarter that have
materially affected, or are reasonably likely to materially affect, the
Company's internal controls over internal reporting.

PART III

ITEM 10.      DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information, as of March 28, 2004, with
respect to the executive officers and directors of the Company and Kaiser. All
officers and directors hold office until their respective successors are elected
and qualified or until their earlier death, resignation or removal.


               NAME                                   POSITIONS AND OFFICES WITH THE COMPANY AND KAISER*
-----------------------------------        ------------------------------------------------------------------------
Jack A. Hockema                            President, Chief Executive Officer and Director
Joseph A. Bonn                             Executive Vice President, Corporate Development
John T. La Duc                             Executive Vice President and Chief Financial Officer
John Barneson                              Senior Vice President and Chief Administrative Officer
Kris S. Vasan                              Senior Vice President, Strategic Risk Management
Edward F. Houff                            Vice President, Secretary and General Counsel
Edward A. Kaplan                           Vice President of Taxes
W. Scott Lamb                              Vice President, Investor Relations and Corporate Communications
Daniel D. Maddox                           Vice President and Controller
Daniel J. Rinkenberger                     Vice President of Economic Analysis and Planning
Kerry A. Shiba                             Vice President and Treasurer
Robert J. Cruikshank                       Director
James T. Hackett                           Director
George T. Haymaker, Jr.                    Chairman of the Board and Director
Charles E. Hurwitz                         Director
Ezra G. Levin                              Director
John D. Roach                              Director

---------------------------
*  All named individuals hold the same positions and offices with both the
   Company and Kaiser.

Jack A. Hockema. Mr. Hockema, age 57, was elected to the position of President
and Chief Executive Officer and as a director of the Company and Kaiser in
October 2001. He previously served as Executive Vice President and President of
Kaiser Fabricated Products of the Company from January 2000 until October 2001,
and Executive Vice President of Kaiser from May 2000 until October 2001. He
served as Vice President of Kaiser from May 1997 until May 2000. Mr. Hockema was
Vice President of the Company and President of Kaiser Engineered Products from
March 1997 until January 2000. He served as President of Kaiser Extruded
Products and Engineered Components from September 1996 to March 1997. Mr.
Hockema served as a consultant to the Company and acting President of Kaiser
Engineered Components from September 1995 until September 1996. Mr. Hockema was
an employee of the Company from 1977 to 1982, working at the Company's Trentwood
facility, and serving as plant manager of its former Union City, California, can
plant and as operations manager for Kaiser Extruded Products. In 1982, Mr.
Hockema left the Comany to become Vice President and General Manager of Bohn
Extruded Products, a division of Gulf+Western, and later served as Group Vice
President of American Brass Specialty Products until June 1992. From June 1992
until September 1996, Mr. Hockema provided consulting and investment advisory
services to individuals and companies in the metals industry.

Joseph A. Bonn. Mr. Bonn, age 60, was elected to the position of Executive Vice
President, Corporate Development of the Company and Kaiser effective August
2001. He will retire from the Company and Kaiser as of March 31, 2004. Mr. Bonn
previously served as Vice President, Commodities Marketing, Corporate Planning
and Development of the Company from September 1999 through August 2001, and of
Kaiser from May 2000 through August 2001. He served as Vice President, Planning
and Development of the Company from March 1997 through September 1999, and as
Vice President of Kaiser from May 1997 through May 2000. He served as Vice
President, Planning and Administration of the Company from July 1989 through
July 1997, and of Kaiser from February 1992 through May 1997. Mr. Bonn was first
elected a Vice President of the Company in April 1987. He served as Senior Vice
President--Administration of MAXXAM from September 1991 through December 1992.
He also was the Company's Director of Strategic Planning from April 1987 until
July 1989. From September 1982 to April 1987, Mr. Bonn served as General Manager
of various aluminum fabricating divisions of the Company.

John T. La Duc. Mr. La Duc, age 61, was elected Executive Vice President and
Chief Financial Officer of the Company effective July 1998, and of Kaiser
effective September 1998. He will retire from the Company and Kaiser as of March
31, 2004. Mr. La Duc served as Vice President and Chief Financial Officer of the
Company from June 1989 and January 1990, respectively, and was Treasurer of the
Company from June 1995 until February 1996. He also was Treasurer of Kaiser from
August 1995 until February 1996 and from January 1993 until April 1993, and
served as Vice President and Chief Financial Officer of Kaiser from June 1989
and May 1990, respectively. He previously served as Senior Vice President of
MAXXAM from September 1990 through December 2001. Prior to December 2001, Mr. La
Duc also served as a Vice President and a director of MAXXAM Group Holdings
Inc., a wholly owned subsidiary of MAXXAM and parent of MAXXAM's forest products
operations ("MGHI"), as a Vice President and manager on the Board of Managers of
Scotia Pacific Company LLC ("Scopac LLC"), a wholly owned subsidiary of MAXXAM
engaged in forest product operations and successor by merger in July 1998 to
Scotia Pacific Holding Company, and as a director and Vice President of The
Pacific Lumber Company, the parent of Scopac LLC ("Pacific Lumber").

John Barneson. Mr. Barneson, age 53, was elected to the position of Senior Vice
President and Chief Administrative Officer of the Company and Kaiser effective
August 2001. He previously served as Vice President and Chief Administrative
Officer of the Company and Kaiser from December 1999 through August 2001. He
served as Engineered Products Vice President of Business Development and
Planning from September 1997 until December 1999. Mr. Barneson served as
Flat-Rolled Products Vice President of Business Development and Planning from
April 1996 until September 1997. Mr. Barneson has been an employee of the
Company since September 1975 and has held a number of staff and operation
management positions within the Flat-Rolled and Engineered Products business
units.

Kris S. Vasan. Mr. Vasan, age 54, was elected to the position of Senior Vice
President, Strategic Risk Management of the Company and Kaiser effective August
2001. In March 2002, he also was appointed Senior Vice President of Strategic
Planning, Energy and Hedging of the Company's Commodities business unit. Mr.
Vasan previously served as Vice President, Strategic Risk Management of the
Company from June 2000 through August 2001, and of Kaiser from August 2000
through August 2001. He served as Vice President, Financial Risk Management of
the Company from June 1995 through June 2000. Mr. Vasan served as Treasurer of
Kaiser from April 1993 until August 1995, and as Treasurer of the Company from
April 1993 until June 1995. Prior to that, Mr. Vasan served the Company and
Kaiser as Corporate Director of Financial Planning and Analysis from June 1990
until April 1993. From October 1987 until June 1990, he served as Associate
Director of Financial Planning and Analysis.

Edward F. Houff. Mr. Houff, age 57, was elected to the position of Vice
President and General Counsel of the Company and Kaiser effective April 2002. He
was elected Secretary of the Company and Kaiser in October 2002. He served as
Acting General Counsel of the Company and Kaiser from February 2002 until April
2002, and Deputy General Counsel for Litigation of the Company and Kaiser from
October 2001 until February 2002. Mr. Houff was President and Managing
Shareholder of the law firm Church & Houff, P.A. in Baltimore, Maryland from
April 1989 through September 2001.

Edward A. Kaplan. Mr. Kaplan, age 45, was elected to the position of Vice
President of Taxes of the Company and Kaiser effective March 2001. Mr. Kaplan
previously served as Director of Taxes of the Company and Kaiser from October
1999 through February 2001. From July 1997 to September 1999, he served as
Director of Tax Planning of the Company and Kaiser, and from January 1995
through June 1997, he served as Associate Director of Tax Planning of the
Company and Kaiser.

W. Scott Lamb. Mr. Lamb, age 49, was elected Vice President, Investor Relations
and Corporate Communications of the Company effective July 1998, and of Kaiser
effective September 1998. Mr. Lamb previously served as Director of Investor
Relations and Corporate Communications of the Company and Kaiser from June 1997
through July 1998. From July 1995 through June 1997, he served as Director of
Investor Relations of the Company and Kaiser, and from January 1995 through July
1995, he served as Director of Public Relations of the Company and Kaiser.

Daniel D. Maddox. Mr. Maddox, age 44, was elected to the position of Vice
President and Controller of the Company effective July 1998, and of Kaiser
effective September 1998. He served as Controller, Corporate Consolidation and
Reporting of the Company and Kaiser from October 1997 through July 1998 and
September 1998, respectively. Mr. Maddox previously served as Assistant
Corporate Controller of the Company from June 1997 to September 1997, and of
Kaiser from May 1997 to September 1997, and Director--External Reporting of the
Company from June 1996 to May 1997. Mr. Maddox was with Arthur Andersen LLP from
1982 until joining the Company in June 1996.

Daniel J. Rinkenberger. Mr. Rinkenberger, age 45, was elected to the position of
Vice President of Economic Analysis and Planning of the Company and Kaiser
effective February 2002. Mr. Rinkenberger previously served as Vice President,
Planning and Business Development of Kaiser Fabricated Products of the Company
from June 2000 through February 2002. Prior to that, he served as Vice
President, Finance and Business Planning of Kaiser Flat-Rolled Products of the
Company from February 1998 to February 2000, and as Assistant Treasurer of the
Company and Kaiser from January 1995 through February 1998.

Kerry A. Shiba. Mr. Shiba, age 49, was elected to the position of Vice President
and Treasurer of the Company and Kaiser effective February 2002. He will assume
the additional position of Chief Financial Officer of the Company and Kaiser as
of April 1, 2004. Mr. Shiba previously served as Vice President, Controller and
Information Technology of Kaiser Fabricated Products of the Company from January
2000 to February 2002, and as Vice President and Controller of Kaiser Engineered
Products of the Company from June 1998 through January 2000. Prior to joining
the Company, Mr. Shiba was with the BF Goodrich Company for 16 years, holding
various financial positions.

Robert J. Cruikshank. Mr. Cruikshank, age 73, has served as a director of the
Company and Kaiser since January 1994. In addition, Mr. Cruikshank has been a
director of MAXXAM since May 1993. Mr. Cruikshank was a Senior Partner in the
international public accounting firm of Deloitte & Touche from December 1989
until his retirement in March 1993. Mr. Cruikshank served on the board of
directors of Deloitte Haskins & Sells from 1981 to 1985 and as Managing Partner
of the Houston office from June 1974 until its merger with Touche Ross & Co. in
December 1989. Mr. Cruikshank also serves as a director of Encysive
Pharmaceuticals Inc. (formerly Texas Biotechnology Corp), a biopharmaceutical
company; a director of Texas Genco, Inc., owner of electric generating plants; a
trust manager of Weingarten Realty Investors; and as advisory director of
Compass Bank--Houston.

James T. Hackett. Mr. Hackett, age 50, has been a director of the Company since
June 2000, and of Kaiser since May 2000. Since December 2003, Mr. Hackett has
been President and Chief Executive Officer of Anadarko Petroleum Corporation, a
company engaged in oil and gas exploration and production. He also serves as a
director of Anadarko Petroleum Corporation. From 1990 through 1995, Mr. Hackett
worked for NGC Corporation, now known as Dynegy, Inc., serving as Senior Vice
President and President of the Trident Division in 1995. From January 1996 until
June 1997, Mr. Hackett served as Executive Vice President of PanEnergy
Corporation. PanEnergy Corporation merged with Duke Energy Corporation in June
1997. From June 1997 until September 1998, Mr. Hackett served as
President-Energy Services Group of Duke Energy Corporation. From September 1998
through December 1998, Mr. Hackett was Chief Executive Officer of Seagull Energy
Corporation. From January 1999 through March 1999, Mr. Hackett assumed the
additional title of Chairman of Seagull Energy Corporation, and when Seagull
Energy Corporation merged with Ocean Energy, Inc. in March 1999, he was
appointed President and Chief Executive Officer of Ocean Energy, Inc. He assumed
the additional title of Chairman of Ocean Energy, Inc. in January 2000. In April
2003, Ocean Energy, Inc. merged with Devon Energy Corporation. From April 2003
until December 2003, Mr. Hackett served as President and Chief Operating Officer
of Devon Energy Corporation. Mr. Hackett also serves as a director of Fluor
Corporation, a worldwide engineering services company; and Temple Inland Inc., a
holding company engaged in wood, pulp, paper and fiber products, and financial
services.

George T. Haymaker, Jr. Mr. Haymaker, age 66, has been a director of the Company
since June 1993, and of Kaiser since May 1993. He was named as non-executive
Chairman of the Board of the Company and Kaiser effective October 2001. Mr.
Haymaker served as Chairman of the Board and Chief Executive Officer of the
Company and Kaiser from January 1994 until January 2000, and as non-executive
Chairman of the Board of the Company and Kaiser from January 2000 through May
2001. He served as President of the Company from June 1996 through July 1997,
and of Kaiser from May 1996 through July 1997. From May 1993 to December 1993,
Mr. Haymaker served as President and Chief Operating Officer of the Company and
Kaiser. Mr. Haymaker also is a director of 360networks Corporation, a provider
of broadband network services; Flowserve Corporation, a provider of valves,
pumps and seals; a director of CII Carbon, LLC., a producer of calcined coke; a
director of Hayes Lemmerz International, Inc., a provider of automotive and
commercial vehicle components; and non-executive Chairman of the Board of
Directors of Safelite Glass Corp., a provider of automotive replacement glass.
Since July 1987, Mr. Haymaker has been a director, and from February 1992
through March 1993 was President, of Mid-America Holdings, Ltd. (formerly
Metalmark Corporation), which is in the business of semi-fabrication of aluminum
extrusions.

Charles E. Hurwitz. Mr. Hurwitz, age 63, has served as a director of the Company
since November 1988, and of Kaiser since October 1988. From December 1994 until
April 2002, he served as Vice Chairman of the Company. Mr. Hurwitz also has
served as a member of the Board of Directors and the Executive Committee of
MAXXAM since August 1978 and was elected Chairman of the Board and Chief
Executive Officer of MAXXAM in March 1980. From January 1993 to January 1998, he
also served MAXXAM as President. Mr. Hurwitz was Chairman of the Board and Chief
Executive Officer of Federated Development Company, a Texas corporation, from
January 1974 until its merger in February 2002 into Federated Development, LLC
("FDLLC"), a wholly owned subsidiary of Giddeon Holdings, Inc. ("Giddeon
Holdings"). Mr. Hurwitz is the President and Director of Giddeon Holdings, a
principal stockholder of MAXXAM, which is primarily engaged in the management of
investments. Mr. Hurwitz also has been, since its formation in November 1996,
Chairman of the Board, President and Chief Executive Officer of MGHI.

Ezra G. Levin. Mr. Levin, age 70, has been a director of the Company since
November 1988. He has been a director of Kaiser since July 1991, and a director
of MAXXAM since May 1978. Mr. Levin also served as a director of Kaiser from
April 1988 to May 1990. Mr. Levin has served as a director of Pacific Lumber
since February 1993, and as a manager on the Board of Managers of Scopac LLC
since June 1998. Mr. Levin is a member and co-chair of the law firm of Kramer
Levin Naftalis & Frankel LLP. He has held leadership roles in various legal
and philanthropic capacities and also has served as visiting professor at the
University of Wisconsin Law School and Columbia College.

John D. Roach. Mr. Roach, age 60, has been a director of the Company and Kaiser
since April 2002. Since August 2001, Mr. Roach has been the Chairman and Chief
Executive Officer of Stonegate International, Inc., a private investment and
advisory services firm. From March 1998 to September 2001, Mr. Roach was the
Chairman, President and Chief Executive Officer of Builders FirstSource, Inc., a
distributor of building products to production homebuilders. From July 1991 to
July 1997, Mr. Roach served as Chairman, President and Chief Executive Officer
of Fibreboard Corporation. From 1988 to July 1991, he was Executive Vice
President of Manville Corporation. Mr. Roach also serves as a director of
Material Sciences Corp., a provider of materials-based solutions; PMI Group,
Inc., a provider of credit enhancement products and lender services; and URS
Corporation, an engineering firm. He is also Executive Chairman of the board of
directors of Unidare US Inc., a wholesale supplier of industrial, welding and
safety products.

AUDIT COMMITTEE FINANCIAL EXPERT

The Board of Directors of the Company has determined that each of Messrs.
Cruikshank and Roach, members of the Audit Committee of the Company's Board of
Directors, satisfies the Securities and Exchange Commission's criteria to serve
as an "audit committee financial expert." The Company's securities currently are
not listed on any exchange. However, the Board of Directors has determined that
each of Messrs. Cruikshank and Roach meet the independence standards set forth
in the new listing requirements of either of the New York Stock Exchange and the
Nasdaq Stock Market, Inc.

CODE OF ETHICS

The Company has a Code of Ethics that applies to all of its officers and other
employees, including the Company's principal executive officer, principal
financial officer, and the principal accounting officer or controller. A copy of
the Code of Ethics is available from the Company, without charge, upon written
request to the Company at the address set forth below:

              Corporate Secretary
              Kaiser Aluminum & Chemical Corporation
              5847 San Felipe, Suite 2500
              Houston, Texas  77057

             SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Based solely upon a review of the copies of the Forms 3, 4 and 5 and amendments
thereto furnished to the Company with respect to its most recent fiscal year,
and written representations from reporting persons that no other Forms 5 were
required, the Company believes that there was compliance with all filing
requirements that were applicable to its officers, directors and greater than
10% beneficial owners.

ITEM 11.      EXECUTIVE COMPENSATION

SUMMARY COMPENSATION TABLE

Although certain plans or programs in which executive officers of the Company
participate are jointly sponsored by the Company and Kaiser, executive officers
of the Company generally are directly employed and compensated by the Company.
The following table sets forth compensation information, cash and non-cash, for
each of the Company's last three completed fiscal years with respect to the
Company's Chief Executive Officer and the four most highly compensated executive
officers other than the Chief Executive Officer for the year 2003 (collectively
referred to as the "Named Executive Officers").



                                            ANNUAL COMPENSATION
                                   ------------------------------------
           (A)                 (B)       (C)         (D)          (E)

                                                                 OTHER
                                                                 ANNUAL
         NAME AND                      SALARY       BONUS    COMPENSATION
    PRINCIPAL POSITION         YEAR      ($)         ($)         ($)(1)
--------------------------    ------  --------- ------------- -----------
Jack A. Hockema                2003    730,000            -0-      -
President and Chief Executive  2002    730,000            -0-      -
Officer                        2001    455,390        159,135      -

Edward F. Houff                2003    400,000        125,000      -
Vice President, Secretary and  2002    400,000        125,000      -
General Counsel                2001    100,000         62,500      -

John T. La Duc                 2003    405,513            -0-      -
Executive Vice President and   2002    400,592            -0-      -
Chief Financial Officer        2001    387,393        171,000      -

Joseph A. Bonn                 2003    337,428            -0-      -
Executive Vice President,      2002    333,333            -0-      -
Corporate Development          2001    322,350        126,464      -

John Barneson                  2003    275,000            -0-      -
Senior Vice President and      2002    257,500            -0-      -
Chief Administrative Officer   2001    216,667         75,240      -


                                   LONG-TERM COMPENSATION
                               -----------------------------------
                                     AWARDS             PAYOUTS
                               --------------------- -------------
           (A)                       (F)           (G)          (H)            (I)
                                                SECURITIES
                                 RESTRICTED     UNDERLYING
                                   STOCK        OPTIONS/      LTIP         ALL OTHER
         NAME AND                 AWARD(S)         SARS       PAYOUTS     COMPENSATION
    PRINCIPAL POSITION               ($)            #        ($)(2)           ($)
--------------------------     -------------    ---------- ------------- ---------------
Jack A. Hockema                       -0-          -0-           -0-         365,000(5)(6)
President and Chief Executive     116,495(3)       -0-       236,200(4)      346,750(5)(6)
Officer                           467,104(3)   375,770       887,600(4)       22,770(6)

Edward F. Houff                       -0-          -0-           -0-         200,000(5)(6)
Vice President, Secretary and         -0-          -0-           -0-         168,909(5)(6)(7)
General Counsel                   524,573(8)   222,772           -0-           2,865(6)(7)

John T. La Duc                        -0-          -0-           -0-         202,750(5)(6)
Executive Vice President and          -0-          -0-           -0-         189,958(5)(6)
Chief Financial Officer               -0-(9)       -0-         4,628(10)      19,370(6)

Joseph A. Bonn                        -0-          -0-           -0-         168,700(5)(6)
Executive Vice President,             -0-          -0-           -0-         158,060(5)(6)
Corporate Development                 -0-(9)       -0-       148,829(10)      16,118(6)

John Barneson                         -0-          -0-           -0-         125,000(5)(6)
Senior Vice President and             -0-          -0-        13,627(4)      212,268(5)(6)(7)
Chief Administrative Officer          -0-(9)       -0-        35,004(4)       10,833(6)

------------------------------------
(1)   Excludes perquisites and other personal benefits, which in the aggregate
      amount do not exceed the lesser of either $50,000 or 10% of the
      total of annual salary and bonus reported for the Named Executive Officer.
(2)   Amounts reflect the value of payments actually received during the year
      indicated in connection with awards under the Company's long-term
      incentive plan. To the extent any awards were paid in shares of Kaiser
      Common Stock, the value of such shares included in column (h) was
      determined by multiplying the number of shares paid by the average of the
      high and low market price of a share of Kaiser Common Stock on the New
      York Stock Exchange on the date of payment.
(3)   As part of his annual long-term incentive, effective as of June 28, 2001,
      Mr. Hockema was granted 53,552 restricted shares of Kaiser Common Stock,
      vesting at the rate of 33 1/3% per year, beginning on December 31, 2001.
      In connection with Mr. Hockema's promotion to President and Chief
      Executive Officer, he also was granted 146,448 restricted shares of Kaiser
      Common Stock effective as of October 31, 2001, and 95,488 restricted
      shares of Kaiser Common Stock effective as of January 25, 2002, each such
      grant vesting at the rate of 33 1/3% per year, beginning October 11, 2002.
      The restrictions on 33 1/3% of the shares granted to Mr. Hockema in June
      2001 lapsed and the shares vested on December 31, 2001. Prior to the
      scheduled vesting dates, Mr. Hockema elected to cancel all of his
      restricted shares of Kaiser Common Stock otherwise scheduled to vest
      during 2002 and 2003. If not cancelled before vesting by Mr. Hockema or as
      part of a plan of reorganization, vesting of Mr. Hockema's remaining
      restricted shares is subject to his being an employee of the Company,
      Kaiser or an affiliate or subsidiary of the Company or Kaiser as of the
      applicable vesting date. Any dividends payable on the shares prior to the
      lapse of the restrictions or any cancellation thereof are payable to Mr.
      Hockema. The above table includes, for the respective year, the value of
      the restricted shares granted to Mr. Hockema in 2001 and 2002, in each
      case determined by multiplying the number of shares in the grant by the
      closing market price of a share of Kaiser Common Stock on the New York
      Stock Exchange on the effective date of the grant. As of December 31,
      2003, Mr. Hockema owned 80,645 restricted shares of Kaiser Common Stock
      valued at $6,855, based on the closing price on the OTC Bulletin Board of
      $0.085 per share. The Debtors currently believe that the equity interests
      of Kaiser's stockholders, including any interests in the restricted shares
      of Kaiser Common Stock, will be cancelled without consideration as part of
      a plan of reorganization.
(4)   Amounts reflect the cash awards actually received by Messrs. Hockema and
      Barneson during the year indicated under the Company's long-term incentive
      plan for the rolling three-year performance periods 1998-2000 and
      1999-2001. In each case, such awards were paid in the year immediately
      following the end of the applicable three-year performance period. Mr.
      Hockema's 1998-2000 award includes a special "growing the business" bonus
      for the period 1999-2000 in the amount of $601,200.
(5)   Includes retention payments made during 2003 and 2002, respectively, under
      the Company's key employee retention plans in the amount of $365,000 and
      $346,750 for Mr. Hockema; $200,000 and $160,000 for Mr. Houff; $202,750
      and $189,958 for Mr. La Duc; $168,700 and $158,060 for Mr. Bonn; and
      $125,000 and $118,750 for Mr. Barneson. In addition to such retention
      amounts, pursuant to the terms of the Kaiser Aluminum & Chemical
      Corporation Key Employee Retention Plan, the Company has withheld
      additional retention payments with respect to the year 2003 and 2002,
      respectively, for each of Messrs. Hockema, Houff, La Duc, Bonn and
      Barneson as follows: $547,500 and $273,750 for Mr. Hockema; $300,000 and
      $150,000 for Mr. Houff; $304,125 and $152,063 for Mr. La Duc; $253,050 and
      $126,525 for Mr. Bonn; and $187,500 and $93,750 for Mr. Barneson. Payment
      of such additional retention amounts (other than in the case of Messrs. La
      Duc and Bonn, who will each be entitled to receive a portion of their
      withheld retention payments upon retirement) generally is subject to,
      among other conditions, the Company's emergence from chapter 11 and the
      timing thereof. For additional information, see discussion under
      "Employment Contracts, Retention Plan and Agreements and Termination of
      Employment and Change-in-Control Arrangements - Kaiser Retention Plan and
      Agreements" below.
(6)   Includes for 2001 contributions by the Company of $22,770 for Mr. Hockema;
      $-0- for Mr. Houff; $19,370 for Mr. La Duc; $16,118 for Mr. Bonn; and
      $10,833 for Mr. Barneson under the Company's Supplemental Savings and
      Retirement Plan and Supplemental Benefits Plan. The Company did not
      contribute any amounts under such plans for the Named Executive Officers
      or any salaried employees for 2003 or 2002.
(7)   Includes moving-related items of $8,909 and $2,685 for Mr. Houff in 2002
      and 2001, respectively, and $93,518 for Mr. Barneson in 2002.
(8)   Effective as of October 9, 2001, Mr. Houff was granted 171,429 restricted
      shares of Kaiser Common Stock, vesting at the rate of 33 1/3% per year,
      beginning on October 1, 2002. Prior to the scheduled vesting dates, Mr.
      Houff elected to cancel all of his restricted shares of Kaiser Common
      Stock otherwise scheduled to vest during 2003 and 2002. If not cancelled
      before vesting by Mr. Houff or as part of a plan of reorganization,
      vesting of Mr. Houff's remaining restricted shares is subject to his being
      an employee of the Company, Kaiser or an affiliate or subsidiary of the
      Company or Kaiser as of the applicable vesting date. Any dividends payable
      on the shares prior to the lapse of the restrictions or any cancellation
      thereof are payable to Mr. Houff. The above table includes for the year
      2001 the value of the restricted shares granted to Mr. Houff, determined
      by multiplying the number of shares in the grant by the closing market
      price of a share of Kaiser Common Stock on the New York Stock Exchange on
      the effective date of the grant. As of December 31, 2003, Mr. Houff owned
      57,143 restricted shares of Kaiser Common Stock, valued at $4,857, based
      on the closing price on the OTC Bulletin Board of $0.085 per share. The
      Debtors currently believe that the equity interests of Kaiser's
      stockholders, including any interests in the restricted shares of Kaiser
      Common Stock, will be cancelled without consideration as part of a plan of
      reorganization.
(9)   In April 2001, the Company and Kaiser made an offer to current employees
      and directors to exchange their outstanding options to acquire shares of
      Kaiser's Common Stock for restricted shares of Kaiser Common Stock (the
      "Exchange Offer"), vesting at the rate of 33 1/3% per year beginning March
      5, 2002. Pursuant to the Exchange Offer, Mr. La Duc exchanged
      approximately 51% (i.e., options to purchase 243,575 shares) of his then
      outstanding options to acquire Kaiser Common Stock for 34,511 restricted
      shares of Kaiser Common Stock; Mr. Bonn exchanged all of his then
      outstanding options (i.e., options to purchase 171,690 shares) to acquire
      Kaiser Common Stock for 91,133 restricted shares of Kaiser Common Stock;
      and Mr. Barneson exchanged all of his then outstanding options (i.e.,
      options to purchase 123,700 shares) to acquire Kaiser Common Stock for
      68,407 restricted shares of Kaiser Common Stock. Messrs. La Duc, Bonn and
      Barneson elected to cancel all of their respective restricted shares prior
      to their respective vesting dates. The restricted shares issued to Messrs.
      La Duc, Bonn and Barneson in connection with the Exchange Offer are not
      reflected in the above table. As of December 31, 2003, Messrs. La Duc,
      Bonn and Barneson owned 11,503, 30,377 and 22,802 restricted shares of
      Kaiser Common Stock, respectively, valued at $978, $2,582 and $1,938,
      respectively, based on the closing price on the OTC Bulletin Board of
      $0.085 per share. Messrs. La Duc, Bonn and Barneson cancelled all of such
      shares prior to their vesting on March 5, 2004.
(10)  Amounts reflect the value of shares of Kaiser Common Stock actually
      received in 2001 under the Company's long-term incentive plan for the
      rolling three-year performance period 1997-1999. For Mr. Bonn, the amount
      also reflects the cash award actually received by him in 2001for the
      rolling three-year performance period 1998-2000. The awards for the
      1997-1999 performance period generally were paid in two equal
      installments, with the first during the year following the end of the
      three-year performance period and the second during the next following
      year. Such awards generally were made entirely in shares of Kaiser Common
      Stock (based on the average closing price of Kaiser's Common Stock during
      the last December of such performance period for one-half of the award and
      on a target price of $15.00 per share for the other half).

OPTION/SAR GRANTS IN LAST FISCAL YEAR

The Company did not issue any stock options or SARs during the year 2003.

AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES

The table below provides information on an aggregated basis concerning each
exercise of stock options during the fiscal year ended December 31, 2003, by
each of the Company's Named Executive Officers, and the 2003 fiscal year-end
value of unexercised options. During 2003, the Company did not have any SARs
outstanding. The Debtors currently believe that any equity interests of Kaiser's
stockholders will be cancelled without consideration as part of a plan of
reorganization. Upon any such cancellation, any options to purchase Kaiser
Common Stock from Kaiser also would be cancelled.
             (A)                    (B)            (C)                      (D)                            (E)
                                                                                                  VALUE OF UNEXERCISED
                                                               NUMBER OF SECURITIES UNDERLYING        IN-THE-MONEY
                                                                 UNEXERCISED OPTIONS/SARS              OPTIONS/SARS
                                                                   AT FISCAL YEAR END (#)         AT FISCAL YEAR-END ($)
                                                               -----------------------------  -----------------------------
                                   SHARES
                                 ACQUIRED ON      VALUE
            NAME                EXERCISE (#)   REALIZED ($)     EXERCISABLE    UNEXERCISABLE    EXERCISABLE   UNEXERCISABLE
-----------------------------  -------------- --------------   -------------  --------------  -------------- --------------
Jack A. Hockema                     -0-            -0-               273,730(1)      130,224(1)           --(2)          --(2)
Edward F. Houff                     -0-            -0-               148,515(1)       74,257(1)           --(2)          --(2)
John T. La Duc                      -0-            -0-                   -0-             -0-             -0-            -0-
Joseph A. Bonn                      -0-            -0-                   -0-             -0-             -0-            -0-
John Barneson                       -0-            -0-                   -0-             -0-             -0-            -0-

------------------------------------
(1)   Represents shares of Kaiser Common Stock underlying stock options.
(2)   No value is shown because the exercise price is higher than the closing
      price of $0.085 per share of Kaiser's Common Stock on the OTC Bulletin
      Board on December 31, 2003.

LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR

During 2002, the Company adopted, and the Court approved as part of the Kaiser
Employee Retention Program discussed below, a new cash-based long-term incentive
program under which participants became eligible to receive an award based on
the attainment by the Company of sustained cost reductions above a stipulated
threshold for the period 2002 through emergence from bankruptcy. The following
table and accompanying footnotes further describe the awards made in 2002 to the
Named Executive Officers under such program.


                                                                                    ESTIMATED FUTURE PAYOUTS
                                                                                UNDER NON-STOCK PRICE-BASED PLANS
                                                                         -----------------------------------------------
              (A)                      (B)                  (C)              (D)              (E)               (F)

                                                       PERFORMANCE OR
                                     NUMBER OF       OTHER PERIODS UNTIL
                                 SHARES, UNITS OR        MATURATION
             NAME                  OTHER RIGHTS           OR PAYOUT        THRESHOLD        TARGET(1)       MAXIMUM(1)
------------------------------  -------------------  ------------------  --------------  ---------------  --------------
Jack A. Hockema                         N/A                  (2)               (3)        $1,500,000(3)   $4,500,000(3)
Edward F. Houff                         N/A                  (2)               (3)           300,000(3)      900,000(3)
John T. La Duc                          N/A                  (4)               (4)           523,000(4)    1,569,000(4)
Joseph A. Bonn                          N/A                  (4)               (4)           338,000(4)    1,014,000(4)
John Barneson                           N/A                  (2)               (3)           350,000(3)    1,050,000(3)

------------------------------------
(1)   The target and maximum payout amounts in the table are per annum.
(2)   Except as described in footnote (4) below with regard to Messrs. La Duc
      and Bonn, any awards earned under the program generally are payable in two
      equal installments - the first on the date that the Company emerges from
      bankruptcy and the second on the one year anniversary of such date. Any
      awards earned under the program generally are forfeited if the participant
      voluntarily terminates his or her employment (other than at normal
      retirement, or in the case of Messrs. La Duc and Bonn, retirement after
      February 12, 2004) or is terminated for cause prior to the scheduled
      payment date.
(3)   The amount, if any, that may be paid under the program generally shall not
      be determinable until the end of the performance period.
(4)   Messrs. La Duc and Bonn, who are retiring as of March 31, 2004, will earn
      awards under the program through March 31, 2004. Amounts earned for the
      years 2002 and 2003 will be paid to Messrs. La Duc and Bonn upon their
      retirement or as soon as practicable thereafter, subject to certain
      approvals. Any additional amounts earned by Messrs. La Duc and Bonn for
      the first quarter of 2004 will be paid upon the Company's emergence from
      bankruptcy. The amount of any award payable to Messrs. La Duc and Bonn
      cannot currently be determined.

DEFINED BENEFIT PLANS

Kaiser Retirement Plan. The Company previously maintained a qualified,
defined-benefit retirement plan (the "Kaiser Retirement Plan") for salaried
employees of the Company and co-sponsoring subsidiaries who met certain
eligibility requirements. Effective December 17, 2003, the Pension Benefit
Guaranty Corporation (the "PBGC") terminated the Kaiser Retirement Plan in an
involuntary termination pursuant to Section 4042 of the Employee Retirement
Income Security Act of 1974, as amended. As a consequence of such termination,
all benefit accruals ceased under the Kaiser Retirement Plan. The table below
shows estimated annual retirement benefits payable under the terms of the Kaiser
Retirement Plan to participants with the indicated years of credited service.
These benefits are reflected (a) without reduction for the limitations imposed
by the Internal Revenue Code of 1986, as amended (the "Tax Code") on qualified
plans and before adjustment for the Social Security offset, thereby reflecting
aggregate benefits to be received, subject to Social Security offsets, under the
Kaiser Retirement Plan and the Kaiser Supplemental Benefits Plan (as defined
below), and (b) without reduction for the limitation on benefits payable by the
PBGC as a result of the involuntary termination of the Kaiser Retirement Plan
($43,977.24 annually for retirement at age 65 and $34,742.04 for retirement at
age 62, the normal retirement age under the Kaiser Retirement Plan, for plans
terminated in 2003).


  AVERAGE ANNUAL
   REMUNERATION                                       YEARS OF SERVICE
------------------  ------------------------------------------------------------------------------------
                         15               20                25                30               35
                    -------------   ---------------  ----------------  ----------------  ---------------

    $  250,000        $ 56,250         $ 75,000          $ 93,750         $ 112,500        $ 131,250
       350,000          78,750          105,000           131,250           157,500          183,750
       450,000         101,250          135,000           168,750           202,500          236,250
       550,000         123,750          165,000           206,250           247,500          288,750
       650,000         146,250          195,000           243,750           292,500          341,250
       750,000         168,750          225,000           281,250           337,500          393,750
       850,000         191,250          255,000           318,750           382,500          446,250
       950,000         213,750          285,000           356,250           427,500          498,750
     1,050,000         236,250          315,000           393,750           472,500          551,250

The estimated annual retirement benefits shown are based upon the assumptions
that the provisions of the Kaiser Retirement Plan prior to the termination by
the PBGC and the current Kaiser Supplemental Benefits Plan provisions are in
effect, that the participant retires at age 62, and that the retiree receives
payments based on a straight-life annuity for his lifetime. Messrs. Hockema, La
Duc, Bonn and Barneson had 11.9, 34.3, 36.5 and 28.8 years of credited service,
respectively, on December 31, 2003. Mr. Houff is not a participant in either the
Kaiser Retirement Plan or the Kaiser Supplemental Benefits Plan. Monthly
retirement benefits, except for certain minimum benefits, are determined by
multiplying years of credited service (not in excess of 40) by the difference
between 1.50% of average monthly compensation for the highest base period (of
36, 48 or 60 consecutive months, depending upon compensation level) in the last
10 years of employment and 1.25% of monthly primary Social Security benefits.
Pension compensation covered by the Kaiser Retirement Plan and the Kaiser
Supplemental Benefits Plan consists of salary and bonus amounts set forth in the
Summary Compensation Table (column (c) plus column (d) thereof). Because of the
PBGC limitation on benefits payable from the Kaiser Retirement Plan, the
estimated benefits with respect to the Kaiser Retirement Plan for Messrs.
Hockema, La Duc, Bonn and Barneson for retirement at age 62 are significantly
reduced.

Participants are entitled to retire and receive pension benefits, unreduced for
age, upon reaching age 62 or after 30 years of credited service. Full early
pension benefits (without adjustment for Social Security offset prior to age 62)
are payable to participants who are at least 55 years of age and have completed
10 or more years of pension service (or whose age and years of pension service
total 70) and who have been terminated by the Company or an affiliate for
reasons of job elimination or partial disability. Participants electing to
retire prior to age 62 who are at least 55 years of age and who have completed
10 or more years of pension service (or whose age and years of pension service
total at least 70) may receive pension benefits, unreduced for age, payable at
age 62 or reduced benefits payable earlier. Participants who terminate their
employment after five years or more of pension service, or after age 55 but
prior to age 62, are entitled to pension benefits, unreduced for age, commencing
at age 62 or, if they have completed 10 or more years of pension service,
actuarially reduced benefits payable earlier. For participants with five or more
years of pension service or who have reached age 55 and who die, the Kaiser
Retirement Plan provides a pension to their eligible surviving spouses. Upon
retirement, participants may elect among several payment alternatives including,
for most types of retirement, a lump-sum payment.

As a result of the termination of the Kaiser Retirement Plan by the PBGC,
benefits payable to participants will be reduced to a maximum of $34,742.04
annually for retirement at age 62, lower for retirement prior to age 62, and
higher for retirements after age 62 up to $43,977.24 at age 65, and participants
will not accrue additional benefits. In addition, the PBGC will not make
lump-sum payments to these participants or reflect any events under the Kaiser
Retirement Plan after December 17, 2003.

Kaiser Supplemental Benefits Plan. The Company maintains an unfunded,
non-qualified Supplemental Benefits Plan (the "Kaiser Supplemental Benefits
Plan"), the purpose of which is to restore benefits that would otherwise be paid
from the Kaiser Retirement Plan or the Supplemental Savings and Retirement Plan,
a qualified Section 401(k) plan (the "Kaiser Savings Plan"), were it not for the
Section 401(a)(17) and Section 415 limitations imposed by the Tax Code.
Participation in the Kaiser Supplemental Benefits Plan is available to all
employees of the Company and its subsidiaries whose benefits under the Kaiser
Retirement Plan and Kaiser Savings Plan are likely to be affected by such
limitations imposed by the Tax Code. Eligible participants are entitled to
receive the equivalent of the Kaiser Retirement Plan and Kaiser Savings Plan
benefits that they may be prevented from receiving under those plans because of
such Tax Code limitations, before considering any impacts of the PBGC
termination of the Kaiser Retirement Plan. The Kaiser Supplemental Benefits Plan
will not make up benefits lost with respect to the Kaiser Retirement Plan
because of limitations on benefits payable by the PBGC.

Pursuant to the Kaiser Key Employee Retention Program discussed below, payments
under the Kaiser Supplemental Benefits Plan may be made only to participants
(including Messrs. Hockema and Barneson) whose voluntary termination of
employment with the Company does not occur until after the Company emerges from
bankruptcy (other than normal retirement at age 62), and Messrs. Bonn and La Duc
on the condition that their retirement occur on or after February 12, 2004. See
"Employment Contracts, Retention Plan and Agreements and Termination of
Employment and Change-in-Control Arrangements - Kaiser Retention Plan and
Agreements" below for a discussion of the trust created and funded by the
Company and Kaiser to pay Messrs. Bonn and La Duc their benefits under the
Kaiser Supplemental Benefits Plan under certain conditions. Any claims by
participants with respect to amounts not paid under the Kaiser Supplemental
Benefits Plan either because the claims arose pre-petition or the participant
voluntarily terminates employment prior to the Company's emergence from
bankruptcy (other than normal retirement at age 62) will be resolved in the
overall context of a plan of reorganization.

Kaiser Termination Payment Policy. Most full-time salaried employees of the
Company are eligible for benefits under an unfunded termination policy if their
employment is involuntarily terminated, subject to a number of exclusions. The
policy provides for lump-sum payments after termination ranging from one-half
month's salary for less than one year of service graduating to eight months'
salary for 30 or more years of service. As a result of the filing of the Cases,
payments under the policy in respect of periods prior to the Filing Date
generally cannot be made by the Company. Any claims for such pre-petition
amounts will be resolved in the overall context of a plan of reorganization. The
Named Executive Officers and certain other participants in the Kaiser Key
Employee Retention Plan waived their rights to any payments under the
termination policy in connection with their participation in the Kaiser Key
Employee Retention Plan.

DIRECTOR COMPENSATION

Each of the directors who is not an employee of the Company or Kaiser generally
receives an annual base fee for services as a director. The base fee for the
year 2003 was $50,000. During 2003, Messrs. Cruikshank, Hackett, Hurwitz, Levin
and Roach each received base compensation of $50,000. Mr. Haymaker's
compensation for 2003 was covered by a separate agreement with the Company and
Kaiser, which is discussed below.

For the year 2003, non-employee directors of the Company and Kaiser who were
directors of MAXXAM, also received director or committee fees from MAXXAM. In
addition, the non-employee Chairman of each of the Company's and Kaiser's
committees (other than the Audit Committees) was paid a fee of $3,000 per year
for services as Chairman. Effective February 2003, the fee paid to the Chairman
of the Audit Committees was increased from $3,000 per year to $10,000 per year.
All non-employee directors also generally received a fee of $1,500 per day for
Board meetings attended in person or by phone and $1,500 per day for committee
meetings held in person or by phone on a date other than a Board meeting.
Effective as of January 1, 2004, generally all non-employee directors members of
the Company's and Kaiser's Executive Committees also will be paid a fee of
$6,000 per year for such services. In respect of 2003, Messrs. Cruikshank,
Hackett, Hurwitz, Levin and Roach received an aggregate of $21,000, $19,500,
$18,000, $25,500, and $30,203, respectively, in such fees from the Company and
Kaiser in the form of cash payments.

Non-employee directors are eligible to participate in the Kaiser 1997 Omnibus
Stock Incentive Plan (the "1997 Omnibus Plan"). During 2003, no awards were made
to non-employee directors under such plan.

Directors are reimbursed for travel and other disbursements relating to Board
and committee meetings, and non-employee directors are provided accident
insurance in respect of Company-related business travel. Subject to the approval
of the Chairman of the Board, directors also generally may be paid ad hoc fees
in the amount of $750 per one-half day or $1,500 per day for services other than
attending Board and committee meetings that require travel in excess of 100
miles. No such payments were made for 2003.

The Company and Kaiser have a deferred compensation program in which all
non-employee directors are eligible to participate. By executing a deferred fee
agreement, a non-employee director may defer all or part of the fees from the
Company and Kaiser for services in such capacity for any calendar year. The
deferred fees are credited to a book account and are deemed "invested," in 25%
increments, in two investment choices: in phantom shares of Kaiser Common Stock
and/or in an account bearing interest calculated using one-twelfth of the sum of
the prime rate plus 2% on the first day of each month. If deferred, fees,
including all earnings credited to the book account, are paid in cash to the
director or beneficiary as soon as practicable following the date the director
ceases for any reason to be a member of the Board, either in a lump sum or in a
specified number of annual installments not to exceed ten, at the director's
election. With the exception of Mr. Haymaker, who deferred his fees in 2000 and
2001, no deferral elections have been made under this program.

Fees to directors who also are employees of the Company are deemed to be
included in their salary. Directors of the Company were also directors of Kaiser
and received the foregoing compensation for acting in both capacities.

On November 4, 2002, Mr. Haymaker, the Company and Kaiser entered into an
agreement concerning the terms upon which Mr. Haymaker would continue to serve
as a director and non-executive Chairman of the Boards of the Company and Kaiser
through December 31, 2003. For the year 2003, Mr. Haymaker's base compensation
under the agreement was $50,000 for services as a director and $73,000 for
services as non-executive Chairman of the Boards of the Company and Kaiser,
inclusive of any Board and committee fees otherwise payable. All compensation
under the agreement was paid in cash.

As of January 1, 2004, Mr. Haymaker, the Company and Kaiser entered into a new
agreement concerning the terms upon which Mr. Haymaker will continue to serve as
a director and non-executive Chairman of the Boards of the Company and Kaiser
through the earlier of December 31, 2004 and the effective date of the Company's
and Kaiser's emergence from bankruptcy. The annual compensation payable under
such agreement is the same as in effect during 2003.

EMPLOYMENT CONTRACTS, RETENTION PLAN AND AGREEMENTS AND TERMINATION OF
EMPLOYMENT AND CHANGE-IN-CONTROL ARRANGEMENTS

Employment Agreement with Edward F. Houff. Effective October 1, 2001, Mr. Houff
and the Company entered into an employment agreement for the period October 1,
2001 through September 30, 2004. Under the terms of the agreement, Mr. Houff's
annual salary is $400,000. The agreement also provides for a guaranteed cash
bonus of $125,000, plus an annual incentive bonus of up to $125,000.

Pursuant to the agreement, in 2001 Mr. Houff received a grant under the 1997
Omnibus Plan of options, valued at the time of grant at $450,000, to purchase
222,772 shares of Kaiser Common Stock at an exercise price of $2.625 per share,
plus 171,429 restricted shares of Kaiser Common Stock, also valued at $450,000
at the time of grant. The options generally vest at the rate of 33 1/3% per
year, beginning October 1, 2002, with an additional 33 1/3% vesting on each of
October 2, 2003 and September 30, 2004. Vesting of the options may be
accelerated under certain circumstances. See Note 8 to the Summary Compensation
Table above for additional information with respect to Mr. Houff's restricted
shares.

Mr. Houff's agreement provides that if his employment is terminated by the
Company for any reason other than cause, death or disability, he shall be
entitled to receive all of the remaining base salary and guaranteed bonus to the
end of the term of the agreement, but in no event less than six month's base
salary. The agreement also provides that if Mr. Houff's employment is not
retained beyond the term of the agreement, he shall be entitled to six months'
base salary as severance and up to $25,000 in relocation expenses. If Mr. Houff
terminates his employment as a result of a breach by the Company of its
contractual duties or the Company's material and unilateral alteration of his
duties, the agreement provides that he shall be paid his base salary and
guaranteed bonus for the balance of the agreement. If Mr. Houff's employment
terminates as a result of death or disability, the agreement also provides that
he or his estate, as applicable, shall receive any base salary, guaranteed bonus
and unpaid vacation accrued through the date of death or disability and any
other benefits payable under the Company's then existing benefit plans and
policies. The foregoing severance arrangements are superseded by the terms of
Mr. Houff's severance agreements discussed below.

Pursuant to the Code, as debtor-in-possession, the Company may have the right,
subject to Court approval, to assume or reject Mr. Houff's employment agreement.
See Item 1., "Business--Reorganization Proceedings" for a discussion of
assumption or rejection of executory contracts.

Kaiser Key Employee Retention Program. On September 3, 2002, the Court approved
a Key Employee Retention Program, consisting of the long-term incentive program
discussed above and the Kaiser Retention Plan, the Kaiser Severance Plan, and
the Kaiser Change in Control Severance Program discussed below.

Kaiser Retention Plan and Agreements. Effective September 3, 2002, the Company
adopted the Kaiser Aluminum & Chemical Corporation Key Employee Retention Plan
(the "Retention Plan") and in connection therewith entered into retention
agreements with certain key employees, including each of the Named Executive
Officers. The Retention Plan replaced the Kaiser Aluminum & Chemical Corporation
Retention Plan adopted on January 15, 2002 (the "Prior Plan'). As described
below, each of the Named Executive Officers received a basic award under the
Retention Plan and Messrs. La Duc and Bonn also received an additional award
under the Retention Plan.

Basic awards under the Retention Plan generally vest or have vested, as
applicable, on September 30, 2002, March 31, 2003, September 30, 2003 and March
31, 2004, provided that if a participant's employment is terminated within 90
days following the payment of any award for any reason other than death,
disability, retirement on or after age 62, or termination without cause (as
defined in the Retention Plan), the participant must return such payment to the
Company. For each of the Named Executive Officers, the amount earned on each
vesting date is equal to 62.5% of his base salary at the time of grant. If the
Named Executive Officer is employed by the Company on a vesting date, 40% of the
amount earned on such date is paid to him in a lump sum on such date. Except as
described below, the remaining 60% of such amount (the "Withheld Amount")
generally is payable to the applicable Named Executive Officer as follows: (i)
33 1/3% of each Withheld Amount is payable to the Named Executive Officer in a
lump sum on the date of the Company's emergence from bankruptcy if the Named
Executive Officer is employed by the Company on that date, (ii) 33 1/3% of each
Withheld Amount is payable to the Named Executive Officer in a lump sum on the
first anniversary of the date of the Company's emergence from bankruptcy if the
Named Executive Officer is employed by the Company on that date, and (iii) 33
1/3% of the remaining portion of each Withheld Amount (the "Emergence Amount")
is payable as follows: (A) 100% of the Emergence Amount is payable on the date
of the Company's emergence from bankruptcy if the emergence occurs on or prior
to August 12, 2004 and the Named Executive Officer is employed by the Company on
that date, (B) 50% of the Emergence Amount is payable on the date of the
Company's emergence from bankruptcy if the emergence occurs on or prior to
August 12, 2005 but after August 12, 2004, and the Named Executive Officer is
employed by the Company on that date (the remaining 50% of the Emergence Amount
is forfeited by the Named Executive Officer to the Company), and (C) 100% of the
Emergence Amount is forfeited by the Named Executive Officer to the Company if
the date of the Company's emergence from bankruptcy occurs after August 12,
2005.

In general, if a Named Executive Officer's employment with the Company is
terminated prior to any vesting date for any reason, the portion of the basic
award that would have become vested and payable on such vesting date, all
subsequent portions of the award, if any, that would have become payable
following such vesting date and any Withheld Amounts are forfeited by the Named
Executive Officer. However, if the Named Executive Officer's employment with the
Company is terminated as a result of the Named Executive Officer's death,
disability, retirement from the Company on or after age 62 (or in the case of
Messrs. La Duc and Bonn, retirement after February 12, 2004) or the Company's
termination of the Named Executive Officer's employment without cause, the Named
Executive Officer is entitled to receive (a) a prorated portion of the amount
due on the vesting date immediately following the termination of employment, (b)
all Withheld Amounts, and (c) the Emergence Amount, if such amount is earned
based on the date of the Company's emergence from bankruptcy, as described
above.

In addition to the basic awards described above, Messrs. La Duc and Bonn
received an additional award under the Retention Plan. In consideration of the
receipt of the additional award, neither of Messrs. La Duc or Bonn is eligible
to participate in the Kaiser Aluminum & Chemical Corporation Severance Plan and
neither was eligible to enter into a Kaiser Aluminum & Chemical Corporation
Change in Control Severance Agreement, as discussed below. Messrs. La Duc and
Bonn also agreed to forego any claims under the Enhanced Severance Protection
and Change in Control Benefits Program adopted in 2000, as discussed below. The
additional award entitles each of Messrs. La Duc and Bonn to a lump sum payment
upon his termination of employment with the Company if his employment is
terminated as a result of death, disability, retirement on or after February 12,
2004, or he is terminated without cause. For each of Messrs. La Duc and Bonn,
the amount of the additional award is equal to his benefit under the Kaiser
Supplemental Benefits Plan, discussed above. In connection with the
establishment of the Prior Plan, the Company and Kaiser created and funded an
irrevocable grantor trust for the purpose of paying the additional awards to
Messrs. La Duc and Bonn when due. The additional awards will be paid to Messrs.
La Duc and Bonn in connection with their retirement as of March 31, 2004.

Kaiser Severance Plan and Agreements. Effective September 3, 2002, the Company
adopted the Kaiser Aluminum & Chemical Corporation Severance Plan (the
"Severance Plan") in order to provide selected executive officers, including
Messrs. Hockema, Houff and Barneson, and other key employees of the Company with
appropriate protection in the event of certain terminations of employment. The
Severance Plan, along with the Kaiser Aluminum & Chemical Corporation Change in
Control Severance Agreements described below, replaced for participants in such
plans, the Enhanced Severance Protection and Change in Control Benefits Program
implemented in 2000. The Severance Plan terminates on the first anniversary of
the date the Company emerges from bankruptcy.

The Severance Plan provides for payment of a severance benefit and continuation
of welfare benefits in the event of certain terminations of employment.
Participants are eligible for the severance payment and continuation of benefits
in the event the participant's employment is terminated without cause (as
defined in the Severance Plan) or the participant terminates employment with
good reason (as defined in the Severance Plan). The severance payment and
continuation of benefits are not available if (i) the participant receives
severance compensation or benefit continuation pursuant to a Kaiser Aluminum &
Chemical Corporation Change in Control Severance Agreement (as described below),
(ii) the participant's employment is terminated other than without cause or by
the participant for good reason, or (iii) the participant declines to sign, or
subsequently revokes, a designated form of release. In addition, in
consideration for the severance payment and continuation of benefits, a
participant will be subject to noncompetition, nonsolicitation and
confidentiality restrictions following the participant's termination of
employment with the Company.

The severance payment payable under the Severance Plan to each of Messrs.
Hockema, Houff and Barneson consists of a lump sum cash payment equal to two
times his base salary. Each of Messrs. Hockema, Houff and Barneson also will be
entitled to continued medical, dental, vision, life insurance and disability
benefits for a period of two years following termination of employment.
Severance payments payable under the Severance Plan are in lieu of any severance
or other termination payments provided for under any plan of the Company or any
other agreement between the participant and the Company.

Kaiser Change in Control Severance Program. In 2002, the Company entered into
Kaiser Aluminum & Chemical Corporation Change in Control Severance Agreements
(the "Change in Control Agreements") with certain key executives, including
Messrs. Hockema, Houff and Barneson, in order to provide them with appropriate
protection in the event of a termination of employment in connection with a
change in control (as defined in the Change in Control Agreements) of the
Company. In connection with the Severance Plan, these Change in Control
Agreements replaced the Enhanced Severance Protection and Change in Control
Benefits Program implemented in 2000. The Change in Control Agreements terminate
on the second anniversary of a change in control of the Company.

The Change in Control Agreements provide for severance payments and continuation
of benefits in the event of certain terminations of employment. The participants
are eligible for severance benefits if their employment terminates or
constructively terminates due to a change in control during a period that
commences ninety (90) days prior to the change in control and ends on the second
anniversary of the change in control. These benefits are not available if (i)
the participant voluntarily resigns or retires, other than for good reason (as
defined in the Change in Control Agreements), (ii) the participant is discharged
for cause (as defined in the Change in Control Agreements), (iii) the
participant's employment terminates as the result of death or disability, (iv)
the participant declines to sign, or subsequently revokes, a designated form of
release, or (v) the participant receives severance compensation or benefit
continuation pursuant to the Kaiser Aluminum & Chemical Corporation Severance
Plan or any other prior agreement. In addition, in consideration for the
severance payment and continuation of benefits, a participant will be subject to
noncompetition, nonsolicitation and confidentiality restrictions following his
or her termination of employment with the Company.

Upon a qualifying termination of employment, each of Messrs. Hockema, Houff and
Barneson are entitled to receive the following: (i) three times the sum of his
base pay and most recent short-term incentive target, (ii) a pro-rated portion
of his short-term incentive target for the year of termination, and (iii) a
pro-rated portion of his long-term incentive target in effect for the year of
his termination, provided that such target was achieved. Each of Messrs.
Hockema, Houff and Barneson also are entitled to continued medical, dental, life
insurance, disability benefits and perquisites for a period of three years after
termination of employment with the Company. Each of Messrs. Hockema, Houff and
Barneson are also entitled to a payment in an amount sufficient, after the
payment of taxes, to pay any excise tax due by him under Section 4999 of the Tax
Code or any similar state or local tax.

Severance payments payable under the Change in Control Agreements are in lieu of
any severance or other termination payments provided for under any plan of the
Company or any other agreement between the Named Executive Officer and the
Company.

Except as otherwise noted, there are no employment contracts between the Company
or any of its subsidiaries and any of the Company's Named Executive Officers.
Similarly, except as otherwise noted, there are not any compensatory plans or
arrangements that include payments from the Company or any of its subsidiaries
to any of the Company's Named Executive Officers in the event of any such
officer's resignation, retirement or any other termination of employment with
the Company and its subsidiaries or from a change in control of the Company or a
change in the Named Executive Officer's responsibilities following a change in
control.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

During 2003, Messrs. Cruikshank, Hackett and Levin (Chairman) were members of
the Company's Compensation Policy Committee, and Messrs. Cruikshank and Hackett
(Chairman) were members of the Company's Section 162(m) Compensation Committee.

No member of the Compensation Policy Committee or the Section 162(m)
Compensation Committee of the Board was, during the 2003 fiscal year, an officer
or employee of the Company or any of its subsidiaries, or was formerly an
officer of the Company or any of its subsidiaries or, other than Mr. Levin, had
any relationships requiring disclosure by the Company under Item 404 of
Regulation S-K. Mr. Levin served on the Company's Compensation Policy Committee
and Board of Directors during 2003 and is also a member of the law firm of
Kramer Levin Naftalis & Frankel LLP, which provided legal services to the
Company and its subsidiaries during 2003.

During the Company's 2003 fiscal year, no executive officer of the Company
served as (i) a member of the compensation committee (or other board committee
performing equivalent functions) of another entity, one of whose executive
officers served on the Compensation Policy Committee or Section 162(m)
Compensation Committee of the Company, (ii) a director of another entity, one of
whose executive officers served on any of such committees, or (iii) a member of
the compensation committee (or other board committee performing equivalent
functions) of another entity, one of whose executive officers served as a
director of the Company.

ITEM 12.        SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
                AND RELATED STOCKHOLDER MATTERS

As of March 28, 2004, Kaiser owned 100% of the issued and outstanding Common
Stock of the Company.

OWNERSHIP OF KAISER

The following table sets forth, as of March 28, 2004, unless otherwise
indicated, the beneficial ownership of Kaiser's Common Stock by (i) those
persons known by the Company to own beneficially more than 5% of the shares of
Kaiser's Common Stock then outstanding, (ii) each of the directors of the
Company, (iii) each of the Named Executive Officers, and (iv) all directors and
executive officers of the Company and Kaiser as a group. The Debtors currently
believe that the equity interests of Kaiser's stockholders will be cancelled
without consideration as part of a plan of reorganization. The affairs of Kaiser
and its Debtor subsidiaries, including the Company, are subject to the control
and administration of the Court.


                        NAME OF
                   BENEFICIAL OWNER                        TITLE OF CLASS            # OF SHARES(1)                % OF CLASS
------------------------------------------------------ -----------------------   -----------------------        ----------------
MAXXAM Inc.                                                 Common Stock                      50,000,000(2)          62.6
John Barneson                                               Common Stock                          10,700               *
Joseph A. Bonn                                              Common Stock                          23,948(3)            *
Robert J. Cruikshank                                        Common Stock                          15,009(4)            *
James T. Hackett                                            Common Stock                          13,009(4)            *
George T. Haymaker, Jr.                                     Common Stock                           9,685(4)            *
Jack A. Hockema                                             Common Stock                         372,226(4)(5)         *
Edward F. Houff                                             Common Stock                         205,658(4)(5)         *
Charles E. Hurwitz                                          Common Stock                             -0-(6)            *
John T. La Duc                                              Common Stock                         135,815               *
Ezra G. Levin                                               Common Stock                          13,009(4)            *
John D. Roach                                               Common Stock                             -0-               *
All directors and executive officers of the Company         Common Stock                         952,955(4)(7)        1.2
   as a group (17 persons)
------------------------------------
*     Less than 1%.
(1)   Unless otherwise indicated, the beneficial owners have sole voting and
      investment power with respect to the shares listed in the table. Also
      includes options exercisable within 60 days of March 28, 2004, to acquire
      such shares.
(2)   Includes 27,938,250 shares beneficially owned by MGHI.  The address of
      MAXXAM is 5847 San Felipe, Suite 2600, Houston, Texas 77057.
(3)   Represents 23,948 shares of Kaiser Common Stock held in trust with respect
      to which Mr. Bonn possesses shared voting and investment power with his
      spouse.
(4)   Includes options exercisable within 60 days of March 28, 2004 to acquire
      shares of Kaiser Common Stock as follows: Mr. Cruikshank - 13,009; Mr.
      Hackett - 13,009; Mr. Haymaker - 7,143; Mr. Hockema - 273,730; Mr. Houff -
      148,515; and Mr. Levin - 13,009.
(5)   Includes restricted shares of Kaiser Common Stock owned as follows: Mr.
      Hockema - 80,645; and Mr. Houff - 57,143.
(6)   Excludes shares owned by MAXXAM. Mr. Hurwitz may be deemed to hold
      beneficial ownership in Kaiser as a result of his beneficial ownership in
      MAXXAM.
(7)   Includes 137,788 restricted shares of Kaiser Common Stock. Also includes
      options exercisable within 60 days of March 28, 2004, to acquire 590,203
      shares of Kaiser Common Stock.

OWNERSHIP OF MAXXAM

As of March 28, 2004, MAXXAM owned, directly and indirectly, approximately 62.6%
of the issued and outstanding Common Stock of Kaiser. The following table sets
forth, as of March 28, 2004, unless otherwise indicated, the beneficial
ownership of the common stock and Class A $.05 Non-Cumulative Participating
Convertible Preferred Stock ("MAXXAM Preferred Stock") of MAXXAM by the
directors of the Company, each of the Named Executive Officers, and by the
directors and the executive officers of the Company and Kaiser as a group:


                  NAME OF                                                                          %        % OF COMBINED
             BENEFICIAL OWNER                  TITLE OF CLASS        # OF SHARES(1)            OF CLASS   VOTING POWER (2)
------------------------------------------  --------------------  ---------------------       ----------  -----------------
Charles E. Hurwitz                              Common Stock                3,098,201(3)(4)      49.5           76.8
                                              Preferred Stock                 752,441(4)(5)      99.2
Robert J. Cruikshank                            Common Stock                    5,400(6)           *               *
Ezra G. Levin                                   Common Stock                    5,400(6)           *               *
All directors and executive officers as a       Common Stock                3,111,421(3)(4)(7)   49.6           76.8
   group (17 persons)                         Preferred Stock                 752,441(4)(5)      99.2

------------------------------------
*     Less than 1%.
(1)   Unless otherwise indicated, beneficial owners have sole voting and
      investment power with respect to the shares listed in the table. Includes
      the number of shares such persons would have received on March 28, 2004,
      if any, for their exercisable SARs (excluding SARs payable in cash only)
      exercisable within 60 days of such date if such rights had been paid
      solely in shares of MAXXAM common stock.
(2)   MAXXAM Preferred Stock is generally entitled to ten votes per share on
      matters presented to a vote of MAXXAM's stockholders.
(3)   Includes 2,404,314 shares of MAXXAM common stock owned by Gilda
      Investments, LLC ("Gilda"), a wholly owned subsidiary of Giddeon Holdings,
      as to which Mr. Hurwitz indirectly possesses voting and investment power.
      Mr. Hurwitz serves as the sole director of Giddeon Holdings, and together
      with members of his immediate family and trusts for the benefit thereof,
      owns all of the voting shares of Giddeon Holdings. Also includes (a)
      80,808 shares of MAXXAM common stock separately owned by Mr. Hurwitz's
      spouse and as to which Mr. Hurwitz disclaims beneficial ownership, (b)
      4,017.6 shares of MAXXAM common stock owned by the Hurwitz Investment
      Partnership L.P., a limited partnership in which Mr. Hurwitz and his
      spouse each have a 4.32% general partnership interest, 2,008.8 of which
      shares were separately owned by Mr. Hurwitz's spouse prior to their
      transfer to such limited partnership and as to which Mr. Hurwitz disclaims
      beneficial ownership, (c) 268,553 shares of MAXXAM common stock held
      directly by Mr. Hurwitz, (d) 60,000 shares of MAXXAM common stock owned by
      Giddeon Portfolio, LLC, which is owned 79% by Gilda and 21% by Mr.
      Hurwitz, and of which Gilda is the managing member ("Giddeon Portfolio"),
      (e) options to purchase 21,029 shares of MAXXAM common stock held by
      Gilda, and (f) options held by Mr. Hurwitz to purchase 259,480 shares of
      MAXXAM common stock exercisable within 60 days of March 28, 2004.
(4)   Gilda, Giddeon Holdings, Giddeon Portfolio, the Hurwitz Investment
      Partnership L.P., and Mr. Hurwitz may be deemed a "group" (the
      "Stockholder Group") within the meaning of Section 13(d) of the Securities
      Exchange Act of 1934, as amended. As of March 28, 2004, in the aggregate,
      the members of the Stockholder Group owned 3,140,684 shares of MAXXAM
      common stock and 752,441 shares of MAXXAM Preferred Stock, aggregating
      approximately 77.1% of the total voting power of MAXXAM. By reason of his
      relationship with the members of the Stockholder Group, Mr. Hurwitz may be
      deemed to possess shared voting and investment power with respect to the
      shares held by the Stockholder Group. The address of Gilda is 5847 San
      Felipe, Suite 2600, Houston, Texas 77057. The address of the Stockholder
      Group is Giddeon Holdings, Inc., 5847 San Felipe, Suite 2600, Houston,
      Texas 77057.
(5)   Includes options exercisable by Mr. Hurwitz within 60 days of March 28,
      2004, to acquire 90,000 shares of MAXXAM Preferred Stock.
(6)   Includes options exercisable within 60 days of March 28, 2004, to acquire
      4,400 shares of MAXXAM common stock.
(7)   Includes options exercisable within 60 days of March 28, 2004, to acquire
      11,220 shares of MAXXAM common stock, held by directors and executive
      officers not in the Stockholder Group.

CHANGES IN CONTROL

Kaiser owns 100% of the Common Stock of the Company, which shares Kaiser has
pledged as security under the Company's Post-Petition Credit Agreement. If there
were an occurrence of an event of default under the Post-Petition Credit
Agreement that was not cured or waived within any applicable grace period, such
event could result in a change in ownership of the Company. See Note 7 of Notes
to Consolidated Financial Statements for additional information with regard to
the Company's Post-Petition Credit Agreement.  As indicated in Item 1. "Business
-- Reorganization Proceedings," the Debtors currently believe that it is likely
that the equity interests of the Company's stockholders will be cancelled
without consideration as part of a plan of reorganization.

EQUITY COMPENSATION PLAN INFORMATION

The Debtors currently believe that any equity interests of Kaiser's stockholders
will be cancelled without consideration as part of a plan of reorganization.
However, the following table summarizes the Company's and Kaiser's equity
compensation plans as of December 31, 2003:

                                                                    WEIGHTED-AVERAGE EXERCISE       NUMBER OF SECURITIES
                                                                    RICE OF OUTSTANDING OPTION    EMAINING AVAILABLE FOR FUTURE
                                    NUMBER OF SECURITIES TO BE         WARRANTS AND RIGHTS          ISSUANCE UNDER EQUITY
                                      ISSUED UPON EXERCISE OF       WEIGHTED-AVERAGE EXERCISE         COMPENSATION PLANS
                                       OUTSTANDING OPTIONS,        PRICE OF OUTSTANDING OPTIONS     (EXCLUDING SECURITIES
                                         WARRANTS, RIGHTS              WARRANTS AND RIGHTS         REFLECTED IN COLUMN (A))
          PLAN CATEGORY                         (A)                            (B)                          (C)
--------------------------------   -----------------------------   ---------------------------   --------------------------
EQUITY COMPENSATION PLANS
   APPROVED BY SECURITY HOLDERS             850,140(1)                        $3.34                             4,187,286(2)
EQUITY COMPENSATION PLANS NOT
   APPROVED BY SECURITY HOLDERS                  -                              -                                     -
      Total                                 850,140                           $3.34                             4,187,286

---------------------------
(1)  Represents shares of Kaiser Common Stock underlying outstanding stock
     options.
(2)  Shares are issuable under the 1997 Omnibus Plan. Stock-based awards made
     under the 1997 Omnibus Plan may be in the form of stock options, stock
     appreciation rights, restricted stock, performance shares or performance
     units. Of the shares available for future issuance under the 1997 Omnibus
     Plan, 1,548,497 may be made in the form of restricted stock.

ITEM 13.        CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

During the period from October 28, 1988 through June 30, 1993, Kaiser and its
domestic subsidiaries, including the Company, were included in the federal
consolidated income tax returns of MAXXAM. Tax allocation agreements between the
Company and Kaiser with MAXXAM for such years terminated by their terms,
effective for taxable periods beginning after June 30, 1993. During 2002, the
Company and MAXXAM agreed that no further payments or refunds would be payable
between the parties under the agreements. The Court approved this agreement in
February 2003.

The Company and MAXXAM historically have had an arrangement pursuant to which
they reimburse each other for certain allocable costs associated with the
performance of services by their respective employees and other shared services.
The vast majority of such intercompany services terminated on or before January
1, 2003. The aggregate amount of charges to the Company under the arrangement
with regard to 2003 was under $50,000. The Company did not provide any services
to MAXXAM under the arrangement for 2003.

Mr. Levin, a director of the Company and Kaiser, is a member of the law firm of
Kramer Levin Naftalis & Frankel LLP, which provides legal services to Kaiser and
its subsidiaries, including the Company. The aggregate amount of charges to the
Company and Kaiser by Kramer Levin Naftalis & Frankel LLP with regard to 2003
was under $10,000.

ITEM 14.        PRINCIPAL ACCOUNTANT FEES AND SERVICES

For the years ended December 31, 2003 and 2002, professional services were
performed by Deloitte & Touche LLP, the member firms of Deloitte & Touche
Tohmatsu, and their respective affiliates (collectively, "Deloitte & Touche").

Audit and audit-related fees aggregated $1,691,971 and $1,104,916 for the years
ended December 31, 2003 and 2002, respectively, and were composed of the
following:

AUDIT FEES

The aggregate fees billed for audit services for the fiscal years ended December
31, 2003 and 2002 were $1,499,632 and $1,104,916, respectively. These fees
relate to the audit of the Company's annual financial statements, the reviews of
the financial statements included in the Company's Quarterly Reports on Form
10-Q and certain statutory foreign audits.

AUDIT-RELATED FEES

The aggregate fees billed for audit-related services for the fiscal years ended
December 31, 2003 and 2002 were $192,339 and $-0-, respectively. These fees
relate to Sarbanes-Oxley Act of 2002, Section 404 advisory services ($117,726)
and audits of certain employee benefit plans ($74,613) for the fiscal year ended
December 31, 2003.

TAX FEES

The aggregate fees billed for tax services for the fiscal years ended December
31, 2003 and 2002 were $197,538 and $176,015, respectively. These fees relate to
tax compliance, tax advice and tax planning services for the fiscal years ended
December 31, 2003 and 2002.

ALL OTHER FEES

The aggregate fees for services not included above were $23,504, for the fiscal
year ended December 31, 2002. The fees relate to valuation services for the
Company's post-retirement benefit obligations as permitted under transition
rules in effect at May 6, 2003.

AUDIT COMMITTEE PRE-APPROVED POLICIES AND PROCEDURES

The Audit Committee of the Company's Board of Directors has adopted policies and
procedures in respect of services performed by the independent auditor which are
to be pre-approved. The policy requires that each fiscal year, a description of
the services--by major category of type of service--that are expected to be
performed by the independent auditor in the following fiscal year (the "Services
List") be presented to the Audit Committee for approval.

In considering the nature of the services to be provided by the independent
auditor, the Audit Committee will determine whether such services are compatible
with the provision of independent audit services. The Audit Committee will
discuss any such services with the independent auditor and Company's management
to determine that they are permitted under the rules and regulations concerning
auditor independence promulgated by the Securities and Exchange Commission (the
"SEC") to implement the Sarbanes-Oxley Act of 2002, as well as the American
Institute of Certified Public Accountants.

Any request for audit, audit-related, tax, and other services not contemplated
on the Services List must be submitted to the Audit Committee for specific
pre-approval and cannot commence until such approval has been granted, except as
provided below. Normally, pre-approval is to be provided at regularly scheduled
meetings. However, the authority to grant specific pre-approval between
meetings, as necessary, is delegated to the Chairman of the Audit Committee. The
Chairman must update the Audit Committee at the next regularly scheduled meeting
of any services that were granted specific pre-approval.

As required, the Audit Committee will periodically be provided with and review
the status of services and fees incurred year-to-date against the original
Service List for such fiscal year as well as the accumulated costs associated
with projects pending retroactive approval.

Retroactive approval for permissible non-audit services is allowed under the
policy subject to certain limitations. Pre-approval is waived if all of the
following criteria are met:

     1.    The service is not an audit, review or other attest service, except
           that the management may authorize or incur up to $25,000 in respect
           of scoping or planning activities by the independent auditor in
           connection with new or possible attest requirements so long as no
           formal engagement letter is signed prior to pre-approval by the Audit
           Committee and audit field work does not begin;

     2.    The individual project is not expected to and does not exceed
           $50,000 and/or the aggregate amount of all such services pending
           retroactive approval does not exceed $200,000;

     3.    Such services were not recognized at the time of the engagement to be
           non-audit services; and

     4.    Such services are brought to the attention of the Audit Committee or
           its designee at the next regularly scheduled meeting.

PART IV

ITEM 15.        EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K

(a)           INDEX TO FINANCIAL STATEMENTS AND SCHEDULES

              1.  Financial Statements....................................................................Page

                  Independent Auditors' Report..............................................................38

                  Copy of Report of Independent Public Accountants..........................................39

                  Consolidated Balance Sheets...............................................................40

                  Statements of Consolidated Income (Loss)..................................................41

                  Statements of Consolidated Stockholders' Equity (Deficit) and
                       Comprehensive Income (Loss)..........................................................42

                  Statements of Consolidated Cash Flows.....................................................43

                  Notes to Consolidated Financial Statements................................................44

                  Quarterly Financial Data (Unaudited)......................................................87

                  Five-Year Financial Data..................................................................88


              2.  Financial Statement Schedules

                  Financial statement schedules are inapplicable or the required
                  information is included in the Consolidated Financial
                  Statements or the Notes thereto.

              3.  Exhibits

                  Reference is made to the Index of Exhibits immediately
                  preceding the exhibits hereto (beginning on page 109), which
                  index is incorporated herein by reference.

(b) REPORTS ON FORM 8-K

              On December 19, 2003, under Item 5, "Other Events" of Form 8-K,
              the Company filed a Current Report on Form 8-K reporting that it
              had executed a Memorandum of Understanding to sell its 90%
              interest in Volta Aluminium Company Limited ("Valco"), which owns
              and operates a primary aluminum smelter in Ghana, to the Republic
              of Ghana.

              On December 19, 2003, under Item 5, "Other Events" of Form 8-K,
              the Company filed a Current Report on Form 8-K reporting that it
              had been notified by the Pension Benefit Guaranty Corporation
              ("PBGC") that the PBGC intends to assume responsibility for the
              Kaiser Aluminum Salaried Employees Retirement Plan as of December
              17, 2003.

              No other Reports on Form 8-K were filed by the Company during the
              quarter ended December 31, 2003, however:

              On January 13, 2004, under Item 5, "Other Events" of Form 8-K, the
              Company filed a Current Report on Form 8-K reporting that it had
              filed three related motions with the U.S. Bankruptcy Court to
              enable it to substantially reduce or eliminate ongoing/future cash
              requirements for pension and post-retirement benefit plans.

              On January 21, 2004, under Item 5, "Other Events" of Form 8-K, the
              Company filed a Current Report on Form 8-K reporting that it had
              signed an agreement to sell its interest in Alumina Partners of
              Jamaica ("Alpart"), a partnership that owns bauxite mining
              operations and an alumina refinery in Jamaica, to Glencore AG.

              On February 4, 2004, under Item 5, "Other Events" of Form 8-K, the
              Company filed a Current Report on Form 8-K reporting that it had
              reached an agreement in principle with the United Steelworkers of
              America with regard to certain modifications to their labor
              agreements covering several of the Company's U.S. facilities and
              that the U.S. Bankruptcy Court had conditionally approved the
              agreement and the recently concluded agreements with the 1114
              Committee and the International Association of Machinists.

              On February 27, 2004, under Item 5, "Other Events" of Form 8-K,
              the Company filed a Current Report on Form 8-K reporting that it
              had reached an agreement to sell the Mead facility.

(c)           EXHIBITS

              Reference is made to the Index of Exhibits immediately preceding
              the exhibits hereto (beginning on page 109), which index is
              incorporated herein by reference.


                                   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.

                                    KAISER ALUMINUM & CHEMICAL CORPORATION


Date:  March 29, 2004        By:     /s/ Jack A. Hockema
                                         Jack A. Hockema
                                President and Chief Executive 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.

Date:  March 29, 2004                /s/ Jack A. Hockema
                                         Jack A. Hockema
                                President, Chief Executive Officer and Director
                                     (Principal Executive Officer)

Date:  March 29, 2004                /s/ John T. La Duc
                                         John T. La Duc
                                Executive Vice President and
                                  Chief Financial Officer
                               (Principal Financial Officer)

Date:  March 29, 2004                /s/ Daniel D. Maddox
                                         Daniel D. Maddox
                                 Vice President and Controller
                               (Principal Accounting Officer)

Date:  March 29, 2004               /s/ George T. Haymaker, Jr.
                                        George T. Haymaker, Jr.
                                 Chairman of the Board and Director

Date:  March 29, 2004               /s/ Robert J. Cruikshank
                                        Robert J. Cruikshank
                                             Director

Date:  March 29, 2004               /s/ James T. Hackett
                                        James T. Hackett
                                            Director

Date:  March 29, 2004               /s/ Charles E. Hurwitz
                                        Charles E. Hurwitz
                                            Director

Date:  March 29, 2004               /s/ Ezra G. Levin
                                        Ezra G. Levin
                                            Director

Date:  March 29, 2004               /s/ John D. Roach
                                        John D. Roach
                                            Director


                                INDEX OF EXHIBITS

Exhibit
Number                                   Description

   3.1    Restated Certificate of Incorporation of Kaiser Aluminum &
          Chemical Corporation ("KACC"), dated July 25, 1989 (incorporated by
          reference to Exhibit 3.1 to the Registration Statement on Form S-1
          dated August 25, 1991, filed by KACC, Registration No. 33-30645).

   3.2    Certificate of Retirement of KACC, dated February 7, 1990
          (incorporated by reference to Exhibit 3.2 to the Report on Form 10-K
          for the period ended December 31, 1989, filed by KACC, File No.
          1-3605).

   3.3    Amended and Restated By-Laws of KACC, dated October 1, 1997
          (incorporated by reference to Exhibit 3.3 to the Report on Form 10-Q
          for the quarterly period ended September 30, 1997, filed by KACC, File
          No. 1-3605).

   4.1    Indenture, dated as of February 1, 1993, among Kaiser Aluminum &
          Chemical Corporation ("KACC"), as Issuer, Kaiser Alumina Australia
          Corporation, Alpart Jamaica Inc., and Kaiser Jamaica Corporation, as
          Subsidiary Guarantors, and The First National Bank of Boston, as
          Trustee, regarding KACC's 12 3/4% Senior Subordinated Notes Due 2003
          (incorporated by reference to Exhibit 4.1 to the Report on Form 10-K
          for the period ended December 31, 1992, filed by KACC, File No.
          1-3605).

   4.2    First Supplemental Indenture, dated as of May 1, 1993, to the
          Indenture, dated as of February 1, 1993 (incorporated by reference to
          Exhibit 4.2 to the Report on Form 10-Q for the quarterly period ended
          June 30, 1993, filed by KACC, File No. 1-3605).

   4.3    Second Supplemental Indenture, dated as of February 1, 1996, to the
          Indenture, dated as of February 1, 1993 (incorporated by reference to
          Exhibit 4.3 to the Report on Form 10-K for the period ended December
          31, 1995, filed by KAC, File No. 1-9447).

   4.4    Third Supplemental Indenture, dated as of July 15, 1997, to the
          Indenture, dated as of February 1, 1993 (incorporated by reference to
          Exhibit 4.1 to the Report on Form 10-Q for the quarterly period ended
          June 30, 1997, filed by KAC, File No. 1-9447).

   4.5    Fourth Supplemental Indenture, dated as of March 31, 1999, to the
          Indenture, dated as of February 1, 1993, (incorporated by reference to
          Exhibit 4.1 to the Report on Form 10-Q for the quarterly period ended
          March 31, 1999, filed by KAC, File No. 1-9447).

   4.6    Indenture, dated as of February 17, 1994, among KACC, as Issuer,
          Kaiser Alumina Australia Corporation, Alpart Jamaica Inc., Kaiser
          Jamaica Corporation, and Kaiser Finance Corporation, as Subsidiary
          Guarantors, and First Trust National Association, as Trustee,
          regarding KACC's 9 7/8% Senior Notes Due 2002 (incorporated by
          reference to Exhibit 4.3 to the Report on Form 10-K for the period
          ended December 31, 1993, filed by KAC, File No. 1-9447).

   4.7    First Supplemental Indenture, dated as of February 1, 1996, to the
          Indenture, dated as of February 17, 1994 (incorporated by reference to
          Exhibit 4.5 to the Report on Form 10-K for the period ended December
          31, 1995, filed by KAC, File No. 1-9447).

   4.8    Second Supplemental Indenture, dated as of July 15, 1997, to the
          Indenture, dated as of February 17, 1994 (incorporated by reference to
          Exhibit 4.2 to the Report on Form 10-Q for the quarterly period ended
          June 30, 1997, filed by KAC, File No. 1-9447).

   4.9    Third Supplemental Indenture, dated as of March 31, 1999, to the
          Indenture, dated as of February 17, 1994 (incorporated by reference to
          Exhibit 4.2 to the Report on Form 10-Q for the quarterly period ended
          March 31, 1999, filed by KAC, File No. 1-9447).

   4.10   Indenture, dated as of October 23, 1996, among KACC, as Issuer, Kaiser
          Alumina Australia Corporation, Alpart Jamaica Inc., Kaiser Jamaica
          Corporation, Kaiser Finance Corporation, Kaiser Micromill Holdings,
          LLC, Kaiser Sierra Micromills, LLC, Kaiser Texas Micromill Holdings,
          LLC and Kaiser Texas Sierra Micromills, LLC, as Subsidiary Guarantors,
          and First Trust National Association, as Trustee, regarding KACC's 10
          7/8% Series B Senior Notes Due 2006 (incorporated by reference to
          Exhibit 4.2 to the Report on Form 10-Q for the quarterly period ended
          September 30, 1996, filed by KAC, File No. 1-9447).

   4.11   First Supplemental Indenture, dated as of July 15, 1997, to the
          Indenture, dated as of October 23, 1996 (incorporated by reference to
          Exhibit 4.3 to the Report on Form 10-Q for the quarterly period ended
          June 30, 1997, filed by KAC, File No. 1-9447).

   4.12   Second Supplemental Indenture, dated as of March 31, 1999, to the
          Indenture, dated as of October 23, 1996 (incorporated by reference to
          Exhibit 4.3 to the Report on Form 10-Q for the quarterly period ended
          March 31, 1999, filed by KAC, File No. 1-9447).

   4.13   Indenture, dated as of December 23, 1996, among KACC, as Issuer,
          Kaiser Alumina Australia Corporation, Alpart Jamaica Inc., Kaiser
          Jamaica Corporation, Kaiser Finance Corporation, Kaiser Micromill
          Holdings, LLC, Kaiser Sierra Micromills, LLC, Kaiser Texas Micromill
          Holdings, LLC, and Kaiser Texas Sierra Micromills, LLC, as Subsidiary
          Guarantors, and First Trust National Association, as Trustee,
          regarding KACC's 10 7/8% Series D Senior Notes due 2006 (incorporated
          by reference to Exhibit 4.4 to the Registration Statement on Form S-4,
          dated January 2, 1997, filed by KACC, Registration No. 333-19143).

   4.14   First Supplemental Indenture, dated as of July 15, 1997, to the
          Indenture, dated as of December 23, 1996 (incorporated by reference to
          Exhibit 4.4 to the Report on Form 10-Q for the quarterly period ended
          June 30, 1997, filed by KAC, File No. 1-9447).

   4.15   Second Supplemental Indenture, dated as of March 31, 1999, to the
          Indenture, dated as of December 23, 1996 (incorporated by reference to
          Exhibit 4.4 to the Report on Form 10-Q for the quarterly period ended
          March 31, 1999, filed by KAC, File No. 1-9447).

   4.16   Post-Petition Credit Agreement, dated as of February 12, 2002, among
          KACC, KAC, certain financial institutions and Bank of America, N.A.,
          as Agent (incorporated by reference to Exhibit 4.44 to the Report on
          Form 10-K for the period ended December 31, 2001, filed by KAC, File
          No. 1-9447).

   4.17   First Amendment to Post-Petition Credit Agreement and Post-Petition
          Pledge and Security Agreement and Consent of Guarantors, dated as of
          March 21, 2002, amending the Post-Petition Credit Agreement dated as
          of February 12, 2002, among KACC, KAC, certain financial institutions
          and Bank of America, N.A., as Agent, and amending a Post-Petition
          Pledge and Security Agreement dated as of February 12, 2002, among
          KACC, KAC, certain subsidiaries of KAC and KACC, and Bank of America,
          N.A., as Agent (incorporated by reference to Exhibit 4.45 to the
          Report on Form 10-K for the period ended December 31, 2001, filed by
          KAC, File No. 1-9447).

   4.18   Second Amendment to Post-Petition Credit Agreement and Consent of
          Guarantors, dated as of March 21, 2002, amending the Post-Petition
          Credit Agreement dated as of February 12, 2002, among KACC, KAC,
          certain financial institutions and Bank of America, N.A., as Agent
          (incorporated by reference to Exhibit 4.46 to the Report on Form 10-K
          for the period ended December 31, 2001, filed by KAC, File No.
          1-9447).

   4.19   Third Amendment to Post-Petition Credit Agreement, Second Amendment to
          Post-Petition Pledge and Security Agreement and Consent of Guarantors,
          dated as of December 19, 2002, amending the Post-Petition Credit
          Agreement dated as of February 12, 2002, among KACC, KAC, certain
          financial institutions and Bank of America, N.A., as Agent
          (incorporated by reference to Exhibit 4.19 to the Report on Form 10-K
          for the period ended December 31, 2002, filed by KAC, File No.
          1-9447).

   4.20   Fourth Amendment to Post-Petition Credit Agreement and Consent of
          Guarantors, dated as of March 17, 2003, amending the Post-Petition
          Credit Agreement dated as of February 12, 2002, among KACC, KAC,
          certain financial institutions and Bank of America, N.A., as Agent
          (incorporated by reference to Exhibit 4.20 to the Report on Form 10-K
          for the period ended December 31, 2002, filed by KAC, File No.
          1-9447).

   4.21   Waiver and Consent with Respect to Post-Petition Credit Agreement,
          dated October 9, 2002, among KAC, KACC, the financial institutions
          party to the Post-Petition Credit Agreement, dated as of February 12,
          2002, as amended, and Bank of America, N.A., as Agent (incorporated by
          reference to Exhibit 4.21 to the Report on Form 10-K for the period
          ended December 31, 2002, filed by KAC, File No. 1-9447).

   4.22   Second Waiver and Consent with respect to Post-Petition Credit
          Agreement, dated January 13, 2003, among KACC, KACC, the financial
          institutions party to the Post-Petition Credit Agreement, dated as of
          February 12, 2002, as amended, and Bank of America, N.A., as Agent
          (incorporated by reference to Exhibit 4.22 to the Report on Form 10-K
          for the period ended December 31, 2002, filed by KAC, File No.
          1-9447).

   4.23   Waiver Letter with Respect to Post-Petition Credit Agreement, dated
          March 24, 2003, among KACC, KAC, the financial institutions party to
          the Post-Petition Credit Agreement, dated as of February 12, 2002, as
          amended, and Bank of America, N.A., as Agent (incorporated by
          reference to Exhibit 4.1 to Report on Form 10-Q for the quarterly
          period ended March 31, 2003, filed by KAC, File No. 1-9447).

   4.24   Extension and Modification of Waiver Letter with Respect to
          Post-Petition Credit Agreement, dated May 5, 2003, among KACC, KAC,
          the financial institutions party to the Post-Petition Credit
          Agreement, dated as of February 12, 2002, as amended, and Bank of
          America, N.A., as Agent (incorporated by reference to Exhibit 4.1 to
          Report on Form 10-Q for the quarterly period ended June 30, 2003,
          filed by KAC, File No. 1-9447).

   4.25   Fifth Amendment to Post-Petition Credit Agreement, dated June 6, 2003,
          amending the Post-Petition Credit Agreement dated February 12, 2002,
          among KACC, KAC, certain financial institutions and Bank of America,
          N.A., as Agent (incorporated by reference to Exhibit 4.2 to Report on
          Form 10-Q for the quarterly period ended June 30, 2003, filed by KAC,
          File No. 1-9447).

   4.26   Sixth Amendment to Post-Petition Credit Agreement, dated August 1,
          2003, amending the Post-Petition Credit Agreement dated February 12,
          2002, among KACC, KAC, certain financial institutions and Bank of
          America, N.A., as Agent (incorporated by reference to Exhibit 4.1 to
          the Report on Form 10-Q for the quarterly period ended September 30,
          2003, filed by KAC, File No. 1-9447).

   4.27   Intercompany Note between KAC and KACC (incorporated by reference to
          Exhibit 10.10 to the Report on Form 10-K for the period ended December
          31, 1996, filed by MAXXAM Inc. ("MAXXAM"), File No. 1-3924).

   4.28   Confirmation of Amendment of Non-Negotiable Intercompany Note, dated
          as of October 6, 1993, between KAC and KACC (incorporated by reference
          to Exhibit 10.11 to the Report on Form 10-K for the period ended
          December 31, 1996, filed by MAXXAM, File No. 1-3924).

   4.29   Amendment to Non-Negotiable Intercompany Note, dated as of December
          11, 2000, between KAC and KACC (incorporated by reference to Exhibit
          4.41 to the Report on Form 10-K for the period ended December 31,
          2000, filed by KAC, File No. 1-9447).

   4.30   Senior Subordinated Intercompany Note between KAC and KACC dated
          February 15, 1994 (incorporated by reference to Exhibit 4.22 to the
          Report on Form 10-K for the period ended December 31, 1993, filed by
          KAC, File No. 1-9447).

   4.31   Senior Subordinated Intercompany Note between KAC and KACC dated March
          17, 1994 (incorporated by reference to Exhibit 4.23 to the Report on
          Form 10-K for the period ended December 31, 1993, filed by KAC, File
          No. 1-9447).

          KAC has not filed certain long-term debt instruments not being
          registered with the Securities and Exchange Commission where the
          total amount of indebtedness authorized under any such
          instrument does not exceed 10% of the total assets of KAC and
          its subsidiaries on a consolidated basis. KAC agrees and
          undertakes to furnish a copy of any such instrument to the
          Securities and Exchange Commission upon its request.

   10.1   Form of indemnification agreement with officers and directors
          (incorporated by reference to Exhibit (10)(b) to the Registration
          Statement of KAC on Form S-4, File No. 33-12836).

   10.2   Tax Allocation Agreement, dated as of December 21, 1989, between
          MAXXAM and KACC (incorporated by reference to Exhibit 10.21 to
          Amendment No. 6 to the Registration Statement on Form S-1, dated
          December 14, 1989, filed by KACC, Registration No. 33-30645).

   10.3   Amendment of Tax Allocation Agreement, dated as of March 12, 2001,
          between MAXXAM and KACC, amending the Tax Allocation Agreement dated
          as of December 21, 1989 (incorporated by reference to Exhibit 10.3 to
          the Report on Form 10-K for the period ended December 31, 2000, filed
          by KAC, File No. 1-9447).

   10.4   Tax Allocation Agreement, dated as of February 26, 1991, between KAC
          and MAXXAM (incorporated by reference to Exhibit 10.23 to Amendment
          No. 2 to the Registration Statement on Form S-1, dated June 11, 1991,
          filed by KAC, Registration No. 33-37895).

   10.5   Tax Allocation Agreement, dated as of June 30, 1993, between KACC and
          KAC (incorporated by reference to Exhibit 10.3 to the Report on Form
          10-Q for the quarterly period ended June 30, 1993, filed by KACC, File
          No. 1-3605).

                  Executive Compensation Plans and Arrangements
                       [Exhibits 10.6 - 10.33, inclusive]

   10.6   Kaiser 1993 Omnibus Stock Incentive Plan (incorporated by reference to
          Exhibit 10.1 to the Report on Form 10-Q for the quarterly period ended
          June 30, 1993, filed by KACC, File No. 1-3605).

   10.7   Kaiser 1997 Omnibus Stock Incentive Plan (incorporated by reference to
          Appendix A to the Proxy Statement, dated April 29, 1997, filed by KAC,
          File No. 1-9447).

   10.8   Non-Executive Chairman of the Boards Agreement, dated November 4,
          2002, among KAC, KACC and George T. Haymaker, Jr. (incorporated by
          reference to Exhibit 10.12 to the Report on Form 10-K for the period
          ended December 31, 2002, filed by KAC, File No. 1-9447).

  *10.9   Non-Executive Chairman of the Boards Agreement, dated February 20,
          2004, among KAC, KACC and George T. Haymaker, Jr.

  10.10   Employment Agreement, dated October 1, 2001, between KACC and Edward
          F. Houff (incorporated by reference to Exhibit 10.13 to the Report on
          Form 10-K for the period ended December 31, 2002, filed by KAC, File
          No. 1-9447).

  10.11   Stock Option Grant pursuant to the Kaiser 1997 Omnibus Stock Incentive
          Plan to Jack A. Hockema (incorporated by reference to Exhibit 10.1 to
          the Report on Form 10-Q for the quarterly period ended September 30,
          2000, filed by KAC, File No. 1-9447).

  10.12   Form of letter agreement with persons granted stock options under the
          Kaiser 1993 Omnibus Stock Incentive Plan to acquire shares of KAC
          Common Stock (incorporated by reference to Exhibit 10.18 to the Report
          on Form 10-K for the period ended December 31, 1994, filed by KAC,
          File No. 1-9447).

  10.13   Form of Deferred Fee Agreement between KAC, KACC, and directors of KAC
          and KACC (incorporated by reference to Exhibit 10 to the Report on
          Form 10-Q for the quarterly period ended March 31, 1998, filed by KAC,
          File No. 1-9447).

  10.14   Form of Non-Employee Director Stock Option Grant for options issued
          commencing January 1, 2001 under the 1997 Kaiser Omnibus Stock
          Incentive Plan (incorporated by reference to Exhibit 10.1 to the
          Report on Form 10-Q for the quarterly period ended June 30, 2001,
          filed by KAC, File No. 1-9447).

  10.15   Form of Stock Option Grant for options issued commencing January 1,
          2001 under the 1997 Kaiser Omnibus Stock Incentive Plan (incorporated
          by reference to Exhibit 10.2 to the Report on Form 10-Q for the
          quarterly period ended June 30, 2001, filed by KAC, File No. 1-9447).

  10.16   Form of Restricted Stock Agreement for restricted shares issued
          commencing January 1, 2001 under the 1997 Kaiser Omnibus Stock
          Incentive Plan (incorporated by reference to Exhibit 10.3 to the
          Report on Form 10-Q for the quarterly period ended June 30, 2001,
          filed by KAC, File No. 1-9447).

  10.17   The Kaiser Aluminum & Chemical Corporation Retention Plan, dated
          January 15, 2002 (the "January 2002 Retention Plan") (incorporated by
          reference to Exhibit 10.35 to the Report on Form 10-K for the period
          ended December 31, 2001, filed by KAC, File No. 1-9447).

  10.18   Retention Agreement for the January 2002 Retention Plan, dated January
          15, 2002, between KACC and Joseph A. Bonn (incorporated by reference
          to Exhibit 10.37 to the Report on Form 10-K for the year ended
          December 31, 2001, filed by KAC, File No. 1-9447).

  10.19   Retention Agreement for the January 2002 Retention Plan, dated January
          15, 2002, between KACC and John T. La Duc (incorporated by reference
          to Exhibit 10.38 to the Report on Form 10-K for the year ended
          December 31, 2001, filed by KAC, File No. 1-9447).

  10.20   The Kaiser Aluminum & Chemical Corporation Key Employee Retention
          Plan (effective September 3, 2002) (incorporated by reference to
          Exhibit 10.26 to the Report on Form 10-K for the period ended December
          31, 2002, filed by KAC, File No. 1-9447).

  10.21   Form of Retention Agreement for the Kaiser Aluminum & Chemical
          Corporation Key Employee Retention Plan (effective September 3, 2002)
          for John Barneson, Jack A. Hockema, Edward F. Houff and Harvey L.
          Perry (incorporated by reference to Exhibit 10.27 to the Report on
          Form 10-K for the period ended December 31, 2002, filed by KAC, File
          No. 1-9447).

  10.22   Form of Retention Agreement for the Kaiser Aluminum & Chemical
          Corporation Key Employee Retention Plan (effective September 3, 2002)
          for Joseph A. Bonn and John T. La Duc (incorporated by reference to
          Exhibit 10.28 to the Report on Form 10-K for the period ended December
          31, 2002, filed by KAC, File No. 1-9447).

  10.23   Form of Retention Agreement for the Kaiser Aluminum & Chemical
          Corporation Key Employee Retention Plan (effective September 3, 2002)
          for Certain Executive Officers (incorporated by reference to Exhibit
          10.29 to the Report on Form 10-K for the period ended December 31,
          2002, filed by KAC, File No. 1-9447).

  10.24   Kaiser Aluminum & Chemical Corporation Severance Plan (effective
          September 3, 2002) (incorporated by reference to Exhibit 10.30 to the
          Report on Form 10-K for the period ended December 31, 2002, filed by
          KAC, File No. 1-9447).

  10.25   Form of Severance Agreement for the Kaiser Aluminum & Chemical
          Corporation Severance Plan (effective September 3, 2002) for John
          Barneson, Jack A. Hockema, Edward F. Houff, Harvey L. Perry and
          Certain Other Executive Officers (incorporated by reference to Exhibit
          10.31 to the Report on Form 10-K for the period ended December 31,
          2002, filed by KAC, File No. 1-9447).

  10.26   Form of Kaiser Aluminum & Chemical Corporation Change in Control
          Severance Agreement for John Barneson, Jack A. Hockema and Edward F.
          Houff (incorporated by reference to Exhibit 10.32 to the Report on
          Form 10-K for the period ended December 31, 2002, filed by KAC, File
          No. 1-9447).

  10.27   Form of Kaiser Aluminum & Chemical Corporation Change in Control
          Severance Agreement for Harvey L. Perry and Certain Other Executive
          Officers (incorporated by reference to Exhibit 10.33 to the Report on
          Form 10-K for the period ended December 31, 2002, filed by KAC, File
          No. 1-9447).

    *21   Significant Subsidiaries of KAC.

  *31.1   Certification of Jack A. Hockema pursuant to Section 302 of the
          Sarbanes-Oxley Act of 2002.

  *31.2   Certification of John T. La Duc pursuant to Section 302 of the
          Sarbanes-Oxley Act of 2002.

  *32.1   Confirmation of Jack A. Hockema pursuant to Section 906 of the
          Sarbanes-Oxley Act of 2002.

  *32.2   Confirmation of John T. La Duc pursuant to Section 906 of the
          Sarbanes-Oxley Act of 2002.


------------------------
*     Filed herewith


Principal       Arizona
Domestic          Chandler
Operations          Fabricated Products
and             California
Administrative    Laguna Niguel
Offices             Administrative Offices
(Partial List)    Los Angeles (City of Commerce)
                    Fabricated Products
                Louisiana
                  Baton Rouge
                    Alumina Business Unit Offices(1)
                  Gramercy(1)
                    Alumina
                Michigan
                  Detroit (Southfield)
                    Automotive Product Development and
                    Sales
                Ohio
                  Newark
                    Fabricated Products
                Oklahoma
                  Tulsa
                    Fabricated Products
                South Carolina
                  Greenwood
                    Fabricated Products
                Tennessee
                  Jackson
                    Fabricated Products
                Texas
                  Houston
                    Corporate Headquarters
                  Sherman
                    Fabricated Products
                Virginia
                  Richmond
                    Fabricated Products
                Washington
                  Mead(1)
                    Primary Aluminum
                  Richland
                    Fabricated Products
                  Trentwood
                    Fabricated Products


Principal       Australia
Worldwide         Queensland Alumina Limited (20%)(1)
Operations          Alumina
(Partial List)  Canada
                  Kaiser Aluminum & Chemical of
                  Canada Limited (100%)
                    Fabricated Products
                Ghana
                  Volta Aluminium Company Limited (90%)(1)
                    Primary Aluminum
                Jamaica
                  Alumina Partners of Jamaica (65%)(1)
                    Bauxite, Alumina
                  Kaiser Jamaica Bauxite Company (49%)(1)
                    Bauxite
                Wales, United Kingdom
                  Anglesey Aluminium Limited (49%)(1)
                    Primary Aluminum

(1)     See Note 1 of Notes to Consolidated Financial Statements which contains
        information as to the possible sale of the Company interests in respect
        of these assets.